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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 26, 1999
---------------
XOMED SURGICAL PRODUCTS, INC.
-----------------------------
(Exact name of registrant as specified in its charter)
Delaware 000-21507 06-1393528
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(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification No.)
6743 Southpoint Drive North
Jacksonville, Florida 32216-0980
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(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code: (904) 296-9600
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Item 5. Other Events
After the close of business on August 26, 1999, Xomed Surgical Products,
Inc. (the "Company") entered into an Agreement and Plan of Merger (the
"Merger Agreement") with Medtronic, Inc. ("Medtronic") and MXS Merger
Corp., a wholly owned subsidiary of Medtronic ("Merger Sub"). Pursuant to
the terms and subject to the conditions of the Merger Agreement, Merger Sub
will merge with and into the Company (the "Merger"), with the Company as
the surviving corporation. As set forth more fully in the Merger Agreement,
as a result of the Merger, each issued and outstanding share of common
stock, par value $.01 per share (the "Common Stock"), of the Company (other
than shares owned by the Company, Medtronic, Merger Sub or any subsidiary
of the Company or Medtronic) will be converted into that number of shares
of Medtronic's Common Stock, par value $.10 per share (the "Medtronic
Common Stock"), equal to the Conversion Ratio (as defined below).
The Merger Agreement provides that the Conversion Ratio will be that number
of shares of Medtronic Common Stock, based on the average of the daily
closing sale prices of a share of Medtronic Common Stock as reported on the
New York Stock Exchange (the "NYSE") Composite Tape (the "Medtronic Average
Stock Price") for the ten consecutive NYSE trading days ending on and
including the NYSE trading day that is three NYSE trading days prior to the
Company's stockholders' meeting in respect of the Merger (the
"Determination Period"), determined as follows: (i) if the Medtronic
Average Stock Price for the Determination Period is greater than $66.60 and
less than $81.40, then the Conversion Ratio will be $60.00 divided by the
Medtronic Average Stock Price for the Determination Period; (ii) if the
Medtronic Average Stock Price for the Determination Period is equal to or
less than $66.60, then the Conversion Ratio will be 0.90090; or (iii) if
the Medtronic Average Stock Price for the Determination Period is equal to
or greater than $81.40, then the Conversion Ratio will be 0.73710.
References to Medtronic share amounts and prices do not reflect its
publicly announced two-for-one stock split to be effected on September 24,
1999 to holders of record on September 10, 1999.
The consummation of the Merger is subject to customary conditions,
including approval of the Merger Agreement by stockholders of the Company
and the expiration or termination of the waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the regulations
thereunder and any foreign merger laws. The foregoing description of the
Merger and the Merger Agreement is qualified in its entirety by reference
to the Merger Agreement, a copy of which is attached hereto as Exhibit 2.1
and incorporated herein by reference.
On August 26, 1999, as a condition and inducement to Medtronic and Merger
Sub entering into the Merger Agreement, the Company entered into a Stock
Option Agreement with Medtronic (the "Stock Option Agreement") pursuant to
which, among other things, the Company granted to Medtronic an option to
purchase from the Company shares of Common Stock representing 19.9% of the
aggregate number of outstanding shares of Common Stock, at an exercise
price of $60.00 per share of Common Stock, subject to adjustment. Such
option is exercisable only under certain conditions specified in the Stock
Option Agreement. The foregoing description of the Stock Option Agreement
is qualified in its entirety by reference to the Stock Option Agreement, a
copy of which is attached hereto as Exhibit 10.1 and incorporated by
reference herein.
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A copy of the joint press release issued by the Company and Medtronic on
August 27, 1999 in respect of the Merger Agreement is attached hereto as
Exhibit 99.1 and incorporated herein by reference.
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Item 7. Financial Statements and Exhibits
(a) Financial Statements of business acquired: None
(b) Pro Forma Financial Information: None
(c) Exhibits:
2.1 Agreement and Plan of Merger, dated as of August 26, 1999, by and
among Medtronic, Inc., MXS Merger Corp. and Xomed Surgical Products,
Inc.
10.1 Stock Option Agreement, dated as of August 26, 1999, between
Medtronic, Inc. and Xomed Surgical Products, Inc.
99.1 Joint Press Release issued by Xomed Surgical Products, Inc. and
Medtronic, Inc. on August 27, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
XOMED SURGICAL PRODUCTS, INC.
Dated: August 30, 1999 By: /s/ Thomas E. Timbie
------------------------------
Name: Thomas E. Timbie
Title: Vice President, Finance and
Chief Financial Officer
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EXHIBIT INDEX
Exhibit No. Description
----------- -----------
2.1 Agreement and Plan of Merger, dated as of August 26, 1999, by and
among Medtronic, Inc., MXS Merger Corp. and Xomed Surgical
Products, Inc.
10.1 Stock Option Agreement, dated as of August 26, 1999, between
Medtronic, Inc. and Xomed Surgical Products, Inc.
99.1 Joint Press Release issued by Xomed Surgical Products, Inc. and
Medtronic, Inc. on August 27, 1999
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MEDTRONIC, INC.,
MXS MERGER CORP.,
AND
XOMED SURGICAL PRODUCTS, INC.
August 26, 1999
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TABLE OF CONTENTS
ARTICLE 1 THE MERGER; CONVERSION OF SHARES.....................................1
1.1 The Merger..........................................................1
1.2 Effective Time......................................................2
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.......................................................6
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 of the Surviving Corporation..............................7
ARTICLE 2 CLOSING..............................................................8
2.1 Time and Place......................................................8
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...................................10
3.5 Absence of Undisclosed Liabilities.................................11
3.6 Consents and Approvals.............................................11
3.7 Compliance with Laws...............................................12
3.8 Litigation.........................................................13
3.9 Absence of Material Adverse Changes................................13
3.10 Officers, Directors and Employees..................................13
3.11 Taxes..............................................................13
3.12 Contracts..........................................................14
3.13 Intellectual Property Rights.......................................15
3.14 Benefit Plans......................................................15
3.15 Minute Books.......................................................17
3.16 No Finders.........................................................17
3.17 Proxy Statement....................................................17
3.18 Fairness Opinion...................................................18
3.19 State Takeover Laws................................................18
3.20 Merger Filings.....................................................18
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY......18
4.1 Organization.......................................................19
4.2 Authorization......................................................19
4.3 Capitalization.....................................................19
4.4 Consents and Approvals.............................................20
4.5 Reports; Financial Statements; Absence of Changes..................20
4.6 Registration Statement.............................................21
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4.7 No Finders.........................................................21
4.8 Absence of Undisclosed Liabilities.................................21
4.9 Compliance with Laws...............................................21
4.10 Litigation.........................................................22
4.11 Absence of Material Adverse Changes................................22
4.12 Reorganization.....................................................22
4.13 Merger Filings.....................................................22
ARTICLE 5 COVENANTS...........................................................22
5.1 Conduct of Business of the Company.................................23
5.2 Conduct of Business of Parent......................................25
5.3 No Solicitation....................................................26
5.4 Access and Information.............................................27
5.5 Approval of Stockholders; Proxy Statement; Registration Statement..28
5.6 Consents...........................................................30
5.7 Affiliates'Letters.................................................30
5.8 Expenses...........................................................31
5.9 Further Actions....................................................31
5.10 Regulatory Approvals...............................................31
5.11 Certain Notifications..............................................32
5.12 Voting of Shares...................................................32
5.13 Stock Option Agreement.............................................32
5.14 NYSE Listing Application...........................................33
5.15 Indemnification....................................................33
5.16 Letters of the Company's and Parent's Accountants..................34
5.17 Subsidiary Shares..................................................34
5.18 Benefit Plans and Employee Matters.................................35
5.19 Obligations of Merger Subsidiary...................................35
5.20 Plan of Reorganization.............................................35
5.21 Pooling............................................................35
ARTICLE 6 CLOSING CONDITIONS..................................................36
6.1 Conditions to Obligations of Parent, Merger Subsidiary,
and the Company....................................................36
6.2 Conditions to Obligations of Parent and Merger Subsidiary..........36
6.3 Conditions to Obligations of the Company...........................37
ARTICLE 7 TERMINATION AND ABANDONMENT.........................................38
7.1 Termination........................................................38
7.2 Effect of Termination..............................................40
ARTICLE 8 MISCELLANEOUS.......................................................42
8.1 Amendment and Modification.........................................42
8.2 Waiver of Compliance; Consents.....................................43
8.3 Investigation; Survival of Representations and Warranties..........43
8.4 Notices............................................................43
8.5 Assignment.........................................................44
8.6 Governing Law......................................................44
8.7 Counterparts.......................................................44
8.8 Knowledge..........................................................44
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8.9 Interpretation.....................................................44
8.10 Publicity..........................................................45
8.11 Entire Agreement...................................................45
8.12 Severability.......................................................45
8.13 Specific Performance...............................................45
EXHIBITS:
Exhibit A: Form of Certificate of Incorporation
Exhibit B: Form of Bylaws
Exhibit C: Form of Affiliate's Letter
Exhibit D: Form of Agreement to Facilitate Merger
Exhibit E: Form of Stock Option Agreement
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT is dated as of August 26, 1999, by and among Medtronic,
Inc., a Minnesota corporation ("Parent"), MXS Merger Corp., a Delaware
corporation and wholly-owned subsidiary of Parent ("Merger Subsidiary"), and
Xomed Surgical Products, 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 ("APB 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
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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, $.01 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 ten (10) consecutive NYSE trading
days ending on and including the NYSE trading day that is three 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 $66.60 and less than $81.40, then the
Conversion Ratio shall equal $60 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 $66.60, then the Conversion Ratio
shall equal .90090; or
(iii) if the Parent Average Stock Price for the Determination
Period is equal to or greater than $81.40, then the Conversion Ratio
shall equal .73710.
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
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then owned beneficially or of record by Parent, Merger Subsidiary, or any
direct or indirect wholly owned 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, with respect to the shares of Parent Common Stock into which shares
of Company Common Stock have been converted pursuant to Section 1.3(a), (i)
if the Exchange Agent is Parent's stock transfer agent, Parent shall
deliver written instructions to the transfer agent instructing Parent's
transfer agent to issue such shares of Parent Common Stock pursuant to the
provisions of this Section 1.5, or (ii) if the Exchange Agent is not
Parent's stock transfer agent, Parent shall deposit, or cause to be
deposited, with the Exchange Agent for the benefit of holders of shares of
Company Common Stock, certificates representing such shares of Parent
Common Stock. 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
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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.
(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. Parent shall deposit with the Exchange Agent any such dividend or
other distributions, and 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
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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 Parent Average Stock Price for the Determination Period, 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
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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) 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 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, 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
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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 Option Plan (as defined in Section 3.3) and use commercially
reasonable efforts to cause those Company Options that qualified as
incentive stock options prior to the Effective Time to continue to qualify
as incentive stock options immediately after 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 in accordance with the terms of Section 5.2 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 as of the Effective Time to read as set
forth on Exhibit A to this Agreement.
1.10 Bylaws of the Surviving Corporation. The Bylaws of the Company, as in
effect immediately prior to the Effective Time, shall be amended as of the
Effective Time to read as set forth on Exhibit B to this Agreement.
1.11 Directors of the Surviving Corporation. The directors of Merger
Subsidiary immediately prior to the Effective Time shall be the directors of the
Surviving Corporation until their respective successors shall be duly elected
and qualified.
ARTICLE 2
CLOSING
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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 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
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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 by telecopy exchange of signature pages with originals to follow by
overnight delivery, or in such other manner or at such place 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
251 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, referring specifically to the representations
and warranties in this Agreement that identifies by section number to which such
disclosure relates (the "Company Disclosure Schedule"), or (ii) as specifically
described through express disclosure of specific facts set forth or incorporated
by reference in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 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, to the extent the relevancy of such disclosure to such
particular representation and warranty 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 a corporation duly organized, validly existing,
and in good standing under the laws of its respective jurisdiction of
incorporation 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 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 would
not, individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect (as defined below). "Company Material Adverse Effect"
means an effect that 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;
or (ii) to the Company's ability to perform any of its material obligations
under this Agreement or to consummate the Merger; or (iii) to the ability of the
Surviving Corporation or Parent to conduct such business, as presently
conducted, following the Effective Time or the ability of Parent to exercise
full rights of ownership of the Company or its assets or business (excluding
effects resulting from agreements previously entered into or actions previously
taken by Parent), except in each case for (i) any such effects directly
resulting from this Agreement or the transactions contemplated by this Agreement
or the announcement hereof, (ii) any occurrence or condition
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affecting the medical device industry generally, or (iii) any changes in general
economic, regulatory or political conditions. 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, Bylaws and other governing instruments of the Company and each
Subsidiary, 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 a less-than-100% interest. Neither the Company nor any Subsidiary, directly
or indirectly, owns or controls or has any equity, partnership, or other
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 action of the Company's Board of Directors or
corporate proceeding on the part of the Company or any Subsidiary are necessary
to authorize this Agreement, and, subject to obtaining the approval and adoption
of this Agreement and approval of the Merger by the holders of 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 action of the Company's Board of Directors or corporate action on the part
of the Company or any Subsidiary 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 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 date hereof, the authorized capital stock of
the Company consists of (i) 30,000,000 shares of Company Common Stock, par value
$.01 per share, of which 12,273,636 shares are issued and outstanding and no
shares are held in the Company's treasury, and (ii) 1,000,000 shares of Company
Preferred Stock, par value $.01 per share, none of which are 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"), other than Liens granted in connection with the Company's
credit facility. 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 options to purchase an aggregate 1,710,764 shares of Company Common Stock
granted pursuant to the Company's Third Amended and Restated 1996 Stock Option
Plan (the "Company Option Plan") listed, together with their respective exercise
prices, in the Company Disclosure Schedule,
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and for Liens granted in connection with the Company's credit facility, as of
the date of this Agreement, there are 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 is a party that, directly or
indirectly, (i) obligate 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, (ii)
call for or relate to the sale, pledge, transfer, or other disposition or
encumbrance by the Company or any Subsidiary of any shares of its capital stock,
or (iii) to the knowledge of the Company, relate 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, 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 Option Plan 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 Option Plan to allow for the treatment of Company
Options as is provided in Section 1.7, has 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 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 by more than 1,000 shares the sum
of the outstanding shares of Company Common Stock described in the first
sentence of this Section 3.3, plus any shares of Company Common Stock issued
upon the exercise of outstanding options to purchase Company Common Stock
identified in Section 3.3.
3.4 Reports and Financial Statements. The Company has filed all forms,
reports, registration statements, and documents required to be filed by it with
the Securities and Exchange Commission ("SEC") since October 11, 1996 (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 Securities
Exchange Act of 1934 and the rules and regulations thereunder (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 and unaudited
interim 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 December 31, 1998 (the "Company
1998 Financials"), (i) were prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except as may be indicated therein or in the notes thereto or, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC), (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 as of the dates thereof and the income, cash
flows, and changes in stockholders' equity for the periods involved (subject, in
the case of unaudited statements, to normal and recurring year-end adjustments
that were not and are not,
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individually or in the aggregate, expected to have a Company Material Adverse
Effect). The statements of earnings 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 GAAP,
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)
except (a) liabilities or obligations that are accrued or reserved against in
the audited consolidated balance sheet of the Company as of December 31, 1998
contained in the Company 1998 Financials (the "Company Audited Balance Sheet")
or in the unaudited consolidated balance sheet of the Company as of July 3, 1999
contained in the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended July 3, 1999 (the "Company Interim Balance Sheet"), or referred to in the
notes thereto, (b) liabilities incurred since July 3, 1999 in the ordinary
course of business and of a type and in an amount consistent with past practice,
and (c) liabilities or obligations that would not, individually or in the
aggregate, 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 Hart-Scott-Rodino
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 (iii) the filing and recordation of appropriate merger documents as required
by the DGCL, the authorization and approval by the Company's Board of Directors
and 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 of Incorporation or
Bylaws of the Company or any Subsidiary; (b) violate any statute, law, 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 with or permit, consent, or approval to be obtained 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 (b), (c) and (d), for any such filings, permits, consents or
approvals or violations, breaches, defaults, or other occurrences that would
not, individually or in the aggregate, reasonably be expected to prevent or
delay
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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 would not, individually or in the
aggregate, 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, under or with
respect to which the transactions contemplated by this Agreement will 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 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 the Company or any Subsidiary, except for violations,
defaults, losses, rights and Liens that would not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect.
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 would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect. The Company and each Subsidiary has 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 would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
3.8 Litigation. There are no claims, actions, suits, proceedings or, to the
knowledge of the Company, investigations or 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, except for
such claims, actions, suits, proceedings, investigations or reviews that would
not, individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect.
3.9 Absence of Material Adverse Changes. Since December 31, 1998 there has
not been any (a) Company Material Adverse Effect; (b) damage, destruction, or
loss, not covered by insurance, that would, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect; or (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.
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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
the name and current annual salary rate of each executive officer of the Company
or of any Subsidiary whose total remuneration for the last fiscal year was, or
for the current fiscal year is expected to be, in excess of $100,000, 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 executive
officers of the Company or of any Subsidiary whose employment with the Company
or any Subsidiary has terminated either voluntarily or involuntarily during the
preceding 12-month period; and (ii) the names of the executive officers (with
all positions and titles indicated) and directors of the Company and of each
Subsidiary. Except as would not, individually or in the aggregate, 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, 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 (iii) 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, individually or in the aggregate,
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) 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,
individually and in the aggregate, are not reasonably expected to have a Company
Material Adverse Effect. 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 Sections 368(a)(2)(E) and 368(a)(1)(B) of the Code. The Company is not
aware of any agreement, plan or other circumstance that would prevent the Merger
from so qualifying under Sections 368(a)(2)(E) and 368(a)(1)(B) of the Code.
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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, (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, and (c) every
contract, agreement, or understanding to which the Company or any Subsidiary is
a party that would reasonably be expected to involve payments by or to the
Company or any Subsidiary in excess of $100,000 during the Company's current
1999 fiscal year or in excess of $250,000 in the aggregate during the Company's
1999, 2000 and 2001 fiscal years, or would have a Company Material Adverse
Effect, or that is material and was not made in the ordinary course of business.
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 would not, individually or in the
aggregate, 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)
that restricts the Company's, or after the Merger would restrict the Surviving
Corporation's or Parent's, ability to conduct any line of business, (ii) that
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 1998 Financials, 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.
3.13 Intellectual Property Rights. The Company Disclosure Schedule contains
a complete and accurate list of all material patents, trademarks, trade names,
service marks, copyrights, and all applications for or registrations of any of
the foregoing as to which the Company or any Subsidiary is the owner or a
licensee (the "Company Intellectual Property"). The Company and each Subsidiary
owns, free and clear of any Lien (as defined in Section 3.3), other than Liens
granted in connection with the Company's credit facility and Liens that would
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not be reasonably expected to have a Company Material Adverse Effect, or is
licensed to use, all patents, trademarks, trade names, service marks,
copyrights, applications for or registrations of any of the foregoing comprising
the Company Intellectual Property. No claim has been asserted or, to the
knowledge of the Company, threatened in writing by any person, with respect to
the use of the Company Intellectual Property or challenging or questioning the
validity or effectiveness of any license or agreement with respect thereto,
except for such claims that, individually or in the aggregate, would not
reasonably be expected to have a Company Material Adverse Effect. To the
knowledge of the Company, neither the use of the Company Intellectual Property
by the Company or any Subsidiary 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, individually or in
the aggregate, would reasonably be expected to have a Company Material Adverse
Effect. Except as would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect, (i) all Company Intellectual
Property listed in the Company Disclosure Schedule 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 has not been challenged
in any judicial or administrative 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
would not, individually or in the aggregate, 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, within the past five years, 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 would
not, individually or in the aggregate, reasonably be expected to have a
Company Material Adverse Effect.
(b) Neither the Company nor any Subsidiary sponsors, maintains,
contributes to, or has, within the past five years, 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,
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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 would 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 that would, individually or in
the aggregate, reasonably be expected to have a Company Material Adverse
Effect.
(f) The IRS 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 or made
available to Parent summaries 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 or made available to Parent (i) copies of all
employment agreements with officers of any of the Company or its
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 or any
Subsidiary with or relating to any of its employees; and (iii) copies of
all plans, programs, agreements and other arrangements of any of the
Company or any Subsidiary with or relating to any of its employees that
contain change in control provisions.
(g) The execution of, and performance 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 or
may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase
in benefits, or obligation to fund benefits. The aggregate amount that (i)
would 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
all employees,
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officers, or directors of the Company or any of its affiliates who are a
"disqualified individuals" (as such term is defined in proposed Treasury
Regulation Section 1.280G-1) under any Pension Plan, Welfare Plan, or
Compensation Plan currently in effect, and (ii) would constitute an "excess
parachute payment" (as such term is defined in Section 280G(b)(1) of the
Code), shall not exceed $4,500,000.
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, Boards of Directors, and committees of the
Boards 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 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, 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 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.
3.18 Fairness Opinion. The Board of Directors of the Company has received
an opinion from Deutsche Bank Securities Inc. to the effect that, as of the date
of this Agreement, 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. 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.
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
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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, referring
specifically to the representations and warranties in this Agreement that
identifies by section number to which such disclosure relates (the "Parent
Disclosure Schedule"), or (ii) as specifically described through express
disclosure of specific facts set forth or incorporated by reference in Parent's
Annual Report on Form 10-K for the fiscal year ended April 30, 1999 or in any
other filing by Parent with the SEC filed after the date of filing such Form
10-K and prior to the date hereof, to the extent the relevancy of such
disclosure to such particular representation and warranty 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 would not, individually or in the aggregate,
reasonably be expected to have a Parent Material Adverse Effect (as defined
below). "Parent Material Adverse Effect" means an effect that 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 hereof, (ii) any occurrence or condition affecting the medical
device industry 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 of the transactions contemplated hereby and thereby, have been
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duly and validly authorized and approved by the Boards of Directors of Parent
and Merger Subsidiary and by Parent as the sole stockholder of Merger
Subsidiary, and no other action of Parent's or Merger Subsidiary's Boards of
Directors or corporate proceeding 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,
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 August 25, 1999, the authorized capital stock of
Parent consisted of (a) 1,600,000,000 shares of Common Stock with a par value of
$.10 per share, of which there were 586,744,542 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 authorization and approval by parent's
and Merger Subsidiary's Boards of Directors and 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 Articles or Certificate of Incorporation or Bylaws
of Parent or Merger Subsidiary; (b) violate any statute, law, 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 with or permit,
consent, or approval to be obtained 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
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may be bound, except, in the case of clauses (b), (c) and (d), for any such
filings, permits, consents or approvals or violations, breaches, defaults, or
other occurrences that would not, individually or in the aggregate, 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
would not, individually or in the aggregate, reasonably be expected to have a
Parent Material Adverse Effect.
4.5 Reports; Financial Statements; Absence of Changes4.5 Reports; Financial
Statements; Absence of Changes. Parent has filed all forms, reports,
registration statements, and documents required to be filed by it with the SEC
since May 1, 1996 (such forms, reports, registration statements and documents,
together with any 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 and unaudited interim financial statements included or incorporated
by reference in the Parent SEC Filings (i) were prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except as may be indicated therein or in the notes thereto
or, in the case of unaudited statements, as permitted by Form 10-Q of the SEC),
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 as of the dates thereof and the income, cash flows, and changes in
shareholders' equity for the periods involved, except as otherwise noted therein
(subject, in the case of unaudited statements, to normal and recurring year-end
adjustments that were not and are not expected to have a Parent Material Adverse
Effect).
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 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, 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
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payment in connection with the transactions contemplated herein, except for
payments to US Bancorp Piper Jaffray for financial advisory services to Parent
in connection herewith.
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) except (a)
liabilities or obligations that are accrued or reserved against in the audited
consolidated balance of Parent as of April 30, 1999 contained in the Parent SEC
Filings or referred to in the notes thereto, (b) liabilities incurred since
April 30, 1999 in the ordinary course of business and of a type and in an amount
consistent with past practice, and (c) liabilities or obligations that would
not, individually or in the aggregate, 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 would not,
individually or in the aggregate, 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 would not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect.
4.10 Litigation. There are no claims, actions, suits, proceedings, or, to
the knowledge of Parent, investigations or 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,
except for such claims, actions, suits, proceedings, investigations or reviews
that would not, individually or in the aggregate, reasonably be expected to have
a Parent Material Adverse Effect.
4.11 Absence of Material Adverse Changes. Since April 30, 1999, there has
not been any (a) Parent Material Adverse Effect, (b) damage, destruction or
loss, not covered by insurance, that would, individually or in the aggregate,
reasonably be expected to have a Parent Material Adverse Effect, or (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 or generally accepted accounting principles and concurred with by
Parent's independent public accountants.
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
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Sections 368(a)(2)(E) and 368(a)(1)(B) of the Code. Parent is not aware of any
agreement, plan or other circumstances that would prevent the Merger from so
qualifying under Sections 368(a)(2)(E) and 368(a)(1)(B) 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 conduct
its respective operations, to the extent commercially reasonable, according to
its ordinary and usual course of business and consistent with past practice, and
the Company and each Subsidiary will use its 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 Schedule, from the date of the 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 of Incorporation or 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 the issuance of shares of Company Common Stock pursuant to the
exercise of stock options outstanding on the date of this Agreement);
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(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; 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 material Lien on any material asset;
(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 not required by any existing plan, agreement, or arrangement to any
such director, officer, employee or consultant; 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;
(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, materials and
supplies in the ordinary course of business consistent with past practice;
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(h) make or agree to make any new capital expenditure or expenditures,
except for capital expenditures not in excess of an aggregate $7,500,000;
(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 that restricts the
Company's, or after the Merger would restrict the Surviving Corporation's
or Parent's, ability to conduct any line of business;
(k) change in any material respect its general credit policy as to
sales of inventories or collection of receivables or its inventory
consignment practices;
(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;
(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; or
(p) 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
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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 Parent's capital stock
(whether by merger, consolidation, reorganization or otherwise), declare,
set aside or pay any 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 and excluding Parent's regular
quarterly cash dividends) in respect of Parent's capital stock, or redeem
or otherwise acquire (other than as would not violate Section 5.21) any
shares of Parent's capital stock or amend or alter any material term of any
of Parent's outstanding securities;
(b) 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 generally accepted accounting principles and
concurred with by Parent's independent public accountants;
(c) knowingly take any action that would result in a failure to
maintain the trading of Parent Common Stock on the NYSE;
(d) 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
(e) 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 involving capital
stock of the Company or any material Subsidiary; (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 material 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
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transaction or series of related transactions. 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 written inquiry that it
receives after the date hereof in respect of any proposed Alternative
Transaction or a reasonably detailed description of any such information
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 18-month standstill provisions of the Confidentiality Agreement
(as defined in Section 5.4(b)) 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 at
least 24 hours' prior 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 (as defined in Section 5.4(b))
entered into with Parent as modified by clause (I)(x) of this sentence, and (c)
the Company concurrently provides Parent with all non-public information to be
provided to such person or entity that Parent has not previously received from
the Company, and the Company keeps Parent informed, on a regular basis as
frequently as reasonably requested by Parent, 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,
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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 all
commercially reasonable efforts to provide acceptable alternative
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, clinicals, 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 and in accordance with the confidentiality agreement dated
December 12, 1997, between Parent and the Company, as supplemented by an
agreement dated August 6, 1999 (as so supplemented, 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
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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 reasonable
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 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 reasonable 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.
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(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 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 all reasonable
efforts to obtain all 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 all reasonable efforts to obtain all approvals and consents of all
third parties necessary on the part of Parent to consummate the transactions
contemplated hereby. The Company agrees to cooperate with Parent 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
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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 C,
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.
(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 1933 Act.
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 (the
"Shared Expenses").
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 its
reasonable best 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
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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 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.
Notwithstanding the foregoing provisions of this Section 5.10 or anything
in this Agreement to the contrary, nothing shall require Parent or Merger
Subsidiary to make or agree to make, or to cause or permit the Company or
any Subsidiary to make or agree to make, any divestiture of any portion of
any business or assets of Parent, Merger Subsidiary, the Company, or any of
their affiliates in order to obtain any waiver, consent or approval, and
neither Parent nor Merger Subsidiary shall be required to hold separate or
otherwise take or commit to take any action that limits its freedom of
action with respect to, or its ability to retain, as of and after the
Closing any businesses or assets of the Company, Parent or any of their
respective affiliates.
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 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 D (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.
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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 E (the "Stock Option
Agreement"), pursuant to which the Company has granted to Parent an option to
acquire from the Company such number of shares of Company Common Stock as equals
19.9% of the aggregate number of outstanding shares of Company Common Stock at
an exercise price equal to $60.00 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 its reasonable best 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.
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, unless such modification is required by law.
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 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 coverage under Parent's
directors' and officers' liability insurance or coverage under other
policies providing coverage on terms and conditions that are no less
advantageous to such persons than the Company's current insurance, 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 those persons who are currently
covered by the Company's directors' and officers' liability insurance
policy (a copy of which has been heretofore delivered or made available to
Parent or its advisors ) (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 200% of the annual premium
currently paid by
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the Company for such insurance; and provided further that if the cost per
year of such coverage exceeds such 200% amount, Parent shall be obligated
to obtain such coverage as is available for a cost per year not exceeding
such amount. The Company represents that Section 5.15(b) of the Company
Disclosure Schedule sets forth the annual premium currently paid by the
Company for such insurance.
(c) In the event Parent, the Surviving Corporation or any of their
successors or assigns (i) consolidates with or merges into any other person
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 Company, Parent, the
Surviving Corporation and the Indemnified Parties, and all other
individuals who on or at any time prior to the Effective Time were
directors, officers, employees or agents of the Company or any Subsidiary,
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 its reasonable
efforts to cause to be delivered to Parent and the Company the following
letters from Ernst & Young LLP addressed to the Company: (i) a letter dated
the date of this Agreement, stating that they concur with the Company's
management's conclusions as to the appropriateness of pooling of interest
accounting for the Merger under APB 16 and applicable SEC rules and
regulations if closed and consummated in accordance with this Agreement;
and (ii) a letter dated as of the Closing Date stating that they concur
with the Company's management's conclusions as to the appropriateness of
pooling of interest accounting for the Merger under APB 16 and applicable
SEC rules and regulations if closed and consummated in accordance with this
Agreement.
(b) The Company shall cooperate with Parent and Parent shall use its
reasonable efforts to cause to be delivered to the Company and Parent the
following letters from Pricewaterhouse Coopers LLP addressed to Parent: (i)
a letter dated the date of this Agreement, stating that they concur with
Parent's management's conclusions as to the appropriateness of pooling of
interest accounting for the Merger under APB 16 and applicable SEC rules
and regulations if closed and consummated in accordance with this
Agreement; and (ii) a letter dated as of the Closing Date stating that they
concur with Parent's management's conclusions as to the appropriateness of
pooling of interest accounting for the Merger under APB 16 and applicable
SEC rules and regulations if closed and consummated in accordance with this
Agreement.
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5.17 Subsidiary Shares. At or prior to the Closing, the Company shall use
its 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 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 employees that, in the aggregate, are
substantially comparable or more favorable, as a whole, 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
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 or cause the Surviving Corporation to 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 were disclosed
to Parent prior to the date hereof.
(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. Except as required by law or the applicable plan with
respect to foreign pension benefit plans, under no 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.
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, each party hereto shall use all reasonable 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 that
could prevent the Merger from qualifying as a reorganization under the
provisions of Sections 368(a)(2)(E) and 368(a)(1)(B) of the Code.
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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
take all reasonable actions necessary 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.
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 Company or the assets or 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 or qualification
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
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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:
(a) Representations and Warranties True. The representations and
warranties 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 of representations and warranties that,
individually or in the aggregate, 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 by more than 1,000 shares as of
the Closing Date. 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 on or prior to the Closing, and Parent
shall have received a certificate to such effect signed by the Chief
Executive Officer of the Company.
(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. Neither the chief
executive officer nor the chief operating officer of the Company shall have
advised Parent or the Company that he intends to terminate his employment
with the Company following the Merger for any reason other than death or
disability.
6.3 Conditions to Obligations 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. The representations and
warranties 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
warranties that address matters only as of a particular date shall remain
true and correct as of such date, and except in any case for any
inaccuracies of representations and warranties that, individually or in the
aggregate, have not had, or would not reasonably be expected to have, a
Parent Material Adverse Effect. The
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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 on 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 Willkie
Farr & Gallagher, 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 the 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 February 26, 2000; 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
for an additional 45 days;
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(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, (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 either (A)
recommends in favor of acceptance of such tender offer or exchange offer by
its stockholders, or (B) 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 material breach of its obligations under this Agreement
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 five 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 five 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) promptly
(in no event more than two business days) after 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 sixth
business day after Parent has received the notice to
38
<PAGE>
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); 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 terminated by Parent pursuant to Section
7.1(e)(ii), (e)(iii) or (e)(iv)(A); or
(ii) this Agreement is terminated by the Company pursuant to
Section 7.1(f); or
(iii) (A) this Agreement is terminated by Parent or the Company
pursuant to Section 7.1(d) due to the failure of the Company's
stockholders to approve the Merger or pursuant to Section 7.1(b) due
to the expiration of the date specified therein (provided that prior
to such termination pursuant to Section 7.1(b) the Company's
stockholders have not approved the Merger), (B) at any time prior to
such termination a proposal for an "Alternative Control Transaction"
(as defined below) shall have been publicly announced, and (C) within
12 months of the date of such termination, the Company shall have
entered into an agreement providing for an Alternative Control
Transaction. For purposes of this Agreement, "Alternative Control
Transaction" shall mean any of the following
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involving the Company or any material Subsidiary: (i) any tender
offer, exchange offer, merger, consolidation, share exchange, business
combination or similar transaction involving a majority of the
outstanding capital stock of the Company or any material Subsidiary;
(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 50% of the outstanding shares of any
class of capital stock of the Company or any material Subsidiary; 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; or
(iv) this Agreement is terminated by Parent pursuant to Section
7.1(e)(iv)(B) and, within 12 months of the date of such termination,
an Alternative Control Transaction shall have occurred or the Company
shall have entered into an agreement providing for an Alternative
Control Transaction; or
(v) this Agreement is terminated by Parent pursuant to Section
7.1(e)(i) due to a material breach by the Company of the first
sentence of Section 5.3;
then, in any such event, the Company will pay to Parent, (1) promptly (in
no event more than two business days) after the termination date in the
event of termination pursuant to Section 7.1(f), and (2) within five
business days after demand by Parent in the case of termination pursuant to
Section 7.1(e)(i), (e)(ii), (e)(iii), or (e)(iv)(A), and (3) within two
business days after consummation of an Alternative Control Transaction, in
the case of the events specified in clause (iii) or (iv) above (in each
case by wire transfer of immediately available funds to an account
designated by Parent for such purpose), a fee equal to $24,100,000;
provided in the event the fee is payable pursuant to one or more of clauses
(i), (ii), (iii), (iv) or (v) above, the fee shall be due and payable
pursuant to the clause calling for payment at the earliest time.
(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 this Section 7.2, 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
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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 date of such change in such prime rate.
(c) Parent agrees that the payments provided for in Section 7.2(a)
shall be the sole and exclusive remedies of Parent upon termination of this
Agreement pursuant to Section 7.1(d), (e) and (f), as the case may be, and
such remedies 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, and (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 exceed $30,100,000. 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 and any Option Share Profit not remitted to the Company pursuant
to Section 2(c) of the Stock Option Agreement.
(d) 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 that 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.
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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 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.
7000 Central Avenue, N.E.
Minneapolis, Minnesota 55402
with separate copies thereof addressed to
Attention: General Counsel
FAX: (612) 572-5459
and
Attention: Vice President and Chief Development Officer
FAX: (612) 572-5404
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(b) If to the Company, to it at:
Xomed Surgical Products, Inc.
6743 Southpoint Drive North
Jacksonville, Florida 32216
FAX: (904) 279-7548
Attention: Jaime A. Frias, Esq.
with a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
FAX: (212) 728-8111
Attention: Steven J. Gartner, 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. This Agreement shall be governed by the laws of the
State of Delaware (regardless of the laws that might otherwise govern under
applicable Delaware principles of conflicts of 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 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
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Agreement or the Merger will be mutually agreed upon by them, except as provided
in the following sentence. Neither party shall, without such mutual agreement or
the prior consent of the other, file any documents or 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.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement and
Plan of Merger as of the date first above written.
MEDTRONIC, INC.
By: /s/ Michael D. Ellwein
------------------------------
Michael D. Ellwein, Vice President
and Chief Development Officer
MXS MERGER CORP.
By: /s/ Michael D. Ellwein
------------------------------
Michael D. Ellwein, Vice President
XOMED SURGICAL PRODUCTS, INC.
By: /s/ James T. Treace
------------------------------
James T. Treace
Chairman, President and
Chief Executive Officer
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EXHIBIT A
Form of Certificate of Incorporation
<PAGE>
EXHIBIT B
Form of Bylaws
<PAGE>
EXHIBIT C
Form of Affiliate's Letter
<PAGE>
EXHIBIT D
Form of Agreement to Facilitate Merger
<PAGE>
EXHIBIT E
Form of Stock Option Agreement
<PAGE>
STOCK OPTION AGREEMENT
THIS AGREEMENT is dated as of August 26, 1999, between Medtronic, Inc., a
Minnesota corporation ("Grantee"), and Xomed Surgical Products, Inc., a Delaware
corporation ("Issuer").
RECITALS
A. Grantee, Issuer, and MXS Merger Corp., a Delaware corporation and
wholly-owned subsidiary of Grantee ("Merger Subsidiary"), have entered into an
Agreement and Plan of Merger (the "Merger Agreement") which provides, among
other things, that, upon the terms and subject to the conditions thereof, Merger
Subsidiary will be merged with and into Issuer (the "Merger").
B. As a condition to its willingness to enter into the Merger Agreement,
Grantee has required that Issuer enter into this Agreement, which provides,
among other things, that Issuer grant to Grantee an option to purchase shares of
Issuer's Common Stock, par value $.01 per share ("Issuer Common Stock"), upon
the terms and subject to the conditions provided for herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements contained in this Agreement and the Merger Agreement, the parties
agree as follows:
1. Grant of Option. Subject to the terms and conditions of this Agreement,
Issuer hereby grants to Grantee an irrevocable option (the "Option") to purchase
2,442,453 shares of Issuer Common Stock (the "Option Shares"), in the manner set
forth below, at an exercise price of $60.00 per share of Issuer Common Stock,
subject to adjustment as provided below (the "Option Price"). Issuer represents
that the Option Shares represent at least 19.9% of the number of shares of
Issuer Common Stock outstanding on the date hereof. Capitalized terms used
herein but not defined herein shall have the meanings set forth in the Merger
Agreement.
2. Exercise of Option.
(a) Subject to the terms and conditions of this Agreement, Grantee or
its designee (which shall be a wholly-owned subsidiary of Grantee) may,
prior to the Expiration Date (as defined in Section 11), exercise the
option, in whole or in part, at any time or from time to time on or after
the occurrence of an Exercise Event (as defined below). As used herein, an
"Exercise Event" shall mean (i) the occurrence of a termination specified
in Section 7.2(a)(i), Section 7.2(a)(ii) or Section 7.2(a)(v) of the Merger
Agreement or (ii) immediately prior to consummation of an Alternative
Control Transaction after the occurrence of all of the events and
circumstances specified in Section 7.2(a)(iii) or Section 7.2(a)(iv) of the
Merger Agreement.
(b) In the event Grantee wishes to exercise the Option at such time as
the Option is exercisable, Grantee shall deliver written notice (the
"Exercise Notice") to
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Issuer specifying its intention to exercise the Option, the total number of
Option Shares it wishes to purchase, and a date and time for the closing of
such purchase (a "Closing") not less than three nor more than ten business
days after the later of (i) the date such Exercise Notice is given and (ii)
the expiration or termination of any applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"). When this Option is exercisable, Grantee, in lieu of exercising the
Option, shall have the right at any time thereafter prior to the Expiration
Date to request in writing (the "Cash Cancellation Notice") that Issuer
pay, and promptly (but in any event not more than five business days) after
Grantee makes such request, Issuer shall, subject to Section 2(c) below,
pay to Grantee by certified check, official bank check or wire transfer
pursuant to Grantee's instructions, in cancellation of the Option, an
amount in cash (the "Cancellation Amount") equal to (i) the lesser of
(x) the excess, if any, over the Option Price of the greater of
(A) the last sale price of a share of Issuer Common Stock as reported
on the Nasdaq Stock Market (or other United States national exchange
upon which Issuer's Common Stock is traded) on the last trading day
prior to the date of the Cash Cancellation Notice (the "Last Sale
Price"), (B) the highest price per share of Issuer Common Stock
offered to be paid or paid in connection with the Alternative
Transaction giving rise to such Cash Cancellation Notice, and (C) if
the Alternative Transaction giving rise to such Cash Cancellation
Notice is structured as an asset acquisition, the highest aggregate
consideration offered to be paid or paid in such transaction or
proposed transaction, divided by the number of shares of Issuer Common
Stock then outstanding, and
(y) $30,100,000 divided by the initial number of Option Shares
covered by the Option,
multiplied by (ii) the number of Option Shares then covered by the Option;
provided, however, that the Cancellation Amount shall be reduced (but not
below zero) to the extent necessary so that the sum of the termination fee
described in Section 7.2(a) of the Merger Agreement (the "Termination Fee")
paid to Grantee, the Option Share Profit (as defined below) not remitted to
Issuer pursuant to Section 2(c) hereof, and the Cancellation Amount shall
not exceed $30,100,000. If all or a portion of the price per share of
Issuer Common Stock offered, paid, or payable or the aggregate
consideration offered, paid, or payable for the assets of Issuer, each as
contemplated by the preceding sentence, consists of noncash consideration,
the amount described in clause (x) of the preceding sentence shall equal
the excess, if any, over the Option Price of the Last Sale Price. In no
event shall (i) the Cancellation Amount exceed $30,100,000 or (ii) the sum
of the Termination Fee paid, the Option Share Profit not remitted to Issuer
pursuant to Section 2(c) hereof, and the Cancellation Amount paid exceed
$30,100,000.
(c) In the event that Grantee sells, pledges, or otherwise disposes of
(including, without limitation, by merger or exchange) any Option Shares
within six months after Grantee's acquisition of such Option Shares (such
sale or disposition of Option Shares within six months after acquisition
referred to as a "Sale"), or in the event that any Cancellation Amount is
paid to Grantee or any Option Share Profit is received
2
<PAGE>
by Grantee (and not required to be remitted to Issuer pursuant to this
Section 2(c)), then any Termination Fee due and payable by Issuer shall be
reduced to the extent necessary so that the sum of
(w) the Termination Fee;
(x) any Cancellation Amount paid to Grantee;
(y) the amount received (whether in cash, loan proceeds,
securities, or otherwise) by Grantee in such Sale less the exercise
price of such Option Shares sold in the Sale (the "Option Share
Profit") and not remitted to Issuer pursuant to this Section 2(c); and
(z) Option Share Profit received in connection with any prior
Sales of Option Shares and not remitted to Issuer pursuant to this
Section 2(c),
shall not exceed $30,100,000. Grantee shall remit to Issuer, within five
business days after completion of any Sale, the amount, if any, by which
the Option Share Profit from such Sale, when added to the Termination Fee
previously paid, the Cancellation Amount previously paid, and the Option
Share Profit from prior Sales of Option Shares not remitted to Issuer
pursuant to this Section 2(c), exceeds $30,100,000.
3. Payment of Option Price and Delivery of Certificate. Any Closings under
Section 2 of this Agreement shall be held at the principal executive offices of
Issuer, or at such other place as Issuer and Grantee may agree. At any Closing
hereunder, (a) Grantee or its designee will make payment to Issuer of the
aggregate price for the Option Shares being so purchased by delivery of a
certified check, official bank check, or wire transfer of funds pursuant to
Issuer's instructions payable to Issuer in an amount equal to the product
obtained by multiplying the Option Price by the number of Option Shares to be
purchased, and (b) upon receipt of such payment Issuer will deliver to Grantee
or its designee (which shall be a wholly-owned subsidiary of Grantee) a
certificate or certificates representing the number of validly issued, fully
paid, and nonassessable Option Shares so purchased, in the denominations and
registered in such names (which shall be Grantee or a wholly-owned subsidiary of
Grantee) designated in writing to Issuer by Grantee.
4. Registration and Listing of Option Shares.
(a) Issuer agrees to use its reasonable best efforts to (i) effect as
promptly as possible upon the request of Grantee or other holder of Option
Shares to whom Grantee has assigned its registration rights under this
Section 4 (Grantee or such transferee referred to herein as a "Holder") and
(ii) cause to become and remain effective for a period not in excess of 120
days from the day such registration statement first becomes effective (or
such shorter period as may be necessary to effect the distribution of such
shares) the registration under the 1933 Act, and any applicable state
securities laws, of all or any part of the Option Shares as may be
specified in such request; provided, however, that (i) Holder shall have
the right to select the managing underwriter for any such offering after
consultation with Issuer, which managing underwriter shall be reasonably
3
<PAGE>
acceptable to Issuer, (ii) Holder shall not be entitled to more than two
effective registration statements hereunder, (iii) Holder shall not be
entitled to request such a registration statement within a period of one
year after the effective date of a registration statement in which Grantee
was entitled to include all or a portion of the Option Shares, and (iv)
Holder shall not be entitled to request any such registration unless it has
provided to Issuer a written opinion of counsel to Holder, which opinion
shall be reasonably satisfactory to Issuer and its counsel, that the
distribution of Option Shares specified in Holder's request requires
registration of such Option Shares under the 1933 Act. The obligations of
Issuer hereunder to file a registration statement and to maintain its
effectiveness may be suspended for one or more periods of time not
exceeding 90 days in the aggregate in any twelve-month period if and so
long as the Board of Directors of Issuer determines in good faith that the
filing of such registration or the maintenance of its effectiveness would
require disclosure of nonpublic information that would materially and
adversely affect Issuer. Upon receipt of notice of the happening of any
event as a result of which any registration statement, prospectus,
prospectus supplement, or any document incorporated by reference in any of
the foregoing, contains any untrue statements of material fact or fails or
omits to state any material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which
they are made, not misleading, Holder shall forthwith discontinue the
disposition of any shares under such registration statement, prospectus or
prospectus supplement until Holder receives from Issuer copies (which,
subject to the limitations on suspension set forth above, shall promptly be
made available by Issuer) of an amended or supplemented registration
statement, prospectus or supplement so that, as thereafter delivered to
purchasers of such shares, such registration statement, prospectus or
prospectus supplement shall not contain any untrue statement of material
fact or fail or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading. The 120-day period
specified in (ii) above shall be extended by the number of days during
which Holder is precluded from disposing of Option Shares pursuant to the
preceding two sentences.
(b) In addition to such demand registrations, if Issuer proposes to
effect a registration of Issuer Common Stock for its own account or for the
account of any other stockholder of Issuer (other than in connection with
(i) employee stock option plans or similar arrangements or (ii) corporate
acquisitions), Issuer will give prompt written notice to Holder of its
intention to do so and shall use its reasonable best efforts to include
therein all Option Shares requested by Holder to be so included; provided,
however, that, (i) Issuer shall not be required to include any Option
Shares in such registration unless Holder has provided to Issuer a written
opinion of counsel to Holder, which opinion shall be reasonably
satisfactory to Issuer and its counsel, that the distribution of the Option
Shares requested by Holder to be so included in such registration requires
registration under the 1933 Act and (ii) if the managing underwriter of the
offering covered by such registration advises Issuer that in its opinion
the number of Option Shares requested to be included in such registration
exceeds the number that can be sold in such offering, Issuer shall, after
fully including therein all securities to be sold by Issuer, include the
shares requested to be included therein by Holder pro rata (based on the
number of shares intended to be included therein) with the shares intended
to be included therein by
4
<PAGE>
persons other than Issuer. In connection with any underwritten offering,
sale and delivery of Option Shares pursuant to a registration statement
effected pursuant to Section 4(a) or this Section 4(b), Holder, Issuer, and
each underwriter of the offering shall provide each other with customary
representations, warranties, covenants and indemnities. No registration
effected under this Section 4(b) shall relieve Issuer of its obligations to
effect demand registrations under Section 4(a) hereof.
(c) Registrations effected under this Section 4 shall be effected at
Issuer's expense, but excluding underwriting discounts and commissions to
brokers or dealers and the fees and expenses of counsel to Holder. In
connection with each registration under this Section 4, Issuer shall
indemnify and hold each Holder participating in such offering, its
underwriters, and each of their respective affiliates harmless against any
and all losses, claims, damage, liabilities, and expenses (including,
without limitation, investigation expenses and fees and disbursements of
counsel and accountants), joint or several, to which such Holder, its
underwriters, and each of their respective affiliates may become subject,
under the 1933 Act or otherwise, insofar as such losses, claims, damages,
liabilities, or expenses (or actions in respect thereof) arise out of or
are based upon an untrue statement or alleged untrue statement of a
material fact contained in any registration statement (including any
prospectus therein), or any amendment or supplement thereto, or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, other than such losses, claims, damages,
liabilities, or expenses (or actions in respect thereof) that arise out of
or are based upon an untrue statement or alleged untrue statement of a
material fact contained in written information furnished by a Holder to
Issuer expressly for use in such registration statement.
(d) In connection with any registration statement pursuant to this
Section 4, each Holder participating in such offering agrees to furnish
Issuer with such information concerning itself and the proposed sale or
distribution as shall reasonably be required in order to ensure compliance
with the requirements of the 1933 Act. In addition, such Holder shall
indemnify and hold Issuer, its underwriters and each of their respective
affiliates harmless against any and all losses, claims, damages,
liabilities, and expenses (including, without limitation, investigation
expenses and fees and disbursements of counsel and accountants), joint or
several, to which Issuer, its underwriters, and each of their respective
affiliates may become subject under the 1933 Act or otherwise, insofar as
such losses, claims, damages, liabilities, or expenses (or actions in
respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in written
information furnished by such Holder to Issuer expressly for use in such
registration statement.
(e) Upon the issuance of Option Shares hereunder, Issuer will use its
reasonable best efforts promptly to list such Option Shares with the Nasdaq
Stock Market or on such national or other exchange on which the shares of
Issuer Common Stock are at the time listed.
5. Representations and Warranties of Issuer. Issuer hereby represents and
warrants to Grantee as follows:
5
<PAGE>
(a) Issuer is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Delaware and has requisite
corporate power and authority to enter into and perform this Agreement.
(b) The execution and delivery of this Agreement by Issuer and the
consummation by Issuer of the transactions contemplated hereby have been
duly and validly authorized by the Board of Directors of Issuer, and no
other corporate proceedings on the part of Issuer are necessary to
authorize this Agreement or to consummate the transactions contemplated
hereby. The Board of Directors of Issuer has duly approved the issuance and
sale of the Option Shares, upon the terms and subject to the conditions
contained in this Agreement, and the consummation of the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Issuer and, assuming this Agreement has been duly and validly
authorized, executed, and delivered by Grantee, constitutes a valid and
binding obligation of Issuer enforceable against Issuer in accordance with
its terms, subject to bankruptcy, insolvency, reorganization, moratorium,
or other similar laws affecting or relating to creditors' rights generally;
the availability of injunctive relief and other equitable remedies; and
limitations imposed by law on indemnification for liability under federal
securities laws.
(c) Issuer has taken all necessary action to authorize and reserve for
issuance and to permit it to issue, and at all times from the date of this
Agreement through the date of expiration of the Option will have reserved
for issuance upon exercise of the Option, such number of authorized shares
of Issuer Common Stock as is equal to the number of Option Shares (or such
other amount as may be required pursuant to Section 10 hereof), each of
which, upon issuance pursuant to this Agreement and when paid for as
provided herein, will be validly issued, fully paid, and nonassessable, and
shall be delivered free and clear of all claims, liens, charges,
encumbrances, and security interests and not subject to any preemptive
rights.
(d) The execution, delivery, and performance of this Agreement by
Issuer and the consummation by it of the transactions contemplated hereby
except as required by the HSR Act (if applicable), and, with respect to
Section 4, compliance with the provisions of the 1933 Act and any
applicable state securities laws, do not require the consent, waiver,
approval, license, or authorization of or result in the acceleration of any
obligation under, or constitute a default under, any term, condition, or
provision of any charter or bylaw, or any indenture, mortgage, lien, lease,
agreement, contract, instrument, order, judgment, ordinance, regulation, or
decree or any restriction to which Issuer or any property of Issuer or its
subsidiaries is bound, except where the failure to obtain such consents,
waivers, approvals, licenses, or authorizations or where such acceleration
or defaults would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect.
6. Representations and Warranties of Grantee. Grantee hereby represents and
warrants to Issuer that:
6
<PAGE>
(a) Grantee is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Minnesota and has requisite
corporate power and authority to enter into and perform this Agreement.
(b) The execution and delivery of this Agreement by Grantee and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of Grantee, and no other
corporate proceedings on the part of Grantee are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by Grantee and,
assuming this Agreement has been duly executed and delivered by Issuer,
constitutes a valid and binding obligation of Grantee enforceable against
Grantee in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium, or other similar laws affecting or relating to
creditors' rights generally; the availability of injunctive relief and
other equitable remedies; and limitations imposed by law on indemnification
for liability under federal securities laws, including, without limitation,
the 1933 Act.
(c) Grantee or its designee is acquiring the Option and it will
acquire the Option Shares issuable upon the exercise thereof for its own
account and not with a view to the distribution or resale thereof in any
manner not in accordance with applicable law.
7. Covenants of Grantee. Grantee agrees not to transfer or otherwise
dispose of the Option Shares, or any interest therein, except in compliance with
the 1933 Act and any applicable state securities law. Grantee further agrees to
the placement of the following legend on the certificates representing the
Option Shares (in addition to any legend required under applicable state
securities laws):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER EITHER (1) THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"),
OR (2) ANY APPLICABLE STATE LAW GOVERNING THE OFFER AND SALE OF
SECURITIES. NO TRANSFER OR OTHER DISPOSITION OF THESE SHARES, OR OF
ANY INTEREST THEREIN, MAY BE MADE EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT AND SUCH OTHER STATE LAWS OR
PURSUANT TO EXEMPTIONS FROM REGISTRATION UNDER THE ACT, SUCH OTHER
STATE LAWS, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER."
8. Reasonable Best Efforts. Grantee and Issuer shall take, or cause to be
taken, all reasonable action to consummate and make effective the transactions
contemplated by this Agreement, including, without limitation, reasonable best
efforts to obtain any necessary consents of third parties and governmental
agencies and the filing by Grantee and Issuer promptly after the date hereof of
any required HSR Act notification forms and the documents required to comply
with the HSR Act.
7
<PAGE>
9. Certain Conditions. The obligation of Issuer to issue Option Shares
under this Agreement upon exercise of the Option shall be subject to the
satisfaction or waiver of the following conditions:
(a) any waiting periods applicable to the acquisition of the Option
Shares by Grantee pursuant to this Agreement under the HSR Act shall have
expired or been terminated;
(b) the representations and warranties of Grantee made in Section 6 of
this Agreement shall be true and correct in all material respects as of the
date of the Closing for the issuance of such Option Shares; and
(c) no order, decree, or injunction entered by any court of competent
jurisdiction or governmental, regulatory, or administrative agency or
commission in the United States shall be in effect that prohibits the
exercise of the option or acquisition of Option Shares pursuant to this
Agreement.
10. Adjustments Upon Changes in Capitalization. In the event of any change
in the number of issued and outstanding shares of Issuer Common Stock by reason
of any stock dividend, stock split, recapitalization, merger, rights offering,
share exchange, or other change in the corporate or capital structure of Issuer,
Grantee shall receive, upon exercise of the Option, the stock or other
securities, cash, or property to which Grantee would have been entitled if
Grantee had exercised the Option and had been a holder of record of shares of
Issuer Common Stock on the record date fixed for determination of holders of
shares of Issuer Common Stock entitled to receive such stock or other
securities, cash, or property at the same aggregate price as the aggregate
Option Price of the Option Shares.
11. Limitation on Exercise. Notwithstanding any other provision of this
Agreement, the Option may not be exercised for a number of Option Shares as
would, as of the date of the Exercise Notice, result in a Notional Total Profit
(as defined below) of more than $30,100,000 and, if exercise of the Option
otherwise would exceed such amount, Grantee, at its discretion, may increase the
Option Price for that number of Option Shares set forth in the Exercise Notice
so that the Notional Total Profit shall not exceed $30,100,000; provided, that
nothing in this sentence shall restrict any exercise of the Option permitted
hereby on any subsequent date at the Option Price set forth in Section 1.
As used herein, "Notional Total Profit" with respect to any number of
Option Shares as to which Grantee may propose to exercise the Option means the
Total Profit determined as of the date of the Exercise Notice assuming, for
purposes of clause (iii) of the definition of Total Profit, that (x) the Option
were exercised on such date for such number of Option Shares and (y) such Option
Shares, together with all other Option Shares held by Grantee and its affiliates
as of such date, were sold for cash at the closing market price for Issuer
Common Stock as of the close of business on the preceding trading day (less
customary brokerage commissions).
As used herein, "Total Profit" means the aggregate amount (before taxes) of
the following: (i) the Termination Fee paid to Grantee; (ii) any Cancellation
Amount paid to
8
<PAGE>
Grantee; and (iii) all Option Share Profits received in connection with Sales of
Option Shares and not remitted to Issuer pursuant to Section 2(c).
12. Expiration. The Option shall expire at the earlier of (a) the Effective
Time (as defined in the Merger Agreement), (b) six months after the termination
of the Merger Agreement in accordance with the terms thereof in the event
Section 7.2(a)(i), Section 7.2(a)(ii) or Section 7.2(a)(v) of the Merger
Agreement applies, or six months after the date of consummation of the
Alternative Control Transaction in the event Section 7.2(a)(iii) or Section
7.2(a)(iv) of the Merger Agreement applies, or (c) termination of the Merger
Agreement in accordance with the terms thereof in circumstances under which the
fee specified in Section 7.2 thereof cannot in any circumstances become payable
(such expiration date is referred to as the "Expiration Date").
13. General Provisions.
(a) Survival. All of the representations, warranties, and covenants
contained herein shall survive each Closing and shall be deemed to have
been made as of the date hereof and as of the date of each Closing.
(b) Further Assurances. If Grantee exercises the Option, or any
portion thereof, in accordance with the terms of this Agreement, Issuer and
Grantee will execute and deliver all such further documents and instruments
and use their reasonable best efforts to take all such further action as
may be necessary in order to consummate the transactions contemplated
thereby.
(c) Severability. It is the desire and intent of the parties that the
provisions of this Agreement be enforced to the fullest extent permissible
under the law and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, in the event that any provision of this
Agreement would be held in any jurisdiction to be invalid, prohibited, or
unenforceable for any reason, such provision, as to such jurisdiction,
shall be ineffective, without invalidating the remaining provisions of this
Agreement or affecting the validity or enforceability of such provision in
any other jurisdiction. Notwithstanding the foregoing, if such provision
could be more narrowly drawn so as not be invalid, prohibited, or
unenforceable in such jurisdiction, it shall, as to such jurisdiction, be
so narrowly drawn, without invalidating the remaining provisions of this
Agreement or affecting the validity or enforceability of such provision in
any other jurisdiction.
(d) Assignment. This Agreement shall be binding on and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that Issuer shall not be entitled to assign or otherwise
transfer any of its rights or obligations hereunder, and Grantee shall not
be entitled to assign or otherwise transfer any of its rights or
obligations hereunder, other than Grantee's rights under Section 4 which
may be assigned to a transferee of Option Shares.
(e) Specific Performance. The parties agree and acknowledge that in
the event of a breach of any provision of this Agreement, the aggrieved
party would be without an adequate remedy at law. The parties therefore
agree that in the event of a
9
<PAGE>
breach of any provision of this Agreement, the aggrieved party may elect to
institute and prosecute proceedings in any court of competent jurisdiction
to enforce specific performance or to enjoin the continuing breach of such
provision, as well as to obtain damages for breach of this Agreement. By
seeking or obtaining any such relief, the aggrieved party will not be
precluded from seeking or obtaining any other relief to which it may be
entitled.
(f) Amendments. This Agreement may not be modified, amended, altered,
or supplemented except upon the execution and delivery of a written
agreement executed by Grantee and Issuer.
(g) Notices. All notices, requests, claims, demands, and other
communications hereunder shall be in writing and shall be deemed to be
sufficient if contained in a written instrument and shall be deemed given
if delivered personally, telecopied, sent by nationally-recognized
overnight courier or mailed by registered or certified mail (return receipt
requested), postage prepaid, to the other party at the following addresses
(or such other address for a party as shall be specified by like notice):
If to Grantee:
Medtronic, Inc.
7000 Central Avenue, N.E.
Minneapolis, Minnesota 55402
with separate copies thereof addressed to
Attention: General Counsel
FAX: (612) 572-5459
and
Attention: Vice President and Chief Development Officer
FAX: (612) 572-5404
If to Issuer:
Xomed Surgical Products, Inc.
6743 Southpoint Drive North
Jacksonville, Florida 32216
FAX: (904) 279-7548
Attention: Jaime A. Frias, Esq.
10
<PAGE>
with a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
FAX: (212) 728-8111
Attention: Steven J. Gartner, Esq.
(h) Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
(i) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
(j) Governing Law. This Agreement shall be governed by the laws of the
State of Delaware (regardless of the laws that might otherwise govern under
applicable Delaware principles of conflicts of law).
(k) Entire Agreement. This Agreement, the Confidentiality Agreement,
and the Merger Agreement and any documents and instruments referred to
herein and therein constitute the entire agreement between the parties
hereto and thereto with respect to the subject matter hereof and thereof
and supersede all other prior agreements and understandings, both written
and oral, between the parties with respect to the subject matter hereof and
thereof. This Agreement shall be binding upon, inure to the benefit of, and
be enforceable by the successors and permitted assigns of the parties
hereto. Nothing in this Agreement shall be construed to give any person
other than the parties to this Agreement or their respective successors or
permitted assigns any legal or equitable right, remedy, or claim under or
in respect of this Agreement or any provision contained herein.
(l) Expenses. Except as otherwise provided in this Agreement or the
Merger Agreement, each party shall pay its own expenses incurred in
connection with this Agreement.
11
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Stock Option Agreement to
be signed by their respective officers thereunto duly authorized as of the date
first written above.
MEDTRONIC, INC.
By: /s/ Michael D. Ellwein
------------------------------
Michael D. Ellwein, Vice President
and Chief Development Officer
XOMED SURGICAL PRODUCTS, INC.
By: /s/ James T. Treace
------------------------------
James T. Treace
Chairman, President and
Chief Executive Officer
12
<PAGE>
Contacts:
---------
Xomed: Medtronic:
Thomas E. Timbie Rachael Scherer
Chief Financial Officer Investor Relations
904/332-2452 612/514-4971
Diana Campau
612/514-4920
Pager: 888/790-0650
Jessica Stoltenberg
612/514-3333
Pager: 888/731-6434
F O R I M M E D I A T E R E L E A S E
MEDTRONIC TO MERGE WITH XOMED,
WORLD LEADER IN TECHNOLOGIES TO TREAT
EAR, NOSE AND THROAT CONDITIONS
MINNEAPOLIS, MN, and JACKSONVILLE, FL -- August 27, 1999 -- Medtronic,
Inc. (NYSE: MDT), and Xomed Surgical Products, Inc. (NASDAQ: XOMD), today
announced that they have signed a merger agreement under which Medtronic will
acquire all shares of Xomed, the world's leading provider of surgical products
used by ear, nose and throat surgeons. The merger would establish Medtronic as
the global leader in the market for medical problems in the ear, nose and throat
(ENT).
The agreement calls for a pooling of interests transaction valued at
approximately $800 million with Xomed shareholders to receive $60.00 in the form
of Medtronic stock for each share of Xomed they now hold. The agreement is
subject to certain collar provisions.
"Medtronic's merger with Xomed is another important step in our strategy to
build a broad base of market leading franchises, supported by the full breadth
of our technology," said William W. George, Medtronic's chairman and chief
executive officer. "Xomed is an exceptional company which is the clear market
and technology leader in the growing, yet underserved ENT industry. Xomed is
growing rapidly by broadening its
<PAGE>
product offerings, and will contribute significantly to Medtronic's continuing
growth in revenues and earnings."
"Xomed's market leadership, strong clinical relationships, highly regarded
management and full range of products offer Medtronic a new platform for
continuing growth beyond our current franchises in cardiac rhythm management,
cardiac surgery, vascular and neurological and spinal," George said.
James T. Treace, Xomed chairman and chief executive officer, will lead
Medtronic Xomed, based in Jacksonville, FL. Xomed has 700 employees worldwide,
with manufacturing locations in Jacksonville, Mystic, CT; and St. Aubin le
Monial, France. Distribution is managed by a direct sales organization of 100
representatives and a network of more than 130 distributors worldwide.
Treace said a merger with Medtronic would spur Xomed to its next growth
level. "Both companies have products and technologies that are highly
complementary, particularly in the area of image-guided surgery. I believe
customers, employees and shareholders of both organizations will benefit
meaningfully from this combination."
When merged, Treace will report directly to Art Collins, Medtronic
president and chief operating officer. "Xomed continues to introduce new
technologies that will facilitate minimally invasive procedures in the ENT
market in a field where many surgical techniques have remained unchanged for
many years," Collins said. "The company is dramatically changing the way ENT
medical procedures are performed by replacing highly invasive procedures with
new minimally invasive instruments and techniques."
"There are also opportunities to use Xomed's clinical relationships to
develop and market new products incorporating Medtronic's significant core
technologies. The company is committed to creating synergies and efficiencies
between Medtronic and Xomed to ensure continuation of its leadership position,"
said Collins.
Xomed is the world's leading provider of surgical devices used by ENT
physicians. The company's products are designed to treat:
o Sinus and rhinology conditions such as diseases, infections,
malformations and inflammations of the sinuses. Chronic sinusitis
affects more than 35 million people or about 15 percent of Americans
each year and results in 15 million
<PAGE>
physician office visits. Xomed products include the XPS(R) shaver
systems for removing hard and soft tissue; sinus stents and catheters;
disposable sinus packing materials; endoscopes; LandmarXTM image
guidance systems and other specialized instruments.
o Otological conditions such as infections, diseases or malformations of
the middle ear. Middle-ear infections are the leading cause of
physician visits in children. Xomed products include the ActiventTM
anti-microbial and other myringotomy tubes for ventilation of ear
infections, middle ear prostheses and powered and manual instruments.
o Other head and neck conditions such as infections of tonsils and
adenoids, laryngeal and facial lesions, facial and skull-based tumors
and obstructions of the throat and airway that cause such problems as
sleep apnea. Products include Powerforma(TM) and XPS 2000 surgical
drills, the NIM(R) nerve integrity monitoring system and plastic
surgery instruments.
The $60.00 per share acquisition price stated above applies if Medtronic's
average common stock price for the 10 NYSE trading days ending on and including
the third NYSE trading day preceding the Xomed's shareholders' meeting on the
merger is between $66.60 and $81.40 per share. If such average Medtronic stock
price is equal to or greater than $81.40 then each Xomed share will be exchanged
for 0.73710 Medtronic shares, and if it is equal to or less than $66.60 then
each Xomed share will be exchanged for 0.90090 Medtronic shares. References to
Medtronic share amounts and prices do not reflect the two-for-one stock split
effective on September 24, 1999.
The transaction is subject to customary conditions, including approval by
shareholders of Xomed and Hart-Scott-Rodino clearance. The companies expect the
transaction to be completed before the end of 1999.
Medtronic, Inc., headquartered in Minneapolis, is the world's leading
medical technology company, specializing in implantable and interventional
therapies that restore health, extend life and alleviate pain. Its Internet
address is www.medtronic.com.
<PAGE>
Xomed Surgical Products, Inc., is a leading developer, manufacturer and
marketer of surgical products for use by ENT physicians. The company offers a
broad line of products in its ENT market that include powered tissue-removal
systems, nerve monitoring systems, disposable fluid-control products, image
guided surgery systems and bioabsorbable products. Xomed's Internet address is
www.xomed.com.
-0-
Any statements made about the company's anticipated financial results and
regulatory approvals are forward-looking statement subject to risks and
uncertainties such as those described in the company's Annual Report on Form 10K
for the year ended April 30, 1999. Actual results may differ materially from
anticipated results.
