AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MEDTRONIC, INC.,
MAV MERGER CORP.,
AND
ARTERIAL VASCULAR ENGINEERING, INC.
November 29, 1998
TABLE OF CONTENTS
PAGE
ARTICLE 1 THE MERGER; CONVERSION OF SHARES......................................................................1
1.1 The Merger...........................................................................................1
1.2 Effective Time.......................................................................................1
1.3 Conversion of Shares.................................................................................2
1.4 No Appraisal Rights..................................................................................3
1.5 Exchange of Company Common Stock.....................................................................3
1.6 Exchange of Merger Subsidiary Common Stock...........................................................5
1.7 Stock Options........................................................................................5
1.8 Capitalization Changes...............................................................................7
1.9 Certificate of Incorporation of the Surviving Corporation............................................7
1.10 Bylaws of the Surviving Corporation.................................................................7
1.11 Directors and Officers of the Surviving Corporation.................................................7
ARTICLE 2 CLOSING ..............................................................................................7
2.1 Time and Place.......................................................................................7
2.2 Filings at the Closing...............................................................................8
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................................................8
3.1 Organization.........................................................................................8
3.2 Authorization........................................................................................9
3.3 Capitalization......................................................................................10
3.4 Reports and Financial Statements....................................................................11
3.5 Absence of Undisclosed Liabilities..................................................................12
3.6 Consents and Approvals..............................................................................12
3.7 Compliance with Laws................................................................................13
3.8 Litigation..........................................................................................13
3.9 Absence of Material Adverse Changes.................................................................13
3.10 Officers, Directors and Employees..................................................................14
3.11 Taxes..............................................................................................14
3.12 Contracts..........................................................................................15
3.13 Intellectual Property Rights.......................................................................16
i.
3.14 Benefit Plans......................................................................................16
3.15 Minute Books.......................................................................................18
3.16 No Finders.........................................................................................18
3.17 Proxy Statement....................................................................................18
3.18 Fairness Opinion...................................................................................19
3.19 State Takeover Laws; Rights Plan...................................................................19
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY.......................................19
4.1 Organization........................................................................................20
4.2 Authorization.......................................................................................20
4.3 Capitalization......................................................................................21
4.4 Consents and Approvals..............................................................................21
4.5 Reports; Financial Statements; Absence of Changes...................................................21
4.6 Registration Statement..............................................................................22
4.7 No Finders..........................................................................................22
4.8 Absence of Undisclosed Liabilities..................................................................23
4.9 Compliance with Laws................................................................................23
4.10 Litigation.........................................................................................23
4.11 Absence of Material Adverse Changes................................................................23
4.12 Reorganization.....................................................................................24
4.13 Merger Filings.....................................................................................24
ARTICLE 5 COVENANTS ...........................................................................................24
5.1 Conduct of Business of the Company..................................................................24
5.2 Conduct of Business of Parent.......................................................................27
5.3 No Solicitation.....................................................................................28
5.4 Access and Information..............................................................................29
5.5 Approval of Stockholders; Proxy Statement; Registration Statement...................................30
5.6 Consents............................................................................................32
5.7 Affiliates'Letters..................................................................................32
5.8 Expenses............................................................................................33
5.9 Further Actions.....................................................................................33
ii.
5.10 Regulatory Approvals...............................................................................33
5.11 Certain Notifications..............................................................................34
5.12 Voting of Shares...................................................................................34
5.13 Stock Option Agreement.............................................................................34
5.14 NYSE Listing Application...........................................................................34
5.15 Indemnification....................................................................................35
5.16 Letters of the Company's and Parent's Accountants..................................................36
5.17 Subsidiary Shares..................................................................................36
5.18 Benefit Plans and Employee Matters.................................................................36
5.19 Obligations of Merger Subsidiary...................................................................37
5.20 Plan of Reorganization.............................................................................37
5.21 Pooling............................................................................................37
5.22 Tax Matters........................................................................................37
ARTICLE 6 CLOSING CONDITIONS...................................................................................38
6.1 Conditions to Obligations of Parent, Merger Subsidiary, and the Company.............................38
6.2 Conditions to Obligations of Parent and Merger Subsidiary...........................................38
6.3 Conditions to Obligation of the Company.............................................................39
ARTICLE 7 TERMINATION AND ABANDONMENT..........................................................................40
7.1 Termination.........................................................................................40
7.2 Effect of Termination...............................................................................42
ARTICLE 8 MISCELLANEOUS........................................................................................44
8.1 Amendment and Modification..........................................................................44
8.2 Waiver of Compliance; Consents......................................................................44
8.3 Investigation; Survival of Representations and Warranties...........................................45
8.4 Notices.............................................................................................45
8.5 Assignment..........................................................................................46
8.6 Governing Law.......................................................................................46
8.7 Counterparts........................................................................................46
8.8 Knowledge...........................................................................................46
8.9 Interpretation......................................................................................46
8.10 Publicity..........................................................................................47
8.11 Entire Agreement...................................................................................47
iii.
8.12 Severability.......................................................................................47
8.13 Specific Performance...............................................................................47
EXHIBITS:
Exhibit A: Certificate of Incorporation
Exhibit B: Form of Affiliate's Letter
Exhibit C: Form of Agreement to Facilitate Merger
Exhibit D: Form of Stock Option Agreement
iv.
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT is dated as of November 29, 1998, by and among
Medtronic, Inc., a Minnesota corporation ("Parent"), MAV Merger Corp., a
Delaware corporation and wholly owned subsidiary of Parent ("Merger
Subsidiary"), and Arterial Vascular Engineering, Inc., a Delaware corporation
(the "Company").
WHEREAS, the Boards of Directors of Parent, Merger Subsidiary, and the
Company have approved the merger of Merger Subsidiary with and into the Company
(the "Merger") upon the terms and subject to the conditions set forth herein;
and
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
WHEREAS, for accounting purposes, it is intended that the Merger shall
be recorded as a "pooling of interests" within the meaning of Accounting
Principles Board Opinion No. 16, and the rules and regulations of the Securities
and Exchange Commission (the "SEC"); and
WHEREAS, as a condition to, and upon or immediately following the
execution of, this Agreement, Parent and the Company are entering into the Stock
Option Agreement described in Section 5.13 hereof; and
WHEREAS, the parties hereto desire to make certain representations,
warranties, and agreements in connection with the Merger and also to prescribe
various conditions to the Merger;
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual representations, warranties, covenants, and agreements contained herein,
the parties hereto agree as follows:
ARTICLE 1
THE MERGER; CONVERSION OF SHARES
1.1 The Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time (as defined in Section 1.2 hereof), Merger Subsidiary
shall be merged with and into the Company in accordance with the provisions of
the Delaware General Corporation Law (the "DGCL"), whereupon the separate
corporate existence of Merger Subsidiary shall cease, and the Company shall
continue as the surviving corporation (the "Surviving Corporation"). From and
after the Effective Time, the Surviving Corporation shall possess all the
rights, privileges, powers, and franchises and be subject to all the
restrictions, disabilities, and duties of the Company and Merger Subsidiary, all
as more fully described in the DGCL.
1.2 Effective Time. As soon as practicable after each of the conditions
set forth in Article 6 has been satisfied or waived on the Closing Date (as
defined in Section 2.1), the Company will file, or cause to be filed, with the
Secretary of State of the State of Delaware a Certificate of
Merger for the Merger, which Certificate shall be in the form required by and
executed in accordance with the applicable provisions of the DGCL. The Merger
shall become effective at the time such filing is made or, if agreed to by
Parent and the Company, such later time or date set forth in the Certificate of
Merger (the "Effective Time").
1.3 Conversion of Shares. At the Effective Time, by virtue of the
Merger and without any action on the part of the Company, Parent, Merger
Subsidiary or any holder of any share of capital stock of the Company or Merger
Subsidiary:
(a) Each share of common stock of the Company, $.001 par value
per share ("Company Common Stock"), issued and outstanding immediately prior
thereto (except for shares referred to in Section 1.3(b) hereof) shall be
converted, subject to Section 1.5(f), into the right to receive a number of
shares (carried out to five decimal places and rounded up if the sixth decimal
place is 5 or greater) (the "Conversion Ratio") of common stock of Parent, par
value $.10 per share (the "Parent Common Stock"), based on the average (rounded
to the nearest full cent, with the cents rounded up if the third decimal place
is 5 or more) of the daily closing sale prices of a share of Parent Common Stock
as reported on the New York Stock Exchange ("NYSE") Composite Tape, as reported
in The Wall Street Journal (the "Parent Average Stock Price"), for the fifteen
consecutive NYSE trading days ending on and including the NYSE trading day that
is two NYSE trading days prior to the Company Stockholders Meeting (as defined
in Section 5.5) (the "Determination Period"), determined as follows:
(i) if the Parent Average Stock Price for the
Determination Period is greater than $61.20 and less than
$74.80, then the Conversion Ratio shall equal $54.00 divided
by the Parent Average Stock Price for the Determination
Period;
(ii) if the Parent Average Stock Price for the
Determination Period is equal to or less than $61.20, then the
Conversion Ratio shall equal 0.88235; or
(iii) if the Parent Average Stock Price for the
Determination Period is equal to or greater than $74.80, then
the Conversion Ratio shall equal 0.72193.
An appropriate adjustment to the Conversion Ratio shall be
made in the event that, prior to the Effective Time, the outstanding shares of
Company Common Stock, without new consideration, are changed into or exchanged
for a different number of shares or a different class by reason of any
reorganization, reclassification, subdivision, recapitalization, split-up,
combination, exchange of shares, stock dividend or other similar transaction.
Notwithstanding the foregoing, nothing in this section shall be deemed to
constitute authorization or permission for or consent from Parent or Merger
Subsidiary to any reorganization, reclassification, subdivision,
recapitalization, split-up, combination, exchange of shares, or other similar
transaction.
(b) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time that is held in the treasury of the
Company or is then owned beneficially or of record by Parent, Merger Subsidiary,
or any direct or indirect wholly owned
2.
subsidiary of Parent or the Company shall be canceled in accordance with
applicable laws without payment of any consideration therefor and without any
conversion thereof.
(c) Each share of any other class of capital stock of the
Company (other than Company Common Stock) shall be canceled without payment of
any consideration therefor and without any conversion thereof.
(d) Each share of common stock of Merger Subsidiary, par value
$.01 per share ("Merger Subsidiary Common Stock"), issued and outstanding
immediately prior to the Effective Time shall be converted into one share of the
common stock of the Surviving Corporation, par value $.01 per share ("Surviving
Corporation Common Stock").
1.4 No Appraisal Rights. The parties acknowledge that, pursuant to
Section 262 of the DGCL, no holders of Company Common Stock shall have appraisal
rights in connection with the Merger.
1.5 Exchange of Company Common Stock.
(a) At or prior to the Effective Time, Parent shall cause
Parent's stock transfer agent or such other person as Parent may appoint and is
reasonably satisfactory to the Company to act as exchange agent (the "Exchange
Agent") hereunder. As promptly as practicable after the Effective Time, Parent
shall cause the Exchange Agent to mail to each holder of record (other than
Parent, Merger Subsidiary, the Company, or any wholly owned subsidiary of Parent
or the Company) of a certificate or certificates that immediately prior to the
Effective Time represented outstanding shares of Company Common Stock ("Company
Certificates") a form letter of transmittal (which shall specify that delivery
shall be effective, and risk of loss and title to the Company Certificate(s)
shall pass, only upon delivery of the Company Certificate(s) to the Exchange
Agent) and instructions for such holder's use in effecting the surrender of the
Company Certificates in exchange for certificates representing shares of Parent
Common Stock and cash in lieu of any fractional shares.
(b) As soon as practicable after the Effective Time, the
Exchange Agent shall distribute to holders of shares of Company Common Stock,
upon surrender to the Exchange Agent of one or more Company Certificates for
cancellation, together with a duly-executed letter of transmittal, (i) one or
more certificates representing the number of whole shares of Parent Common Stock
into which the shares represented by the Company Certificate(s) shall have been
converted pursuant to Section 1.3(a), (ii) a bank check in the amount of cash
into which the shares represented by the Company Certificate(s) shall have been
converted pursuant to Section 1.5(f) (relating to fractional shares), and (iii)
any dividends or other distributions to which such holder is entitled pursuant
to Section 1.5(c), and the Company Certificate(s) so surrendered shall be
canceled. In the event of a transfer of ownership of Company Common Stock that
is not registered in the transfer records of the Company, it shall be a
condition to the issuance of shares of Parent Common Stock that the Company
Certificate(s) so surrendered shall be properly endorsed or be otherwise in
proper form for transfer and that such transferee shall (i) pay to the Exchange
Agent any transfer or other taxes required or (ii) establish to the satisfaction
of the Exchange Agent that such tax has been paid or is not payable.
3.
(c) Holders of Company Common Stock will be entitled to any
dividends or other distributions pertaining to the Parent Common Stock received
in exchange therefor that become payable to persons who are holders of record of
Parent Common Stock as of a record date that follows the Effective Time, but
only after they have surrendered their Company Certificates for exchange.
Subject to the effect, if any, of applicable law, the Exchange Agent shall
receive, hold, and remit any such dividends or other distributions to each such
record holder entitled thereto, without interest, at the time that such Company
Certificates are surrendered to the Exchange Agent for exchange. Holders of
Company Common Stock will not be entitled, however, to dividends or other
distributions that become payable before or after the Effective Time to persons
who were holders of record of Parent Common Stock as of a record date that is
prior to the Effective Time.
(d) All certificates evidencing shares of Parent Common Stock
that are issued upon the surrender for exchange of Company Certificates in
accordance with the terms hereof, together with any cash paid for fractional
shares pursuant to Section 1.5(f) hereof, shall be deemed to have been issued in
full satisfaction of all rights pertaining to the shares of Company Common Stock
represented by the surrendered Company Certificates.
(e) After the Effective Time, 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, Company
Certificates representing such shares are presented to the Surviving
Corporation, they shall be canceled and exchanged as provided in this Article 1.
As of the Effective Time, the holders of Company Certificates representing
shares of Company Common Stock shall cease to have any rights as stockholders of
the Company, except such rights, if any, as they may have pursuant to the DGCL
or this Agreement. Except as provided above, until such Company Certificates are
surrendered for exchange, each such Company Certificate shall, after the
Effective Time, represent for all purposes only the right to receive a
certificate or certificates evidencing the number of whole shares of Parent
Common Stock into which the shares of Company Common Stock shall have been
converted pursuant to the Merger as provided in Section 1.3(a) hereof, the right
to receive the cash value of any fraction of a share of Parent Common Stock as
provided in Section 1.5(f) hereof and the right to receive any dividends or
distributions as provided in Section 1.5(c).
(f) No fractional shares of Parent Common Stock and no
certificates or scrip therefor, or other evidence of ownership thereof, shall be
issued in connection with the Merger, no dividend or other distribution of
Parent shall relate to any fractional share, and such fractional share interests
shall not entitle the owner thereof to vote or to any rights of a shareholder of
Parent. All fractional shares of Parent Common Stock to which a holder of
Company Common Stock immediately prior to the Effective Time would otherwise be
entitled, at the Effective Time, shall be aggregated if and to the extent
multiple Company Certificates of such holder are submitted together to the
Exchange Agent. If a fractional share results from such aggregation, then (in
lieu of such fractional share) the Exchange Agent shall pay to each holder of
shares of Company Common Stock who otherwise would be entitled to receive such
fractional share of Parent Common Stock an amount of cash (without interest)
determined by multiplying (i) the
4.
closing sale price of a share of Parent Common Stock as reported on the NYSE
Composite Tape, as reported in The Wall Street Journal, on the Closing Date by
(ii) the fractional share of Parent Common Stock to which such holder would
otherwise be entitled. Parent will make available to the Exchange Agent any cash
necessary for this purpose.
(g) In the event any Company Certificates shall have been
lost, stolen, or destroyed, the Exchange Agent shall issue in respect of such
lost, stolen, or destroyed Company Certificates, upon the making of an affidavit
of that fact by the holder thereof, such shares of Parent Common Stock, cash for
fractional shares, if any, and dividends or other distributions, if any, as may
be required pursuant to this Article 1; provided, however, that Parent may, in
its discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen, or destroyed Company Certificate to deliver a bond
in such sum as Parent may reasonably direct as indemnity against any claim that
may be made against Parent or the Exchange Agent with respect to such Company
Certificate alleged to have been lost, stolen, or destroyed.
(h) The parties hereto acknowledge that each certificate
representing a share of Parent Common Stock issued pursuant to this Article 1
will, pursuant to the Rights Agreement dated as of June 27, 1991, between Parent
and Norwest Bank Minnesota, N.A. (the "Parent Rights Plan"), also represent the
number of Parent preferred share purchase rights associated with one share of
Parent Common Stock at the Effective Time.
1.6 Exchange of Merger Subsidiary Common Stock. From and after the
Effective Time, each outstanding certificate previously representing shares of
Merger Subsidiary Common Stock shall be deemed for all purposes to evidence
ownership of and to represent the number of shares of Surviving Corporation
Common Stock into which such shares of Merger Subsidiary Common Stock shall have
been converted. Promptly after the Effective Time, the Surviving Corporation
shall issue to Parent a stock certificate or certificates representing such
shares of Surviving Corporation Common Stock in exchange for the certificate or
certificates that formerly represented shares of Merger Subsidiary Common Stock,
which shall be canceled.
1.7 Stock Options.
(a) Except as provided in (c) below with respect to the
Company's 1997 Employee Stock Purchase Plan, as amended (the "Company ESPP"),
each option to purchase shares of Company Common Stock that is outstanding at
the Effective Time, whether or not exercisable and whether or not vested (a
"Company Option") shall, without any action on the part of the Company or the
holder thereof, be assumed by Parent in such manner that Parent (i) is a
corporation "assuming a stock option in a transaction to which Section 424(a)
applies" within the meaning of Section 424 of the Code and the regulations
thereunder or (ii) to the extent that Section 424 of the Code does not apply to
any such Company Option, would be such a corporation were Section 424 of the
Code applicable to such Company Option. From and after the Effective Time, all
references to the Company in the Company Options shall be deemed to refer to
Parent. The Company Options assumed by Parent shall be exercisable upon the same
terms and conditions as under the Company Options (including provisions
regarding vesting and the acceleration thereof) except that (i) such Company
Options shall entitle the holder to
5.
purchase from Parent the number of shares of Parent Common Stock (rounded down
to the nearest whole number of such shares) that equals the product of the
Conversion Ratio multiplied by the number of shares of Company Common Stock
subject to such Company Option immediately prior to the Effective Time, (ii) the
option exercise price per share of Parent Common Stock shall be an amount
(rounded up to the nearest full cent) equal to the option exercise price per
share of Company Common Stock in effect immediately prior to the Effective Time
divided by the Conversion Ratio, and (iii) the Company Options shall vest to the
extent required pursuant to the current terms of such Company Options or other
agreements as described in Section 1.7 of the Company Disclosure Schedule (as
defined below); provided that if such vesting of Company Options or other
provisions with respect to the Company Options would jeopardize the Merger being
accounted for as a "pooling of interests", then the Company shall, subject to
Parent's written consent not to be unreasonably withheld, use reasonable best
efforts to prevent such vesting or effect of other provisions. Except to the
extent required pursuant to the current terms of such Company Options or other
agreements as described in Section 1.7 of the Company Disclosure Schedule (as
defined below), the Company shall not take any action to accelerate the vesting
of any Company Options. Prior to the Effective Time, the Board of Directors of
Parent shall, for purposes of Rule 16b-3(d)(1) promulgated under Section 16 of
the Securities Exchange Act of 1934, and the rules and regulations thereunder
(the "1934 Act"), specifically approve (i) the assumption by Parent of the
Company Options and (ii) the issuance of Parent Common Stock in the Merger to
directors, officers and stockholders of the Company subject to Section 16 of the
1934 Act.
(b) As promptly as practicable after the Effective Time,
Parent shall issue to each holder of a Company Option a written instrument
informing such holder of the assumption by Parent of such Company Option. As
soon as reasonably practicable after the Effective Time (and in any event no
later than five business days after the Effective Time, provided current option
information required therefor is delivered to Parent at the Effective Time),
Parent shall file a registration statement on Form S-8 (or any successor form)
with respect to the shares of Parent Common Stock subject to Company Options and
shall use commercially reasonable efforts to maintain such registration
statement (or any successor form), including the current status of any related
prospectus or prospectuses, for so long as the Company Options remain
outstanding. In addition, Parent shall use commercially reasonable efforts to
cause the shares of Parent Common Stock subject to Company Options to be listed
on the NYSE and such other exchanges as Parent shall determine. Parent shall
take all corporate action necessary to reserve for issuance a sufficient number
of shares of Parent Common Stock for delivery upon exercise of Company Options
pursuant to the terms set forth in this Section 1.7. Parent shall comply with
the terms of the Company Stock Option Plans (as defined in Section 3.3) and use
commercially reasonable efforts to cause those Company Options which qualified
as incentive stock options prior to the Effective Time to continue to qualify as
incentive stock options immediately after the Effective Time.
(c) The current offerings in process as of the date of this
Agreement under the Company ESPP shall continue, and shares shall be issued to
participants thereunder on the next currently scheduled purchase dates
thereunder occurring after the date hereof as provided under, and subject to the
terms and conditions of, the Company ESPP. The Company may, consistent
6.
with past practice, commence a new offering period under the Company ESPP on or
after February 1, 1999 and prior to the Effective Time at an exercise price for
such offering not less than as is required under the Company ESPP. Immediately
prior to the Effective Time, pursuant to Section 12(b) of the Company ESPP, all
offerings under the Company ESPP shall be terminated, and each participant shall
be deemed to have purchased immediately prior to the Effective Time, to the
extent of payroll deductions accumulated by such participant as of such offering
period end, the number of whole shares of Company Common Stock at a per share
price determined pursuant to the provisions of the Company ESPP, and each
participant shall receive a cash payment equal to the balance, if any, of such
accumulated payroll deductions remaining after such purchase of such shares. As
of the Effective Time, each participant shall receive, by virtue of the Merger,
the number of whole shares of Parent Common Stock into which the shares of
Company Common Stock such participant has so purchased under the Company ESPP
have been converted pursuant to the Merger as provided in Section 1.3(a) hereof,
plus the cash value of any fraction of a share of Parent Common Stock as
provided in Section 1.5(f) hereof, plus any dividends or distributions as
provided in Section 1.5(c). The Company ESPP and all purchase rights thereunder
shall terminate effective as of the Effective Time.
1.8 Capitalization Changes. If, between the date of this Agreement and
the Effective Time, the outstanding shares of Parent Common Stock shall have
been changed into or exchanged for a different number of shares or a different
class by reason of any reorganization, reclassification, subdivision,
recapitalization, split-up, combination, exchange of shares, stock dividend or
other similar transaction, the Conversion Ratio and all per-share price amounts
and calculations set forth in this Agreement shall be appropriately adjusted to
reflect such reorganization, reclassification, subdivision, recapitalization,
split-up, combination, exchange of shares, stock dividend or other similar
transaction.
1.9 Certificate of Incorporation of the Surviving Corporation. The
Certificate of Incorporation of the Company, as in effect immediately prior to
the Effective Time, shall be amended to read as set forth on EXHIBIT A to this
Agreement.
1.10 Bylaws of the Surviving Corporation. The Bylaws of Merger
Subsidiary, as in effect immediately prior to the Effective Time, shall, subject
to Section 5.15, be the Bylaws of the Surviving Corporation until thereafter
amended in accordance with applicable law.
1.11 Directors and Officers of the Surviving Corporation. The directors
and officers of Merger Subsidiary immediately prior to the Effective Time shall
be the directors and officers, respectively, of the Surviving Corporation until
their respective successors shall be duly elected and qualified.
ARTICLE 2
CLOSING
2.1 Time and Place. Subject to the satisfaction or waiver of the
provisions of Article 6, the closing of the Merger (the "Closing") shall take
place at 1:00 p.m., local time, on the date that the Required Company
Stockholder Vote (as defined in Section 3.2) is obtained, or as soon
7.
thereafter as, and in any event no later than the second business day after, all
conditions to Closing have been satisfied or waived, or on such other date
and/or at such other time as Parent and the Company may mutually agree. The date
on which the Closing actually occurs is herein referred to as the "Closing
Date." The Closing shall take place at the corporate headquarters offices of
Parent, or at such other place or in such other manner (e.g., by telecopy
exchange of signature pages with originals to follow by overnight delivery) as
the parties hereto may agree.
2.2 Filings at the Closing. At the Closing, subject to the provisions
of Article 6, Parent, Merger Subsidiary, and the Company shall cause the
Certificate of Merger to be filed in accordance with the provisions of Section
252 of the DGCL, and take any and all other lawful actions and do any and all
other lawful things necessary to cause the Merger to become effective.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except: (i) as set forth in a document of even date herewith and
concurrently delivered herewith (the "Company Disclosure Schedule"); (ii) as
specifically described through express disclosure of current, specific facts set
forth in the Company's Annual Report on Form 10-K for the fiscal year ended June
30, 1998 or in any other filing by the Company with the SEC (as defined in
Section 3.4) filed after the date of filing such Form 10-K and prior to the date
hereof and the Company's Registration Statement on Form S-4 with respect to the
acquisition of World Medical (as defined below) as amended or supplemented prior
to the date hereof and previously delivered to Parent; (iii) as specifically
described in the schedules referred to in Section 3.1 of the Stock and Asset
Purchase Agreement dated July 9, 1998 between ▇. ▇. ▇▇▇▇, Inc. and the Company
(the "Bard Schedules"), as amended or supplemented prior to the date hereof and
previously delivered to Parent; or (iv) as specifically described in the
Disclosure Schedule delivered pursuant to Article 2 of the Agreement and Plan of
Merger and Reorganization dated April 10, 1998 between World Medical
Manufacturing Corporation ("World Medical"), Walleye Acquisition Corporation and
the Company (the "World Medical Schedules"), as amended or supplemented prior to
the date hereof and previously delivered to Parent (for purposes of clauses (i),
(ii), (iii) and (iv) above, disclosures in the Company Disclosure Schedule, such
Company SEC filings, the Bard Schedules or the World Medical Schedules shall be
deemed to qualify or limit only those particular representations and warranties
set forth in this Article 3 to which the relevancy of such disclosures is
readily apparent); the Company hereby makes the following representations and
warranties to Parent and Merger Subsidiary:
3.1 Organization. The Company and each subsidiary of the Company
(referred to herein as a "Subsidiary") is an entity duly organized, validly
existing, and in good standing (where such concept is recognized) under the laws
of its respective jurisdiction of organization and has all requisite corporate
power and authority to own, lease, and operate its properties and to carry on
its business as now being conducted, except where the failure to be so
organized, existing or in good standing or to have such corporate power and
authority would not, individually or in the aggregate, have a Company Material
Adverse Effect (as defined below). The Company and each Subsidiary is duly
qualified and in good standing to do business in each jurisdiction in which the
8.
property owned, leased, or operated by it or the nature of the business
conducted by it makes such qualification necessary, except where the failure to
be so qualified or in good standing could not reasonably be expected to have a
Company Material Adverse Effect (as defined below). "Company Material Adverse
Effect" means an effect that, in the aggregate with other favorable and
unfavorable effects arising from breaches of the Company's representations and
warranties, is or would reasonably at the time of such effect be expected to be
materially adverse: (i) to the business, results of operation, or financial
condition of the Company and its Subsidiaries, considered as a whole; (ii) to
the ability of the Surviving Corporation to conduct such business, as presently
conducted, following the Effective Time or the ability of Parent to derive the
benefits of owning all of the stock of the Surviving Corporation; or (iii) to
the Company's ability to perform any of its material obligations under this
Agreement or to consummate the Merger, except in each case for any such effects
resulting from or arising out of (i) this Agreement or the transactions
contemplated by this Agreement or the announcement or pendency of the Merger,
(ii) any occurrence or condition affecting the medical device or stent
industries generally, or (iii) any changes in general economic, regulatory or
political conditions, and provided, that the probability of the Company being
indemnified by ▇.▇. ▇▇▇▇, Inc. against such effects or related losses or
expenses (assuming a claim therefor is asserted as soon as reasonably
practicable) shall be taken into account for purposes of determining whether
there has been a Company Material Adverse Effect. The jurisdictions in which the
Company and each Subsidiary are incorporated are listed in the Company
Disclosure Schedule. The Company has heretofore delivered or made available to
Parent or its advisers complete and accurate copies of the Certificate of
Incorporation and Bylaws of the Company, as currently in effect, and of the
organizational documents and agreements defining the rights of the Company or
any Subsidiary with respect to any material joint ventures, partnerships or
other business in which the Company owns less than substantially all of the
outstanding equity interest. As of the date hereof, neither the Company nor any
Subsidiary, directly or indirectly, owns or controls or has any material equity,
partnership, or other similar ownership interest in any corporation,
partnership, joint venture, or other business association or entity that is
material to the Company and its Subsidiaries, considered as a whole.
3.2 Authorization. The Company has all necessary corporate power and
authority to execute and deliver this Agreement and, subject to obtaining the
necessary approval of its stockholders, to consummate the transactions
contemplated hereby. The execution and delivery by the Company of this Agreement
and the other agreements contemplated hereby to which the Company is a party,
and the consummation by the Company of the transactions contemplated hereby and
thereby, have been duly and validly authorized and approved by the Company's
Board of Directors, no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement, and, subject to obtaining the
approval and adoption of this Agreement and approval of the Merger by a majority
of the shares of the Company Common Stock outstanding as of the record date of
the Company's stockholder meeting (the "Required Company Stockholder Vote"), no
other corporate action on the part of the Company is necessary to consummate the
transactions contemplated hereby. The Merger has been declared advisable by the
Board of Directors of the Company. This Agreement has been duly and validly
executed and delivered by the Company and, assuming due execution and delivery
by the other parties hereto, constitutes the valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, subject
to laws of general application relating to
9.
bankruptcy, insolvency, and the relief of debtors and rules of law governing
specific performance, injunctive relief, or other equitable remedies.
3.3 Capitalization. As of the close of business on November 25, 1998,
the authorized capital stock of the Company consisted of (i) 300,000,000 shares
of Company Common Stock, $.001 par value per share, of which 64,360,781 were
issued and outstanding and 60,000 shares were held in the Company's treasury,
and (ii) 5,000,000 shares of Company Preferred Stock, $.001 par value per share,
of which 1,000,000 have been designated as Series A Preferred Stock and none of
which were issued or outstanding. All issued and outstanding shares of capital
stock of each Subsidiary are owned, beneficially and of record, by the Company,
free and clear of any mortgage, pledge, security interest, encumbrance, lien or
other charge of any kind ("Lien") that would materially affect the Company's
interest in such shares. All issued and outstanding shares of Company Common
Stock have been validly issued, are fully paid and nonassessable, and have not
been issued in violation of and are not currently subject to any preemptive
rights. Except for (i) Company Options to purchase an aggregate of 346,332
shares of Company Common Stock not granted pursuant to any Company Stock Option
Plan (as defined below) and that are listed, together with their respective
exercise prices, in the Company Disclosure Schedule, (ii) Company Options to
purchase an aggregate of 3,901,835 shares of Company Common Stock that were
granted pursuant to the Company's 1996 Equity Incentive Plan and the Company's
1996 Non-Employee Directors' Stock Option Plan (collectively, the "Company Stock
Option Plans") and that are listed, together with their respective exercise
prices, in the Company Disclosure Schedule, (iii) the rights to purchase shares
of Company Common Stock under the Company ESPP (estimated to be approximately
250,000 shares as of the next purchase date under the Company ESPP, based on the
current contribution rates of the participants for the current Company ESPP
offerings in process as of the date of this Agreement) and (iv) the rights
outstanding pursuant to the Company Rights Agreement (as defined in Section
3.19), as of November 25, 1998, there were not any outstanding or authorized
subscriptions, options, warrants, calls, rights, convertible securities,
commitments, restrictions, arrangements, or any other agreements of any
character to which the Company or any Subsidiary was a party that, directly or
indirectly, (A) obligated the Company or any Subsidiary to issue any shares of
capital stock or any securities convertible into, or exercisable or exchangeable
for, or evidencing the right to subscribe for, any shares of capital stock, (B)
called for or related to the sale, pledge, transfer, or other disposition or
encumbrance by the Company or any Subsidiary of any shares of its capital stock,
or (C) to the knowledge of the Company, related to the voting or control of such
capital stock. The Company Disclosure Schedule sets forth a complete and
accurate list of all stock options, warrants, and other rights to acquire
Company Common Stock that were outstanding as of November 25, 1998, including
the name of the holder, the date of grant, acquisition price, number of shares,
exercisability schedule, and, in the case of options, the type of option under
the Code. No consent of holders or participants under the Company Stock Option
Plans or the Company ESPP is required to carry out the provisions of Section
1.7. All actions, if any, required on the part of the Company under the Company
Stock Option Plans or the Company ESPP to allow for the treatment of Company
Options and the Company ESPP as is provided in Section 1.7, have been, or prior
to the Closing will be, validly taken by the Company. In no event will the
aggregate number of shares of Company Common Stock outstanding at the Effective
Time (including all shares subject to then outstanding Company
10.
Options or other rights to acquire or commitments to issue shares of Company
stock, other than the Stock Option Agreement referenced in Section 5.13) exceed
the sum of (w) the outstanding shares of Company Common Stock described in the
first sentence of this Section 3.3, plus (x) any shares of Company Common Stock
issued upon the exercise of outstanding options to purchase Company Common Stock
identified in Section 3.3, plus (y) any shares of Company Common Stock issued by
the Company upon the exercise of rights under the Company ESPP, plus (z) any
additional shares identified in Section 3.3 of the Company Disclosure Schedule
or permitted to be issued under Section 5.1(b) hereof.
3.4 Reports and Financial Statements. The Company has filed all forms,
reports, registration statements, and other documents required to be filed by it
with the Securities and Exchange Commission ("SEC") since January 1, 1995 (such
forms, reports, registration statements, and documents, together with any
amendments thereto, are referred to as the "Company SEC Filings"). As of their
respective dates, the Company SEC Filings (i) complied as to form in all
material respects with the applicable requirements of the Securities Act of
1933, and the rules and regulations thereunder (the "1933 Act") and the 1934
Act, as the case may be, and (ii) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading. The audited financial statements
included or incorporated by reference in the Company SEC Filings, including but
not limited to the Company's audited financial statements at and for the year
ended June 30, 1998 (the "Company June 30, 1998 Financials"), and the unaudited
interim financial statements at and for periods commencing on or after July 1,
1998, included or incorporated by reference in the forms, reports, registration
statements and other documents filed by the Company with the SEC (i) were
prepared in accordance with generally accepted accounting principles (except, in
the case of unaudited statements, as permitted by Form 10-Q filed with the SEC)
applied on a consistent basis during the periods involved (except as may be
indicated therein or in the notes thereto), subject, in the case of unaudited
interim financial statements, to the absence of notes and to year-end
adjustments, (ii) complied as of their respective dates in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, and (iii) fairly present in all material
respects the consolidated financial position of the Company and its consolidated
subsidiaries as of the dates thereof and the consolidated income, cash flows,
and changes in stockholders' equity of the Company and its consolidated
subsidiaries for the periods involved, except as otherwise noted therein and
subject, in the case of unaudited statements, to normal year-end audit
adjustments. The statements of operations included in the audited or unaudited
interim financial statements in the Company SEC Filings do not contain any items
of special or nonrecurring income or any other income not earned in the ordinary
course of business required to be disclosed separately in accordance with
generally accepted accounting principles, except as expressly specified in the
applicable statement of operations or notes thereto.
3.5 Absence of Undisclosed Liabilities. To the best of the Company's
knowledge, neither the Company nor any Subsidiary has any liabilities or
obligations of any nature (whether absolute, accrued, contingent or otherwise)
of the type required to be reflected on or reserved against in, or disclosed in
the notes to, a balance sheet prepared in accordance with U.S.
11.
generally accepted accounting principles except: (a) liabilities or obligations
that are accrued or reserved against in the audited consolidated balance sheet
of the Company and its consolidated subsidiaries as of June 30, 1998 contained
in the Company June 30, 1998 Financials (the "Company Audited Balance Sheet") or
in the unaudited consolidated balance sheet of the Company and its consolidated
subsidiaries as of September 30, 1998 contained in the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended September 30, 1998 (the
"Company Interim Balance Sheet") or referred to in the notes thereto, (b)
liabilities incurred in the ordinary course of business since September 30, 1998
and (c) liabilities or obligations that could not reasonably be expected to have
a Company Material Adverse Effect.
3.6 Consents and Approvals. Except for: (i) any applicable requirements
of the 1933 Act, the 1934 Act, state securities laws, the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976 and the regulations thereunder (the "HSR
Act"), and the antitrust, competition, foreign investment, or similar laws of
any foreign countries or supranational commissions or boards that require
pre-merger notifications or filings with respect to the Merger (collectively,
"Foreign Merger Laws"), (ii) obtaining the Required Company Stockholder Vote and
any stockholder vote necessary under the requirements of Nasdaq with respect to
issuance of shares of Company Common Stock pursuant to the Stock Option
Agreement described in Section 5.13, (iii) the filing and recordation of
appropriate merger documents as required by the DGCL, the execution and delivery
by the Company of this Agreement and the other agreements contemplated hereby to
which the Company is a party and the consummation by the Company of the
transactions contemplated hereby and thereby will not: (a) violate any provision
of the Certificate or Articles of Incorporation or Bylaws of the Company or any
Subsidiary; (b) violate any material statute, rule, regulation, order, or decree
of any federal, state, local, or foreign governmental or regulatory body or
authority (including, but not limited to, the Food and Drug Administration (the
"FDA")) (a "Governmental Body") or any nongovernmental self-regulatory agency by
which the Company or any Subsidiary, or any of their respective properties or
assets may be bound; (c) require any filing by the Company with or permit,
consent, or approval to be obtained by the Company from any Governmental Body or
any nongovernmental self-regulatory agency; or (d) result in any violation or
breach of, or constitute (with or without due notice or lapse of time or both) a
default under, result in the loss of any material benefit under, or give rise to
any right of termination, cancellation, increased payments, or acceleration
under, or result in the creation of any Lien (as defined in Section 3.3) on any
of the properties or assets of the Company or any Subsidiary under, any of the
terms, conditions, or provisions of any note, bond, mortgage, indenture,
license, franchise, permit, authorization, agreement, or other instrument or
obligation to which the Company or any Subsidiary is a party, or by which it or
any of its properties or assets may be bound, except, in the case of clauses (c)
and (d), for any such filings, permits, consents or approvals or violations,
breaches, defaults, or other occurrences that could not reasonably be expected
to prevent or delay consummation of any of the transactions contemplated hereby
in any material respect, or otherwise prevent the Company from performing its
obligations under this Agreement in any material respect, and could not
reasonably be expected to have a Company Material Adverse Effect. Section 3.6 of
the Company Disclosure Schedule lists each note, bond, mortgage, indenture,
license, franchise, permit, authorization, agreement, or other instrument or
obligation to which the Company or any Subsidiary is a party, or by which it or
any of its properties or assets may be bound and which is material to the
12.
Company and its Subsidiaries, considered as a whole, under or with respect to
which the transactions contemplated by this Agreement will result in any
material violation or breach of, or constitute (with or without due notice or
lapse of time or both) a material default under, result in the loss of any
material benefit under, or give rise to any material right of termination,
cancellation, increased payments, or acceleration under, or result in the
creation of any material Lien on any of the material properties or assets of the
Company or any Subsidiary.
3.7 Compliance with Laws. Neither the Company nor any Subsidiary is in
default or violation of any applicable federal, state, local, or foreign laws,
ordinances, regulations, interpretations, judgments, decrees, injunctions,
permits, licenses, certificates, governmental requirements, orders, or other
similar items of any court or other Governmental Body (and including those of
any nongovernmental self-regulatory agency and including environmental laws or
regulations), except for such defaults or violations that could not reasonably
be expected to have a Company Material Adverse Effect. The Company and each
Subsidiary have timely filed or otherwise provided all registrations, reports,
data, and other information and applications with respect to its medical device,
pharmaceutical, consumer, health care, and other governmentally regulated
products (the "Regulated Products") required to be filed with or otherwise
provided to the FDA or any other Governmental Body with jurisdiction over the
manufacture, use, or sale of the Regulated Products, and all regulatory licenses
or approvals in respect thereof are in full force and effect, except where the
failure to file timely such registrations, reports, data, information, and
applications or the failure to have such licenses and approvals in full force
and effect could not reasonably be expected to have a Company Material Adverse
Effect.
3.8 Litigation.
(a) As of the date of this Agreement, there is no
Merger-Related Proceeding pending, or to the knowledge of the Company,
threatened in writing against the Company. (For purposes of this Agreement,
"Merger-Related Proceeding" shall mean any meritorious asserted claim, action,
suit, proceeding, or to the Company's knowledge, governmental investigation or
governmental review of any kind: (i) challenging or seeking to prevent, enjoin
or delay the Merger or any of the other transactions contemplated by this
Agreement, or (ii) seeking material damages from the Company or any of its
Subsidiaries or from Parent or any of its subsidiaries in connection with the
consummation or anticipated consummation of the Merger.)
(b) There are no meritorious asserted claims, actions, suits,
proceedings or, to the knowledge of the Company, governmental investigations or
governmental reviews of any kind pending, or to the knowledge of the Company,
threatened in writing against the Company or any Subsidiary or any asset or
property of the Company or any Subsidiary, other than Merger-Related Proceedings
and except for such claims, actions, suits, proceedings, governmental
investigations or governmental reviews that could not reasonably be expected to
have a Company Material Adverse Effect.
3.9 Absence of Material Adverse Changes. Between June 30, 1998 and the
date hereof, there has not been any (a) Company Material Adverse Effect; (b)
damage, destruction, or loss,
13.
not covered by insurance, that could reasonably be expected to have a Company
Material Adverse Effect; (c) material change by the Company or any Subsidiary in
accounting methods or principles used for financial reporting purposes, except
as required by a change in applicable law or generally accepted accounting
principles and concurred with by the Company's independent public accountants;
or (d) agreement, whether in writing or otherwise, to take any action described
or referenced in this Section 3.9. To the knowledge of the Company, between June
30, 1998 and the date of this Agreement, there have been no events, occurrences
or developments with respect to the business or assets of World Medical that
could, assuming the Company's acquisition of World Medical, reasonably be
expected to have a Company Material Adverse Effect.
3.10 Officers, Directors and Employees. Prior to the date hereof, the
Company has provided to Parent a list that completely and accurately sets forth,
as of the date hereof, the name and current annual salary rate of each current
officer of the Company whose total remuneration for the last fiscal year was, or
for the current fiscal year has been set at, in excess of $150,000, together
with a summary of the bonuses, commissions, additional compensation, and other
like cash benefits, if any, paid or payable to such persons for the last fiscal
year and proposed for the current fiscal year. The Company Disclosure Schedule
completely and accurately sets forth (i) the names of all former officers of the
Company whose employment with the Company has terminated either voluntarily or
involuntarily during the 12-month period preceding the date of this Agreement;
and (ii) the names of the officers (with all positions and titles indicated) and
directors of the Company as of the date hereof. Except as could not reasonably
be expected to have a Company Material Adverse Effect: (i) no unfair labor
practice complaint against the Company or any Subsidiary is pending before the
National Labor Relations Board, and there is no labor strike, slowdown or
stoppage pending or, to the knowledge of the Company, threatened in writing
against or involving the Company or any Subsidiary; (ii) no unionizing efforts
have, to the knowledge of the Company, been made by employees of the Company or
any Subsidiary, (iii) neither the Company nor any Subsidiary is a party to or
subject to any collective bargaining agreement, and no collective bargaining
agreement is currently being negotiated by the Company or any Subsidiary; and
(iv) there is no labor dispute pending or, to the knowledge of the Company,
threatened in writing, between the Company or any Subsidiary and its employees.
3.11 Taxes. Except for such matters that would not have a Company
Material Adverse Effect, (i) the Company and each Subsidiary have filed, or have
obtained extensions to file (which extensions have not expired without filing),
all state, local, United States, foreign, or other tax reports and returns
required to be filed by any of them, (ii) the Company and each Subsidiary have
duly paid, or accrued on their books of account, all taxes (including estimated
taxes) shown as due on such reports and returns (or such extension requests), or
assessed against them, other than taxes being contested in good faith in proper
proceedings, and (iii) to the Company's knowledge, the liabilities and reserves
for taxes reflected on the Company Audited Balance Sheet or the Company Interim
Balance Sheet are adequate to cover all taxes payable by the Company and its
Subsidiaries for all taxable periods and portions thereof ending on or before
the dates thereof. To the Company's knowledge, no tax audits are pending against
and no claims for taxes have been received in writing by the Company or any of
its Subsidiaries, other than audits and claims that are not reasonably expected
to have a Company Material Adverse Effect.
14.
Neither the Company nor any Subsidiary has, with regard to any assets or
property held, acquired or to be acquired by any of them, filed a consent to the
application of Section 341(f)(2) of the Code. Neither the Company nor, to the
knowledge of the Company, any of its Subsidiaries has taken or agreed to take
any action (other than actions contemplated by this Agreement) that would
prevent the Merger from constituting a reorganization qualifying under Section
368(a) of the Code. The Company is not aware of any agreement, plan or other
circumstance that would prevent the Merger from so qualifying under Section
368(a) of the Code.
For the purposes of this Agreement, "tax" shall mean and include taxes,
duties, withholdings, assessments, and charges assessed or imposed by any
governmental authority (together with any interest, penalties and additions to
tax imposed with respect thereto), including but not limited to all federal,
state, county, local, and foreign income, profits, gross receipts, import, ad
valorem, real and personal property, franchise, license, sales, use, value
added, stamp, transfer, withholding, payroll, employment, excise, custom, duty,
and any other taxes, obligations and assessments of any kind whatsoever; "tax"
shall also include any liability for taxes arising as a result of being (or
ceasing to be) a member of any affiliated, consolidated, combined, or unitary
group as well as any liability for taxes under any tax allocation, tax sharing,
tax indemnity, or similar agreement.
3.12 Contracts. The Company Disclosure Schedule lists, and the Company
has heretofore furnished to Parent complete and accurate copies of (or, if oral,
the Company Disclosure Schedule states all material provisions of), (a) every
employment, material consulting, severance or change of control agreement or
arrangement for the benefit of any director, officer, employee, other person or
stockholder of the Company or any Subsidiary or any affiliate thereof in effect
as of the date of this Agreement to which the Company or any Subsidiary is a
party or by which the Company or any Subsidiary or any of their properties or
assets is bound, and (b) every contract with physicians, scientific advisory
board members or material consultants in effect as of the date of this Agreement
to which the Company or any Subsidiary is a party or by which the Company or any
Subsidiary or any of their properties or assets is bound. Neither the Company
nor any Subsidiary is in material violation of or in default under any contract,
plan, agreement, understanding, arrangement or obligation that is material to
the Company and its Subsidiaries considered as a whole, except for such
violations or defaults that could not reasonably be expected to have a Company
Material Adverse Effect. As of the date of this Agreement, neither the Company
nor any Subsidiary is a party to any contract, plan, agreement, understanding,
arrangement or obligation (i) which materially restricts the Company's, or after
the Merger would materially restrict the Surviving Corporation's or Parent's,
ability to conduct any material line of business, (ii) which imposes on the
Company or any Subsidiary material obligations (including, without limitation,
to pay material milestone payments or material license fees) not reflected in
the Company's financial statements included within the Company's SEC Filings, or
(iii) that would be required to be filed with the SEC in a filing to which
paragraph (b)(10) of Item 601 of Regulation S-K of the Rules and Regulations of
the SEC is applicable, which has not been so filed. To the Company's knowledge,
as of the date hereof, World Medical is not a party to any contract, plan,
agreement, understanding, arrangement or obligation which materially restricts
World Medical's, or after the Merger would materially restrict the Surviving
Corporation's or Parent's, ability to conduct any material line of business.
15.
3.13 Intellectual Property Rights. For purposes of this Section,
"Intellectual Property" shall mean patents, registered trademarks, registered
trade names, registered service marks, registered copyrights, and all
applications for or registrations of any of the foregoing. As of the date of
this Agreement, the Company Disclosure Schedule contains a complete and accurate
list of all material Intellectual Property owned by or licensed exclusively or
(with respect to patents material to the products or operations of the Company
which would be infringed by the Company, any Subsidiary or their products but
for such license) non-exclusively to the Company or any Subsidiary (the "Company
Intellectual Property"). The Company Intellectual Property is owned by or
licensed to the Company or a Subsidiary free and clear of any Lien (as defined
in Section 3.3) that would materially adversely affect the Company's rights
thereunder. No claim is being asserted and, to the knowledge of the Company, no
person is threatening in a writing delivered to the Company to assert a claim,
with respect to the use of the Company Intellectual Property owned by the
Company or challenging or questioning the validity or effectiveness of any
license or agreement with respect to any Company Intellectual Property, except
for such claims that could not reasonably be expected to have a Company Material
Adverse Effect. To the knowledge of the Company, neither the use by the Company
or any Subsidiary of the Company Intellectual Property in the present conduct of
its business nor any product or service of the Company or any Subsidiary
infringes on the valid intellectual property rights of any person in a manner
that could reasonably be expected to have a Company Material Adverse Effect.
Except as could not reasonably be expected to have a Company Material Adverse
Effect, (i) all Company Intellectual Property listed in the Company Disclosure
Schedule that is owned by the Company has the status indicated therein and,
unless provided otherwise, all applications are still pending in good standing
and have not been abandoned, and (ii) to the knowledge of the Company, the
Company Intellectual Property is valid and is not being challenged in any
judicial or administrative (excluding any patent-office or registration)
proceeding. To the knowledge of the Company, no person or entity nor such
person's or entity's business or products has infringed, or misappropriated any
Company Intellectual Property, or currently is infringing, or misappropriating
any Company Intellectual Property, except as could not reasonably be expected to
have a Company Material Adverse Effect.
3.14 Benefit Plans.
(a) Neither the Company nor any Subsidiary sponsors,
maintains, contributes to, or has, during the five year period ending on the
date of this Agreement, sponsored, maintained, or contributed to or been
required to contribute to, any "employee pension benefit plan" ("Pension Plan"),
as such term is defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), including, solely for the purpose of
this subsection, a plan excluded from coverage by Section 4(b)(5) of ERISA. Each
such Pension Plan presently maintained by the Company or any Subsidiary is, in
all material respects, in compliance with applicable provisions of ERISA, the
Code, and other applicable law and the Company or such Subsidiary has performed
all of its obligations under such Pension Plan except for such obligations that
could not reasonably be expected to have a Company Material Adverse Effect.
16.
(b) Neither the Company nor any Subsidiary sponsors,
maintains, contributes to, or has, during the five year period ending on the
date of this Agreement, sponsored, maintained, or contributed to or been
required to contribute to, any Pension Plan that is subject to Title IV of
ERISA.
(c) Neither the Company nor any Subsidiary sponsors,
maintains, or contributes to any "employee welfare benefit plan" ("Welfare
Plan"), as such term is defined in Section 3(1) of ERISA, whether insured or
otherwise, and any such Welfare Plan presently maintained by the Company or any
Subsidiary is, in all material respects, in compliance with the provisions of
ERISA, the Code, and all other applicable laws, including, but not limited to,
Section 4980B of the Code and the regulations thereunder, and Part 6 of Title I
of ERISA. Neither the Company nor any Subsidiary has established or contributed
to any "voluntary employees' beneficiary association" within the meaning of
Section 501(c)(9) of the Code.
(d) Neither the Company nor any Subsidiary currently maintains
or contributes to any oral or written bonus, profit-sharing, compensation
(incentive or otherwise), commission, stock option, or other stock-based
compensation, retirement, severance, change of control, vacation, sick or
parental leave, dependent care, deferred compensation, cafeteria, disability,
hospitalization, medical, death, retiree, insurance, or other benefit or welfare
or other similar plan, policy, agreement, trust, fund, or arrangement providing
for the remuneration or benefit of all or any employees, directors or any other
person, that is neither a Pension Plan nor a Welfare Plan (collectively, the
"Compensation Plans").
(e) With respect to the Pension Plans, Welfare Plans or
Compensation Plans, no event has occurred and, to the knowledge of the Company,
there exists no condition or set of circumstances, in connection with which the
Company or any of its Subsidiaries could be subject to any liability under the
terms of such Plans (other than the payment of benefits thereunder), ERISA, the
Code or any other applicable law which could reasonably be expected to have a
Company Material Adverse Effect.
(f) The Internal Revenue Service has issued favorable
determination letters with respect to all Company and Subsidiary Pension Plans
that are intended to be qualified under Section 401(a) of the Code. The Company
has provided to Parent the written documents setting forth the terms of all
Pension Plans, Welfare Plans, Compensation Plans, and related agreements, and
complete and accurate copies of all annual reports (Form 5500), favorable
determination letters, current summary plan descriptions, and all employee
handbooks or manuals. The Company has provided to Parent (i) copies of all
employment agreements with officers of any of the Company, its U.S. Subsidiaries
or, to the extent reasonably available, the Company's non-U.S. Subsidiaries (or
copies of forms of agreements setting forth representative employment terms and
conditions); (ii) copies of all severance, bonus or incentive agreements,
programs and policies of any of the Company, any U.S. Subsidiary or, to the
extent reasonably available, the Company's non-U.S. Subsidiaries with or
relating to any of its employees; and (iii) copies of all plans, programs,
agreements and other arrangements of any of the Company, any U.S. Subsidiary or,
to the extent reasonably available, the Company's non-U.S. Subsidiaries with or
relating to any of its employees which contain change in control provisions.
With respect to any items that
17.
would be described in the immediately preceding sentence but for the fact that
such copies relate to non-U.S. Subsidiaries and are not reasonably available to
the Company, the Company (i) shall deliver copies thereof to Parent prior to the
Effective Time, and (ii) represents and warrants to Parent that such items will
not, individually or in the aggregate, be material to the Company and its
Subsidiaries.
(g) The execution by the Company of, and performance by the
Company of the transactions contemplated in, this Agreement will not (either
alone or upon the occurrence of any additional or subsequent events) constitute
an event under any Pension Plan, Welfare Plan, Compensation Plan, or other
arrangement that will result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits, or obligation to fund benefits. No amount that could be
received (whether in cash or property or the vesting of property) as a result of
any of the transactions contemplated by this Agreement by any employee, officer,
or director of the Company or any of its affiliates who is a "disqualified
individual" (as such term is defined in Prop. Treas. Reg. Section 1.280G-1)
under any Pension Plan, Welfare Plan, or Compensation Plan currently in effect
would be an "excess parachute payment" (as such term is defined in Section
280G(b)(1) of the Code).
3.15 Minute Books. The Company has previously made available to Parent
or its representatives all of its minutes of meetings of and corporate actions
or written consents by the stockholders, Board of Directors, and committees of
the Board of Directors of the Company.
3.16 No Finders. No act of the Company or any Subsidiary has given or
will give rise to any claim against any of the parties hereto for a brokerage
commission, finder's fee, or other like payment in connection with the
transactions contemplated herein, except payments in the amounts specified in
the Company Disclosure Schedule to those parties identified thereon who have
acted as a finder for the Company or have been retained by the Company as
financial advisors pursuant to the agreements or other documents described in
the Company Disclosure Schedule, copies of which have been provided or made
available to Parent or its advisors prior to the date of this Agreement.
3.17 Proxy Statement. The Proxy Statement/Prospectus (as defined in
Section 5.5 hereof) and any amendments or supplements thereto will comply as to
form in all material respects with all applicable laws, and none of the
information supplied by the Company specifically for inclusion or incorporation
therein or in any amendments or supplements thereto, or in any schedules
required to be filed with the SEC in connection therewith, will, at the date the
Proxy Statement/Prospectus (or any amendment or supplement thereto) is first
mailed to stockholders, or at the time of the Company 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 light of the circumstances under which they were made, not
misleading; provided, however, that no representation or warranty is made by the
Company with respect to information relating to Parent or any affiliate of
Parent supplied by Parent specifically for inclusion in the Proxy
Statement/Prospectus.
18.
3.18 Fairness Opinion. The Company has received an opinion from ▇▇
▇▇▇▇▇ Securities Corporation to the effect that, as of the date of such opinion,
the Conversion Ratio is fair, from a financial point of view, to the holders of
Company Common Stock, and the Company will promptly deliver a copy of such
opinion to Parent.
3.19 State Takeover Laws; Rights Plan.
(a) The Board of Directors of the Company has approved the
transactions contemplated by this Agreement, such that the provisions of Section
203 (entitled "Business Combinations with Interested Shareholders") of the DGCL
will not apply to this Agreement or the Agreements to Facilitate Merger or the
Stock Option Agreement or any of the transactions contemplated hereby or
thereby.
(b) The Company has taken all actions and completed all
amendments, if any, necessary or appropriate so that (i) the Rights Agreement
dated as of February 26, 1997, as amended, between the Company and BankBoston,
N.A. (the "Company Rights Agreement"), is inapplicable to the transactions
contemplated by the Agreements to Facilitate Merger, the Stock Option Agreement
and this Agreement, (ii) the execution of this Agreement, the Stock Option
Agreement, and the Agreements to Facilitate Merger, and the consummation of the
transactions contemplated hereby and thereby, do not and will not (w) result in
Parent being an "Acquiring Person" (as such term is defined in the Company
Rights Agreement), (x) result in the ability of any person to exercise any
Rights under the Company Rights Agreement, (y) enable or require the Rights to
separate from the shares of Company Common Stock to which they are attached or
to be triggered or become exercisable, or (z) otherwise result in the occurrence
of a "Distribution Date" or "Shares Acquisition Date" (as such terms are defined
in the Company Rights Agreement), and (iii) immediately prior to the Effective
Time, the Rights under the Company Rights Agreement shall, without any payment
by the Company or Parent, expire with neither the Company nor Parent having any
obligations under, and no holder of Rights having any rights under, the Company
Rights Agreement.
3.20 Merger Filings. The information as to the Company or any of its
affiliates or stockholders included in the Company's filing, or submitted to
Parent and Merger Subsidiary for inclusion in their filing, if any, required to
be submitted under the HSR Act or under any Foreign Merger Laws shall be true,
correct, and complete in all material respects and shall comply in all material
respects with the applicable requirements of the HSR Act, the rules and
regulations issued by the Federal Trade Commission pursuant thereto, and Foreign
Merger Laws.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUBSIDIARY
Except (i) as set forth in a document of even date herewith and
concurrently delivered herewith (the "Parent Disclosure Schedule") or (ii) as
specifically described through express disclosure of current, specific facts set
forth in Parent's Annual Report on Form 10-K for the fiscal year ended April 30,
1998 or in any other filing by Parent with the SEC filed after the date
19.
of filing such Form 10-K and prior to the date hereof (for purposes of clauses
(i) and (ii) above, disclosures in the Parent Disclosure Schedule and such
Parent SEC filings shall be deemed to qualify or limit only those particular
representations and warranties set forth in this Article 4 to which the
relevancy of such disclosures is readily apparent), Parent and Merger Subsidiary
hereby jointly and severally make the following representations and warranties
to the Company:
4.1 Organization. Parent is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Minnesota. Merger
Subsidiary is a corporation duly organized and validly existing under the laws
of the State of Delaware. Each of Parent and Merger Subsidiary has all requisite
corporate power and authority to own, lease, and operate its properties and to
carry on its business as now being conducted, except where the failure to be so
organized, existing or in good standing or to have such corporate power and
authority would not, individually or in the aggregate, have a Parent Material
Adverse Effect (as defined below). Each of Parent and Merger Subsidiary is duly
qualified and in good standing to do business in each jurisdiction in which the
property owned, leased, or operated by it or the nature of the business
conducted by it makes such qualification necessary, except where the failure to
be so qualified or in good standing could not reasonably be expected to have a
Parent Material Adverse Effect (as defined below). "Parent Material Adverse
Effect" means an effect that, in the aggregate with other favorable and
unfavorable effects arising from breaches of Parent's and Merger Subsidiary's
representations and warranties, is or would reasonably at the time of such
effect be expected to be materially adverse: (i) to the business, results of
operation, or financial condition of Parent and its subsidiaries, considered as
a whole, or (ii) to Parent's ability to perform any of its material obligations
under this Agreement or to consummate the Merger, except in each case for any
such effects resulting from or arising out of (i) this Agreement or the
transactions contemplated by this Agreement or the announcement or pendency of
the Merger, (ii) any occurrence or condition affecting the medical device
industry generally or affecting Parent's principal market sector generally, or
(iii) any changes in general economic, regulatory or political conditions.
Parent has heretofore delivered or made available to the Company or its advisors
complete and accurate copies of the Articles of Incorporation and Bylaws of
Parent, as currently in effect.
4.2 Authorization. Each of Parent and Merger Subsidiary has all
necessary corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery by Parent and Merger Subsidiary of this Agreement and the other
agreements contemplated hereby to which Parent or Merger Subsidiary is a party,
and the consummation by Parent and Merger Subsidiary of the transactions
contemplated hereby and thereby, have been duly and validly authorized and
approved by the Boards of Directors of Parent and Merger Subsidiary and by
Parent as the sole shareholder of Merger Subsidiary, and no other corporate
proceedings on the part of Parent and Merger Subsidiary, and no vote, consent or
approval of Parent's shareholders, are necessary to authorize this Agreement or
to consummate the transactions contemplated hereby. The Merger has been declared
advisable by the Board of Directors of Merger Subsidiary. This Agreement has
been duly and validly executed and delivered by each of Parent and Merger
Subsidiary and, assuming due execution and delivery by the Company, constitutes
the valid and binding obligation of Parent and Merger Subsidiary, enforceable
against each of them in accordance with its terms,
20.
subject to laws of general application relating to bankruptcy, insolvency, and
the relief of debtors and rules of law governing specific performance,
injunctive relief, or other equitable remedies.
4.3 Capitalization. As of October 23, 1998, the authorized capital
stock of Parent consisted of (a) 800,000,000 shares of Common Stock with a par
value of $.10 per share, of which there were 489,262,955 shares issued and
outstanding and no shares held in Parent's treasury, and (b) 2,500,000 shares of
Preferred Stock with a par value of $1.00 per share, of which there were no
shares issued and outstanding. The authorized capital stock of Merger Subsidiary
consists of 2,500 shares of Merger Subsidiary Common Stock, 100 of which are
issued and outstanding and owned by Parent. All issued and outstanding shares of
Parent Common Stock and Merger Subsidiary Common Stock are, and the shares of
Parent Common Stock to be issued and delivered in the Merger pursuant to Article
1 hereof shall be, at the time of issuance and delivery, validly issued, fully
paid, nonassessable, and free of preemptive rights. The shares of Parent Common
Stock to be issued and delivered in the Merger pursuant to Article 1 hereof
shall be registered under the 1933 Act and duly listed for trading on the NYSE,
subject to official notice of issuance.
4.4 Consents and Approvals. Except for (i) any applicable requirements
of the 1933 Act, the 1934 Act, state securities laws, the NYSE, the HSR Act, and
Foreign Merger Laws, and (ii) the filing and recordation of appropriate merger
documents as required by the DGCL, the execution and delivery by Parent and
Merger Subsidiary of this Agreement and the other agreements contemplated hereby
to which Parent and Merger Subsidiary are parties, and the consummation of the
transactions contemplated hereby and thereby will not: (a) violate any provision
of the Certificate or Articles of Incorporation or Bylaws of Parent or Merger
Subsidiary; (b) violate any material statute, rule, regulation, order, or decree
of any Governmental Body or any nongovernmental self-regulatory agency by which
Parent or any of its subsidiaries or any of their respective properties or
assets may be bound; (c) require any filing by Parent or Merger Subsidiary with
or permit, consent, or approval to be obtained by Parent or Merger Subsidiary
from any (Governmental Body or any nongovernmental self-regulatory agency; or
(d) result in any violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default under, result in the loss of any
material benefit under, or give rise to any right of termination, cancellation,
increased payments, or acceleration under, or result in the creation of any Lien
on any of the properties or assets of Parent or its subsidiaries under, any of
the terms, conditions, or provisions of any note, bond, mortgage, indenture,
license, franchise, permit, agreement, or other instrument or obligation to
which Parent or any of its subsidiaries is a party, or by which any of them or
any of their respective properties or assets may be bound, except, in the case
of clauses (c) and (d), for any such filings, permits, consents or approvals or
violations, breaches, defaults, or other occurrences that could not reasonably
be expected to prevent or delay consummation of any of the transaction
contemplated hereby in any material respect, or otherwise prevent Parent from
performing its obligations under this Agreement in any material respect, and
could not reasonably be expected to have a Parent Material Adverse Effect.
4.5 Reports; Financial Statements; Absence of Changes. Parent has filed
all forms, reports, registration statements, and other documents required to be
filed by it with the SEC since May 1, 1995 (such forms, reports, registration
statements and other documents, together with any
21.
amendments thereto, are referred to as the "Parent SEC Filings"). As of their
respective dates, the Parent SEC Filings (i) complied as to form in all material
respects with the applicable requirements of the 1933 Act and the 1934 Act, as
the case may be, and (ii) did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances under which
they were made, not misleading. The audited financial statements included or
incorporated by reference in the Parent SEC Filings, including but not limited
to Parent's audited financial statements at and for the year ended April 30,
1998 (the "Parent April 30, 1998 Financials"), and the unaudited interim
financial statements at and for periods commencing on or after May 1, 1998
included or incorporated by reference in the forms, reports, registration
statements and other documents filed by Parent with the SEC (i) were prepared in
accordance with generally accepted accounting principles (except, in the case of
unaudited statements, as permitted by Form 10-Q filed with the SEC) applied on a
consistent basis during the periods involved (except as may be indicated therein
or in the notes thereto) subject, in the case of unaudited interim financial
statements, to the absence of notes and to year-end adjustments, (ii) complied
as of their respective dates in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, and (iii) fairly present in all material respects the consolidated
financial position of Parent and its consolidated subsidiaries as of the dates
thereof and the consolidated income, cash flows, and changes in shareholders'
equity of Parent and its consolidated subsidiaries for the periods involved,
except as otherwise noted therein and subject, in the case of unaudited
statements, to normal year-end audit adjustments. The statements of operations
included in the audited or unaudited interim financial statements in the Parent
SEC Filings do not contain any items of special or nonrecurring income or any
other income not earned in the ordinary course of business required to be
disclosed separately in accordance with generally accepted accounting
principles, except as expressly specified in the applicable statement of
operations or notes thereto.
4.6 Registration Statement. The Registration Statement (as defined in
Section 5.5 hereof) and any amendments or supplements thereto will comply as to
form in all material respects with the 1933 Act, and none of the information
supplied by Parent specifically for inclusion or incorporation therein or in any
amendments or supplements thereto, or in any schedules required to be filed with
the SEC in connection therewith, will, at the time the Registration Statement
becomes effective, at the date the Proxy Statement/Prospectus (or any amendment
or supplement thereto) is first mailed to stockholders, or at the time of the
Company Stockholders' Meeting, or at the Effective Time, 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 light of
the circumstances under which they were made, not misleading, provided, however,
that no representation or warranty is made by Parent with respect to information
supplied by the Company or any affiliate of the Company specifically for
inclusion in the Registration Statement.
4.7 No Finders. No act of Parent or Merger Subsidiary has given or will
give rise to any claim against any of the parties hereto for a brokerage
commission, finder's fee, or other like payment in connection with the
transactions contemplated herein, except for payments to ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. for
financial advisory services to Parent in connection herewith.
22.
4.8 Absence of Undisclosed Liabilities. To the best of Parent's
knowledge, neither Parent nor any of its subsidiaries has any liabilities or
obligations of any nature (whether absolute, accrued, contingent or otherwise)
of the type required to be reflected on or reserved against in, or disclosed in
the notes to, a balance sheet prepared in accordance with U.S. generally
accepted accounting principles except: (a) liabilities or obligations that are
accrued or reserved against in the audited consolidated balance of Parent as of
April 30, 1998 contained in the Parent SEC Filings or in the unaudited
consolidated balance sheet of Parent as of July 31, 1998 contained in Parent's
Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 1998 or
referred to in the notes thereto, (b) liabilities incurred in the ordinary
course of business since July 31, 1998 and (c) liabilities or obligations that
could not reasonably be expected to have a Parent Material Adverse Effect.
4.9 Compliance with Laws. Neither Parent nor any of its subsidiaries is
in default or violation of any applicable federal, state, local or foreign laws,
ordinances, regulations, interpretations, judgments, decrees, injunctions,
permits, licenses, certificates, governmental requirements, orders or other
similar items of any court or other Governmental Body (and including those of
any nongovernmental self-regulatory agency and including environmental laws or
regulations), except for such defaults or violations that could not reasonably
be expected to have a Parent Material Adverse Effect. Parent and each of its
subsidiaries has timely filed or otherwise provided all registrations, reports,
data and other information and applications with respect to its Regulated
Products required to be filed with or otherwise provided to the FDA or any other
Governmental Body with jurisdiction over the manufacture, use of sale of the
Regulated Products, and all regulatory licenses or approvals in respect thereof
are in full force and effect, except where the failure to file timely such
registrations, reports, data, information and applications or the failure to
have such licenses and approvals in full force and effect could not reasonably
be expected to have a Parent Material Adverse Effect.
4.10 Litigation.
(a) As of the date of this Agreement, there is no
Merger-Related Proceeding pending, or to the knowledge of Parent, threatened in
writing against Parent.
(b) There are no meritorious asserted claims, actions, suits,
proceedings or to the knowledge of Parent, governmental investigations or
governmental reviews of any kind pending, or to the knowledge of Parent,
threatened in writing against Parent or any of its subsidiaries or any asset or
property of Parent or any of its subsidiaries, other than Merger-Related
Proceedings and except for such claims, actions, suits, proceedings,
governmental investigations or governmental reviews that could not reasonably be
expected to have a Parent Material Adverse Effect.
4.11 Absence of Material Adverse Changes. Between April 30, 1998 and
the date hereof, there has not been any (a) Parent Material Adverse Effect, (b)
damage, destruction or loss, not covered by insurance, that could reasonably be
expected to have a Parent Material Adverse Effect, (c) material change by Parent
or any of its subsidiaries in accounting methods or principles used for
financial reporting purposes, except as required by a change in applicable law
23.
or generally accepted accounting principles and concurred with by Parent's
independent public accountants, or (d) agreement, whether in writing or
otherwise, to take any action described or referenced in this Section 4.11. To
the knowledge of Parent, between April 30, 1998 and the date of this Agreement,
there have been no events, occurrences or developments with respect to the
business or assets of either AVECOR Cardiovascular Inc. or Sofamor ▇▇▇▇▇ Group,
Inc. that could, assuming Parent's acquisition of either such entity, reasonably
be expected to have a Parent Material Adverse Effect.
4.12 Reorganization. Neither Parent nor, to the knowledge of Parent,
any of its subsidiaries has taken or agreed to take any action (other than
actions contemplated by this Agreement) that would prevent the Merger from
constituting a reorganization qualifying under Section 368(a) of the Code.
Parent is not aware of any agreement, plan or other circumstances that would
prevent the Merger from so qualifying under Section 368(a) of the Code.
4.13 Merger Filings. The information as to Parent and Merger Subsidiary
or any of their affiliates or shareholders included in Parent's filing, or
submitted to the Company for inclusion in its filing, if any, required to be
submitted under the HSR Act or under any Foreign Merger Laws shall be true,
correct, and complete in all material respects and shall comply in all material
respects with the applicable requirements of the HSR Act, the rules and
regulations issued by the Federal Trade Commission pursuant thereto, and Foreign
Merger Laws.
ARTICLE 5
COVENANTS
5.1 Conduct of Business of the Company. Except as contemplated by this
Agreement or as set forth in Section 5.1 of the Company Disclosure Schedule,
unless Parent shall otherwise consent in writing (such consent not to be
unreasonably withheld or delayed), during the period from the date of this
Agreement to the Effective Time, the Company and each Subsidiary will, and the
Company shall use commercially reasonable efforts to cause to World Medical to,
(i) conduct its respective operations, to the extent commercially reasonable,
according to its ordinary and usual course of business and consistent with past
practice, and (ii) use commercially reasonable efforts to preserve substantially
intact its respective business organizations, to keep available the services of
its respective officers and employees and to maintain satisfactory relationships
with licensors, licensees, suppliers, contractors, distributors, physicians,
consultants, customers, and others having material business relationships with
it. The Company will promptly advise Parent of any material change in the
management, present or planned business, properties, liabilities, results of
operations, or financial condition of the Company or any material Subsidiary.
The Company will, prior to distributing or otherwise circulating any notices,
directives, or other communications directed to all or groups of customers,
vendors, employees, distributors, or others associated with its business
relating to the transactions contemplated hereby or to the operation of business
after consummation of such transactions, consult with Parent and give Parent
reasonable opportunity to comment thereon. Without limiting the generality of
the foregoing, and except as otherwise expressly provided in or contemplated by
this Agreement or as set forth in Section 5.1 of the Company Disclosure
24.
Schedule, from the date of this Agreement until the Effective Time, neither the
Company nor any Subsidiary will, without the prior written consent of Parent
(such consent not to be unreasonably withheld or delayed):
(a) amend its Certificate or Articles of Incorporation or,
pursuant to action by the Company's Board of Directors, amend its Bylaws;
(b) authorize for issuance, issue, sell, pledge, or deliver
(whether through the issuance or granting of additional options, warrants,
commitments, subscriptions, rights to purchase, or otherwise) any stock of any
class or any securities convertible into shares of stock of any class (other
than, so long as treatment of the Merger as a pooling of interests is not
reasonably expected by Parent's or the Company's independent accounts to be
jeopardized, the (i) issuance of shares of Company Common Stock pursuant to the
exercise of stock options outstanding on the date of this Agreement or granted
in accordance with this subsection (b), (ii) the issuance, in the ordinary
course of business and consistent with past practice, of stock options to
purchase, at not less than the fair market value on the date of grant, up to the
number of shares specified in Section 5.1 of the Company Disclosure Schedule,
and (iii) subject to the limitations set forth in Section 1.7(c), grant of
purchase rights pursuant to the Company ESPP or the issuance of shares upon
exercise of such purchase rights);
(c) split, combine, or reclassify any shares of its capital
stock, declare, set aside, or pay any dividend or other distribution (whether in
cash, stock, or property or any combination thereof) in respect of its capital
stock; or redeem or otherwise acquire any shares of its capital stock or its
other securities (other than, so long as treatment of the Merger as a pooling of
interests is not jeopardized, pursuant to contractual agreements with employees,
directors or consultants existing as of the date of this Agreement); or amend or
alter any material term of any of its outstanding securities;
(d) other than indebtedness incurred in the ordinary course of
business and consistent with past practice and other than intercompany
indebtedness, create, incur or assume any indebtedness for borrowed money, or
assume, guarantee, endorse, or otherwise agree to become liable or responsible
for the obligations of any other person, or make any loans, advances or capital
contributions to, or investments in, any other person; or create, incur or
assume any Lien on any material asset other than any Lien that would not
materially adversely affect the Company's or any Subsidiary's rights with
respect thereto;
(e) (i) increase in any manner the compensation of any of its
directors, officers, employees, or consultants, or accelerate the payment of any
such compensation, except in each case in the ordinary course of business and
consistent with past practice (including, without limitation, annual year end
increases and accelerated payments customarily made upon termination of
employment) or consistent with existing contractual commitments or as required
by applicable law; (ii) pay or accelerate or otherwise modify in any material
respect the payment, vesting, exercisability, or other feature or requirement of
any pension, retirement allowance, severance, change of control, stock option,
or other employee benefit to any of its directors, officers, employees or
consultants except as required by any existing plan, agreement, or
25.
arrangement; or (iii) except for normal increases in the ordinary course of
business in accordance with its customary past practices or consistent with
existing contractual commitments or as required by applicable laws, commit
itself to any additional or increased pension, profit-sharing, bonus, incentive,
deferred compensation, group insurance, severance, change of control, retirement
or other benefit, plan, agreement, or arrangement, or to any employment or
consulting agreement, with or for the benefit of any person, or amend any of
such plans or any of such agreements in existence on the date hereof (except any
amendment required by law or that would not materially increase benefits under
the relevant plan);
(f) except in the ordinary course of business and consistent
with past practice or pursuant to contractual obligations existing on the date
hereof, sell, transfer, mortgage, or otherwise dispose of or encumber any assets
or properties material to the Company and its Subsidiaries, considered as a
whole other than any Lien that would not materially adversely affect the
Company's and its Subsidiaries' rights with respect to such assets or
properties;
(g) acquire or agree to acquire (i) by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business of any corporation, partnership, joint
venture, association, or other business organization or division thereof or (ii)
any assets that are material, individually or in the aggregate, to the Company
and its Subsidiaries, considered as a whole, except as provided in subsection
(h) below and except purchases of inventory in the ordinary course of business
consistent with past practice;
(h) make or agree to make any new capital expenditure or
expenditures, except for up to $30,000,000 of capital expenditures pursuant to
the Company's budget previously provided to Parent;
(i) enter into, amend in any material respect, or terminate
any joint ventures or any other agreements, commitments, or contracts that are
material to the Company and its Subsidiaries, considered as a whole (except
agreements, commitments, or contracts expressly provided for or contemplated by
this Agreement or for the purchase, sale, or lease of goods, services, or
properties in the ordinary course of business, consistent with past practice);
(j) enter into or terminate, or amend, extend, renew, or
otherwise modify in any material respect (including, but not limited to, by
default or by failure to act) any material distribution, OEM, independent sales
representative, noncompetition, licensing, franchise, research and development,
supply, or similar contract, agreement, or understanding (except agreements,
commitments, or contracts expressly provided for or contemplated by this
Agreement or for the purchase, sale, or lease of goods, services, or properties
in the ordinary course of business, consistent with past practice), or enter
into any contract, plan, agreement, understanding, arrangement or obligation
which materially restricts the Company's, or after the Merger would restrict the
Surviving Corporation's or Parent's, ability to conduct any material line of
business;
(k) change in any material respect its credit policy as to
sales of inventories or collection of receivables or its inventory consignment
practices;
26.
(l) remove or permit to be removed from any building,
facility, or real property any material machinery, equipment, fixture, vehicle,
or other personal property or parts thereof, except in the ordinary course of
business or unless the same is replaced with similar items of equal quality;
(m) alter or revise its accounting principles, procedures,
methods, or practices in any material respect, except as required by applicable
law or by a change in generally accepted accounting principles and concurred
with by the Company's independent public accountants;
(n) institute, settle, or compromise any claim, action, suit,
or proceeding pending or threatened by or against it involving amounts in excess
of $1,000,000, at law or in equity or before any Governmental Body (including,
but not limited to, the FDA) or any nongovernmental self-regulatory agency;
(o) knowingly take any action that would render any
representation, warranty, covenant, or agreement of the Company in this
Agreement inaccurate or breached such that the conditions in Section 6.2 will
not be satisfied as of the Closing Date;
(p) fail to use commercially reasonable efforts to cause World
Medical to refrain from taking any actions described in subsections (d), (e),
(f), (g), (i), (j), (k), (l), (m), (n), or (o) above; or
(q) agree, whether in writing or otherwise, to do any of the
foregoing.
5.2 Conduct of Business of Parent. Except as contemplated by this
Agreement, from the date of this Agreement until the Effective Time, Parent will
not do, and will not permit any of its subsidiaries to do, any of the following
without the prior written consent of the Company (such consent not to be
unreasonably withheld or delayed):
(a) combine or reclassify any shares of its capital stock,
declare, set aside or pay any extraordinary dividend or other distribution
(whether in cash, stock or property or any combination thereof, but excluding a
stock split effected in the form of a stock dividend) in respect of its capital
stock, or redeem or otherwise acquire (other than pursuant to Parent's
previously established stock repurchase program or as would not violate Section
5.21) any shares of its capital stock or amend or alter any material term of any
of its outstanding securities;
(b) acquire or agree to acquire, by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any other
manner, any business of any corporation, partnership, joint venture, association
or other business organization or division thereof, or otherwise acquire or
agree to acquire, or dispose of or agree to dispose of, any assets of any
person, which, in each case, could reasonably be expected to delay materially
the consummation of, or increase materially the risk of non-consummation of, the
transactions contemplated by this Agreement;
(c) alter or revise its accounting principles, procedures,
methods or practices in any material respect, except as required by applicable
law or regulation or by a change in
27.
generally accepted accounting principles and concurred with by Parent's
independent public accountants;
(d) knowingly take any action that would result in a failure
to maintain the trading of Parent Common Stock on the NYSE;
(e) knowingly take any action, or knowingly fail to take any
action, that would render any representation, warranty, covenant or agreement of
Parent in this Agreement inaccurate or breached such that the conditions in
Section 6.3 will not be satisfied; or
(f) fail to use commercially reasonable efforts to cause
AVECOR Cardiovascular Inc. and Sofamor ▇▇▇▇▇ Group, Inc. to refrain from taking
any actions described in subsection (e) above; or
(g) agree, whether in writing or otherwise, to do any of the
foregoing.
5.3 No Solicitation. The Company and its Subsidiaries shall not,
and shall cause their respective officers, directors, employees,
representatives, agents, or affiliates (including, but not limited to any
investment banker, attorney, or accountant retained by the Company or any
Subsidiary), not to, directly or indirectly, solicit, knowingly encourage,
initiate, or participate in any way in discussions or negotiations with, or
knowingly provide any nonpublic information to, any corporation, partnership,
person, or other entity or group (other than Parent or any affiliate or agent of
Parent) concerning any proposed Alternative Transaction, or otherwise knowingly
facilitate any effort or attempt to make or implement an Alternative
Transaction. For purposes of this Agreement, "Alternative Transaction" shall
mean any of the following involving the Company or any Subsidiary: (i) any
tender offer, exchange offer, merger, consolidation, share exchange, business
combination or similar transaction; (ii) any transaction or series of related
transactions pursuant to which any person or entity (or its shareholders), other
than Parent, or Merger Subsidiary or any of their affiliates (a "Third Party")
acquires shares (or securities exercisable for or convertible into shares)
representing more than 20% of the outstanding shares of any class of capital
stock of the Company or any Subsidiary; or (iii) any sale, lease, exchange,
licensing, transfer or other disposition pursuant to which a Third Party
acquires control of more than 20% of the assets (including, but not limited to,
intellectual property assets) of the Company and its Subsidiaries taken as a
whole (determined by reference to the fair market value of such assets), in a
single transaction or series of related transactions; provided, however, that
the proposed transaction with World Medical shall not constitute an Alternative
Transaction. The Company will immediately terminate all discussions with Third
Parties concerning any proposed Alternative Transaction, and will request that
such Third Parties promptly return any confidential information furnished by the
Company in connection with any proposed Alternative Transaction. The Company
will not waive any provision of any confidentiality, standstill or similar
agreement entered into with any third party regarding any proposed Alternative
Transaction, and prior to the Closing shall enforce all such agreements in
accordance with their terms. The Company will promptly communicate to Parent the
name of the person or entity submitting, and the terms and conditions of, any
proposal or inquiry that it receives after the date hereof in respect of any
proposed Alternative Transaction or a reasonably detailed description of any
such information
28.
requested from it after the date hereof or of any such negotiations or
discussions being sought to be initiated or continued with the Company after the
date hereof in respect of a proposed Alternative Transaction; provided, however,
that this Agreement shall not prohibit the Board of Directors of the Company
from (i) prior to the Required Company Stockholder Vote, furnishing nonpublic
information to or entering into discussions or negotiations with, any person or
entity that makes an unsolicited Superior Proposal (as defined below), if, and
only to the extent that, (a) such action is so required under applicable law in
order for the Board of Directors to comply with its applicable fiduciary duties
to its stockholders imposed by law, (b) prior to first furnishing nonpublic
information to, or first entering into substantive discussions and negotiations
with, such person or entity after the date hereof, the Company (I) (x) releases
Parent from the two-year standstill provisions of the Confidentiality Agreement
with respect to any proposal submitted by Parent to the Company's Board of
Directors for a transaction that, by the proposal's terms, would only be
consummated with the cooperation and approval of the Company's Board of
Directors (which proposal shall be submitted by Parent on a confidential basis
unless the Company or such person or entity proposing the Superior Proposal
publicly discloses the Superior Proposal), and (y) provides written notice to
Parent to the effect that it intends to furnish information to, or enter into
discussions or negotiations with, such person or entity, and naming and
identifying the person or entity making the Superior Proposal, and (II) receives
from such person or entity an executed confidentiality and standstill agreement
with terms no less favorable to the Company than the Confidentiality Agreement
entered into with Parent, as modified by clause (I)(x) of this sentence, and (c)
the Company provides Parent with all non-public information to be provided to
such person or entity which Parent has not previously received from the Company,
and the Company keeps Parent informed, on a daily or more regular basis if the
context requires or Parent so requests, of the status, terms and conditions and
all other material information with respect to any such discussions or
negotiations; and (ii) to the extent applicable, complying with Rule 14e-2 or
14d-9 promulgated under the 1934 Act with regard to a proposed Alternative
Transaction. Nothing in this section shall (x) permit the Company to terminate
this Agreement (except as specifically provided in Article 7 hereof), or (y)
permit the Company to enter into any agreement providing for an Alternative
Transaction (other than the confidentiality and standstill agreement as
provided, and in the circumstances and under the conditions set forth, above)
for as long as this Agreement remains in effect. For purposes of this Agreement,
a "Superior Proposal" shall mean a proposal for an Alternative Transaction that
the Board of Directors of the Company has reasonably and in good faith
determined (with the advice of its financial advisors and taking into account
all legal, financial and regulatory aspects of the likelihood of the
consummation of such Alternative Transaction, including, but not limited to, the
conditions to consummation and the consequences under such Alternative
Transaction proposal of any material adverse effects or changes in the Company)
to be more favorable to the Company's stockholders than the transactions
contemplated by this Agreement.
5.4 Access and Information.
(a) Except as required pursuant to any confidentiality
agreement or similar agreement or arrangement to which the Company or any of its
Subsidiaries is a party (in which case the Company shall use commercially
reasonable efforts to provide acceptable alternative
29.
arrangements, not in violation of such agreement or arrangement, for disclosure
to Parent or its advisors) or pursuant to applicable law, the Company shall
afford to Parent, and to Parent's accountants, officers, directors, employees,
counsel, and other representatives, reasonable access during normal business
hours upon reasonable prior notice, from the date hereof through the Effective
Time, to all of its properties, books, contracts, commitments, and records, and,
during such period, the Company shall furnish promptly to Parent all information
concerning the Company's and its Subsidiaries' businesses, prospects,
properties, liabilities, results of operations, financial condition, testing,
clinical trials, officers, employees, investigators, distributors, customers,
suppliers, and others having material dealings with the Company as Parent may
reasonably request and reasonable opportunity to contact and obtain information
from such officers, employees, investigators, distributors, customers,
suppliers, and others having dealings with the Company as Parent may reasonably
request. During the period from the date hereof to the Effective Time, the
parties shall in good faith meet and correspond on a regular basis for mutual
consultation concerning the conduct of the Company's and the Subsidiaries'
businesses and, in connection therewith, Parent shall be entitled, during normal
business hours upon reasonable prior notice and in a manner that does not
unreasonably interfere with the Company's business, to have employees or other
representatives present at the offices of the Company and its Subsidiaries to
observe, and be kept informed concerning, the Company's and the Subsidiaries'
operations and business planning.
(b) Parent shall hold in confidence all such nonpublic
information as required by and in accordance with the confidentiality agreement
dated November 13, 1998, between Parent and the Company (the "Confidentiality
Agreement").
5.5 Approval of Stockholders; Proxy Statement; Registration Statement.
(a) The Company shall promptly take all action necessary in
accordance with the DGCL and the Company's Certificate of Incorporation and
Bylaws to cause a special meeting of the Company's stockholders (the "Company
Stockholders Meeting") to be duly called and held as soon as reasonably
practicable following the date upon which the Registration Statement (as defined
below) becomes effective for the purpose of voting upon the Merger and the
adoption and approval of this Agreement and at such Meeting to submit this
Agreement and the Merger to a vote of the stockholders. The stockholder vote or
consent required for adoption and approval of this Agreement and the approval of
the Merger shall be no greater than that set forth in the DGCL and the Company's
Certificate of Incorporation as previously provided to Parent. Accordingly, the
Company represents and warrants that the affirmative vote of the holders of
record of a majority of the shares of Company Common Stock outstanding on the
record date for the Company Stockholders Meeting is all that is necessary to
obtain stockholder adoption and approval of this Agreement and approval of the
Merger. The Company shall use best efforts to obtain the adoption and approval
by the Company's stockholders of this Agreement and the approval by the
Company's stockholders of the Merger, unless otherwise required under applicable
law in order for the Board of Directors to comply with its applicable fiduciary
duties to its stockholders imposed by law. In accordance therewith, the Company
shall, with the cooperation of Parent, prepare and file, as soon as reasonably
practicable, a proxy statement/prospectus included as part of the Registration
Statement (such proxy
30.
statement/prospectus, together with notice of meeting, form of proxy, and any
letter or other materials to the Company's stockholders included therein are
referred to in this Agreement as the "Proxy Statement/Prospectus"). Parent shall
furnish to the Company all information concerning Parent and its subsidiaries,
officers, directors and shareholders, and shall take such other action and
otherwise cooperate, as the Company may reasonably request in connection with
any such action. The Company shall use best efforts to cause the definitive
Proxy Statement/Prospectus to be mailed to the stockholders of the Company, as
soon as reasonably practicable after the Registration Statement shall have
become effective, with the date of mailing as mutually determined by the Company
and Parent. The Proxy Statement/Prospectus shall include the recommendation of
the Company's Board of Directors in favor of the Merger, unless otherwise
required under applicable law in order for the Board of Directors to comply with
its applicable fiduciary duties to its stockholders imposed by law. Unless and
until this Agreement is validly terminated pursuant to Article 7, nothing herein
shall limit or eliminate in any way the Company's obligation to call, give
notice of, convene and hold the Company Stockholders Meeting and at such meeting
submit this Agreement and the Merger to a vote of the Company's stockholders
(and not postpone or adjourn such meeting or the vote by the Company's
stockholders upon this Agreement and the Merger to another date without Parent's
approval, not to be unreasonably withheld if and only to the extent such
postponement or adjournment is required by law or by SEC or Nasdaq regulation).
(b) Parent shall, with the cooperation of the Company, prepare
and file, as soon as reasonably practicable, a registration statement under the
1933 Act registering the shares of Parent Common Stock to be issued in the
Merger (the "Registration Statement"), which Registration Statement shall
include the Proxy Statement/Prospectus. Parent will use commercially reasonable
efforts to have the Registration Statement declared effective by the SEC as
promptly thereafter as practicable. Parent shall also take any action required
to be taken under state blue sky or securities laws in connection with the
issuance of Parent Common Stock pursuant to the Merger. The Company shall
furnish to Parent all information concerning the Company and its Subsidiaries
and the holders of its capital stock, and shall take such other action and
otherwise cooperate, as Parent may reasonably request in connection with any
such action.
(c) Parent shall notify the Company promptly (i) of the
receipt of the comments of the SEC, (ii) of any request by the SEC for
amendments or supplements to the Registration Statement, (iii) of the time when
the Registration Statement has become effective or any supplement or amendment
has been filed, or the issuance of any stop order and (iv) of the suspension of
the qualification of the Parent Common Stock issuable in connection with the
Merger for offering or sale in any jurisdiction and shall supply the Company
with copies of all correspondence with the SEC with respect to the Registration
Statement.
(d) If at any time prior to the Effective Time, any event or
circumstance relating to the Company, any Subsidiary, or the Company's officers
or directors should occur and be discovered by the Company that is required to
be described in an amendment or supplement to the definitive Proxy
Statement/Prospectus or the Registration Statement, the Company shall promptly
inform Parent. If at any time prior to the Effective Time, any event or
circumstance relating to Parent or any of its subsidiaries or their respective
officers or directors should occur
31.
and be discovered by Parent that is required to be described in an amendment or
supplement to the definitive Proxy Statement/Prospectus or the Registration
Statement, Parent shall promptly inform the Company. Whenever any event occurs
that should be described in an amendment of, or supplement to, the definitive
Proxy Statement/Prospectus or the Registration Statement, the Company or Parent,
as the case may be, shall, upon learning of such event, promptly notify the
other and consult and cooperate with the other in connection with the
preparation of a mutually acceptable amendment or supplement. The parties shall
promptly file such amendment or supplement with the SEC and mail such amendment
or supplement as soon as practicable after it is cleared by the SEC. No
amendment or supplement to the Proxy Statement/Prospectus or the Registration
Statement will be made by Parent or the Company without the approval of the
other party (such approval not to be unreasonably withheld or delayed).
5.6 Consents. The Company will, at its cost and expense, use
commercially reasonable efforts to obtain all material approvals and consents of
all third parties necessary on the part of the Company or its Subsidiaries to
consummate the transactions contemplated hereby. Parent agrees to cooperate with
the Company in connection with obtaining such approvals and consents. Parent
will, at its cost and expense, use commercially reasonable efforts to obtain all
material approvals and consents of all third parties necessary on the part of
Parent to consummate the transactions contemplated hereby. The Company and
Parent agree to cooperate with each other in connection with obtaining such
approvals and consents.
5.7 Affiliates' Letters.
(a) The Company has delivered to Parent a list of names and
addresses of those persons, in the Company's reasonable judgment after
consultation with outside legal counsel, who, as of the date hereof, are
affiliates within the meaning of Rule 145 of the rules and regulations
promulgated under the 1933 Act or otherwise applicable SEC accounting releases
with respect to pooling-of-interests accounting treatment (each such person, an
"Affiliate") of the Company. The Company shall provide Parent such information
and documents as Parent shall reasonably request for purposes of reviewing such
list and shall promptly update such list to reflect any changes thereto. The
Company has delivered or caused to be delivered, or will, promptly after the
execution hereof, deliver or cause to be delivered, to Parent an affiliate's
letter in the form attached hereto as EXHIBIT B, executed by each of the
Affiliates of the Company identified in the foregoing list, who were available,
and shall use reasonable best efforts to deliver or cause to be delivered to
Parent as soon as practicable after the date hereof such an affiliate's letter
executed by any Affiliate who was not available to sign and deliver such letter
on or prior to the date hereof and by any additional persons who, to the
knowledge of the Company, become Affiliates after the date hereof. Parent shall
be entitled to place legends as specified in such affiliates' letters on the
certificates evidencing any of the Parent Common Stock received by such
Affiliates pursuant to the terms of this Agreement, and to issue appropriate
stop transfer instructions to the transfer agent for the Parent Common Stock,
consistent with the terms of such letters.
32.
(b) For so long as resales of shares of Parent Common Stock
issued pursuant to the Merger are subject to the resale restrictions set forth
in Rule 145 under the 1933 Act, Parent will use commercially reasonable efforts
to comply with Rule 144(c)(1) under the ▇▇▇▇ ▇▇▇.
5.8 Expenses. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement, the transactions
contemplated hereby, the Proxy Statement/Prospectus, and the Registration
Statement will be paid by the party incurring such costs and expenses, except
that the Company and Parent will share equally the cost of printing and filing
with the SEC the Proxy Statement/Prospectus and the Registration Statement and
the filing fees required under the HSR Act or any Foreign Merger Laws.
5.9 Further Actions. Subject to the terms and conditions herein
provided and without being required to waive any conditions herein (whether
absolute, discretionary, or otherwise), each of the parties hereto agrees to use
commercially reasonable efforts to take, or cause to be taken, all action, and
to do, or cause to be done, all things necessary, proper, or advisable to
consummate and make effective the transactions contemplated by this Agreement.
In case at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and
directors of each party to this Agreement shall take all such necessary action.
5.10 Regulatory Approvals.
(a) The Company and Parent each agree to use commercially
reasonable efforts to take, or cause to be taken, all appropriate action, and
do, or cause to be done, all things as may be necessary under federal or state
securities laws or the HSR Act or Foreign Merger Laws applicable to or necessary
for, and will file as soon as reasonably practicable and, if appropriate, use
commercially reasonable efforts to have declared effective or approved all
documents and notifications with the SEC and other governmental or regulatory
bodies (including, without limitation, the FDA and equivalent foreign regulatory
bodies, and other foreign regulatory bodies that administer Foreign Merger Laws,
and any foreign labor councils or bodies as may be required) that they deem
necessary or appropriate for, the consummation of the Merger or any of the other
transactions contemplated hereby, and each party shall give the other
information reasonably requested by such other party pertaining to it and its
subsidiaries and affiliates to enable such other party to take such actions.
(b) Although the parties do not anticipate any legislative,
administrative or judicial objection to the consummation of the Merger or any of
the transactions contemplated by this Agreement, each of the Company, Parent and
Merger Subsidiary agrees to use commercially reasonable efforts vigorously to
contest and resist any action, including legislative, administrative or judicial
action, and to have vacated, lifted, reversed or overturned any decree,
judgment, injunction or other order (whether temporary, preliminary or
permanent) (an "Order") that is in effect and that restricts, prevents or
prohibits the consummation of the Merger or any of the other transactions
contemplated by this Agreement, including, without limitation, by vigorously
pursuing available avenues of administrative and judicial appeal. Each of the
Company, Parent and Merger Subsidiary also agrees to use commercially reasonable
efforts to
33.
take any and all actions necessary to avoid or eliminate each and every
impediment under any antitrust law that may be asserted by any governmental
antitrust authority or any other party so as to enable the parties to close by
the date specified in Section 7.1(b) the transactions contemplated hereby,
including without limitation, committing to and/or effecting, by consent decree,
hold separate orders, or otherwise, the sale or disposition of such assets or
businesses as are required to be divested in order to avoid the entry of, or to
effect the dissolution of, any injunction, temporary restraining order or other
order in any suit or proceeding, which would otherwise have the effect of
preventing the consummation by the date specified in Section 7.1(b) of all or
any material part of the transactions contemplated hereby. Notwithstanding the
foregoing or anything herein to the contrary, in no event shall any party hereto
be required under this Section 5.10 to make arrangements for or to effect the
sale, cessation, or other disposition of product lines or businesses or take any
action materially adverse to such party.
5.11 Certain Notifications. The Company shall promptly notify Parent in
writing of the occurrence of any event that will or could reasonably be expected
to result in the failure by the Company or its affiliates to satisfy any of the
conditions specified in Section 6.1 or 6.2. Parent shall promptly notify the
Company in writing of the occurrence of any event that will or could reasonably
be expected to result in the failure by Parent or its affiliates to satisfy any
of the conditions specified in Section 6.1, 6.2(e) or 6.3.
5.12 Voting of Shares. To induce Parent to execute this Agreement,
certain executive officers and directors of the Company included in the list of
"Affiliates" referenced in Section 5.7 have executed and delivered as of the
date hereof Agreements to Facilitate Merger in the form attached hereto as
EXHIBIT C (the "Agreement to Facilitate Merger"), pursuant to which each such
person has agreed to vote his or her shares of Company Common Stock in favor of
the Merger at the Company Stockholders Meeting. The Company will use reasonable
best efforts to have all other such Affiliates execute and deliver to Parent
Agreements to Facilitate Merger as soon as practicable after the date hereof.
5.13 Stock Option Agreement. To induce Parent to execute this
Agreement, the Company has executed and delivered to Parent as of the date
hereof a Stock Option Agreement in the form attached hereto as EXHIBIT D (the
"Stock Option Agreement"), pursuant to which the Company has granted to Parent
an option to acquire from the Company 12,807,795 shares of Company Common Stock
at an exercise price equal to $54.00 per share. Such option shall become
exercisable only in the events described in the Stock Option Agreement.
5.14 NYSE Listing Application. Parent shall promptly prepare and submit
to the NYSE a listing application for the Parent Common Stock to be issued in
the Merger pursuant to Article 1 of this Agreement and pursuant to the Company
Options assumed by Parent, and shall use commercially reasonable efforts to
obtain, prior to the Effective Time, approval for the listing of such Parent
Common Stock, subject to official notice to the NYSE of issuance. The Company
shall cooperate with Parent in such listing application.
34.
5.15 Indemnification.
(a) The certificate of incorporation and the bylaws of the
Surviving Corporation shall contain the provisions with respect to
indemnification, payment of fees and expenses and exculpation from liability set
forth in the Company's certificate of incorporation and bylaws on the date of
this Agreement, which provisions shall not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who on or at any
time prior to the Effective Time were directors, officers, employees or agents
of the Company (the "Indemnified Parties"), unless such modification is required
by law. From and after the Effective Time, Parent will cause the Surviving
Corporation to fulfill and honor in all respects the obligations of the Company
pursuant to each indemnification agreement in effect between the Company and an
Indemnified Party. Parent shall guarantee the obligations of the Surviving
Corporation with respect to the indemnification and payment of fees and expenses
provisions contained in the Surviving Corporation's certificate of incorporation
and bylaws and in the indemnification agreements described in the Company
Disclosure Schedule in effect between the Company and an Indemnified Party as of
the Effective Time with respect to acts occurring at or before the Effective
Time (including the transactions contemplated by this Agreement).
(b) For a period of six years after the Effective Time, Parent
shall cause to be maintained in effect the Company's current directors' and
officers' liability insurance policy with respect to claims arising from facts
or events that occurred at or prior to the Effective Time; provided, however,
that (i) Parent may substitute therefor policies providing coverage on terms and
conditions that are no less advantageous to the Indemnified Parties, and (ii)
Parent may satisfy its obligations hereunder by extending the discovery or
reporting period under such policy for six years from the Effective Time to
maintain in effect directors' and officers' liability insurance covering
pre-acquisition acts (including acts in connection with this Agreement and the
transactions contemplated hereby) for the Indemnified Parties on terms no less
favorable than the terms of such current insurance coverage; provided, however,
that in no event shall Parent be required to expend for any such coverage an
amount per year in excess of $798,000; and provided further that if the cost per
year of such coverage exceeds $798,000, Parent shall be obligated to obtain such
coverage as is available for a cost per year not exceeding such amount. The
Company represents that the annual premium currently paid by the Company for
such insurance is approximately $399,000.
(c) In the event Parent, the Surviving Corporation or any of
their successors or assigns (i) consolidates with or merges into any other
person or entity and shall not be the continuing or surviving corporation or
entity of such consolidation or merger or (ii) transfers all or substantially
all of its properties and assets to any person, then and in each such case,
proper provisions shall be made so that the successors and assigns of Parent or
the Surviving Corporation, as the case may be, shall assume the obligations set
forth in this Section 5.15.
(d) This Section 5.15 shall survive the consummation of the
Merger at the Effective Time, is intended to benefit the Indemnified Parties,
may be enforced by the
35.
Indemnified Parties as third party beneficiaries and shall be binding on all
successors and assigns of Parent and the Surviving Corporation.
5.16 Letters of the Company's and Parent's Accountants.
(a) The Company shall cooperate with Parent and use reasonable
best efforts to cause to be delivered to Parent and the Company, letters from
Ernst & Young LLP addressed to the Company, as of the Closing Date, stating that
based upon discussions with officials of the Company responsible for financial
and accounting matters, and information furnished to Ernst & Young LLP to the
date of its letter, Ernst & Young LLP concurs with the Company's management's
conclusion that, as of the date of its letter, no conditions exist related to
the Company that would preclude Parent's accounting for the merger with the
Company as a pooling of interests.
(b) The Company shall cooperate with Parent and Parent shall
use reasonable best efforts to cause to be delivered to the Company and Parent,
letters from PricewaterhouseCoopers LLP addressed to Parent, dated as of the
Closing Date, confirming as of the Closing Date that the Merger will qualify as
a pooling of interests transaction under Opinion 16 of the Accounting Principles
Board and applicable SEC rules and regulations.
5.17 Subsidiary Shares. At or prior to the Closing, the Company shall
use commercially reasonable efforts to cause all issued and outstanding
Subsidiary shares (other than any interests in joint ventures or similar
arrangements) owned by any person other than the Company or any of its
Subsidiaries to be transferred for no or nominal consideration to such qualified
person or persons designated by Parent.
5.18 Benefit Plans and Employee Matters.
(a) From and after the Effective Time, Parent shall to the
extent practicable cause the Surviving Corporation to provide employee benefits
and programs to the Company's and its Subsidiaries' employees that, in the
aggregate, are substantially comparable to or more favorable than those in
existence as of the date hereof and disclosed in writing to Parent prior to the
date hereof; provided that stock-based compensation shall be comparable, in the
aggregate, to that offered by Parent and its subsidiaries generally. To the
extent Parent satisfies its obligations under this Section by maintaining
Company benefit plans, Parent shall not be required to include employees of the
Company in Parent's benefit plans. From and after the Effective Time, Parent
shall honor, in accordance with their terms, all employment and severance
agreements and all severance, incentive and bonus plans as in effect immediately
prior to the Closing Date that are applicable to any current or former employees
or directors of the Company or any of its Subsidiaries and that are disclosed in
the Company Disclosure Schedule.
(b) To the extent that service is relevant for purposes of
eligibility, level of participation, or vesting under any employee benefit plan,
program or arrangement established or maintained by Parent, the Company or any
of their respective subsidiaries, employees of the Company and its Subsidiaries
shall be credited for service accrued or deemed accrued prior to the Effective
Time with the Company or such Subsidiary, as the case may be. Under no
36.
circumstances shall employees receive credit for service accrued or deemed
accrued prior to the Effective Time with the Company or such Subsidiary, as the
case may be, for benefit accruals under any employee pension benefit plan (as
defined by Section 3(2) of ERISA) or any retiree health plan.
(c) As soon as reasonably practicable after the Effective
Time, Parent shall take whatever action is reasonably necessary to provide for a
special phase under Parent's employee stock purchase plan (the "Parent ESPP") to
permit those employees of the Surviving Corporation who have satisfied the
eligibility requirements of the Parent ESPP to purchase Parent Common Stock
under the Parent ESPP, with such phase to be operated under the terms and
conditions of the Parent ESPP.
5.19 Obligations of Merger Subsidiary. Parent shall take all action
necessary to cause Merger Subsidiary to perform its obligations under this
Agreement and to consummate the Merger on the terms and subject to the
conditions set forth in this Agreement.
5.20 Plan of Reorganization. This Agreement is intended to constitute a
"plan of reorganization" within the meaning of Section 1.368-2(g) of the income
tax regulations promulgated under the Code. From and after the date of this
Agreement and after the Effective Time, each party hereto shall use reasonable
best efforts to cause the Merger to qualify, and shall not, without the prior
written consent of the other parties hereto, knowingly take any actions or cause
any actions to be taken which could prevent the Merger from qualifying as a
reorganization under the provisions of Section 368(a) of the Code.
5.21 Pooling. From and after the date of this Agreement and until the
Effective Time, neither Parent nor the Company, nor any of their respective
subsidiaries or other affiliates, shall knowingly take any action, or knowingly
fail to take any action, that is reasonably likely to jeopardize the treatment
of the Merger as a "pooling of interests" for accounting purposes. Between the
date of this Agreement and the Effective Time, Parent and the Company each shall
use reasonable best efforts to cause the characterization of the Merger as a
pooling of interests for accounting purposes if such a characterization were
jeopardized by action taken by Parent or the Company, respectively, prior to the
Effective Time. Following the Effective Time, Parent shall not knowingly take
any action, or fail to take any action, that would jeopardize the
characterization of the Merger as a "pooling of interests" for accounting
purposes.
5.22 Tax Matters. At or prior to the filing of the Registration
Statement and at or prior to the Closing, the Company and Parent shall execute
and deliver to ▇▇▇▇▇▇ Godward LLP and to ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.A. tax
representation letters reasonably satisfactory to such counsel setting forth
customary representations which may be relied upon by such counsel in rendering
any opinions contemplated by this Agreement. Parent shall use commercially
reasonable efforts to cause ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, P.A. to deliver to Parent a
legal opinion, satisfying the requirements of Item 601 of Regulation S-K
promulgated under the 1933 Act and dated as of a date that is no more than two
business days prior to the date of filing of the Registration Statement, to the
effect that the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code, based in part on the tax representation letters
described in this
37.
Section 5.22. The Company shall use commercially reasonable efforts to cause
▇▇▇▇▇▇ Godward LLP to deliver to the Company a legal opinion, satisfying the
requirements of Item 601 of Regulation S-K promulgated under the 1933 Act and
dated as of a date that is no more than two business days prior to the date of
filing of the Registration Statement, to the effect that the Merger will
constitute a reorganization within the meaning of Section 368(a) of the Code,
based in part on the tax representation letters described in this Section 5.22.
ARTICLE 6
CLOSING CONDITIONS
6.1 Conditions to Obligations of Parent, Merger Subsidiary, and the
Company. The respective obligations of each party to consummate the Merger shall
be subject to the fulfillment at or prior to the Closing of the following
conditions, any or all of which may be waived, in whole or in part, to the
extent permitted by applicable law:
(a) No Injunction. None of Parent, Merger Subsidiary, or the
Company shall be subject to any final order, decree, or injunction of a court of
competent jurisdiction within the United States that is then in effect and (i)
has the effect of making the Merger illegal or otherwise prohibiting the
consummation of the Merger, or (ii) would impose any material limitation on the
ability of Parent to effectively exercise full rights of ownership of the stock
of the Surviving Corporation or of the Surviving Corporation to own and operate
the assets and business of the Company.
(b) Stockholder Approval. The approval of the stockholders of
the Company referred to in Section 5.5 hereof shall have been obtained, in
accordance with the DGCL and the Company's Certificate of Incorporation and
Bylaws.
(c) Registration Statement. The Registration Statement (as
amended or supplemented) shall have become effective under the 1933 Act and
shall not be subject to any "stop order," and no action, suit, proceeding, or
investigation by the SEC to suspend the effectiveness thereof shall have been
initiated and be continuing.
(d) NYSE Listing. The shares of Parent Common Stock to be
delivered pursuant to the Merger shall have been duly authorized for listing on
the NYSE, subject to official notice of issuance.
(e) Waiting Periods. The waiting periods (and any extension
thereof) applicable to the consummation of the Merger under the HSR Act and any
Foreign Merger Laws shall have expired or been terminated.
6.2 Conditions to Obligations of Parent and Merger Subsidiary. The
respective obligations of Parent and Merger Subsidiary to consummate the Merger
shall be subject to the fulfillment at or prior to the Closing of the following
additional conditions, any or all of which may be waived by Parent, in whole or
in part, to the extent permitted by applicable Law:
38.
(a) Representations and Warranties True. Each representation
and warranty of the Company contained in this Agreement, without regard to any
qualification or reference to "Company Material Adverse Effect," shall be true
and correct on the Closing Date as though such representations and warranties
were made on such date, except that those representations and warranties that
address matters only as of the date hereof or another particular date shall
remain true and correct as of such date, and except in any case for any
inaccuracies that have not had, or would not reasonably be expected to have, a
Company Material Adverse Effect; provided, however, notwithstanding the
foregoing, this Section 6.2(a) shall not be considered fulfilled or satisfied if
the representation and warranty set forth in the last sentence of Section 3.3 is
incorrect as of the Closing Date by understating the number of shares of Company
Common Stock by more than 20,000 shares. Parent shall have received a
certificate to the foregoing effect signed by the Chief Executive Officer of the
Company or other authorized Officer of the Company.
(b) Performance. The Company shall have performed and complied
in all material respects with all material covenants required by this Agreement
to be performed or complied with by it at or prior to the Closing, and Parent
shall have received a certificate to such effect signed by the Chief Executive
Officer of the Company or other authorized Officer of the Company (provided that
for purposes of this subsection (b), actions of representatives or agents of the
Company who are not officers, directors or employees of the Company which do not
result in a proposal for an Alternative Transaction shall not be deemed to be a
breach of Section 5.3 so long as the Company has used commercially reasonable
efforts to cause such representatives and agents to comply with Section 5.3).
(c) Affiliates' Letters. Parent shall have received a letter
from each of the Affiliates pursuant to Section 5.7 hereof.
(d) Pooling Opinion. Parent shall have received each of the
letters described in Section 5.16.
(e) Continued Employment of Key Executives. There shall not
have been since the date hereof any termination of employment (excluding any
termination due to death or disability) involving the Chief Executive Officer or
a majority of the other executive officers of the Company as of the date hereof,
or any notice or announcement that such Chief Executive Officer or a majority of
such other executive officers of the Company as of the date hereof will not
continue their employment with the Surviving Corporation after the Merger.
6.3 Conditions to Obligation of the Company. The obligation of the
Company to consummate the Merger shall be subject to the fulfillment at or prior
to the Closing of the following additional conditions, any or all of which may
be waived by the Company, in whole or in part, to the extent permitted by
applicable law:
(a) Representations and Warranties True. Each representation
and warranty of Parent contained in this Agreement, without regard to any
qualification or reference to "Parent Material Adverse Effect," shall be true
and correct on the Closing Date as though such representations and warranties
were made on such date, except that those representations and
39.
warranties that address matters only as of the date hereof or another particular
date shall remain true and correct as of such date, and except in any case for
any inaccuracies that have not had, or would not reasonably be expected to have
a Parent Material Adverse Effect. The Company shall have received a certificate
to the foregoing effect signed by the Chief Executive Officer or other
authorized officer of Parent.
(b) Performance. Parent and Merger Subsidiary shall have
performed and complied in all material respects with all material covenants
required by this Agreement to be performed or complied with by them at or prior
to the Closing, and the Company shall have received a certificate to such effect
signed by the Chief Executive Officer or other authorized officer of Parent.
(c) Tax Opinion. The Company shall have received an opinion of
▇▇▇▇▇▇ Godward LLP, counsel to the Company, addressed to the Company's
stockholders, based upon representations of Parent, Merger Subsidiary and the
Company and normal assumptions, and dated on or about the date that is two
business days prior to the date the Proxy Statement/Prospectus is first mailed
to Company's stockholders, which opinion shall not have been withdrawn or
modified in any material respect prior to the Effective Time, to the effect
that, subject to customary conditions and representations, the Merger will be
treated for federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code, and that each of Parent, Merger Subsidiary and
the Company will be considered a party to such reorganization. Parent, Merger
Subsidiary and the Company hereby agree to provide to such counsel certificates
acceptable to such counsel setting forth the customary representations which may
be relied upon by such counsel in rendering such opinion.
(d) Pooling Opinion. The Company shall have received each of
the letters described in Section 5.16.
ARTICLE 7
TERMINATION AND ABANDONMENT
7.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval by the stockholders of the
Company, only:
(a) by mutual written consent duly authorized by the Board of
Directors of Parent and the Board of Directors of the Company;
(b) by either Parent or the Company if the Merger shall not
have been consummated on or before May 31, 1999; provided, however, that the
terminating party shall not have breached in any material respect its
obligations under this Agreement in any manner that shall have been the
proximate cause of, or resulted in, the failure to consummate the Merger by such
date and provided further, however, that, if a request for additional
information is received from the U.S. Federal Trade Commission ("FTC") or
Department of Justice ("DOJ") pursuant to the HSR Act or additional information
is requested by a governmental authority (a "Foreign Authority") pursuant to
Foreign Merger Laws, such date shall be extended to the 90th day
40.
following acknowledgment by the FTC, DOJ, or Foreign Authority, as applicable,
that Parent and the Company have complied with such request, but in any event
not later than October 31, 1999;
(c) by either Parent or the Company if a court of competent
jurisdiction or an administrative, governmental, or regulatory authority has
issued a final nonappealable order, decree, or ruling, or taken any other
action, having the effect of permanently restraining, enjoining, or otherwise
prohibiting the Merger;
(d) by either Parent or the Company if, at the Company
Stockholders Meeting, the requisite vote of the stockholders of the Company for
approval and adoption of this Agreement and the Merger is not obtained, except
that the right to terminate this Agreement under this Section 7.1(d) will not be
available to any party whose failure to perform any material obligation under
this Agreement has been the proximate cause of, or resulted in, the failure to
obtain the requisite vote of the stockholders of the Company;
(e) by Parent if either (i) the Company has breached its
obligations under Section 5.3 in any material respect (provided that for
purposes of this clause (i), actions of representatives or agents of the Company
who are not officers, directors or employees of the Company which do not result
in a proposal for an Alternative Transaction shall not be deemed to be a breach
of Section 5.3 so long as the Company has used commercially reasonable efforts
to cause such representatives and agents to comply with Section 5.3), (ii) the
Board of Directors of the Company has recommended, approved, or authorized the
Company's acceptance or execution of a definitive agreement providing for an
Alternative Transaction, as defined in Section 5.3, (iii) the Board of Directors
of the Company has modified in a manner materially adverse to Parent or
withdrawn its recommendation of this Agreement, or (iv) a tender offer or
exchange offer for any outstanding shares of Company Common Stock is commenced,
and the Board of Directors of the Company, within 10 business days after such
tender offer or exchange offer is so commenced, either fails to recommend
against acceptance of such tender offer or exchange offer by its stockholders or
takes no position with respect to the acceptance of such tender offer or
exchange offer by its stockholders;
(f) by the Company prior to the Required Company Stockholder
Vote if (i) it is not in breach of its obligations under Section 5.5 in any
material respect and has complied with, and continues to comply with, all
requirements and procedures of Section 5.3 in all material respects, (ii) the
Board of Directors of the Company has complied with, and continues to comply
with, all requirements and procedures of Section 5.3 in all material respects
and has authorized, subject to complying with the terms of this Agreement, the
Company to enter into a binding written agreement concerning a transaction that
constitutes a Superior Proposal and the Company notifies Parent in writing that
it intends to enter into such agreement, attaching the most current version of
such agreement to such notice, (iii) Parent does not make, within ten business
days after receipt of the Company's written notice of its intention to enter
into a binding agreement for a Superior Proposal, any offer that the Board of
Directors of the Company reasonably and in good faith determines, after
consultation with its financial and legal advisors, is at least as favorable to
the stockholders of the Company as the Superior Proposal and during such ten
41.
business-day period the Company reasonably considers and discusses in good faith
all proposals submitted by Parent and, without limiting the foregoing, meets
with, and causes its financial advisors and legal advisors to meet with, Parent
and its advisors from time to time as requested by Parent to reasonably consider
and discuss in good faith Parent's proposals, and (iv) prior to the Company's
termination pursuant to this Section 7.1(f), the Company pays to Parent the fee
required by Section 7.2 to be paid to Parent in the manner therein provided. The
Company agrees (x) that it will not enter into a binding agreement referred to
in clause (ii) above until at least the 11th business day after Parent has
received the notice to Parent required by clause (ii) above, and (y) to notify
Parent promptly if its intention to enter into a binding agreement referred to
in its notice to Parent shall change at any time after giving such notice;
(g) by Parent if (i) Parent is not in material breach of its
obligations under this Agreement and (ii) there has been a material breach by
the Company of any of its representations, warranties, or obligations under this
Agreement such that the conditions in Section 6.2 will not be satisfied
("Terminating Company Breach"); provided, however, that, if such Terminating
Company Breach is curable by the Company through the exercise of reasonable best
efforts and such cure is reasonably likely to be completed prior to the
applicable date specified in Section 7.1(b), then for so long as the Company
continues to exercise reasonable best efforts, Parent may not terminate this
Agreement under this Section 7.1(g); and provided further that for purposes of
this subsection (g), actions of representatives or agents of the Company who are
not officers, directors or employees of the Company which do not result in a
proposal for an Alternative Transaction shall not be deemed to be a breach of
Section 5.3 so long as the Company has used commercially reasonable efforts to
cause such representatives and agents to comply with Section 5.3); or
(h) by the Company if (i) the Company is not in material
breach of its obligations under this Agreement and (ii) there has been a
material breach by Parent of any of its representations, warranties, or
obligations under this Agreement such that the conditions in Section 6.3 will
not be satisfied ("Terminating Parent Breach"); provided, however, that, if such
Terminating Parent Breach is curable by Parent through the exercise of
reasonable best efforts and such cure is reasonably likely to be completed prior
to the applicable date specified in Section 7.1(b), then for so long as Parent
continues to exercise reasonable best efforts, the Company may not terminate
this Agreement under this Section 7.1(h).
7.2 Effect of Termination.
(a) In recognition of the time, efforts, and expenses expended
and incurred by Parent with respect to the Company and the opportunity that the
acquisition of the Company presents to Parent, if:
(i) this Agreement is validly terminated pursuant to
Section 7.1(e) or 7.1(f); or
(ii) (A) this Agreement is validly terminated by
Parent or the Company pursuant to Section 7.1(d) due to the
failure of the Company's stockholders to
42.
approve the Merger, (B) at any time between the date hereof
and the time of such failure to so approve the Merger, a
proposal for a Competing Transaction shall have been publicly
announced, (C) within 12 months after the date of such
termination, the Company shall have entered into a definitive
agreement with a Third Party providing for a Competing
Transaction, and (D) a Competing Transaction is consummated by
the Company with the same Third Party that entered into the
definitive agreement referenced in clause (C) above or any
affiliate of such Third Party within two years after entering
into the agreement referenced in clause (C) above;
then, in any such event (but subject to Section7.2(c)), the Company will pay to
Parent, upon the termination date in the event of termination pursuant to
Section 7.1(f), within five business days after demand by Parent in the case of
termination pursuant to Section 7.1(e), or within five business days after
consummating the Competing Transaction referenced in clause (ii) (D) above in
the case of the events specified in clause (ii) above (by wire transfer of
immediately available funds to an account designated by Parent for such
purpose), a fee equal to $135,000,000. For purposes of this Agreement,
"Competing Transaction" means: (i) any consolidation, exchange of shares or
merger of the Company with any Third Party, other than a consolidation, exchange
or shares or merger as a result of which the holders of Company Common Stock
immediately prior to such transaction beneficially own 50% or more of the voting
stock of the Company, the surviving corporation or any parent entity immediately
after the transaction, (ii) any transaction or series of related transactions
pursuant to which a Third Party acquires shares (or securities exercisable for
or convertible into shares) representing more than 50% of the outstanding shares
of any class of capital stock of the Company; or (iii) any sale, lease,
exchange, licensing, transfer or other disposition pursuant to which a Third
Party acquires control of more than 50% of the assets (including, but not
limited to, intellectual property assets) of the Company and its Subsidiaries
taken as a whole (determined by reference to the fair market value of such
assets), in a single transaction or series of related transactions.
(b) The Company acknowledges that the agreements contained in
this Section 7.2 are an integral part of the transactions contemplated by this
Agreement and are not a penalty, and that, without these agreements, Parent
would not enter into this Agreement. If the Company fails to pay promptly the
fee due pursuant to Section 7.2(a), the Company shall also pay to Parent
Parent's costs and expenses (including legal fees and expenses) in connection
with any action, including the filing of any lawsuit or other legal action,
taken to collect payment, together with interest on the amount of the unpaid fee
under this section, accruing from its due date, at an interest rate per annum
equal to two percentage points in excess of the prime commercial lending rate
quoted by Norwest Bank Minnesota, N.A.; provided, however, that Parent shall pay
to the Company the Company's costs and expenses (including legal fees and
expenses) incurred in connection with any such legal action if Parent's claims
against the Company in such legal action do not prevail. Any change in the
interest rate hereunder resulting from a change in such prime rate shall be
effective at the beginning of the day of such change in such prime rate.
(c) Parent agrees that the payment provided for in Section
7.2(a) shall be the sole and exclusive remedy of Parent upon termination of this
Agreement pursuant to Section 7.1(e)
43.
and 7.1(f), as the case may be, and such remedy shall be limited to the sum
stipulated in such Section 7.2(a), regardless of the circumstances giving rise
to such termination; provided, however, that nothing herein shall relieve any
party from liability for the willful breach of any of its representations,
warranties, covenants or agreements set forth in this Agreement. In no event
shall the Company be required to pay to Parent more than one fee pursuant to
Section 7.2(a). In no event shall the sum of (i) the termination fee paid
pursuant to Section 7.2(a), (ii) the Cancellation Amount (as defined in the
Stock Option Agreement) paid pursuant to the Stock Option Agreement, (iii) the
aggregate Option Share Profit (as defined in the Stock Option Agreement) not
remitted to the Company pursuant to Section 2(c) of the Stock Option Agreement,
and (iv) the Section 5 Repurchase Consideration (as defined in the Stock Option
Agreement) paid to Parent exceed $150,000,000. In addition, the fee payable by
the Company pursuant to Section 7.2(a) shall be reduced (but not below zero) by
any Cancellation Amount paid pursuant to the Stock Option Agreement, any Option
Share Profit not remitted to the Company pursuant to Section 2(c) of the Stock
Option Agreement and any Section 5 Repurchase Consideration paid pursuant to the
Stock Option Agreement. Except as provided in the next sentence of this
paragraph, in the event of the termination of this Agreement pursuant to any
paragraph of Section 7.1, the obligations of the parties to consummate the
Merger will expire, and none of the parties will have any further obligations
under this Agreement except pursuant to Sections 5.4(b), 5.8, 7.2(a), 7.2(b) and
7.2(c) and Article 8. Nothing herein shall relieve any party from liability for
the willful breach of any of its representations, warranties, covenants or
agreements set forth in this Agreement.
ARTICLE 8
MISCELLANEOUS
8.1 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified, or supplemented only by written agreement of
Parent, Merger Subsidiary, and the Company at any time prior to the Effective
Time with respect to any of the terms contained herein; provided, however, that,
after the approval of this Agreement by the stockholders of the Company, no
amendment may be made which would reduce the amount or change the type of
consideration into which each share of Company Common Stock shall be converted
upon consummation of the Merger or which would otherwise require stockholder
approval under applicable law unless such stockholder approval shall have been
obtained. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
8.2 Waiver of Compliance; Consents. Any failure of Parent or Merger
Subsidiary on the one hand, or the Company on the other hand, to comply with any
obligation, covenant, agreement, or condition herein may be waived by the
Company or Parent, respectively, only by a written instrument signed by an
officer of the party granting such waiver, but such waiver or failure to insist
upon strict compliance with such obligation, covenant, agreement, or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure. Whenever this Agreement requires or permits consent by or on
behalf of any party hereto, such consent shall be given in writing. Merger
Subsidiary agrees that any consent or waiver of
44.
compliance given by Parent hereunder shall be conclusively binding upon Merger
Subsidiary, whether or not given expressly on its behalf.
8.3 Investigation; Survival of Representations and Warranties. The
respective representations and warranties of Parent and the Company contained
herein or in any certificates or other documents delivered prior to or at the
Closing shall not be deemed waived or otherwise affected by any investigation
made by any party hereto. The representations, warranties and agreements in this
Agreement and in any certificate delivered pursuant hereto shall terminate at
the Effective Time, except that the agreements set forth in Articles I and II
and Sections 5.7(b), 5.8, 5.9, 5.15, 5.18, 5.19, 5.20, 5.21 and this Article
VIII shall survive the Effective Time.
8.4 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given when delivered personally by commercial
courier service or otherwise, or by telecopier, or three days after such notice
is mailed by registered or certified mail (return receipt requested) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) If to Parent or Merger Subsidiary, to it at:
Medtronic, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇.▇.
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
with separate copies thereof addressed to:
Attention: General Counsel
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
and
Attention: Vice President and Chief Development
Officer
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to the Company, to it at:
Arterial Vascular Engineering, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
45.
with a copy to:
Cooley Godward LLP
5 Palo Alto Square
▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq. and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
8.5 Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests, or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties.
Except for the provisions of Article II and Section 5.15 (the "Third Party
Provisions"), this Agreement is not intended to confer upon any other person,
except the parties hereto, any rights or remedies hereunder, and no third person
shall be a third party beneficiary of this Agreement. The Third Party Provisions
may be enforced by the beneficiaries thereof.
8.6 Governing Law. Except to the extent that Delaware law is
mandatorily applicable, this Agreement shall be governed by the laws of the
State of Minnesota (regardless of the laws that might otherwise govern under
applicable Minnesota principles of conflicts of law). The parties hereby (i)
agree and consent to be subject to the jurisdiction of any state or federal
court in the state of Delaware or in Minneapolis or St. ▇▇▇▇, Minnesota, with
respect to all actions and proceedings arising out of or relating to this
Agreement (although each party reserves the right to bring such action or
proceedings in any other jurisdiction to which the other party is subject); (ii)
agree that all claims with respect to any such action or proceeding may be heard
and determined in such court; (iii) irrevocably waive any defense of an
inconvenient forum to the maintenance of any action or proceeding in such court;
(iv) consent to service of process by mailing or delivering such service to the
party at its respective principal business address; and (v) agree that a final
judgment in any such action or proceeding from which there is no further appeal
shall be conclusive and may be enforced in any other jurisdictions by suit on
the judgment or in any manner provided by law.
8.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
8.8 Knowledge. As used in this Agreement or the instruments,
certificates or other documents required hereunder, the term "knowledge" of a
party hereto shall mean actual knowledge of the directors or executive officers
of such party.
8.9 Interpretation. The Table of Contents, article and section headings
contained in this Agreement are inserted for reference purposes only and shall
not affect the meaning or interpretation of this Agreement. This Agreement shall
be construed without regard to any
46.
presumption or other rule requiring the resolution of any ambiguity regarding
the interpretation or construction hereof against the party causing this
Agreement to be drafted.
8.10 Publicity. Upon execution of this Agreement by Parent, Merger
Subsidiary, and the Company, the parties shall jointly issue a press release, as
agreed upon by them. The parties intend that all future statements or
communications to the public or press regarding this Agreement or the Merger
will be mutually agreed upon by them. Neither party shall, without such mutual
agreement or the prior consent of the other, issue any statement or
communication to the public or to the press regarding this Agreement, or any of
the terms, conditions, or other matters with respect to this Agreement, except
as required by law or the rules of the NYSE or Nasdaq and then only (a) upon the
advice of such party's legal counsel; (b) to the extent required by law or the
rules of the NYSE or Nasdaq; and (c) following prior notice to, and consultation
with, the other party (which notice shall include a copy of the proposed
statement or communication to be issued to the press or public). The foregoing
shall not restrict Parent's or the Company's communications with their employees
or customers in the ordinary course of business.
8.11 Entire Agreement. This Agreement, including the exhibits and
schedules hereto and the Confidentiality Agreement referred to herein, embodies
the entire agreement and understanding of the parties hereto in respect of the
subject matter contained herein. This Agreement and the Confidentiality
Agreement supersede all prior agreements and the understandings between the
parties with respect to such subject matter.
8.12 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated by this Agreement is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner in order that the transactions contemplated by this Agreement be
consummated as originally contemplated to the fullest extent possible.
8.13 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
47.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
Plan of Merger as of the date first above written.
MEDTRONIC, INC.
By: _____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Vice President
and Chief Development Officer
MAV MERGER CORP.
By: _____________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
ARTERIAL VASCULAR ENGINEERING, INC.
By: _____________________________________
Its: ________________________________
48.
