<PAGE>
As filed with the Securities and Exchange Commission on February 25, 1994
Registration No. 33-________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
CORDIS CORPORATION
(Exact name of registrant as specified in its charter)
Florida
(State or other jurisdiction of incorporation or organization)
3841 59-0870525
(Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification No.)
14201 N.W. 60th Avenue, Miami Lakes, Florida 33014 (305) 824-2000
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
DANIEL G. HALL, ESQ.
Vice President, Legal Affairs,
Secretary and General Counsel
CORDIS CORPORATION
14201 N.W. 60th Avenue, Miami Lakes, Florida 33014 (305) 824-2357
(Name, address, including zip code, and telephone number, including
area code, of agent for service)
With copies to:
JOSEPH G. CONNOLLY, JR., ESQ. MICHAEL W. HALL, ESQ.
HOGAN & HARTSON L.L.P. VENTURE LAW GROUP
Columbia Square, 2800 Sand Hill Road
555 Thirteenth Street, N.W. Menlo Park, CA 94025
Washington, D.C. 20004-1109 (415) 854-4488
(202) 637-5600
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this
Registration Statement.
If the securities being registered on this Form are being
offered in connection with the formation of a holding company and
there is compliance with General Instruction G, check the
following box. []
If any of the securities being registered on this Form are
to be offered on a delayed or continuous basis pursuant to Rule
415 under the Securities Act of 1933, check the following box. []
CALCULATION OF REGISTRATION FEE
Proposed
Maximum Proposed
Offering Maximum Amount
Amount Price Aggregate of
Title of Securities Being Per Offering Registra-
Being Registered Registered Share Price tion Fee
Common Stock, $1.00 par 1,997,203 $1.47(2) $8,656,034(2) $2,985
value per share Shares (1)
(1) Includes 226,831 shares to be issued upon the exercise of
outstanding Webster Laboratories, Inc. stock options to be
assumed by Cordis Corporation.
(2) Estimated solely for the purpose of calculating the
registration fee and based, in accordance with Rule 457(f)(2),
upon the book value of the shares of common stock of Webster
Laboratories, Inc.
[Outside Cover Page Continued on Next Page]
<PAGE>
[Outside Cover Page Continued]
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
<PAGE>
CORDIS CORPORATION
Cross Reference Sheet Showing Location in Prospectus
of Information Required by Form S-4
Registration Statement Item Location in Prospectus
A. Information About the Transaction
1. Forepart of Registration Statement and Front Cover Page
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Inside Front and
Pages of Prospectus Outside Back Cover Pages
3. Risk Factors, Ratio of Earnings to Fixed Comparative Per Share
Charges and Other Information Data
4. Terms of the Transaction Summary; The Merger
5. Pro Forma Financial Information Summary; Pro Forma
Condensed Combined
Financial Statements
6. Material Contacts with the Company The Merger -- Background
Being Acquired of the Merger
7. Additional Information Required for *
Reoffering by Persons and Parties
Deemed to be Underwriters
8. Interests of Named Experts and Counsel Legal Matters; Experts
9. Disclosure of Commission Position on *
Indemnification for Securities Act
Liabilities
B. Information About the Registrant
10. Information with Respect to S-3 Registrants *
11. Incorporation of Certain Information by *
Reference
12. Information with Respect to S-2 or S-3 *
Registrants
13. Incorporation of Certain Information by *
Reference
14. Information with Respect to Registrants Summary; The Merger;
Other than S-2 or S-3 Registrants Market Prices and
Dividends; Pro Forma
Condensed Combined
Financial Statements;
Description of
Cordis Common Stock;
Information
Regarding Cordis --
Selected
Consolidated
Financial Data of
Cordis; -- Cordis
Management's
Discussion and
Analysis of
Financial Condition
and Results of
Operations; Index to
Consolidated
Financial Statements
of Cordis
C. Information About the Company Being Acquired
15. Information with Respect to S-3 Companies *
16. Information with Respect to S-2 or S-3 *
Companies
17. Information with Respect to Companies Summary; The
Other than S-2 or S-3 Companies Merger; Market
Prices and
Dividends; Pro Forma
Condensed Combined
Financial
Statements;
Information
Regarding Webster --
Selected Financial
Data of Webster; --
Webster Management's
Discussion and
Analysis of
Financial Condition
and Results of
Operations; Index to
Financial Statements
of Webster
D. Voting and Management Information
18. Information if Proxies, Consents or Summary; Introductory
Authorizations are to be Solicited Statement; Solicitation
Voting and Revocability
of Consents; The
Merger -- Dissenter's
Rights; -- Interests
of Certain Persons in
the Merger; Potential
Conflicts of Interest
19. Information if Proxies, Consents or *
Authorizations are not to be Solicited
or in an Exchange Offer
<PAGE>
[Webster Letterhead]
March ___, 1994
Dear Shareholder:
We are pleased to forward the enclosed Consent
Statement/Prospectus to you with respect to the proposed
acquisition of Webster Laboratories, Inc. ("Webster") by Cordis
Corporation ("Cordis") through the merger (the "Merger") of
Cordis Acquisition, Inc. ("Acquisition"), a newly formed wholly
owned subsidiary of Cordis, with and into Webster.
The Merger is subject to the terms and conditions of an
Agreement and Plan of Reorganization (the "Reorganization
Agreement") dated as of January 20, 1994 among Cordis,
Acquisition, Webster and certain of the shareholders of Webster,
and a related Agreement of Merger (the "Merger Agreement") to be
executed by Acquisition and Webster and filed with the Secretary
of State of California. In the Merger, Acquisition will be
merged with and into Webster, which will be the surviving
corporation and become a wholly owned subsidiary of Cordis.
Pursuant to the Merger, each outstanding share of the common
stock of Webster ("Webster Common Stock") (except for shares
entitled to dissenters' rights under California law) will be
converted into the right to receive that number of shares of
common stock of Cordis, par value $1.00 per share ("Cordis Common
Stock"), equal to $12.81364 divided by the average of the
reported closing prices of a share of Cordis Common Stock on the
NASDAQ National Market System as reported by NASDAQ for the 20
consecutive trading days immediately preceding the third trading
day before the date of the closing of the Merger (the "Average
Trading Price"); provided, however, if the Average Trading Price
is greater than $52.02, such number shall be 0.246321 and if the
Average Trading Price is less than $42.56, such number shall be
0.301072, subject to certain adjustments and limitations as
described in the attached materials.
The accompanying Consent Statement/Prospectus provides a
detailed description of the Reorganization Agreement and the
Merger Agreement, the business and financial information of
Webster and Cordis and other important information. Copies of
the Reorganization Agreement and the form of Merger Agreement are
attached to the Consent Statement/Prospectus as Appendix A.
The Webster Board of Directors has carefully reviewed and
considered the terms and conditions of the proposed Merger. The
Webster Board believes that the Merger is fair to Webster
shareholders, has unanimously approved the Reorganization
Agreement, the Merger Agreement and the Merger, and unanimously
recommends that shareholders of Webster vote FOR approval of the
Merger.
The Reorganization Agreement and Merger Agreement must be
approved by the holders of a majority of the outstanding shares
of Webster Common Stock and by a majority of the outstanding
shares of Series A Preferred Stock of Webster, voting as separate
classes. Your vote on this matter is very important. We urge
you to review carefully the attached materials and to return your
consent form promptly.
Sincerely,
Tony R. Brown, Ph.D. Wilton W. Webster, Jr.
President and Chief Executive Officer Chairman of the Board of
Directors
IT IS IMPORTANT THAT CONSENTS BE RETURNED PROMPTLY. PLEASE
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED CONSENT FORM IN THE
ENCLOSED POSTAGE PAID ENVELOPE.
PLEASE DO NOT SEND YOUR STOCK CERTIFICATES AT THIS TIME.
<PAGE>
WEBSTER LABORATORIES, INC. CONSENT STATEMENT/
CORDIS CORPORATION PROSPECTUS
This Consent Statement/Prospectus is being furnished to
shareholders of Webster Laboratories, Inc., a California
corporation ("Webster"), and relates to the solicitation of
consents of shareholders of Webster in connection with the
proposed acquisition of Webster by Cordis Corporation, a Florida
corporation ("Cordis"), pursuant to an Agreement and Plan of
Reorganization (the "Reorganization Agreement") dated as of
January 20, 1994 among Cordis, Cordis Acquisition, Inc., a newly
formed wholly owned California subsidiary of Cordis
("Acquisition"), Webster and certain of the shareholders of
Webster (the "Webster Shareholders") and the form of a related
Agreement and Plan of Merger (the "Merger Agreement")
(collectively, the "Agreements"). Copies of the Agreements are
attached hereto as Appendix A. This Consent Statement/Prospectus
and the accompanying form of consent are first being mailed to
the shareholders of Webster on or about March __, 1994. Approval
of the Agreements also shall constitute approval of the specific
terms thereof and the transactions contemplated thereunder,
including (i) the escrow of certain shares of the common stock,
par value $1.00 per share, of Cordis ("Cordis Common Stock") to
be received by the shareholders of Webster pursuant to the merger
of Acquisition with and into Webster (the "Merger"), (ii) the
terms and conditions of the Escrow Agreement (attached as Exhibit
B to the Reorganization Agreement) (the "Escrow Agreement") to be
entered into among Cordis, Acquisition, Webster, _____________
(the "Escrow Agent") and David W. Chonette as the representative
(the "Representative") of the Webster Shareholders and (iii) the
appointment of the Escrow Agent and the Representative in
connection with the Escrow Agreement. The Merger will be
consummated by filing the Merger Agreement and the officers'
certificates required to be filed therewith with the Secretary of
State of the State of California (the date and time of such
filing being the "Effective Time"). Shareholder approval will be
deemed to have occurred once Webster has received unrevoked
consents from the holders of a majority of the outstanding shares
of Webster Common Stock (as defined below) and a majority of the
outstanding shares of Webster Preferred Stock (as defined below).
Pursuant to the Agreements, (i) Acquisition will be merged
with and into Webster, which will be the surviving corporation
that will do business under the name Cordis Webster, Inc. (the
"Surviving Corporation") and become a wholly owned subsidiary of
Cordis and (ii) each share of Webster common stock, no par value
("Webster Common Stock"), outstanding immediately prior to the
consummation of the Merger (except for Dissenting Shares (as
defined below)) will be converted into the right to receive that
number of shares of Cordis Common Stock equal to $12.81364
divided by the average of the reported closing prices of a share
of Cordis Common Stock on the NASDAQ National Market System
("NASDAQ/NMS") as reported by NASDAQ for the 20 consecutive
trading days immediately preceding the third trading day before
the date of the closing (the "Closing") of the Merger (the
"Average Trading Price"); provided, however, if the Average
Trading Price is greater than $52.02, such number shall be
0.246321 and if the Average Trading Price is less than $42.56,
such number shall be 0.301072. Such number as so determined,
including any adjustments thereto by reason of any stock
dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares, is referred to as the
"Exchange Ratio." If, however, prior to the Effective Time, Mr.
Wilton W. Webster, Jr. shall have died or suffered a disability
described in the Reorganization Agreement, the Exchange Ratio
will be recomputed as set forth below (the "Recomputed Exchange
Ratio"). The Recomputed Exchange Ratio will be determined by
dividing $12.05969 by the Average Trading Price of a share of
Cordis Common Stock; provided, however, if the Average Trading
Price is greater than $52.02, such number shall be 0.231828, and
if the Average Trading Price is less than $42.56, such number
shall be 0.283357, subject to adjustments of the type described
above. The minimum and maximum numbers of shares of Cordis
Common Stock issuable pursuant to the Merger as contemplated
under the Reorganization Agreement (assuming the conversion prior
to the Effective Time of all shares of Webster Series A Preferred
Stock, no par value ("Webster Preferred Stock"), into Webster
Common Stock and assuming the issuance prior to the Effective
Time of all shares of Webster Common Stock issuable pursuant to
Webster Options (as defined below)) will be 1,634,008 and
1,997,203, respectively, based on the Exchange Ratio, and
1,537,805 and 1,879,669, respectively, based on the Recomputed
Exchange Ratio. Based upon the average of the reported closing
prices of a share of Cordis Common Stock as reported by NASDAQ
for the 20 consecutive trading days immediately prior to the date
of this Consent Statement/Prospectus, the aggregate value of
shares of Cordis Common Stock issuable pursuant to the Merger
would be approximately $ using the Exchange Ratio
(assuming the conversion prior to the Effective Time of all
shares of Webster Preferred Stock into Webster Common Stock and
assuming the issuance prior to the Effective Time of all shares
of Webster Common Stock issuable pursuant to Webster Options).
The actual value of the transaction is subject to the application
of the Exchange Ratio or the Recomputed Exchange Ratio, as the
case may be, as described herein.
This Consent Statement/Prospectus also constitutes the
Prospectus of Cordis under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the shares of Cordis
Common Stock to be issued in the Merger. Cordis has filed a
Registration Statement on Form S-4 with the Securities and
Exchange Commission (the "Commission") covering up to 1,997,203
shares of Cordis Common Stock that may be issued in connection
with the Merger and the exercise of Webster Options (as defined
below) assumed by Cordis under the Reorganization Agreement.
No persons have been authorized to give any information or
make any representation not contained in this Consent
Statement/Prospectus in connection with the solicitations of
consents or the offering of securities made hereby, and, if given
or made, such information or representation must not be relied
upon as having been authorized by Cordis or Webster. This
Consent Statement/Prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy, Cordis Common Stock,
or the solicitation of a consent, in any jurisdiction to or from
any person to whom it is unlawful to make such offer or
solicitation of an offer or consent solicitation in such
jurisdiction. Neither the delivery of this Consent
Statement/Prospectus nor any distribution of Cordis Common Stock
made under this Consent Statement/Prospectus shall, under any
circumstances, create an implication that there has been no
change in the affairs of Cordis or Webster or in the information
set forth herein since the date of this Consent
Statement/Prospectus.
Information in this Consent Statement/Prospectus regarding
Webster has been prepared and/or supplied by Webster or its
representatives. Webster has represented and warranted to Cordis
in the Reorganization Agreement that none of such information
contains or will contain any untrue statement of a material fact
or omits or will omit to state any material fact necessary, in
light of the circumstances under which it was made, in order to
make such information not misleading.
THE SECURITIES TO BE ISSUED PURSUANT TO THIS CONSENT
STATEMENT/PROSPECTUS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS CONSENT STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Consent Statement/Prospectus is March ___, 1994.
<PAGE>
AVAILABLE INFORMATION
This Consent Statement/Prospectus is a Prospectus of Cordis
delivered in compliance with the Securities Act. A Registration
Statement on Form S-4 (together with any amendments thereto, the
"Registration Statement") under the Securities Act has been filed
by Cordis with the Commission with respect to the shares of
Cordis Common Stock offered hereby. As permitted by the rules
and regulations of the Commission, this Consent
Statement/Prospectus omits certain information contained in the
Registration Statement on file with the Commission. For further
information pertaining to the securities offered hereby,
reference is made to the Registration Statement, including the
exhibits filed as a part thereof.
Cordis is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")
and, in accordance therewith, files reports, proxy statements and
other information with the Commission. The Registration
Statement, as well as reports, proxy statements and other
information filed by Cordis pursuant to the Exchange Act, can be
inspected and copied at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices
of the Commission located at Suite 1400, Northwestern Atrium
Center, 500 West Madison Street, Chicago, Illinois 60661, and at
75 Park Place, 14th Floor, New York, New York 10007. Copies of
such documents can be obtained from the Public Reference Section
of the Commission at prescribed rates by writing to it at
450 Fifth Street, N.W., Washington, D.C. 20549.
<PAGE>
CONSENT STATEMENT/PROSPECTUS
TABLE OF CONTENTS
Page
Summary 1
Selected Historical and Pro Forma Combined Financial Data 13
Comparative Per Share Data 14
Introductory Statement 16
Solicitation, Voting and Revocability of Consents 16
The Merger 17
General Description 17
Background of the Merger 17
Reasons for the Merger; Recommendation of the Board of
Directors of Webster 18
Terms of the Merger 18
Representations and Warranties 24
Indemnification 24
Conduct of Business 25
Conditions to Obligations to Effect the Merger 27
Agreement to Vote Shares 28
Amendment and Termination 29
Interests of Certain Persons With Respect to the Merger;
Potential Conflicts of Interest 30
Fees and Expenses; Termination Fee 31
Agreement with Certain Shareholder 31
Accounting Treatment 31
Certain Federal Income Tax Matters 32
Restrictions on Resale of Cordis Common Stock; Affiliate
Agreements 33
Regulatory Requirements 34
Dissenters' Rights 34
Market Prices and Dividends 36
Description of Cordis Common Stock 36
Comparative Rights of Cordis Stockholders and Webster
Shareholders 38
Pro Forma Condensed Combined Financial Statements 49
Notes to Pro Forma Condensed Combined Financial Statements 52
Information Regarding Cordis 54
General 54
Business 54
Competition 55
International Operations 55
Research and Development 55
Government Regulation 55
Employees 56
Financial Information Relating to Foreign and Domestic
Operations and Export Sales 56
Properties 56
Legal Proceedings 56
Selected Consolidated Financial Data of Cordis 59
Cordis Management's Discussion and Analysis of Financial
Condition and Results of Operations 60
Beneficial Ownership of Cordis Common Stock 65
Directors of Cordis 66
Executive Officers 69
Executive Compensation 71
Summary Compensation Table 71
Option/SAR Grants Table 72
Option/SAR Exercises and Year-End Value Table 73
Long-Term Incentive Plan Awards Table 73
Retirement Benefits 74
Information Regarding Webster 76
General 76
Business 76
Products 77
Patents and Trade Secrets 77
Sales and Marketing 78
Competition 78
Selected Financial Data of Webster 80
Webster Management's Discussion and Analysis of Financial
Condition and Results of Operations 81
Beneficial Ownership of Webster Common Stock 84
Executive Officers and Directors of Webster 85
Executive Compensation 86
Summary Compensation Table 86
Option Grants in Last Fiscal Year 87
Option Exercises and Year-End Value Table 88
Certain Relationships and Related Transactions 89
Legal Matters 89
Experts 89
Index to Consolidated Financial Statements of Cordis F-1
Index to Financial Statements of Webster F-28
Appendix A - Agreement and Plan of Reorganization and Merger
Agreement A-1
Appendix B - Chapter 13 of the California General
Corporation Law B-1
<PAGE>
SUMMARY
The following is a summary of certain information contained
elsewhere in this Consent Statement/Prospectus and/or in the
Appendices attached hereto. Certain capitalized terms used in
this Summary are defined elsewhere in this Consent
Statement/Prospectus. Reference is made to, and this Summary is
qualified in its entirety by, the more detailed information
contained in this Consent Statement/Prospectus and the Appendices
attached hereto. Shareholders of Webster are urged to read
carefully all of the information contained in this Consent
Statement/Prospectus and the Appendices attached hereto.
Parties to the Merger
Cordis: Cordis is engaged in the design, manufacture and
sale of medical devices, primarily angiographic
catheters, neuroscience devices and other related
medical devices. Cordis was incorporated in the State
of Florida in 1959. Cordis' principal executive
offices are located at 14201 N.W. 60th Avenue, Miami
Lakes, Florida 33014 and its telephone number is
(305) 824-2000. See "INFORMATION REGARDING CORDIS."
Acquisition: Acquisition is a California corporation recently
organized by Cordis for the purpose of effecting the
Merger. It has no material assets and has not engaged
in any activities except in connection with the Merger.
Webster: Webster is engaged in the design, development,
manufacture and marketing of a full line of
electrophysiology catheters that are used to diagnose
cardiac tachyarrhythmias. Webster was incorporated in
the State of California in 1980. Webster's principal
executive offices are located at 4750 Littlejohn
Street, Baldwin Park, California 91706 and its
telephone number is (818) 960-6404. See "INFORMATION
REGARDING WEBSTER."
Webster Consent Solicitation
Record Date: Only holders of record of shares of Webster Common
Stock and Webster Preferred Stock at the close of
business on _______, 1994 (the "Webster Record Date")
are entitled to vote on the Merger.
Purpose of the
Solicitation: The purpose of this consent solicitation is to
consider and vote upon a proposal to approve the
Reorganization Agreement and Merger Agreement, which
provide for the merger of Acquisition with and into
Webster, which will become a wholly owned subsidiary of
Cordis. If the Agreements are approved, each share of
Webster Common Stock outstanding immediately prior to
consummation of the Merger (except for Dissenting
Shares) will be converted into the right to receive
that number of shares of Cordis Common Stock equal to
$12.81364 divided by the Average Trading Price, subject
to certain adjustments and limitations described under
"-- The Proposed Merger and Related Matters." Approval
of the Agreements also shall constitute approval of the
specific terms thereof and the transactions
contemplated thereunder including certain escrow
arrangements.
Vote Required: The affirmative vote of a majority of (i) the
outstanding shares of Webster Common Stock, with each
share of Webster Common Stock having one vote, and
(ii) the outstanding shares of Webster Preferred Stock,
with each share of Webster Preferred Stock having one
vote, are required to approve the Agreements. On the
Webster Record Date, there were ________ shares of
Webster Common Stock and 1,200,000 shares of Webster
Preferred Stock outstanding and entitled to vote. Each
share of Webster Preferred Stock is convertible at any
time into one share of Webster Common Stock. 3,866,667
shares of Webster Common Stock (approximately 83% of
the shares of Webster Common Stock entitled to vote on
the Agreements) are held by directors and executive
officers of Webster or their affiliates. All of the
issued and outstanding shares of Webster Preferred
Stock are held by Brentwood Associates V, L.P.
("Brentwood").
Dissenters'
Rights: Pursuant to Chapter 13 of the Corporations Code of
the State of California Code (the "California Code"),
shareholders of Webster will be entitled to dissenters'
rights of appraisal in connection with the Merger. The
provisions of Chapter 13 are technical in nature and
complex. Shareholders desiring to exercise appraisal
rights and to obtain appraisal of the fair value of
their shares should consult counsel, since the failure
to comply strictly with the provisions of Chapter 13
may result in a waiver or forfeiture of their appraisal
rights. It is a condition to the obligations of Cordis
and Acquisition to effect the Merger that the aggregate
of (i) the fractional share interests in Cordis Common
Stock to be paid in cash pursuant to the Reorganization
Agreement and (ii) the shares of Cordis Common Stock
that otherwise would be issuable by virtue of the
Merger with respect to the shares of Webster Common
Stock outstanding on the Webster Record Date that will
not be converted into Cordis Common Stock due to the
shareholders of Webster demanding an appraisal of the
fair value of such shares shall not be more than 2% of
the maximum aggregate number of shares of Cordis Common
Stock which could be issued as a result of the Merger.
See "THE MERGER -- Dissenters' Rights." A copy of
Chapter 13 of the California Code is attached hereto as
Appendix B.
The Proposed Merger and Related Matters
General: Upon consummation of the Merger, (i) Acquisition
will be merged with and into Webster, which will be the
surviving corporation that will do business under the
name Cordis Webster, Inc. and become a wholly owned
subsidiary of Cordis and (ii) each share of Webster
Common Stock outstanding immediately prior to the
consummation of the Merger (except for Dissenting
Shares) will be converted into the right to receive
that number of shares of Cordis Common Stock determined
by dividing $12.81364 by the Average Trading Price of a
share of Cordis Common Stock; provided, however, if the
Average Trading Price is greater than $52.02, such
number shall be 0.246321 and if the Average Trading
Price is less than $42.56, such number shall be
0.301072. If prior to the Effective Time Mr. Wilton W.
Webster, Jr. dies or suffers a disability described in
the Reorganization Agreement, the Exchange Ratio will
be replaced by the Recomputed Exchange Ratio, which is
determined by dividing $12.05969 by the Average Trading
Price of a share of Cordis Common Stock; provided,
however, if the Average Trading Price is greater than
$52.02, such number shall be 0.231828, and if the
Average Trading Price is less than $42.56, such number
shall be 0.283357. The Exchange Ratio and the
Recomputed Exchange Ratio are subject to certain
adjustments and limitations as described in this
Consent Statement/Prospectus. The minimum and maximum
numbers of shares of Cordis Common Stock issuable
pursuant to the Merger as contemplated under the
Reorganization Agreement (assuming the conversion prior
to the Effective Time of all shares of Webster
Preferred Stock into Webster Common Stock and assuming
the issuance prior to the Effective Time of all shares
of Webster Common Stock issuable pursuant to
outstanding options to purchase shares of Webster
Common Stock ("Webster Options") will be 1,634,008 and
1,997,203, respectively, based on the Exchange Ratio,
and 1,537,805 and 1,879,669, respectively, based on the
Recomputed Exchange Ratio. In addition, all Webster
Options will be assumed or substituted by Cordis, with
the number of shares of Cordis Common Stock issuable
upon exercise and the exercise price thereof adjusted
to reflect the Exchange Ratio or the Recomputed
Exchange Ratio, as the case may be. Based upon the
average of the reported closing prices of a share of
Cordis Common Stock as reported by NASDAQ for the 20
consecutive trading days immediately prior to the date
of this Consent Statement/Prospectus, the aggregate
value of shares of Cordis Common Stock issuable
pursuant to the Merger would be approximately $________
using the Exchange Ratio (assuming the conversion prior
to the Effective Time of all shares of Webster
Preferred Stock into Webster Common Stock and assuming
the issuance prior to the Effective Time of all shares
of Webster Common Stock issuable pursuant to Webster
Options). The actual value of the transaction is
subject to the application of the Exchange Ratio or the
Recomputed Exchange Ratio, as the case may be, as
described herein. See "THE MERGER -- Terms of the
Merger." Shareholder approval of the Merger will be
deemed to have occurred once Webster has received
unrevoked consents from the holders of a majority of
the outstanding shares of Webster Common Stock and a
majority of the outstanding shares of Webster Preferred
Stock. The Merger will become effective upon the
acceptance by the California Secretary of State of the
filing of the Merger Agreement, which is expected to be
executed by Acquisition and Webster and filed as soon
as practicable following approval of the Agreements by
the requisite vote of the Webster shareholders and the
satisfaction or waiver of the other conditions set
forth in the Reorganization Agreement. Pursuant to an
agreement between Webster, Brentwood and Cordis,
Brentwood has agreed to terminate certain rights
relating to its ownership of Webster securities and to
convert all of its Webster Preferred Stock into shares
of Webster Common Stock immediately prior to the
Effective Time. See "THE MERGER -- Agreement With
Certain Shareholder."
At the Effective Time, all shares of Webster Common
Stock shall no longer be outstanding and shall
automatically be canceled and retired and shall cease
to exist, and each holder of a certificate representing
any shares of Webster Common Stock shall cease to have
any rights with respect thereto, except the right to
receive the shares of Cordis Common Stock to be issued
in exchange therefor upon the surrender of such
certificate, and except for the rights of Dissenting
Shareholders. Shares of Webster Common Stock held by
shareholders who have perfected their dissenters'
rights under California law shall, upon consummation of
the Merger, represent only the rights accorded to such
shares under the California Code.
Promptly after the Effective Time, the Exchange
Agent (as defined below) will deliver a letter of
transmittal with instructions to all holders of record
of Webster Common Stock for use in exchanging their
Webster Common Stock certificates for Cordis Common
Stock certificates. HOLDERS OF WEBSTER COMMON STOCK
SHOULD NOT SUBMIT THEIR STOCK CERTIFICATES FOR EXCHANGE
UNTIL THEY HAVE RECEIVED THE LETTER OF TRANSMITTAL AND
INSTRUCTIONS FROM THE EXCHANGE AGENT.
Fractional shares of Cordis Common Stock will not
be issued in connection with the Merger. Webster
shareholders otherwise entitled to a fractional share
of Cordis Common Stock will be paid the value of such
fraction in cash, determined as described herein under
"THE MERGER -- Terms of the Merger -- Exchange of
Certificates -- No Fractional Shares."
Background of
the Merger: During June 1993, Cordis representatives
approached Webster to inquire whether Webster would
consider exploring a business combination with Cordis.
As a result of this preliminary discussion, Webster
decided to visit Cordis to ascertain whether an
acquisition of Webster by Cordis was a viable option.
During this visit, Cordis described its business,
products and management philosophy. Cordis described
its sales and marketing operations and the resources it
had that would be made available to Webster if
acquired. These included the ability to utilize
Cordis' well-established European sales force in lieu
of Webster's distributors, the availability of cash for
growth, and access to Cordis' manufacturing processes,
together with skills, systems and procedures typically
available only in companies much larger than Webster.
Webster explained the factors that were important to
its Board and management in considering any acquisition
proposal, which included Webster maintaining its
existing management team and present location while
having access to Cordis' resources for growth. Cordis
also described the market for its common stock, which
would provide increased liquidity for Webster
shareholders after the Merger.
After discussions among Webster's management and Board
members, Webster's management accepted Cordis'
invitation for a second meeting, which occurred in July
1993. At this meeting, Webster and Cordis assessed
their mutual values, cultures and goals, established
common ground and trust and concluded there was a high
level of compatibility.
Cordis management visited Webster in September 1993 to
tour its operations and to meet Webster's management
team. During this visit, Webster management gave an
overview of Webster's operations and strategies, which
led Cordis to proceed with negotiations intended to
lead to an acquisition of Webster.
Early in October 1993 a meeting was held between Cordis
and Webster management, plus one Webster Board member,
during which the decision was reached that the various
concerns of both companies were within a range to be
negotiated and that the due diligence process should
begin. The due diligence process began in mid-October
1993. In mid-November 1993 Cordis, Webster management
and a Webster Board member met to discuss the ongoing
due diligence, to further resolve open issues and to
begin to structure the potential acquisition of
Webster. Due diligence and negotiations continued
until an agreement was reached in mid-January 1994. On
January 20, 1994 Webster's Board of Directors, after
determining that the Merger was fair and in the best
interests of the Webster shareholders, unanimously
approved the execution of the Reorganization Agreement.
Reasons for
the Merger;
Recommendation
of the Webster
Board of
Directors: In the discussions that led to the signing of the
Agreements, the Board of Directors of Webster
identified a number of potential benefits that could
result from the Merger. The Webster Board of Directors
believes that the Merger will provide Webster with,
among other things, enhanced product offerings, an
ability to access technology and processes previously
unavailable to it and access to an established
international direct sales force. The Webster Board of
Directors further believes that given the established
trading market for Cordis Common Stock, the Merger
should provide Webster shareholders with increased
investment liquidity. For these reasons, the Board of
Directors of Webster (including the nonemployee
directors) unanimously has approved the Agreements and
has determined that the Merger is fair to, and in the
best interests of, Webster and its shareholders. The
Board of Directors of Webster unanimously recommends
that the shareholders of Webster vote FOR the approval
and adoption of the Agreements.
Prohibition on
Certain
Activities: The Reorganization Agreement generally provides
that, prior to the Effective Time, Webster will conduct
its business in the ordinary course or as otherwise
discussed in this Consent Statement/Prospectus in "THE
MERGER -- Conduct of Business." In particular, Webster
has agreed that it will not initiate, solicit or
encourage other merger or similar proposals; provided,
however, the Board of Directors of Webster may furnish
information to, or enter into discussions or
negotiations with, any person or entity that makes an
unsolicited bona fide proposal to acquire Webster
pursuant to a merger, consolidation, share exchange,
business combination or other similar transaction (a
"Bona Fide Proposal") under certain circumstances. See
"THE MERGER -- Conduct of Business."
Conditions to
Consummation
of the Merger: The respective obligations of Cordis and Webster
to effect the Merger and the other transactions
contemplated in the Reorganization Agreement are
subject to satisfaction or waiver at or prior to the
Effective Time of the following conditions: (i) the
Registration Statement shall have been declared
effective by the Commission and Cordis shall have
received all other federal or state securities permits
and other authorizations necessary to issue Cordis
Common Stock in exchange for Webster Common Stock and
to consummate the Merger; (ii) the Reorganization
Agreement, the Merger Agreement and the Merger shall
have been approved and adopted by the requisite vote of
the shareholders of Webster; (iii) no Governmental
Entity (as defined below) or federal or state court of
competent jurisdiction shall have prevented or
prohibited consummation of the Merger or any other
transactions contemplated in the Reorganization
Agreement; (iv) the applicable waiting period, together
with any extensions thereof, under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended,
and the rules and regulations thereunder (the "HSR
Act") shall have expired or been terminated; (v) all
consents, waivers, approvals and authorizations
required to be obtained, and all filings or notices
required to be made, by Cordis and Webster prior to
consummation of the transactions contemplated in the
Reorganization Agreement shall have been obtained from
and made with all required Governmental Entities; and
(vi) the Escrow Agent shall execute and deliver the
Escrow Agreement with the other parties thereto. A
"Governmental Entity" is defined in the Reorganization
Agreement to mean any governmental, quasi-governmental
or regulatory authority, domestic or foreign.
The obligations of Cordis to effect the Merger and
the other transactions contemplated in the
Reorganization Agreement also are subject to the
satisfaction or waiver of the following conditions:
(i) each of the representations and warranties of
Webster, the Webster Shareholders and those Webster
Shareholders named on Schedule 2 of the Reorganization
Agreement (the "Schedule 2 Shareholders") contained in
the Reorganization Agreement, without giving effect to
any updated disclosure, shall be true and correct as of
the date of the Reorganization Agreement and as of the
Effective Time as though made as of the Effective Time,
except as otherwise provided therein; (ii) Webster,
each Webster Shareholder and each Schedule 2
Shareholder shall have performed or complied in all
material respects with all agreements and covenants
required by the Reorganization Agreement to be
performed or complied with by them on or prior to the
Effective Time; (iii) Webster shall have obtained the
consent or approval of each person whose consent or
approval shall be required in connection with the
Merger under all loan or credit arrangements, notes,
mortgages, indentures, leases or other agreements or
instruments to which it is a party; (iv) Cordis shall
have received from independent counsel to Webster
reasonably satisfactory to Cordis an opinion dated the
Effective Time, in form and substance reasonably
satisfactory to Cordis; (v) the aggregate of (a) the
fractional share interests in Cordis Common Stock to be
paid in cash and (b) the shares of Cordis Common Stock
that otherwise would be issuable by virtue of the
Merger with respect to the shares of Webster Common
Stock outstanding on the Webster Record Date that will
not be converted into Cordis Common Stock due to the
shareholders of Webster exercising their appraisal
rights shall not be more than 2% of the maximum
aggregate number of shares of Cordis Common Stock which
could be issued as a result of the Merger; (vi) there
shall not be pending any action, proceeding or
investigation by any Governmental Entity
(a) challenging or seeking material damages in
connection with the Merger or the conversion of Webster
Common Stock into Cordis Common Stock pursuant to the
Merger or (b) seeking to restrain or prohibit the
consummation of the Merger or otherwise limit the right
of Cordis or its subsidiaries to own or operate all or
any portion of the business or assets of Webster; (vii)
Cordis shall have received a letter covering certain
matters from Webster's independent auditor; (viii)
Cordis shall have received the opinion of Deloitte &
Touche in its capacity as Cordis' independent auditor
to the effect that the Merger qualifies for pooling-of-
interests accounting treatment if consummated in
accordance with the Reorganization Agreement; (ix)
Cordis shall have received from certain persons a
signed Affiliate Agreement (as defined below); (x) the
opinion of Cordis' financial advisor to the effect that
the consideration to be paid by Cordis in the Merger
pursuant to the Reorganization Agreement is fair from a
financial point of view to the Cordis shareholders
shall not have been modified or withdrawn; (xi)
Brentwood shall have converted the Webster Preferred
Stock into Webster Common Stock in accordance with the
provisions of the Brentwood Agreement; (xii) Cordis
shall have received executed copies of the employment
agreements from Wilton W. Webster, Jr. and Tony R.
Brown; (xiii) since November 30, 1993, there shall not
have been any change or effect that, individually or
when taken together with all other such changes or
effects, is or is reasonably likely to be materially
adverse to the financial condition, business, results
of operations or prospects of Webster ("Webster
Material Adverse Effect"); and (xiv) Webster shall have
taken the actions with respect to certain agreements
called for by the Reorganization Agreement.
The obligations of Webster to effect the Merger and
the other transactions contemplated in the
Reorganization Agreement are also subject to
satisfaction or waiver at or prior to the Effective
Time of the following conditions: (i) each of the
representations and warranties of Cordis contained in
the Reorganization Agreement, without giving effect to
any updated disclosure, shall be true and correct as of
the date of the Reorganization Agreement and as of the
Effective Time as though made as of the Effective Time,
except as otherwise provided therein; (ii) Cordis shall
have performed or complied in all material respects
with all agreements and covenants required by the
Reorganization Agreement to be performed or complied
with by it on or prior to the Effective Time; (iii)
Webster shall have received from the General Counsel of
Cordis an opinion dated the Effective Time, in form and
substance reasonably satisfactory to Webster; and (iv)
there shall not be pending any action, proceeding or
investigation by any Governmental Entity
(a) challenging or seeking material damages in
connection with the Merger or the conversion of Webster
Common Stock and Webster Preferred Stock into Cordis
Common Stock pursuant to the Merger or (b) seeking to
restrain or prohibit the consummation of the Merger or
otherwise limit the right of Cordis or its subsidiaries
to own or operate all or any portion of the businesses
or assets of Webster, which in either case is
reasonably likely to have a Cordis Material Adverse
Effect (as defined below) after the Effective Time; (v)
since September 30, 1993, there shall not have been any
change or effect that, individually or when taken
together with all such other changes or effects, is or
is reasonably likely to be materially adverse to the
financial condition, business or results of operations
of Cordis and its subsidiaries, taken as a whole
("Cordis Material Adverse Effect"); and (vi) Webster
shall have received from Cordis or NASDAQ/NMS evidence
reasonably satisfactory to Webster that the shares of
Cordis Common Stock to be issued to Webster
Shareholders in the Merger shall be quoted on
NASDAQ/NMS immediately after the Effective Time.
See "THE MERGER -- Conditions to Obligations to
Effect the Merger."
Representations
and Warranties:The Reorganization Agreement contains various
representations and warranties of the parties,
including representations made by Webster as to its
organization and qualification, capitalization,
authority to enter into the Agreements, as well as
various other matters. Cordis and Acquisition also
made several representations and warranties under the
Reorganization Agreement, including representations and
warranties relating to their organization and authority
to enter into the Agreements. The representations and
warranties of each of Webster, Cordis and Acquisition
are set forth in the Reorganization Agreement attached
hereto as Appendix A. In addition, each of the Webster
Shareholders severally but not jointly represented and
warranted to Cordis and Acquisition that, except as
otherwise disclosed, to such Webster Shareholder's
knowledge, no representation or warranty by Webster,
and no document, statement, certificate, schedule or
exhibit furnished or to be furnished to Cordis pursuant
to the Reorganization Agreement or otherwise in
connection therewith, contained or will contain any
untrue statement of a material fact or omits or will
omit to state any material fact necessary in order to
make the statements contained therein not misleading.
The Schedule 2 Shareholders severally but not jointly
represented and warranted to Cordis and Acquisition
that, except as otherwise disclosed, certain
representations and warranties of Webster pertaining to
Webster's financial information, books and records,
Webster's absence of undisclosed liabilities and
certain disclosures made by Webster are true and
correct.
The Reorganization Agreement provides that the
representations and warranties of Webster shall survive
the Effective Time, and that the only remedy available
to Cordis for a breach by Webster (as opposed to the
Webster Shareholders and Schedule 2 Shareholders) of
such representations and warranties are the post-
closing adjustment (as described below, the "Post-
closing Adjustment") and the indemnification provisions
contained in the Reorganization Agreement and described
below. The representations and warranties of the
Webster Shareholders are to survive the Effective Time
for a period of three years. The representations and
warranties of the Schedule 2 Shareholders are to
survive the Effective Time for a period of 18 months.
In addition, the Reorganization Agreement provides that
any claim for Damages resulting from a breach of any
representations and warranties of the Webster
Shareholders and the Schedule 2 Shareholders will be
subject to the survival limitations described above and
such other limitations as described below.
See "THE MERGER -- Representations and Warranties."
Escrow of Shares;
Post-closing
Adjustment: At the Effective Time, ten percent of the shares of
Cordis Common Stock issuable to the holders of Webster
Common Stock (including Brentwood, which will have
converted its shares of Webster Preferred Stock into
Webster Common Stock) will be deposited by Cordis with
the Escrow Agent pursuant to the Escrow Agreement to
provide for the Post-closing Adjustment described
below.
The shares of Cordis Common Stock held in escrow
(the "Adjustment Escrow Shares"), (i) together with any
property ("Adjustment Property") that would have been
distributed to the holders of such Adjustment Escrow
Shares as a result of any non-taxable stock dividend,
stock split, recapitalization, merger, combination or
similar transaction occurring during the period (the
"Post-closing Adjustment Period") beginning at the
Effective Time and ending on the date (the "Adjustment
Date") one year after the Effective Time, (ii) less any
Adjustment Escrow Shares, and any Adjustment Property
distributed with respect thereto, that have been
applied as provided in the Reorganization Agreement and
the Escrow Agreement in satisfaction of any amounts
owing to any Indemnified Persons (as defined below),
and (iii) less any Adjustment Escrow Shares, and any
Adjustment Property distributed with respect thereto,
determined pursuant to the Escrow Agreement to be
necessary to provide for any claim or claims for
Damages asserted in writing by one or more of the
Indemnified Persons pursuant to the Reorganization
Agreement during the Post-closing Adjustment Period but
not finally determined as provided in the
Reorganization Agreement and the Escrow Agreement (a
"Claim Amount"), shall be delivered as soon as
practicable after the Adjustment Date (and in any event
within 90 days after the Adjustment Date) as set forth
in the Escrow Agreement to the Representative of the
Webster Shareholders other than Dissenting Shareholders
(such non-Dissenting Shareholders are hereinafter
referred to as the "Holders"), or otherwise in
accordance with written instructions provided by such
Representative, for redelivery to the Holders based on
each such Holder's proportionate interest immediately
following the Effective Time in the Cordis Common Stock
as set forth in the Reorganization Agreement.
Notwithstanding such delivery, any remaining Adjustment
Escrow Shares (and any Adjustment Property distributed
with respect thereto) held in escrow as set forth above
will continue to be held by the Escrow Agent under the
Escrow Agreement in accordance with the provisions of
the Escrow Agreement. By their execution and delivery
of the Reorganization Agreement, the Webster
Shareholders appointed David W. Chonette (a director of
Webster and a general partner of an entity that is the
general partner of Brentwood) as Representative of the
Webster Shareholders (other than Dissenting
Shareholders) for purposes of the Post-closing
Adjustment.
The procedure set forth in the Escrow Agreement
shall be used for the application of the Adjustment
Escrow Shares to satisfy indemnification obligations to
Indemnified Persons under the Reorganization Agreement.
The number of Adjustment Escrow Shares to which an
Indemnified Person will be entitled in respect of an
Indemnification Amount or Claim Amount will be
determined by dividing (i) the Indemnification Amount
or Claim Amount, as the case may be, by (ii) the
Average Trading Price (provided, however, that for such
purposes, if the Average Trading Price is greater than
$52.02, the Average Trading Price shall be $52.02, and
if the Average Trading Price is less than $42.56, the
Average Trading Price shall be $42.56). Any portion of
the Adjustment Escrow Shares applied to satisfy any
indemnification obligations to Indemnified Persons will
be delivered to the Indemnified Persons (together with
any Adjustment Property distributed with respect
thereto) as set forth in the Escrow Agreement.
If the Adjustment Escrow Shares (together with any
Adjustment Property distributed with respect thereto)
are insufficient to cover the full amount of the
adjustments described above, Cordis will have available
to it such other remedies as may exist at law or in
equity to satisfy any claim or claims for Damages,
subject to the terms of the Reorganization Agreement.
During the Post-closing Adjustment Period, the
Escrow Agent will vote the Adjustment Escrow Shares and
any other shares of stock included in the Adjustment
Property in accordance with the written instructions of
the Holders who would receive such shares if all of the
Adjustment Escrow Shares and any other shares of stock
included in the Adjustment Property were delivered to
the Holders pursuant to the procedures described above.
See "THE MERGER -- Terms of the Merger -- Post-
closing Adjustment."
Indemnification;
Limitation of
Liability: The Webster Shareholders have agreed to jointly and
severally indemnify and hold harmless Cordis, the
Surviving Corporation and their respective officers and
directors, and each person, if any, who controls or may
control Cordis or the Surviving Corporation within the
meaning of the Securities Act ("Indemnified Person")
from and against any and all losses, costs, damages,
liabilities and expenses, including attorneys' fees and
expenses, ("Damages") actually suffered (after giving
effect to any insurance proceeds) and arising out of
the breach of the representations, warranties,
covenants and agreements given or made by Webster and
the Webster Shareholders in the Agreements or related
documents, which is to be satisfied through the
application by Cordis of the Adjustment Escrow Shares.
The maximum liability of the Webster Shareholders for
such indemnification is limited to an amount equal to
the number of Adjustment Escrow Shares multiplied by
the Average Trading Price (provided, however, that for
such purposes, if the Average Trading Price is greater
than $52.02, the Average Trading Price will be $52.02,
and if the Average Trading Price is less than $42.56,
the Average Trading Price will be $42.56), provided,
further, that Webster Shareholders will have no
liability under such provision or the Escrow Agreement
to the extent claims for Damages do not exceed
$250,000; provided, however, that if such Damages
exceed $250,000, then the indemnification provided for
hereunder will apply to all Damages without regard to
the $250,000 threshold provided for above. Indemnified
Persons will have to assert a claim for such
indemnification on or prior to the Adjustment Date.
Notwithstanding the foregoing, the application of the
Adjustment Escrow Shares to amounts owing to
Indemnified Persons will not be the exclusive remedy
pursuant to which Cordis may satisfy claims for Damages
against the Webster Shareholders and the Schedule 2
Shareholders. Such other remedies shall be subject to
certain limitations described above in "--
Representations and Warranties" and as described below.
In addition to the limitations described above and
in "-- Representations and Warranties," in the event of
any claim for Damages made against Webster Shareholders
or Schedule 2 Shareholders, each Webster Shareholder or
Schedule 2 Shareholder, as the case may be, will have
maximum liability for such breaches in an amount
("Maximum Liability Amount") not to exceed the sum of
(i) the number of shares of Cordis Common Stock
received by such Webster Shareholder or Schedule 2
Shareholder at the Closing plus (ii) the number of
Adjustment Escrow Shares to which each such Webster
Shareholder or Schedule 2 Shareholder is entitled
(after giving effect to claims made against Adjustment
Escrow Shares), multiplied by the Average Trading Price
(provided, however, that if the Average Trading Price
is greater than $52.02, the Average Trading Price will
be $52.02, and if the Average Trading Price is less
than $42.56, the Average Trading Price will be $42.56);
provided, further, however, that in the case of a
Schedule 2 Shareholder, the maximum liability will not
exceed 95% of the Maximum Liability Amount. In the
event Cordis seeks to recover amounts for breaches of
representations and warranties contained in the
Reorganization Agreement, Cordis must first make claims
against the Adjustment Escrow Shares, to the extent
such shares are available and to the extent permitted
under the terms of the Reorganization Agreement and the
Escrow Agreement.
See "THE MERGER -- Indemnification."
Agreement to
Vote Shares: Pursuant to the Reorganization Agreement, certain
of the shareholders of Webster holding in the aggregate
approximately 99% of the Webster Common Stock and 100%
of the Webster Preferred Stock have agreed to vote all
shares of Webster Common Stock or Webster Preferred
Stock, as the case may be, beneficially owned by such
shareholder in favor of the approval and adoption of
the Agreements and approval of the Merger. Such
shareholders have the right to terminate such voting
agreements under certain circumstances. See "THE
MERGER -- Agreement to Vote Shares."
Amendment and
Termination: The Reorganization Agreement may be amended by the
parties thereto by action taken by or on behalf of
their respective Boards of Directors at any time prior
to the Effective Time; provided, however, that, after
approval of the Merger by the shareholders of Webster,
no amendment may be made which would reduce the amount
or change the type of consideration into which each
share of Webster Common Stock will be converted upon
consummation of the Merger. The Reorganization
Agreement may not be amended except by an instrument in
writing signed by the parties thereto. The
Reorganization Agreement may be terminated at any time
prior to the Effective Time, whether before or after
approval of the Reorganization Agreement, the Merger
Agreement and the Merger by the shareholders of
Webster: (i) by mutual written consent of Cordis and
Webster; (ii)(a) by Cordis, if there has been a breach
by Webster, the Webster Shareholders or the Schedule 2
Shareholders of any of their representations,
warranties, covenants or agreements contained in the
Reorganization Agreement, or any such representation
and warranty shall have become untrue and such breach
or condition has not been promptly cured within 10 days
following receipt by Webster of written notice of such
breach; (b) by Webster, if there has been a breach by
Cordis of any of its representations, warranties,
covenants or agreements contained in the Reorganization
Agreement, or any such representation and warranty
shall have become untrue and such breach or condition
has not been promptly cured within 10 days following
receipt by Cordis of written notice of such breach;
(iii) by either Cordis or Webster if any decree,
permanent injunction, judgment, order or other action
by any court of competent jurisdiction or any
Governmental Entity preventing or prohibiting
consummation of the Merger shall have become final and
nonappealable; (iv) by either Cordis or Webster if the
Merger shall not have been consummated by May 15, 1994;
provided, however, that the Reorganization Agreement
may be extended not more than 60 days by either party
by written notice to the other party if the Merger
shall not have been consummated as a direct result of
the other party having failed by such date to receive
all regulatory approvals or consents required to be
obtained by such party with respect to the Merger;
provided further, however, that the right to terminate
the Reorganization Agreement for this reason will not
be available to any party whose willful failure to
fulfill any obligation under the Reorganization
Agreement has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before
such date; (v) by either Cordis or Webster if the
Reorganization Agreement shall fail to receive the
requisite vote for approval and adoption by the
shareholders of Webster; (vi) by Cordis, if the Board
of Directors of Webster shall have recommended to the
shareholders of Webster any Bona Fide Proposal or
resolved to do so under the circumstances described in
the Reorganization Agreement; (vii) by Webster, if the
Board of Directors of Webster shall have recommended to
the shareholders of Webster any Bona Fide Proposal or
resolved to do so under the circumstances described in
the Reorganization Agreement; provided that any
termination of the Reorganization Agreement by Webster
for this reason will not be effective until the close
of business on the second full business day after
notice thereof to Cordis; and (viii) by either Cordis
or Webster if circumstances arise which make it
impossible, in the reasonable judgment of either Cordis
or Webster, as the case may be, for a condition to such
party's obligation to effect the Merger and the other
transactions contemplated in the Reorganization
Agreement to be satisfied prior to May 15, 1994;
provided, however, that the right to terminate the
Reorganization Agreement for this reason will not be
available to any party whose act or failure to act or
whose breach of any obligation under the Reorganization
Agreement is responsible for such circumstances
arising. See "THE MERGER -- Amendment and
Termination."
Interests of
Certain Persons
with Respect
to the Merger;
Potential
Conflicts
of Interest: In considering the recommendation of Webster's
Board of Directors with respect to the Agreements and
the Merger, Webster shareholders should be aware that
certain members of the management of Webster, some of
whom are members of its Board of Directors, have
certain interests in the Merger that are in addition to
the interests of shareholders of Webster generally.
Certain of such persons will enter into employment
agreements that will become effective upon consummation
of the Merger. The Board of Directors of Webster,
particularly the nonemployee directors, were aware of
these interests and considered them, among other
matters, in approving the Reorganization Agreement and
the Merger Agreement and the transactions contemplated
thereby. See "THE MERGER -- Interests of Certain
Persons with Respect to the Merger; Potential Conflicts
of Interest."
Management
of Cordis
and the Surviving
Corporation
Following
the Merger;
Employment
Agreements: It is a condition to the obligation of Cordis to effect
the Merger that Tony R. Brown, Ph.D. and Wilton W.
Webster, Jr. execute and deliver to Cordis employment
agreements at or prior to the Closing pursuant to
which Dr. Brown will serve as Vice President of
Cordis and President and Chief Executive Officer of the
Surviving Corporation and Mr. Webster will serve as
Vice President and Senior Scientific Advisor of Cordis
and Chief Engineer of the Surviving Corporation. See
"THE MERGER--Interests of Certain Persons with Respect
to the Merger; Potential Conflicts of Interest."
Agreement With
Certain
Shareholder: In connection with the execution and delivery of
the Reorganization Agreement, Brentwood, Webster and
Cordis have entered into an agreement dated as of
January 20, 1994 (the "Brentwood Agreement"), pursuant
to which Brentwood, the owner of all issued and
outstanding shares of Webster Preferred Stock, has
agreed to terminate certain rights relating to its
ownership of Webster securities and to convert all of
its Webster Preferred Stock into shares of Webster
Common Stock immediately prior to the Effective Time.
See "THE MERGER -- Agreement With Certain Shareholder."
Accounting
Treatment: The Merger is expected to qualify as a "pooling of
interests" for accounting and financial reporting
purposes. Consummation of the Merger is conditioned
upon, among other things, Cordis receiving a letter
from Deloitte & Touche, independent auditors to Cordis
and Webster, to the effect that the Merger will qualify
as a "pooling of interests" transaction under
Accounting Principles Board Opinion No. 16. Because of
a limitation on the amount of cash that may be paid in
connection with the Merger imposed by applicable
accounting principles, the Merger may not be accounted
for as a "pooling of interests" if Webster shareholders
holding more than ten percent (10%) of the outstanding
stock of Webster exercise dissenters' rights. Webster
has agreed that, prior to the Effective Time, Webster
will obtain Affiliate Agreements from certain persons
identified in the Reorganization Agreement and any
person who may be deemed to have become an affiliate of
Webster (under Rule 145 of the Securities Act or
otherwise under applicable Commission accounting
releases with respect to pooling-of-interests
accounting treatment) after the date of the
Reorganization Agreement and on or prior to the
Effective Time, provided that Webster has agreed to use
its best efforts to obtain Affiliate Agreements from
each such person as soon as practicable after the date
of the Reorganization Agreement or the date on which
such person attains such status, as the case may be.
Each party to the Reorganization Agreement, including
the Webster Shareholders, has agreed to use its best
efforts to cause the Merger to qualify, and shall not
take any actions which could prevent the Merger from
qualifying, for pooling-of-interests accounting
treatment and as a reorganization qualifying under the
provisions of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"). See "THE
MERGER -- Accounting Treatment."
Certain Federal
Income Tax
Consequences: The Merger is intended to qualify as a
reorganization under Section 368(a) of the Code, in
which case no gain or loss would generally be
recognized by the shareholders of Webster on the
exchange of their shares of Webster Common Stock for
shares of Cordis Common Stock (except with respect to
cash received by such shareholders in lieu of
fractional shares or cash received by shareholders
perfecting dissenters' rights under California law).
The shareholders of Webster have received an opinion
from Venture Law Group to the effect that the Merger
will be treated as a tax-free reorganization for
federal income tax purposes. Such opinion was based
upon representations of Cordis and Acquisition
contained in the Reorganization Agreement and certain
representations made to Venture Law Group by certain of
Webster's shareholders. No rulings have been requested
from the Internal Revenue Service with respect to any
tax matters. All Webster shareholders should consult
their own tax advisors concerning the tax consequences
of the Merger in their particular individual
circumstances. See "THE MERGER -- Certain Federal
Income Tax Matters."
Restrictions on
Resale of Cordis
Common Stock;
Affiliate
Agreements: The shares of Cordis Common Stock to be issued to
Webster shareholders in the Merger will be registered
under the Securities Act and will be freely
transferable after the Effective Time of the Merger,
subject to certain limitations on transfer described
herein. It is a condition to the obligations of Cordis
to effect the Merger that certain affiliates of Webster
execute and deliver Affiliate Agreements (the
"Affiliate Agreements"), pursuant to which such persons
agree not to sell, exchange, transfer, pledge, dispose
of or otherwise reduce such person's risk relative to
the Cordis Common Stock or any part thereof until such
time after the Effective Time as financial results
covering at least thirty (30) days of the combined
operations of Cordis and Webster after the Effective
Time have been made publicly available. Furthermore,
pursuant to the terms of the Affiliate Agreements, such
persons may not sell or otherwise dispose of shares of
Cordis Common Stock held by them (whether received in
the Merger or previously held) except in compliance
with the applicable provisions of the Securities Act
and the rules and regulations thereunder. See "THE
MERGER -- Restrictions on Resale of Cordis Common
Stock; Affiliate Agreements."
Fluctuation in
Market Price: The value realized by Webster shareholders in the
Merger will depend upon the market price of Cordis
Common Stock, which is subject to fluctuation. There
can be no assurance that the recent market prices of
Cordis Common Stock will be maintained until or after
the consummation of the Merger. See "MARKET PRICES AND
DIVIDENDS."
Comparison of
Shareholder
Rights: See "COMPARATIVE RIGHTS OF CORDIS STOCKHOLDERS AND
WEBSTER SHAREHOLDERS" for a summary of the material
differences between the rights of holders of Cordis
Common Stock and Webster Common Stock.
Regulatory
Requirements: Cordis and Webster are aware of no governmental
approvals required for consummation of the Merger,
other than the compliance with federal securities laws
and state securities or "Blue Sky" laws. In addition,
the transaction will be the subject of premerger
notification under the HSR Act. Filings have been made
under the HSR Act by Cordis and by Wilton W. Webster,
Jr. and Helen E. Webster on behalf of Webster and on
behalf of themselves as shareholders of Webster. The
HSR Act waiting period will expire thirty days after
completed premerger notifications have been filed with
the Federal Trade Commission and the Department of
Justice Antitrust Division, subject to either early
termination or extension by a request for additional
information. See "THE MERGER -- Regulatory
Requirements."
Market Prices and Dividends
Cordis: On January 20, 1994, the last full trading day for
Cordis Common Stock prior to the public announcement of
the execution of the Reorganization Agreement, the
reported closing bid price of Cordis Common Stock, as
reported by NASDAQ, was $48-3/8 per share. The closing
bid price of Cordis Common Stock, as reported by
NASDAQ, on February ___, 1994 was $_____ per share. At
January 31, 1994, there were 1,163 stockholders of
record of Cordis Common Stock.
Cordis has not paid any cash dividends to date and has
no present intention to do so. Following the Merger,
any future payment of dividends will be at the
discretion of Cordis' Board of Directors and will
depend upon the financial condition and capital
requirements of Cordis, as well as other factors that
the Board of Directors may deem relevant.
Webster: No established public trading market exists for
Webster's securities. As of ______, 1994, there were
seven holders of record of Webster Common Stock and one
holder of record of Webster Preferred Stock. Webster
has never paid any cash dividends on either its common
stock or its preferred stock.
<PAGE>
SELECTED HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA
Set forth below are selected historical financial data of
Cordis and Webster and selected unaudited pro forma combined
financial data of Cordis and Webster. The selected historical
financial data with respect to Cordis and Webster are based upon
the respective historical financial statements of Cordis and
Webster which are included in this Consent Statement/Prospectus,
including the notes thereto, and should be read in conjunction
therewith. The selected unaudited pro forma combined financial
data should be read in conjunction with the unaudited pro forma
condensed combined financial statements, including the notes
thereto, appearing elsewhere in this Consent
Statement/Prospectus. See "Consolidated Financial Statements of
Cordis," "Financial Statements of Webster," "Pro Forma Condensed
Combined Financial Statements" and "Notes to Pro Forma Condensed
Combined Financial Statements."
The pro forma financial information is presented for
illustrative purposes only and is not necessarily indicative of
the operating results or financial position that would have been
achieved had the transaction been in effect as of the beginning
of the periods presented and should not be construed as
representative of future operations.
CORDIS
SELECTED HISTORICAL FINANCIAL DATA
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
Six Months
Ended December 31, Fiscal Year Ended June 30,
1993 1992 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $144,546 $124,486 $255,458 $222,959 $198,907 $163,674 $141,220
Income from continuing
operations before
income taxes, equity
in loss in joint
venture and
cumulative effect
of accounting change $ 26,714 $ 18,311 $ 38,715 $ 32,289 $ 25,970 $ 17,196 $ 9,363
Provision for income
taxes 10,215 5,340 9,655 8,275 6,638 4,159 394
Equity in loss in
joint venture _ _ _ _ _ (2,880) (2,420)
Income from continuing
operations before
cumulative effect of
accounting change $ 16,499 $ 12,971 $ 29,060 $ 24,014 $ 19,332 $ 10,157 $ 6,549
Earnings per share:
Income from continuing
operations before
cumulative effect of
accounting change $ 1.13 $ .89 $ 2.00 $ 1.67 $ 1.38 $ .75 $ .49
Total assets $236,469 $183,054 $204,291 $168,154 $141,981 $145,778 $129,940
Long-term liabilities $ 8,253 $ 8,733 $ 8,093 $ 9,677 $ 29,948 $ 36,855 $ 40,519
Cash dividends declared
per common share $ _ $ _ $ _ $ _ $ _ $ _ $ _
</TABLE>
<PAGE>
WEBSTER
SELECTED HISTORICAL FINANCIAL DATA
(Dollars in thousands except per share amounts)
Fiscal Year Ended November 30,
1993 1992 1991 1990 1989
Net sales $14,487 $9,044 $5,173 $2,407 $ 1,933
Net income $ 2,701 $1,850 $1,214 $ 271 $ 137
Total assets $11,127 $6,885 $2,514 $1,120 $ 760
Long-term liabilities $ _ $ _ $ _ $ _ $ _
Cash dividends declared
per common share $ _ $ _ $ _ $ _ $ _
CORDIS AND WEBSTER
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
Six Months Ended
December 31, Twelve Months Ended June 30,
1993 1992 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net sales $152,600 $130,049 $267,446 $230,477 $202,560
Income from continuing
operations before
cumulative effect of
accounting change $ 17,808 $ 14,094 $ 31,466 $ 25,731 $ 20,085
Earnings per share:
Income from continuing
operations before
cumulative effect of
accounting change
- Maximum shares $ 1.07 $ .87 $ 1.92 $ 1.64 $ 1.31
- Minimum shares $ 1.10 $ .88 $ 1.96 $ 1.67 $ 1.33
Total assets $247,406 $190,090 $214,408 $171,986 $143,635
Long-term liabilities $ 8,253 $ 8,733 $ 8,093 $ 9,677 $ 29,948
Cash dividends declared per
common share $ _ $ _ $ _ $ _ $ _
</TABLE>
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth certain historical per share
data of Cordis and Webster and combined per share data on an
unaudited pro forma basis after giving effect to the Merger on a
pooling of interests basis assuming that a minimum of 0.246321
and a maximum of 0.301072 of one newly issued share of Cordis
Common Stock are issued in exchange for each outstanding share of
Webster Common Stock and Webster Preferred Stock in the Merger
and assuming the issuance of all shares of Webster Common Stock
issuable pursuant to Webster Options. This data should be read
in conjunction with the selected financial data, the pro forma
condensed combined financial statements and the separate
historical financial statements of Cordis and Webster and notes
thereto, included elsewhere in this Consent Statement/Prospectus.
The unaudited pro forma combined financial data are not
necessarily indicative of the operating results that would have
been achieved had the transaction been in effect as of the
beginning of the periods presented and should not be construed as
representative of future operations.
Six Months Fiscal Years Ended
Ended June 30,
December 31,
1993 1992 1993 1992 1991
Historical-Cordis
Income from continuing
operations
before cumulative effect $ 1.13 $.89 $2.00 $1.67 $1.38
of accounting change
Book value $11.75 $9.68
Fiscal Years Ended
November 30,
1993 1992 1991
Historical-Webster - Equivalent Basis
Net income
- Maximum $1.39 $1.27 $0.92
- Minimum $1.70 $1.55 $1.12
Book value
- Maximum $4.46
- Minimum $5.45
Six Months Fiscal Years Ended
Ended June 30,
December 31,
1993 1992 1993 1992 1991
Pro Forma Combined -- Per
Cordis Share
Income from continuing
operations before
cumulative effect
of accounting change
- Maximum $ 1.07 $.87 $1.92 $1.64 $1.31
- Minimum $ 1.10 $.88 $1.96 $1.67 $1.33
Book value
- Maximum $10.89 $9.04
- Minimum $11.13 $9.23
<PAGE>
INTRODUCTORY STATEMENT
This Consent Statement/Prospectus is being furnished to the
shareholders of Webster for the purposes set forth below. The
information concerning Webster in this Consent
Statement/Prospectus has been supplied by Webster or its
representatives. This Consent Statement/Prospectus is first
being mailed to the shareholders of Webster on or about March
___, 1994.
This Consent Statement/Prospectus is being furnished to the
shareholders of Webster in connection with the solicitation of
Webster shareholder consents by the Board of Directors of Webster
in connection with the approval and adoption of the
Reorganization Agreement and Merger Agreement, copies of which
are attached hereto as Appendix A. If the Agreements are
approved, each share of Webster Common Stock (including those
shares issued to Brentwood upon the conversion of its Webster
Preferred Stock into Webster Common Stock) outstanding
immediately prior to consummation of the Merger (except for
Dissenting Shares) will be converted into the right to receive
that number of shares of Cordis Common Stock equal to $12.81364
divided by the Average Trading Price, subject to certain
adjustments and limitations described in "THE MERGER -- Terms of
the Merger."
The Board of Directors of Webster (including its nonemployee
directors) believes that the Merger is fair and in the best
interests of Webster and its shareholders and has unanimously
approved the Agreements and unanimously recommends that the
shareholders of Webster vote in favor of the Agreements.
The principal executive offices of Webster are located at
4750 Littlejohn Street, Baldwin Park, California 91706 and its
telephone number is (818) 960-6404. Shareholders with questions
regarding the Merger or other transactions or matters described
herein may contact Tony R. Brown, Ph.D., President and Chief
Executive Officer of Webster, at (818) 960-6404.
SOLICITATION, VOTING AND REVOCABILITY OF CONSENTS
The close of business on , 1994 has been fixed
fixed by the Board of Directors of Webster as the Webster Record
Date for determination of shareholders entitled to consent to the
Agreements and the Merger. The number of shares of Webster
Preferred Stock and Webster Common Stock outstanding on the
Webster Record Date were 1,200,000 and ,
respectively. The affirmative vote of the holders of a majority
of (i) the outstanding shares of Webster Common Stock voting as a
class, with each share of Webster Common Stock having one vote,
and (ii) the outstanding shares of Webster Preferred Stock voting
as a class, with each share of Webster Preferred Stock having one
vote, is required to approve the Agreements.
<PAGE>
WEBSTER SHAREHOLDERS SHOULD NOT SEND THEIR
STOCK CERTIFICATES WITH THEIR CONSENT FORMS.
All consents in the enclosed form of consent that are
properly executed and returned to Webster will be voted in
accordance with the instructions thereon. All executed but
unmarked Webster consents will be voted FOR approval of the
Agreements. Shareholder approval will be deemed to have occurred
once Webster has received unrevoked consents from the holders of
a majority of the outstanding shares of Webster Common Stock and
a majority of the outstanding shares of Webster Preferred Stock.
Any consent may be revoked by any shareholder prior to such
shareholder approval by executing and delivering a subsequent
consent or by delivering a written notice to the Secretary of
Webster, as applicable, stating that the consent is revoked.
The expense of printing this Consent Statement/Prospectus
and the consents solicited hereby, and any registration or filing
fees incurred in connection with the Registration Statement, this
Consent Statement/Prospectus and certain other filings, will be
shared equally by Cordis and Webster. See "THE MERGER -- Fees
and Expenses; Termination Fees." In addition to the use of the
mails, consents may be solicited by officers and directors and
regular employees of Webster, without additional remuneration, by
personal interviews, telephone, telegraph or otherwise.
THE BOARD OF DIRECTORS OF WEBSTER RECOMMENDS THAT
SHAREHOLDERS OF WEBSTER CONSENT TO THE APPROVAL OF THE
AGREEMENTS.
<PAGE>
THE MERGER
The following discussion summarizes certain aspects of the
Agreements, including various exhibits thereto. This summary is
not intended to be a complete description of the Agreements and
is subject to, and qualified in its entirety by, reference to the
Agreements, copies of which are attached hereto as Appendix A and
incorporated herein by reference.
General Description
On January 20, 1994, Cordis, Acquisition, Webster and
certain of the shareholders of Webster entered into the
Reorganization Agreement, pursuant to which (i) Acquisition will
be merged with and into Webster, which will be the surviving
corporation that will do business under the name Cordis Webster,
Inc. and become a wholly owned subsidiary of Cordis and (ii) each
share of Webster Common Stock outstanding immediately prior to
the consummation of the Merger (except for Dissenting Shares)
will be converted into the right to receive that number of shares
of Cordis Common Stock equal to $12.81364 divided by the Average
Trading Price, subject to certain adjustments and limitations
described below under "-- Terms of the Merger."
The Merger, if approved by the Webster shareholders, will
become effective upon the acceptance by the California Secretary
of State of the filing of the Merger Agreement. The Merger
Agreement is expected to be executed by Webster and Acquisition
and filed with the Secretary of State of California as soon as
practicable after the Merger has been approved by the
shareholders of Webster and the other conditions to the Merger
have been satisfied or waived (provided that no party has
terminated the Reorganization Agreement previously). Shareholder
approval will be deemed to have occurred once Webster has
received unrevoked consents from the holders of a majority of the
outstanding shares of Webster Common Stock and a majority of the
outstanding shares of Webster Preferred Stock. It is anticipated
that the Effective Time will occur during March 1994, but there
can be no assurance that the various conditions to the Merger
will have been satisfied by such time. The shareholder approval
sought to be obtained by Webster will not expire and is not
subject to reconsideration in the event of an extended delay or
material change in Webster or its prospects or Cordis or its
prospects. However, the Boards of Directors of Cordis,
Acquisition and Webster can, under certain circumstances, abandon
the Merger after such shareholder approval is obtained. Either
party may terminate the Reorganization Agreement if, among other
reasons, Webster shall have accepted or recommended to its
shareholders a Bona Fide Proposal or if the Merger has not been
consummated by May 15, 1994, subject to extension under certain
circumstances. See "-- Conditions to Obligations to Effect the
Merger" and "-- Amendment and Termination."
Background of the Merger
During June 1993, Cordis representatives approached Webster
to inquire whether Webster would consider exploring a business
<PAGE>
combination with Cordis. As a result of this preliminary
discussion, Webster decided to visit Cordis to ascertain whether
an acquisition of Webster by Cordis was a viable option. During
this visit, Cordis described its business, products and
management philosophy. Cordis described its sales and marketing
operations and the resources it had that would be made available
to Webster if acquired. These included the ability to utilize
Cordis' well-established European sales force in lieu of
Webster's distributors, the availability of cash for growth, and
access to Cordis' manufacturing processes, together with skills,
systems and procedures typically available only in companies much
larger than Webster. Webster explained the factors that were
important to its Board and management in considering any
acquisition proposal, which included Webster maintaining its
existing management team and present location while having access
to Cordis' resources for growth. Cordis also described the
market for its common stock, which would provide increased
liquidity for Webster shareholders after the Merger.
After discussions among Webster's management and Board
members, Webster's management accepted Cordis' invitation for a
second meeting, which occurred in July 1993. At this meeting,
Webster and Cordis assessed their mutual values, cultures and
goals, established common ground and trust and concluded there
was a high level of compatibility.
Cordis management visited Webster in September 1993 to tour
its operations and to meet Webster's management team. During
this visit, Webster management gave an overview of Webster's
operations and strategies which led Cordis to proceed with
negotiations intended to lead to an acquisition of Webster.
Early in October 1993 a meeting was held between Cordis and
Webster management, plus one Webster Board member, during which
the decision was reached that the various concerns of both
companies were within a range to be negotiated and that the due
diligence process should begin. The due diligence process began
in mid-October 1993. In mid-November 1993 Cordis, Webster
management and a Webster Board member met to discuss the ongoing
due diligence, to further resolve open issues and to begin to
structure the potential acquisition of Webster. Due diligence
and negotiations continued until an agreement was reached in mid-
January 1994. On January 20, 1994 Webster's Board of Directors,
after determining that the Merger was fair and in the best
interests of the Webster shareholders, unanimously approved the
execution of the Reorganization Agreement.
Reasons for the Merger; Recommendation of the Board of Directors
of Webster
The merger discussions highlighted potential benefits the
Board of Directors of Webster believes will result from the
Merger, including:
* The ability for the entities to take advantage of the
growing demand for electrophysiology products and to
capitalize upon the combined reputations of the parties,
Webster as a pioneer in the field of electrophysiology and
<PAGE>
Cordis as an established manufacturer and distributor of
angiographic and neuroscience products;
* A broader base of research and development resources;
* The pooling of talent and resources to better take
advantage of future technological or marketing
opportunities in the fields of interventional cardiology,
electrophysiology and arrhythmia management;
* Combined marketing and sales teams;
* Webster should be able to offer a wider range of products
to customers as a result of access to Cordis products and
technology;
* Webster expects to benefit from Cordis' well-established
international direct sales force, as well as from Cordis'
marketing expertise;
* Webster will gain access to a number of technological and
operational resources, Cordis' coating technology and
processes, manufacturing processes and a materials testing
laboratory;
* Webster will gain access to Cordis' experienced and better
developed research and development, regulatory affairs,
quality assurance, manufacturing, finance and management
information systems;
* The established trading market for Cordis Common Stock
affords Webster shareholders with increased liquidity; and
* The distinct product lines of Cordis, when combined with
the Webster product lines, provide the Webster
shareholders with diversification of investment.
For these reasons, the Board of Directors of Webster
(including the nonemployee directors) unanimously approved the
Agreements and has determined that the Merger is fair to, and in
the best interests of, Webster and its shareholders. The Board
of Directors of Webster unanimously recommends that the
shareholders of Webster vote FOR the approval and adoption of the
Agreements.
Cordis believes that the integrated electrophysiology
product offerings, when added to Cordis' existing angiography and
angioplasty product lines, will increase Cordis' presence in the
field of interventional cardiology. In addition, the Merger will
enable Cordis to utilize the talents of Webster's experienced
management.
Terms of the Merger
The Reorganization Agreement provides that Acquisition will
be merged with and into Webster, which will be the surviving
corporation and will become a wholly owned subsidiary of Cordis.
Following the Merger, the separate existence of Acquisition will
<PAGE>
cease. The Merger will become effective at the Effective Time,
which is the date of acceptance of the filed Merger Agreement by
the California Secretary of State in accordance with the
California Code. The Merger Agreement will be filed on or as
soon as practicable following the Closing, which would occur as
soon as practicable following the satisfaction or waiver of the
conditions set forth in the Reorganization Agreement. The
Reorganization Agreement and the Merger Agreement also provide
that (i) the Articles of Incorporation and Bylaws of Webster in
effect immediately prior to the Effective Time of the Merger will
be the Articles of Incorporation and Bylaws of the Surviving
Corporation, except that such Articles of Incorporation shall be
amended to provide that the name of the Surviving Corporation
shall be Cordis Webster, Inc., (ii) the directors of Acquisition
immediately prior to the Effective Time will be the initial
directors of the Surviving Corporation and (iii) the officers of
Webster immediately prior to the Effective Time will be the
initial officers of the Surviving Corporation. See "--Interests
of Certain Persons with Respect to the Merger; Potential
Conflicts of Interest."
Conversion of Securities. The Reorganization Agreement
provides that at the Effective Time, as provided in the Merger
Agreement, by virtue of the Merger and without any action on the
part of Acquisition, Webster or the holders of any of the
following securities, each share of Webster Common Stock issued
and outstanding immediately prior to the Effective Time (other
than any shares of Webster Common Stock held by any Webster
shareholder who elects to exercise appraisal rights under
Sections 1300 of the California Code ("Dissenting Shares")) shall
be converted into the right to receive that number of shares of
Cordis Common Stock determined by dividing $12.81364 by the
Average Trading Price of a share of Cordis Common Stock;
provided, however, if the Average Trading Price is greater than
$52.02, such number shall be 0.246321 and if the Average Trading
Price is less than $42.56, such number shall be 0.301072. Based
on the Exchange Ratio, the minimum and maximum numbers of shares
of Cordis Common Stock issuable pursuant to the Merger (assuming
the conversion prior to the Effective Time of all shares of
Webster Preferred Stock into Webster Common Stock and assuming
the issuance prior to the Effective Time of all shares of Webster
Common Stock issuable pursuant to Webster Options) will be
1,634,008 and 1,997,203, respectively. All such shares of
Webster Common Stock shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist,
and each certificate previously representing any such shares
shall thereafter represent the right to receive a certificate
representing the shares of Cordis Common Stock into which such
Webster Common Stock was converted in the Merger. Certificates
previously representing shares of Webster Common Stock shall be
exchanged for certificates representing whole shares of Cordis
Common Stock issued in consideration therefor upon the surrender
of such certificates as described below. No fractional share of
Cordis Common Stock will be issued, and, in lieu thereof, a cash
payment will be made. In any event, if between the date of the
Reorganization Agreement and the Effective Time the outstanding
<PAGE>
shares of Cordis Common Stock, Webster Common Stock or Webster
Preferred Stock shall have been changed into a different number
of shares or a different class, by reason of any stock dividend,
subdivision, reclassification, recapitalization, split,
combination or exchange of shares, the Exchange Ratio will be
correspondingly adjusted to reflect such stock dividend,
subdivision, reclassification, recapitalization, split,
combination or exchange of shares.
If prior to the Effective Time Mr. Wilton W. Webster, Jr.
dies or suffers a disability described in the Reorganization
Agreement, the Exchange Ratio will be replaced by a Recomputed
Exchange Ratio, which is determined by dividing $12.05969 by the
Average Trading Price of a share of Cordis Common Stock;
provided, however, if the Average Trading Price is greater than
$52.02, such number shall be 0.231828, and if the Average Trading
Price is less than $42.56, such number shall be 0.283357, subject
to adjustments of the type described above. Based on the
Recomputed Exchange Ratio, the minimum and maximum numbers of
shares of Cordis Common Stock issuable pursuant to the Merger
(assuming the conversion prior to the Effective Time of all
shares of Webster Preferred Stock into Webster Common Stock and
assuming the issuance prior to the Effective Time of all shares
of Webster Common Stock issuable pursuant to Webster Options)
will be 1,537,805 and 1,879,669, respectively.
The following table provides examples of Exchange Ratios
based upon differing Average Trading Prices of Cordis Common
Stock:
<TABLE>
<CAPTION>
Average Trading Price Effective Merger Consideration
for Per Share of
Cordis Common Stock Exchange Ratio Webster Comon Stock
<C> <C> <C>
More than $52.02 0.246321 More than $12.81364
52.02 0.246321 12.81364
51.23 0.250120 12.81364
50.44 0.254037 12.81364
49.65 0.258079 12.81364
48.86 0.262252 12.81364
48.07 0.266562 12.81364
47.28 0.271016 12.81364
46.49 0.275621 12.81364
45.70 0.280386 12.81364
44.91 0.285318 12.81364
44.12 0.290427 12.81364
43.33 0.295722 12.81364
42.56 0.301072 12.81364
Less than 42.56 0.301072 Less than 12.81364
</TABLE>
As noted above, in the event the Recomputed Exchange Ratio
is used to determine the Merger consideration, the value realized
by Webster shareholders at the Effective Time for each share of
Webster Common Stock converted into Cordis Common Stock will be
less than if the Exchange Ratio is used.
Based upon the average of the reported closing prices of a
share of Cordis Common Stock as reported by NASDAQ for the 20
consecutive trading days immediately prior to the date of this
Consent Statement/Prospectus, the aggregate value of shares of
Cordis Common Stock issuable pursuant to the Merger would be
approximately $__________ using the Exchange Ratio (assuming the
conversion prior to the Effective Time of all shares of Webster
Preferred Stock into Webster Common Stock and assuming the
issuance prior to the Effective Time of all shares of Webster
Common Stock issuable pursuant to Webster Options). The actual
value of the transaction is subject to the application of the
Exchange Ratio or the Recomputed Exchange Ratio, as the case may
be, as described herein.
Any shares of Webster Common Stock or Webster Preferred
Stock held in the treasury of Webster immediately prior to the
Effective Time will be canceled and extinguished without any
conversion thereof and no payment shall be made with respect
thereto. Each share of common stock, par value $0.01 per share,
of Acquisition ("Acquisition Common Stock") issued and
outstanding immediately prior to the Effective Time will be
converted into and exchanged for one newly and validly issued,
fully paid and non-assessable share of common stock of the
Surviving Corporation.
Exchange of Certificates.
Exchange Agent. As of the Effective Time, Cordis must
deposit, or cause to be deposited, with a bank or trust company
designated by Cordis (the "Exchange Agent"), for the benefit of
the holders of shares of Webster Common Stock, for exchange
through the Exchange Agent, certificates representing the whole
shares of Cordis Common Stock (such certificates for shares of
Cordis Common Stock, together with any dividends or distributions
with respect thereto, being hereafter referred to as the
"Exchange Fund") issuable pursuant to the Reorganization
Agreement (excluding the Adjustment Escrow Shares, which Cordis
must deliver to the Escrow Agent) in exchange for outstanding
shares of Webster Common Stock and cash in an amount sufficient
to permit payment of the cash payable in lieu of fractional
shares; it being understood that all outstanding shares of
Webster Preferred Stock shall have been converted to Webster
Common Stock prior to the Closing provided the Merger occurs.
The Exchange Agent will, pursuant to irrevocable instructions,
deliver the Cordis Common Stock out of the Exchange Fund. Except
as otherwise contemplated by the Reorganization Agreement, the
Exchange Fund shall not be used for any other purpose.
Exchange Procedures. Promptly after the Effective
Time, Cordis will instruct the Exchange Agent to mail to each
holder of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding
shares of Webster Common Stock (the "Certificates") (i) a letter
of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the
Exchange Agent and shall be in customary form) and (ii)
instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of
Cordis Common Stock. Upon surrender of a Certificate for
cancellation to the Exchange Agent together with such letter of
transmittal, duly executed, and such other documents as may be
required pursuant to such instructions, the holder of such
Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Cordis
Common Stock which such holder has the right to receive in
respect of the shares of Webster Common Stock formerly
represented by such Certificates (after taking into account all
shares of Webster Common Stock then held by such holder), less a
number of shares of Cordis Common Stock constituting such
holder's proportionate interest of the shares held in escrow
pursuant to the Reorganization Agreement (based on such holder's
respective proportionate interest immediately following the
Effective Time in the Cordis Common Stock into which the
outstanding shares of Webster Common Stock have been converted)
together with cash in lieu of fractional shares of Cordis Common
Stock to which such holder is entitled pursuant to the
Reorganization Agreement and any dividends or other distributions
to which such holder is entitled, and the Certificates so
surrendered will be canceled. In addition, the holder of such
Certificate subsequently may receive shares of Cordis Common
Stock and other property after the Post-closing Adjustment. In
the event of a transfer of ownership of shares of Webster Common
Stock which is not registered in the transfer records of Webster,
a certificate representing the proper number of shares of Cordis
Common Stock may be issued to a transferee if the Certificates
representing such shares of Webster Common Stock are presented to
the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid. Until
surrendered as contemplated by the Reorganization Agreement, each
Certificate shall be deemed at any time after the Effective Time
to represent only the right to receive upon such surrender the
certificate representing shares of Cordis Common Stock, cash in
lieu of any fractional shares of Cordis Common Stock to which
such holder is entitled and any dividends or other distributions
to which such holder is entitled pursuant to the Reorganization
Agreement.
Distributions with Respect to Unexchanged Shares of
Cordis Common Stock. No dividends or other distributions
declared or made after the Effective Time with respect to Cordis
Common Stock with a record date after the Effective Time will be
paid to the holder of any unsurrendered Certificate with respect
to the shares of Cordis Common Stock represented thereby, and no
cash payment in lieu of fractional shares shall be paid to any
such holder pursuant to the Reorganization Agreement, until the
holder of such Certificate surrenders such Certificate. Subject
to the effect of escheat, tax or other applicable laws, following
surrender of any such Certificate, there will be paid to the
holder of the certificates representing whole shares of Cordis
Common Stock issued in exchange therefor, without interest, (i)
promptly, the amount of any cash payable with respect to a
fractional share of Cordis Common Stock to which such holder is
entitled pursuant to the Reorganization Agreement and the amount
of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares
of Cordis Common Stock, including Adjustment Escrow Shares,
subject to the provisions of the Reorganization Agreement, and
(ii) at the appropriate payment date, the amount of dividends or
other distributions, with a record date after the Effective Time
but prior to surrender and a payment date occurring after
surrender, payable with respect to such whole shares of Cordis
Common Stock, including Adjustment Escrow Shares, subject to the
provisions of the Reorganization Agreement.
No Further Rights in Webster Common Stock. All shares
of Cordis Common Stock issued upon conversion of the shares of
Webster Common Stock in accordance with the terms of the
Reorganization Agreement (including any cash paid pursuant
thereto) will be deemed to have been issued in full satisfaction
of all rights pertaining to such shares of Webster Common Stock.
No Fractional Shares. No fractional shares of Cordis
Common Stock will be issued, but in lieu thereof each holder of
shares of Webster Common Stock who would otherwise be entitled to
receive a fraction of a share of Cordis Common Stock, after
aggregating all shares of Cordis Common Stock to which such
holder would be entitled to receive, will receive an amount in
cash equal to the Average Trading Price (provided, however, that
for such purposes, if the Average Trading Price is greater than
$52.02, the Average Trading Price shall be $52.02, and if the
Average Trading Price is less than $42.56, the Average Trading
Price shall be $42.56) multiplied by the fraction of a share of
Cordis Common Stock to which such holder would otherwise be
entitled. Such payment in lieu of fractional shares will be
administered by the Exchange Agent pursuant to the procedures
described above.
Termination of Exchange Fund. Any portion of the
Exchange Fund which remains undistributed to the holders of
Webster Common Stock for one year after the Effective Time will
be delivered to Cordis, upon demand, and any holders of Webster
Common Stock who have not theretofore complied with the exchange
procedures described in the Reorganization Agreement must
thereafter look only to Cordis for the shares of Cordis Common
Stock, any cash in lieu of fractional shares of Cordis Common
Stock to which they are entitled pursuant to and any dividends or
other distributions with respect to Cordis Common Stock to which
they are entitled pursuant to the Reorganization Agreement.
No Liability. Neither Cordis nor Webster will be
liable to any holder of shares of Webster Common Stock for any
such shares of Cordis Common Stock (or dividends or distributions
with respect thereto) delivered to a public official pursuant to
any abandoned property, escheat or similar law.
Escrowed Shares. At the Effective Time, ten percent of
the shares of Cordis Common Stock issuable pursuant to the
Reorganization Agreement to the holders of Webster Common Stock
theretofore outstanding shall be deposited by Cordis with the
Escrow Agent to provide for the Post-closing Adjustment described
below. The execution and delivery of the Escrow Agreement
constitutes a condition of the Reorganization Agreement. Cordis,
Webster, Acquisition and the Representative shall enter into the
Escrow Agreement with the Escrow Agent at the Closing. In the
event that David W. Chonette, the person initially appointed as
the Representative under the Reorganization Agreement, shall be
unable or unwilling to execute and deliver the Escrow Agreement
as required thereunder, the Webster Shareholders shall appoint
another person or entity for such purpose. By their execution
and delivery of the Reorganization Agreement, the Webster
Shareholders appointed David W. Chonette as Representative of the
<PAGE>
Webster Shareholders (other than Dissenting Shareholders) for
purposes of the Post-closing Adjustment.
Lost, Stolen or Destroyed Certificates. In the event
any certificates evidencing shares of Webster Common Stock shall
have been lost, stolen or destroyed, the Exchange Agent will
issue in exchange for such lost, stolen or destroyed
certificates, upon the making of an affidavit of that fact by the
holder thereof, such shares of Cordis Common Stock and cash for
fractional shares, if any, as may be required pursuant to the
Reorganization Agreement; provided, however, that Cordis may, in
its reasonable discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or
destroyed certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made
against Cordis, the Surviving Corporation, or the Exchange Agent
with respect to the certificates alleged to have been lost,
stolen or destroyed.
Stock Transfer Books. The Reorganization Agreement provides
that at the Effective Time, the stock transfer books of Webster
will be closed and there shall be no further registration of
transfers of shares of Webster Common Stock or Webster Preferred
Stock thereafter on the records of Webster. From and after the
Effective Time, the holders of certificates representing shares
of Webster Common Stock or Webster Preferred Stock outstanding
immediately prior to the Effective Time will cease to have any
rights with respect to such shares of Webster Common Stock or
Webster Preferred Stock except as otherwise provided in the
Reorganization Agreement or by law. On or after the Effective
Time, any Certificates presented to the Exchange Agent or Cordis
for any reason will be converted into shares of Cordis Common
Stock, any cash in lieu of fractional shares of Cordis Common
Stock to which the holders thereof are entitled and any dividends
or other distributions to which the holders thereof are entitled
pursuant to the Reorganization Agreement.
Stock Options. Webster and Cordis have agreed to take such
actions prior to the Effective Time as may be necessary or
appropriate for Cordis, at its option, to assume or issue a
substitute option for the Webster Options under Webster's 1992
Stock Plan (the "Webster Stock Plan"), so that at the Effective
Time each Webster Option will become or be replaced by an option
(a "Cordis Option") to purchase a number of whole shares of
Cordis Common Stock equal to the number of shares of Webster
Common Stock that could have been purchased (assuming full
vesting) under the Webster Option multiplied by the Exchange
Ratio or the Recomputed Exchange Ratio, as the case may be (and
eliminating any fractional share), at a price per share of Cordis
Common Stock equal to the per-share option exercise price
specified in the Webster Option divided by the Exchange Ratio or
the Recomputed Exchange Ratio, as the case may be. Each
substituted Cordis Option will otherwise be subject to the same
terms and conditions as apply to the related Webster Option. The
date of grant of each substituted Cordis Option for purposes of
such terms and conditions will be deemed to be the date on which
<PAGE>
the corresponding Webster Option was granted. As to each assumed
Webster Option, at the Effective Time (i) all references to
Webster in the stock option agreements with respect to the
Webster Options being assumed will be deemed to refer to Cordis;
(ii) Cordis will assume all of Webster's obligations with respect
to the related Webster Option; and (iii) Cordis will issue to
each holder of a Webster Option a document evidencing such
assumption by Cordis. The Reorganization Agreement will not
affect the schedule of vesting with respect to the Webster
Options in accordance with the terms of the Webster Stock Plan.
The parties to the Reorganization Agreement intend for the
assumption of Webster Options or the substitution of Cordis
Options for Webster Options to meet the requirements of Section
424(a) of the Code and that each assumed Webster Option or the
substituted Cordis Option qualify immediately after the Effective
Time as incentive stock options as defined in Section 422 of the
Code to the extent that the related Webster Option so qualified
immediately before the Effective Time. Webster has represented
and warranted in the Reorganization Agreement that the assumption
of Webster Options or substitution of Cordis Options therefor may
be effected pursuant to the terms of the Webster Options and the
Webster Stock Plan without the consent of any holder of a Webster
Option and without liability to any such holder.
Post-closing Adjustment. The Adjustment Escrow Shares, (i)
together with any Adjustment Property that would have been
distributed to the holders of such Adjustment Escrow Shares as a
result of any non-taxable stock dividend, stock split,
recapitalization, merger, combination or similar transaction
occurring during the Post-closing Adjustment Period, (ii) less
any Adjustment Escrow Shares, and any Adjustment Property
distributed with respect thereto, that have been applied as
provided in the Reorganization Agreement and the Escrow Agreement
in satisfaction of any amounts owing to any Indemnified Persons,
and (iii) less any Adjustment Escrow Shares, and any Adjustment
Property distributed with respect thereto, determined pursuant to
the Escrow Agreement to be necessary to provide for any Claim
Amount, shall be delivered as soon as practicable after the
Adjustment Date (and in any event within 90 days after the
Adjustment Date) as set forth in the Escrow Agreement to the
Representative of the Holders, or otherwise in accordance with
written instructions provided by such Representative, for
redelivery to the Holders based on each such Holder's
proportionate interest immediately following the Effective Time
in the Cordis Common Stock as set forth in the Reorganization
Agreement. Notwithstanding such delivery, any remaining
Adjustment Escrow Shares (and any Adjustment Property distributed
with respect thereto) held in escrow as set forth above will
continue to be held by the Escrow Agent under the Escrow
Agreement in accordance with the provisions of the Escrow
Agreement.
The procedure set forth in the Escrow Agreement shall be
used for the application of the Adjustment Escrow Shares to
satisfy indemnification obligations to Indemnified Persons. The
number of Adjustment Escrow Shares to which an Indemnified Person
will be entitled in respect of an Indemnification Amount or Claim
<PAGE>
Amount will be determined by dividing (i) the Indemnification
Amount or Claim Amount, as the case may be, by (ii) the Average
Trading Price (provided, however, that for such purposes, if the
Average Trading Price is greater than $52.02, the Average Trading
Price shall be $52.02, and if the Average Trading Price is less
than $42.56, the Average Trading Price shall be $42.56). Any
portion of the Adjustment Escrow Shares applied to satisfy any
indemnification obligations to Indemnified Persons shall be
delivered to the Indemnified Persons (together with any
Adjustment Property distributed with respect thereto) as set
forth in the Escrow Agreement.
If the Adjustment Escrow Shares (together with any
Adjustment Property distributed with respect thereto) are
insufficient to cover the full amount of the adjustments
described above, Cordis will have available to it such other
remedies as may exist at law or in equity to satisfy any claim or
claims for Damages, subject to the terms of the Reorganization
Agreement.
During the Post-closing Adjustment Period, the Escrow Agent
will vote the Adjustment Escrow Shares and any other shares of
stock included in the Adjustment Property in accordance with the
written instructions of the Holders who would receive such shares
if all of the Adjustment Escrow Shares and any other shares of
stock included in the Adjustment Property were delivered to the
Holders pursuant to the procedures described above. Cordis will
show the Adjustment Escrow Shares as issued and outstanding on
its balance sheet after the Effective Time and such shares shall
be duly authorized and validly issued under applicable state law.
Cash dividends paid with respect to the Adjustment Escrow Shares
will be distributed as, if and when paid to the Holders in
proportion to each such Holder's proportionate interest
immediately following the Effective Time in the Cordis Common
Stock as set forth in the Reorganization Agreement, subject to
the provisions thereof.
Representations and Warranties
The Reorganization Agreement contains various
representations and warranties of the parties, including
representations made by Webster as to its organization and
qualification, capitalization, authority to enter into the
Agreements, as well as various other matters. Cordis and
Acquisition also made several representations and warranties
under the Reorganization Agreement, including representations and
warranties relating to their organization and authority to enter
into the Agreements. The representations and warranties of each
of Webster, Cordis and Acquisition are set forth in the
Reorganization Agreement attached hereto as Appendix A. In
addition, each of the Webster Shareholders severally but not
jointly represented and warranted to Cordis and Acquisition that,
except as otherwise disclosed, to such Webster Shareholder's
knowledge, no representation or warranty by Webster, and no
document, statement, certificate, schedule or exhibit furnished
or to be furnished to Cordis pursuant to the Reorganization
Agreement or otherwise in connection therewith, contained or will
<PAGE>
contain any untrue statement of a material fact or omits or will
omit to state any material fact necessary in order to make the
statements contained therein not misleading. The Schedule 2
Shareholders severally but not jointly represented and warranted
to Cordis and Acquisition that, except as otherwise disclosed,
certain representations and warranties of Webster pertaining to
Webster's financial information, books and records, Webster's
absence of undisclosed liabilities and certain disclosure made by
Webster are true and correct.
The Reorganization Agreement provides that the
representations and warranties of Webster are to survive the
Effective Time, and that the only remedy available to Cordis for
a breach by Webster (as opposed to Webster Shareholders and the
Schedule 2 Shareholders) of such representations and warranties
are the Post-closing Adjustment and the indemnification
provisions contained in the Reorganization Agreement and
described below. The representations and warranties of the
Webster Shareholders are to survive the Effective Time for a
period of three years. The representations and warranties of the
Schedule 2 Shareholders are to survive the Effective Time for a
period of 18 months. In addition, the Reorganization Agreement
provides that any claim for Damages resulting from a breach of
any representations and warranties of the Webster Shareholders
and the Schedule 2 Shareholders will be subject to the survival
limitations described above and such other limitations as
described below.
Indemnification
Pursuant to the Reorganization Agreement, the Webster
Shareholders have agreed to jointly and severally indemnify and
hold harmless Cordis, the Surviving Corporation and their
respective officers and directors, and each person, if any, who
controls or may control Cordis or the Surviving Corporation
within the meaning of the Securities Act, from and against any
and all losses, costs, damages, liabilities and expenses,
including attorneys' fees and expenses, actually suffered (after
giving effect to any insurance proceeds) and arising out of the
breach of the representations, warranties, covenants and
agreements given or made by Webster and the Webster Shareholders
in the Agreements or in the Exhibits or Schedules thereto or in
any certificate or document delivered by or on behalf of Webster
pursuant thereto, after giving effect to any updated disclosure.
The indemnity obligation of the Webster Shareholders is to be
satisfied through the application by Cordis of the Adjustment
Escrow Shares held in escrow to amounts owing to Indemnified
Persons, and the maximum liability of the Webster Shareholders
for indemnification under the indemnification provisions as
applicable to the escrow arrangements of the Reorganization
Agreement is limited to an amount equal to the number of
Adjustment Escrow Shares multiplied by the Average Trading Price
(provided, however, that for such purposes, if the Average
Trading Price is greater than $52.02, the Average Trading Price
shall be $52.02, and if the Average Trading Price is less than
$42.56, the Average Trading Price shall be $42.56), provided,
<PAGE>
further, that the Webster Shareholders are to have no liability
under the indemnification provisions of the Reorganization
Agreement or the Escrow Agreement to the extent claims for
Damages thereunder do not exceed $250,000; provided, however,
that if such Damages exceed $250,000, then the indemnification is
to apply to all Damages without regard to the $250,000 threshold
described above. The Reorganization Agreement also provides that
it shall be a condition of the right of each Indemnified Person
to indemnification pursuant to the Reorganization Agreement that
such Indemnified Person assert a claim for indemnification on or
prior to the Adjustment Date. Notwithstanding the foregoing, the
application by Cordis of the Adjustment Escrow Shares to amounts
owing to Indemnified Persons will not be the exclusive remedy
pursuant to which Cordis may satisfy claims for Damages against
the Webster Shareholders and the Schedule 2 Shareholders but will
be the exclusive remedy for satisfying the indemnity obligation
under the indemnification provisions applicable to the escrow
arrangements of the Reorganization Agreement. Such other
remedies shall be subject to certain limitations described above
in "-- Representations and Warranties" and as described below.
In the event of any claim for Damages made against Webster
Shareholders or Schedule 2 Shareholders for breaches of
representations or warranties contained in the Reorganization
Agreement, each Webster Shareholder or Schedule 2 Shareholder, as
the case may be, shall have a Maximum Liability Amount for such
breaches not to exceed the sum of (i) the number of shares of
Cordis Common Stock received by such Webster Shareholder or
Schedule 2 Shareholder at the Closing plus (ii) the number of
Adjustment Escrow Shares to which each such Webster Shareholder
or Schedule 2 Shareholder is entitled (after giving effect to
claims made against Adjustment Escrow Shares pursuant to the
Reorganization Agreement), multiplied by the Average Trading
Price (provided, however, that for such purposes, if the Average
Trading Price is greater than $52.02, the Average Trading Price
shall be $52.02, and if the Average Trading Price is less than
$42.56, the Average Trading Price shall be $42.56); provided,
further, however, that in the case of a Schedule 2 Shareholder,
the maximum liability shall not exceed 95% of the Maximum
Liability Amount. The Reorganization Agreement also provides that
in the event Cordis seeks to recover amounts for breaches of
representations and warranties contained in the Reorganization
Agreement, Cordis must first make claims against the Adjustment
Escrow Shares, to the extent such shares are available and to the
extent permitted under the terms of the Reorganization Agreement
and the Escrow Agreement.
Conduct of Business
Under the terms of the Reorganization Agreement, Webster has
agreed that, from the date of the Reorganization Agreement until
the Effective Time, unless otherwise expressly contemplated by
the Reorganization Agreement or consented to in writing by
<PAGE>
Cordis, Webster will (i) operate its business only in the usual
and ordinary course consistent with past practice; (ii) use its
best efforts to preserve intact its business organization and
assets, maintain its rights and franchises, retain the services
of its officers and key employees and maintain the relationships
with its customers and suppliers; and (iii) use its best efforts
to keep in full force and effect liability and other insurance
and bonds comparable in amount and scope of coverage to that
currently maintained.
Webster has also agreed that, except as expressly
contemplated by the Reorganization Agreement, or as otherwise
disclosed or consented to in writing by Cordis, from the date of
the Reorganization Agreement until the Effective Time, Webster
shall not do any of the following: (i) (a) increase the
compensation payable or to become payable to any director,
officer or employee, except for increases in salary or wages
payable or to become payable in the ordinary course of business
and consistent with past practice to employees of Webster who are
not directors or officers of Webster; (b) grant any severance or
termination pay (other than pursuant to the normal severance
policy of Webster or as required under certain agreements in
effect on the date of the Reorganization Agreement) to, or enter
into any severance agreement with, any director, officer or
employee, or enter into any employment agreement with any
director, officer or employee of Webster; or (c) establish,
adopt, enter into or amend any employee benefit plan or
arrangement, except as may be required to comply with applicable
law; (ii) declare or pay any dividend on, or make any other
distribution in respect of, outstanding shares of capital stock;
(iii) (a) redeem, purchase or otherwise acquire any shares of its
capital stock or any securities or obligations convertible into
or exchangeable for any shares of its capital stock, or any
options, warrants or conversion or other rights to acquire any
shares of its capital stock or any such securities or
obligations; (b) effect any reorganization or recapitalization;
or (c) split, combine or reclassify any of its capital stock or
issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for,
shares of its capital stock (except for the issuance of shares
upon the exercise of options or warrants in accordance with their
terms); (iv) issue, deliver, award, grant or sell, or authorize
the issuance, delivery, award, grant or sale (including the grant
of any security interests, liens, claims, pledges, limitations in
voting rights, charges or other encumbrances) of, any shares of
any class of its capital stock (including shares held in
treasury), any securities convertible into or exercisable or
exchangeable for any such shares, or any rights, warrants or
options to acquire, any such shares (except for the issuance of
shares upon the exercise of outstanding options or warrants in
accordance with their terms), or amend or otherwise modify the
terms of any such rights, warrants or options the effect of which
shall be to make such terms more favorable to the holders
thereof; (v) acquire or agree to acquire, by merging or
consolidating with, by purchasing an equity interest in or a
portion of the assets of, or by any other manner, any business or
any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree
<PAGE>
to acquire any assets of any other person (other than the
purchase of assets from suppliers or vendors in the ordinary
course of business and consistent with past practice), except as
otherwise contemplated in the Reorganization Agreement; (vi)
sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, or agree to sell, lease, exchange, mortgage, pledge,
transfer or otherwise dispose of, any of its assets, except for
dispositions in the ordinary course of business and consistent
with past practice; (vii) initiate, solicit or encourage
(including by way of furnishing information or assistance), or
take any other action to facilitate, any inquiries or the making
of any proposal that constitutes, or may reasonably be expected
to lead to, any Competing Transaction (as defined below), or
enter into discussions or furnish any information or negotiate
with any person or entity or otherwise cooperate in any way in
furtherance of such inquiries or to obtain a Competing
Transaction, or agree to or endorse any Competing Transaction, or
authorize any of the officers, employees, agents, representatives
or directors of Webster to take any such action, and Webster has
agreed to direct and instruct and use its best efforts to cause
the directors, officers, employees, agents and representatives of
Webster (including, without limitation, any investment banker,
financial advisor, attorney or accountant retained by Webster)
not to take any such action, and Webster has agreed to promptly
notify Cordis if any such inquiries or proposals are received by
Webster or any of its or their respective officers, directors,
employees, agents, investment bankers, financial advisors,
attorneys, accountants or other representatives, and Webster has
agreed to promptly inform Cordis as to the material terms of such
inquiry or proposal and, if in writing, promptly deliver or cause
to be delivered to Cordis a copy of such inquiry or proposal, and
Webster has agreed to keep Cordis informed, on a current basis,
of the nature of any such inquiries and the status and terms of
any such proposals; provided, however, that nothing contained in
such provision shall prohibit the Board of Directors of Webster
from (a) furnishing information to, or entering into discussions
or negotiations with, any person or entity that makes a Bona Fide
Proposal, if, and only to the extent that, (1) the Board of
Directors of Webster, after consultation with and based upon the
written advice of independent legal counsel (a copy of which is
furnished to Cordis), determines in good faith that the Bona Fide
Proposal is financially superior to the Merger, is otherwise in
the best interests of the shareholders of Webster and is
reasonably financeable and that accordingly such action is
required for the Board of Directors of Webster to comply with its
fiduciary duties to shareholders imposed by California law, (2)
prior to furnishing such information to, or entering into
discussions or negotiations with, such person or entity, Webster
provides written notice to Cordis to the effect that it is
furnishing information to, or entering into discussions or
negotiations with, such person or entity, (3) prior to furnishing
such information to such person or entity, Webster receives from
such person or entity an executed confidentiality agreement with
terms no less favorable to Webster than those contained in the
nondisclosure agreement, dated October 22, 1993, between Cordis
and Webster (the "Confidentiality Agreement") and (4) Webster
keeps Cordis informed, on a current basis, of the status of any
<PAGE>
such discussions or negotiations; or (b) complying with Rule
14e-2 promulgated under the Exchange Act with regard to a
Competing Transaction. A "Competing Transaction" means any of
the following involving Webster (other than the transactions
contemplated by the Reorganization Agreement): (i) any merger,
consolidation, share exchange, business combination, or other
similar transaction; (ii) any sale, lease, exchange, mortgage,
pledge, transfer or other disposition of ten percent or more of
the assets of Webster or issuance of ten percent or more of the
outstanding voting securities of Webster in a single transaction
or series of transactions; (iii) any tender offer or exchange
offer for ten percent or more of the outstanding shares of
capital stock of Webster or the filing of a registration
statement under the Securities Act in connection therewith; (iv)
any solicitation of proxies in opposition to approval by
Webster's shareholders of the Merger; (v) any person shall have
acquired beneficial ownership or the right to acquire beneficial
ownership of, or any "group" (as such term is defined under
Section 13(d) of the Exchange Act) shall have been formed which
beneficially owns or has the right to acquire beneficial
ownership of, ten percent or more of the then outstanding shares
of capital stock of Webster; or (vi) any agreement to, or public
announcement by Webster or any other person of a proposal, plan
or intention to, do any of the foregoing; (viii) adopt any
amendments to its Articles of Incorporation or By-Laws; (ix) (a)
change any of its methods of accounting in effect at November 30,
1993 or (b) make or rescind any express or deemed election
relating to taxes, settle or compromise any claim, action, suit,
litigation, proceeding, arbitration, investigation, audit or
controversy relating to taxes, or change any of its methods of
reporting income or deductions for federal income tax purposes
from those employed in the preparation of the federal income tax
returns for the taxable year ending November 30, 1992, except in
either case as may be required by law, the Internal Revenue
Service ("IRS") or generally accepted accounting principles; (x)
incur any obligation for borrowed money or purchase money
indebtedness, whether or not evidenced by a note, bond, debenture
or similar instrument, except for additional borrowings made with
the prior written consent of Cordis; (xi) take any action or fail
to take any action which could reasonably be expected to have a
Webster Material Adverse Effect prior to or after the Effective
Time or a Cordis Material Adverse Effect after the Effective
Time, or that could reasonably be expected to adversely effect
the ability of Webster prior to the Effective Time, or Cordis or
any of its subsidiaries after the Effective Time, to obtain
consents of third parties or approvals of Governmental Entities
required to consummate the transactions contemplated in the
Reorganization Agreement; or (xii) agree in writing or otherwise
to do any of the foregoing.
Except as expressly contemplated by the Reorganization
Agreement or otherwise consented to in writing by Webster, from
the date of the Reorganization Agreement until the Effective
Time, Cordis has agreed not to do, and to not permit any of its
subsidiaries to do, any of the following: (i) amend any of the
material terms or provisions of Cordis' securities, except for
any such amendments which affect equally all shares of Cordis
Common Stock; (ii) knowingly take any action which would result
<PAGE>
in a failure to maintain the trading of Cordis Common Stock on
NASDAQ/NMS without causing such stock to be listed for trading on
a national securities exchange at or prior to the termination of
its trading on NASDAQ/NMS; or (iii) agree in writing or otherwise
to do any of the foregoing.
Conditions to Obligations to Effect the Merger
The respective obligations of Cordis and Webster to effect
the Merger and the other transactions contemplated in the
Reorganization Agreement are subject to the satisfaction at or
prior to the Effective Time of the following conditions, any or
all of which may be waived, in whole or in part, to the extent
permitted by applicable law: (i) the Registration Statement shall
have been declared effective by the Commission under the
Securities Act, and no stop order suspending the effectiveness of
the Registration Statement shall have been issued by the
Commission and no proceedings for that purpose shall have been
initiated or, to the knowledge of Cordis or Webster, threatened
by the Commission. Cordis shall have received all other federal
or state securities permits and other authorizations necessary to
issue Cordis Common Stock in exchange for Webster Common Stock
and to consummate the Merger; (ii) the Reorganization Agreement,
the Merger Agreement and the Merger shall have been approved and
adopted by the requisite vote of the shareholders of Webster;
(iii) no Governmental Entity or federal or state court of
competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, executive
order, decree, judgment, injunction or other order (whether
temporary, preliminary or permanent), in any case which is in
effect and which prevents or prohibits consummation of the Merger
or any other transactions contemplated in the Reorganization
Agreement; provided, however, that the parties have agreed to use
their best efforts to cause any such decree, judgment, injunction
or other order to be vacated or lifted; (iv) the applicable
waiting period, together with any extensions thereof, under the
HSR Act shall have expired or been terminated; (v) all consents,
waivers, approvals and authorizations required to be obtained,
and all filings or notices required to be made, by Cordis and
Webster prior to consummation of the transactions contemplated in
the Reorganization Agreement (other than the filing of merger
documents) shall have been obtained from and made with all
required Governmental Entities; and (vi) the Escrow Agent shall
execute and deliver the Escrow Agreement with the other parties
thereto.
The obligations of Cordis to effect the Merger and the other
transactions contemplated in the Reorganization Agreement are
also subject to the following conditions, any or all of which may
be waived, in whole or in part, to the extent permitted by
applicable law: (i) each of the representations and warranties of
Webster, Webster Shareholders and Schedule 2 Shareholders
contained in the Reorganization Agreement, without giving effect
to any updated disclosure, shall be true and correct as of the
date of the Reorganization Agreement and shall be true and
correct in all material respects (except that where any statement
in a representation or warranty expressly includes a standard of
<PAGE>
materiality, such statement shall be true and correct in all
respects giving effect to such standard) as of the Effective Time
as though made as of the Effective Time, except that those
representations and warranties which address matters only as of a
particular date shall remain true and correct in all material
respects (except that where any statement in a representation or
warranty expressly includes a standard of materiality, such
statement shall be true and correct in all respects giving effect
to such standard) as of such date, and Cordis shall have received
a certificate of the Chief Executive Officer or Chief Financial
Officer of Webster and from each Webster Shareholder and Schedule
2 Shareholder to that effect; (ii) Webster, each Webster
Shareholder and each Schedule 2 Shareholder shall have performed
or complied in all material respects with all agreements and
covenants required by the Reorganization Agreement to be
performed or complied with by them on or prior to the Effective
Time, and Cordis shall have received a certificate of the Chief
Executive Officer or Chief Financial Officer of Webster, each
Webster Shareholder and each Schedule 2 Shareholder to that
effect; (iii) Webster shall have obtained the consent or approval
of each person whose consent or approval shall be required in
connection with the Merger under all loan or credit arrangements,
notes, mortgages, indentures, leases or other agreements or
instruments to which it is a party; (iv) Cordis shall have
received from independent counsel to Webster reasonably
satisfactory to Cordis an opinion dated the Effective Time, in
form and substance reasonably satisfactory to Cordis; (v) the
aggregate of (a) the fractional share interests in Cordis Common
Stock to be paid in cash pursuant to the Reorganization Agreement
and (b) the shares of Cordis Common Stock that otherwise would be
issuable by virtue of the Merger with respect to the shares of
Webster Common Stock outstanding on the Webster Record Date that
will not be converted into Cordis Common Stock due to the
shareholders of Webster demanding an appraisal of the fair value
of such shares shall not be more than 2% of the maximum aggregate
number of shares of Cordis Common Stock which could be issued as
a result of the Merger; (vi) there shall not be pending any
action, proceeding or investigation by any Governmental Entity
(a) challenging or seeking material damages in connection with
the Merger or the conversion of Webster Common Stock into Cordis
Common Stock pursuant to the Merger or (b) seeking to restrain or
prohibit the consummation of the Merger or otherwise limit the
right of Cordis or its subsidiaries to own or operate all or any
portion of the business or assets of Webster; (vii) Cordis shall
have received a letter covering certain matters from Webster's
independent auditor dated the date on which the Registration
Statement shall become effective and the Effective Time,
respectively, and addressed to Cordis, in form and substance
satisfactory to Cordis, and reasonably customary in scope and
substance for letters delivered by independent public accountants
in connection with registration statements similar to the
Registration Statement and transactions such as those
contemplated by the Reorganization Agreement; (viii) Cordis shall
have received the opinion of Deloitte & Touche in its capacity as
Cordis' independent auditor, dated as of the date on which the
Registration Statement shall become effective and the Effective
Time, to the effect that the Merger qualifies for pooling-of-
interests accounting treatment if consummated in accordance with
<PAGE>
the Reorganization Agreement; (ix) Cordis shall have received
from certain persons signed Affiliate Agreements; (x) the opinion
of Cordis' financial advisor to the effect that the consideration
to be paid by Cordis in the Merger pursuant to the Reorganization
Agreement is fair from a financial point of view to Cordis
shareholders has not been modified or withdrawn; (xi) Brentwood
shall have converted the Webster Preferred Stock into Webster
Common Stock in accordance with the provisions of the Brentwood
Agreement; (xii) Cordis shall have received executed copies of
the employment agreements from Wilton W. Webster, Jr. and Tony R.
Brown; (xiii) since November 30, 1993, there shall not have been
a Webster Material Adverse Effect; it being understood that the
death or disability of Wilton W. Webster, Jr. shall not be deemed
a Webster Material Adverse Effect for such purposes; and
(xiv) Webster shall have taken the actions with respect to
certain agreements as specified in the Reorganization Agreement.
The obligations of Webster to effect the Merger and the
other transactions contemplated in the Reorganization Agreement
are also subject to the following conditions any or all of which
may be waived, in whole or in part, to the extent permitted by
applicable law: (i) each of the representations and warranties of
Cordis contained in the Reorganization Agreement, without giving
effect to any updated disclosure, shall be true and correct in
all material respects (except that where any statement in a
representation or warranty expressly includes a statement of
materiality, such statement shall be true and correct in all
respects giving effect to such standard) as of the Effective
Time, as though made on and as of the Effective Time, except that
those representations and warranties which address matters only
as of a particular date shall remain true and correct in all
material respects (except that where any statement in a
representation or warranty expressly includes a standard of
materiality, such statement shall be true and correct in all
respects giving effect to such standard) as of such date, and
Webster shall have received a certificate of the Chief Executive
Officer or Chief Financial Officer of Cordis to that effect; (ii)
Cordis shall have performed or complied in all material respects
with all agreements and covenants required by the Reorganization
Agreement to be performed or complied with by it on or prior to
the Effective Time, and Webster shall have received a certificate
of the Chief Executive Officer or Chief Financial Officer of
Cordis to that effect; (iii) Webster shall have received from the
General Counsel of Cordis an opinion dated the Effective Time, in
form and substance reasonably satisfactory to Webster; (iv) there
shall not be pending any action, proceeding or investigations by
any Governmental Entity (a) challenging or seeking material
damages in connection with the Merger or the conversion of
Webster Common Stock and Webster Preferred Stock into Cordis
Common Stock pursuant to the Merger or (b) seeking to restrain or
prohibit the consummation of the Merger or otherwise limit the
right of Cordis or its subsidiaries to own or operate all or any
portion of the businesses or assets of Webster, which in either
case is reasonably likely to have a Cordis Material Adverse
Effect after the Effective Time; (v) since September 30, 1993,
there shall not have been a Cordis Material Adverse Effect; and
(vi) Webster shall have received from Cordis or NASDAQ/NMS
evidence reasonably satisfactory to Webster that the shares of
<PAGE>
Cordis Common Stock to be issued to Webster Shareholders in the
Merger shall be quoted on NASDAQ/NMS immediately after the
Effective Time.
Agreement to Vote Shares
Subject to the rights of each Webster shareholder to
terminate the voting agreement described below, pursuant to the
Reorganization Agreement, certain of the shareholders of Webster
holding in the aggregate approximately 99% of the Webster Common
Stock and 100% of the Webster Preferred have agreed to vote the
Webster securities owned by them in favor of approval and
adoption of the Agreements and the Merger on the terms and
conditions set forth in the Reorganization Agreement, and each
such shareholder that is a member of the Board of Directors of
Webster has agreed (subject to any fiduciary obligations to the
contrary) to recommend that the shareholders of Webster approve
and adopt the Agreements and the Merger on the terms and
conditions set forth in the Reorganization Agreement. The
Webster shareholders have the right to cancel such voting
agreement by written notice delivered to Cordis within the period
(the "Review Period") beginning on the date of his or her initial
receipt of this Consent Statement/Prospectus and ending on the
earlier of (i) five days after such initial receipt or (ii) any
action by written consent of Webster shareholders approving the
Merger. The right to cancel the voting agreement irrevocably
terminates after the expiration of the Review Period; provided,
however, that if Cordis updates, amends or supplements this
Consent Statement/Prospectus, a new Review Period shall commence,
beginning on the date of the Webster shareholders' initial
receipt of such update, amendment or supplement and ending on the
earlier of (i) five days after receipt of such update, or (ii)
any action by written consent of Webster shareholders approving
the Merger.
Amendment and Termination
The Reorganization Agreement provides that it may be amended
by the parties thereto by action taken by or on behalf of their
respective Boards of Directors at any time prior to the Effective
Time; provided, however, that, after approval of the Merger by
the shareholders of Webster, no amendment may be made which would
reduce the amount or change the type of consideration into which
each share of Webster Common Stock shall be converted pursuant to
the Reorganization Agreement upon consummation of the Merger.
The Reorganization Agreement also provides that it may not be
amended except by an instrument in writing signed by the parties
thereto.
The Reorganization Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of
the Reorganization Agreement, the Merger Agreement and the Merger
by the shareholders of Webster:
(i) by mutual written consent of Cordis and Webster;
<PAGE>
(ii)(a) by Cordis, if there has been a breach by Webster,
Webster Shareholders or the Schedule 2 Shareholders of any of
their representations, warranties, covenants or agreements
contained in the Reorganization Agreement, or any such
representation and warranty shall have become untrue, and such
breach or condition has not been promptly cured within 10 days
following receipt by Webster of written notice of such breach;
(b) by Webster, if there has been a breach by Cordis of any of
its representations, warranties, covenants or agreements
contained in the Reorganization Agreement, or any such
representation and warranty shall have become untrue, and such
breach or condition has not been promptly cured within 10 days
following receipt by Cordis of written notice of such breach;
(iii) by either Cordis or Webster if any decree,
permanent injunction, judgment, order or other action by any
court of competent jurisdiction or any Governmental Entity
preventing or prohibiting consummation of the Merger shall have
become final and nonappealable;
(iv) by either Cordis or Webster if the Merger shall not
have been consummated by May 15, 1994; provided, however, that
the Reorganization Agreement may be extended not more than 60
days by either party by written notice to the other party if the
Merger shall not have been consummated as a direct result of the
other party having failed by such date to receive all regulatory
approvals or consents required to be obtained by such party with
respect to the Merger; provided further, however, that the right
to terminate the Reorganization Agreement under this provision
shall not be available to any party whose willful failure to
fulfill any obligation under the Reorganization Agreement has
been the cause of, or resulted in, the failure of the Effective
Time to occur on or before such date;
(v) by either Cordis or Webster if the Reorganization
Agreement shall fail to receive the requisite vote for approval
and adoption by the shareholders of Webster;
(vi) by Cordis, if the Board of Directors of Webster shall
have recommended to the shareholders of Webster any Bona Fide
Proposal or resolved to do so under the circumstances described
in the Reorganization Agreement;
(vii) by Webster, if the Board of Directors of Webster
shall have recommended to the shareholders of Webster any Bona
Fide Proposal or resolved to do so under the circumstances
described in the Reorganization Agreement; provided that any
termination of the Reorganization Agreement by Webster pursuant
to this provision shall not be effective until the close of
business on the second full business day after notice thereof to
Cordis; and
(viii) by either Cordis or Webster if circumstances arise
which make it impossible, in the reasonable judgment of either
Cordis or Webster, as the case may be, for a condition to such
<PAGE>
party's obligation to effect the Merger and the other
transactions contemplated in the Reorganization Agreement, as set
forth therein, to be satisfied prior to May 15, 1994; provided,
however, that the right to terminate the Reorganization Agreement
pursuant to this provision shall not be available to any party
whose act or failure to act or whose breach of any obligation
under the Reorganization Agreement is responsible for such
circumstances arising.
In the event of termination of the Reorganization Agreement
by either Cordis or Webster, the Reorganization Agreement
provides that it shall become void and there shall be no
liability or obligation on the part of Cordis, Acquisition, the
Webster Shareholders, the Schedule 2 Shareholders or Webster or
any of their respective officers or directors except (i) with
respect to certain expenses and the survival of certain
representations, warranties and agreements after the Effective
Time, (ii) nothing therein shall relieve any party from liability
for any breach thereof, (iii) each party shall be entitled to any
remedies at law or in equity for such breach and (iv) certain
provisions relating to the effect of termination, the
Confidentiality Agreement, expenses and other general provisions
shall remain in full force and effect and survive any termination
of the Reorganization Agreement.
Interests of Certain Persons With Respect to the Merger;
Potential Conflicts of Intersest
Certain members of the Board of Directors and senior
management of Webster have interests in the transactions
contemplated under the Reorganization Agreement that may present
them with certain potential conflicts of interest. Two such
persons will enter into employment agreements with Cordis that
will become effective upon consummation of the Merger. The Board
of Directors of Webster was aware of these potential conflicts at
the time of its consideration of the matters described under the
caption "-- Recommendation of the Board of Directors of Webster;
Reasons for the Merger." A summary of these potential conflicts
of interest and certain agreements between Cordis and Webster and
certain members of Webster's Board of Directors and senior
management is provided below.
Employment Agreements. It is a condition to the obligation
of Cordis to effect the Merger that Tony R. Brown, Ph.D. and
Wilton W. Webster, Jr. execute and deliver to Cordis employment
agreements at or prior to the Closing pursuant to which Dr. Brown
will serve as Vice President of Cordis and President and Chief
Executive Officer of the Surviving Corporation and Mr. Webster
will serve as Vice President and Senior Scientific Advisor of
Cordis and Vice President Research & Development and Chief
Engineer of the Surviving Corporation. Dr. Brown is currently
the President, Chief Executive Officer and a Director of Webster,
and Mr. Webster is currently the Vice President, Chairman of the
Board and Chief Engineer of Webster. Dr. Brown and Mr. Webster
also beneficially own approximately 5% and 61%, respectively, of
<PAGE>
the outstanding Webster Common Stock (after giving effect to the
conversion by Brentwood of the Webster Preferred Stock).
Both Dr. Brown's and Mr. Webster's employment agreements
will have an initial term of two years and will continue on an
annual basis thereafter unless terminated by any of the
respective parties upon one month's notice prior to the end of
the employment period or as otherwise provided therein. Pursuant
to their respective employment agreements, Dr. Brown will receive
a base salary of $160,000 and Mr. Webster will receive a base
salary of $115,000. Both employment agreements also will contain
certain provisions pursuant to which Dr. Brown and Mr. Webster,
among other things, will agree to (i) work exclusively for Cordis
and the Surviving Corporation during the terms of their
agreements, (ii) not disclose any confidential information and
(iii) assign all proprietary rights to any inventions,
discoveries or ideas developed or created in the course of their
employment.
Webster Options. At the Effective Time, each Webster Option
will become or be replaced by a Cordis Option to purchase a
number of whole shares of Cordis Common Stock equal to the number
of shares of Webster Common Stock that could have been purchased
(assuming full vesting) under the Webster Option multiplied by
the Exchange Ratio (and eliminating any fractional share), at a
price per share of Cordis Common Stock equal to the per-share
option exercise price specified in the Webster Option divided by
the Exchange Ratio. Each substituted Cordis Option otherwise
shall be subject to the same terms and conditions as apply to the
related Webster Option, and the date of grant of each substituted
Cordis Option for purposes of such terms and conditions shall be
deemed to be the date on which the corresponding Webster Option
was granted.
<PAGE>
The following table sets forth, as of _______, 1994, with
respect to Webster's executive officers listed in the Summary
Compensation Table under "INFORMATION REGARDING WEBSTER --
Executive Compensation," assuming the merger becomes effective
(i) the number of shares of Cordis Common Stock subject to Cordis
Options that will be held by such officer and (ii) the range of
the average exercise price per share of Cordis Common Stock based
upon the minimum and maximum number of shares to be issued in the
Merger pursuant to the Exchange Ratio:
Webster Avg. Ex.
Officer Options Price/sh. Cordis Options Avg. Ex. Price/sh.
Tony R. Brown 0 $0.00 0 to 0 $0.00 to $0.00
Wilton W. Webster 0 $0.00 0 to 0 $0.00 to $0.00
Robert W. Evans 100,000 $0.25 24,632 to 30,107 $1.01 to $0.83
Barry Michaels 50,000 $1.00 12,316 to 15,053 $4.05 to $3.32
Thomas Schroeder 33,000 $0.25 8,210 to 10,035 $1.01 to $0.83
John Stevens 40,000 $2.00 9,852 to 12,042 $8.11 to $6.64
Fees and Expenses; Termination Fee
In general, whether or not the Merger is consummated, each
party to the Reorganization Agreement will bear its respective
costs and expenses incurred in connection with the Reorganization
Agreement, the Merger Agreement and the transactions contemplated
thereby, except that certain expenses incurred in connection with
the Registration Statement and this Consent Statement/Prospectus,
the listing of additional shares of Cordis Common Stock with the
NASDAQ National Market System and expenses associated with
compliance with applicable state securities laws will be shared
equally by Cordis and Webster. In addition, if the
Reorganization Agreement is terminated by either Cordis or
Webster because Webster has recommended to its shareholders a
Bona Fide Proposal, Webster shall pay to Cordis a termination fee
(i) $2 million in cash, plus (ii) 35% of the difference, if
any, between the value of the consideration offered to Webster in
the Bona Fide Proposal, in cash, and $85 million, plus
(iii) reasonable fees and expenses incurred by Cordis in
connection with the Reorganization Agreement, the Merger
Agreement and the transactions contemplated thereby, not to
exceed $500,000. If the Reorganization Agreement is terminated
by either Webster or Cordis because the Reorganization Agreement
failed to receive the requisite approval and adoption by
Webster's shareholders, Webster shall pay a termination fee of
$2 million, plus reasonable fees and expenses incurred by Cordis
in connection with the Reorganization Agreement, the Merger
Agreement and the transactions contemplated thereby, not to
exceed $500,000.
<PAGE>
Agreement With Certain Shareholder
Pursuant to the Brentwood Agreement, Brentwood has agreed
that after the shareholders of Webster and the sole stockholder
of Acquisition have approved the Reorganization Agreement, it
will convert all of the shares of Webster Preferred Stock owned
by Brentwood into shares of Webster Common Stock effective
immediately prior to the Closing, provided the Merger occurs. In
addition, effective as of the Effective Time, Webster and
Brentwood have agreed that both the Series A Preferred Stock
Purchase Agreement and Registration Rights Agreement entered into
between the parties as of July 17, 1992, and all rights and
obligations thereunder, shall be terminated and no longer of any
force or effect.
Accounting Treatment
The Merger is expected to qualify as a "pooling of
interests" for accounting and financial reporting purposes. It
is a condition to the obligation of Cordis to effect the Merger
that Cordis shall have received an opinion from Deloitte &
Touche, independent auditors to Cordis and Webster, that the
Merger may be accounted for as a "pooling of interests" in
accordance with generally accepted accounting principles and all
rules, regulations and policies of the Commission. Because of a
limitation on the amount of cash that may be paid in connection
with the Merger under applicable accounting principles for
"pooling of interests," the Merger may not be accounted for as a
"pooling of interests" if shareholders of Webster holding more
than ten percent of the outstanding stock of Webster exercise
dissenters' rights. See "-- Conditions to Obligations to Effect
the Merger" and "-- Dissenters' Rights."
Certain Federal Income Tax Matters
The following discussion summarizes certain material
federal income tax considerations of the Merger that are
generally applicable to holders of Webster Common Stock. This
discussion is based on currently existing provisions of the Code,
existing and proposed Treasury Regulations thereunder and current
administrative rulings and court decisions, all of which are
subject to change. Any such change, which may or may not be
retroactive, could alter the tax consequences to Cordis, Webster
or Webster's shareholders as described herein.
Webster shareholders should be aware that this discussion
does not deal with all federal income tax considerations that may
be relevant to particular Webster shareholders in light of their
particular circumstances, such as shareholders who are dealers in
securities, who are subject to the alternative minimum tax
provisions of the Code, who are foreign persons, or who acquired
their shares in connection with stock options or stock purchase
plans or in other compensatory transactions. In addition, the
following discussion does not address the tax consequences of the
Merger under foreign, state or local tax laws or the tax
consequences of transactions effectuated prior to or after the
Merger (whether or not such transactions are in connection with
the Merger), including without limitation transactions in which
<PAGE>
shares of Webster Common Stock are acquired or shares of Cordis
Common Stock are disposed of. Accordingly, WEBSTER SHAREHOLDERS
ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC
CONSEQUENCES OF THE MERGER, INCLUDING THE APPLICABLE FEDERAL,
STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF THE MERGER
IN THEIR PARTICULAR CIRCUMSTANCES.
Neither Cordis nor Webster has requested a ruling from the
IRS with regard to any of the federal income tax consequences of
the Merger. The shareholders of Webster have received an opinion
from Venture Law Group to the effect that the Merger will be
treated as a tax-free reorganization under Section 368(a) of the
Code (a "Reorganization"). Such opinion was based upon
representations of Cordis, Webster and Acquisition contained in
the Reorganization Agreement and certain representations made to
Venture Law Group by certain of Webster's shareholders. Such
opinion is subject to the limitations discussed below. Moreover,
such opinion will not be binding on the IRS nor preclude the IRS
from adopting a contrary position. The discussion below assumes
that the Merger will qualify as a Reorganization, based upon such
opinion.
Subject to the limitations and qualifications referred to
herein, the opinion concludes that the Merger qualifies as a
Reorganization and will generally result in the following
consequences:
(i) No gain or loss will be recognized by holders of
Webster Common Stock upon their receipt in the Merger of
Cordis Common Stock (except to the extent of cash received
in lieu of a fractional share thereof) solely in exchange
therefor;
(ii) The aggregate tax basis of the Cordis Common Stock
received in the Merger (including any fractional share
deemed, but not actually received) will be the same as the
aggregate tax basis of Webster Common Stock surrendered in
exchange therefor;
(iii) The holding period of the Cordis Common Stock
received in the Merger will include the period for which the
Webster Common Stock surrendered in exchange therefor was
held, provided that the Webster Common Stock is held as a
capital asset at the time of the Merger;
(iv) Cash payments in lieu of a fractional share of
Cordis Common Stock will be treated as if such fractional
share had been issued in the Merger and then redeemed by
Cordis. A Webster shareholder receiving such cash will
generally recognize gain or loss upon such payment equal to
the difference (if any) between such shareholder's basis in
the fractional share and the amount of cash received;
(v) A shareholder who exercises dissenters' rights
with respect to a share of Webster Common Stock and receives
payment for such share in cash will generally recognize gain
or loss for federal income tax purposes, measured by the
difference between the holder's basis in such share and the
<PAGE>
amount of cash received, provided that the payment is
neither essentially equivalent to a dividend within the
meaning of Section 302 of the Code nor has the effect of a
distribution of a dividend within the meaning of Section
356(a)(2) of the Code (collectively, a "Dividend Equivalent
Transaction"). A sale of Webster Common Stock pursuant to
an exercise of dissenters' rights will generally not be a
Dividend Equivalent Transaction if, as a result of such
exercise, the shareholder exercising dissenters' rights owns
no shares of Cordis Common Stock (either actually or
constructively within the meaning of Section 318 of the
Code). If, however, a shareholder's sale for cash of
Webster Common Stock pursuant to an exercise of dissenters'
rights is a Dividend Equivalent Transaction, then such
shareholder will generally recognize income for federal
income tax purposes in an amount up to the entire amount of
cash so received; and
(vi) Cordis, Acquisition and Webster will not recognize
income, gain or loss solely as a result of the Merger
(except where the amount of any such income, gain or loss
could not reasonably be expected to have a material adverse
effect with respect to Cordis or Webster).
To qualify as a Reorganization, shareholders of Webster must
satisfy a "continuity of interest" requirement. To satisfy the
continuity of interest requirement, Webster shareholders must
not, pursuant to a plan or intent existing at or prior to the
Merger, dispose of or transfer so much of either (i) their
Webster Common Stock in anticipation of the Merger or (ii) the
Cordis Common Stock to be received in the Merger (collectively,
"Planned Dispositions"), such that the Webster shareholders, as a
group, would no longer have a significant equity interest in the
Webster business being conducted by Cordis following the Merger.
Planned Dispositions include, among other things, shares disposed
of pursuant to the exercise of dissenters' rights. Webster
shareholders will generally be regarded as having a significant
equity interest as long as the Cordis Common Stock received in
the Merger (after taking into account Planned Dispositions), in
the aggregate, represents a substantial portion of the entire
consideration received by the Webster shareholders in the Merger.
For advance ruling purposes, the IRS considers an interest equal
to 50% or more of the fair market value of the outstanding
Webster Common Stock held immediately before the Merger as a
significant equity interest. If the continuity of interest
requirement is not satisfied, the Merger would not be treated as
a Reorganization.
Even if the Merger qualifies as a Reorganization, a
recipient of shares of Cordis Common Stock would recognize gain
to the extent such shares were considered to be received in
exchange for services or property (other than solely Webster
Common Stock). All or a portion of such gain may be taxable as
ordinary income. In addition, gain would have to be recognized
to the extent that a Webster shareholder was treated as receiving
(directly or indirectly) consideration other than Cordis Common
Stock in exchange for the shareholder's Webster Common Stock.
Such other consideration is generally referred to as "boot."
<PAGE>
A successful IRS challenge to the Reorganization status of
the Merger (as a result of a failure of the "continuity of
interest" requirement or otherwise) would result in a Webster
shareholder recognizing gain or loss with respect to each share
of Webster Common Stock surrendered equal to the difference
between the shareholder's basis in such share and the fair market
value, as of the Effective Time, of the Cordis Common Stock
received in exchange therefor. In such event, a shareholder's
aggregate basis in the Cordis Common Stock so received would
equal its fair market value and his or her holding period for
such stock would begin the day after the Merger.
Restrictions on Resale of Cordis Common Stock; Affiliate
Agreements
The Cordis Common Stock issuable in the Merger has been
registered under the Securities Act, but this registration does
not cover resales by stockholders of Webster who are deemed to
control or be under common control with Webster or Cordis,
respectively ("Affiliates"). Affiliates of Webster may not sell
their shares of Cordis Common Stock acquired in the Merger except
pursuant to an effective registration statement under the
Securities Act covering the resale of such shares, or in
compliance with the resale provisions of Rule 145 promulgated
under the Securities Act or another applicable exemption from the
registration requirements of the Securities Act. Shareholders of
Webster who become Affiliates of Cordis may not sell any shares
of Cordis Common Stock except pursuant to an effective
registration statement under the Securities Act covering the
resale of such shares or an applicable exemption from the
registration requirements of the Securities Act. Prior to the
Effective Time, Webster shall deliver to Cordis a list
identifying all persons who are or may be deemed Affiliates of
Webster for purposes of Rule 145. It is a condition to the
obligation of Cordis to effect the Merger that each person who is
identified as an Affiliate of Webster execute and deliver, at or
prior to the Effective Time, Affiliate Agreements to Cordis that
provide that such persons will not offer to sell, sell or
otherwise dispose of Cordis Common Stock after the Effective Time
in a manner that would cause the criteria for "pooling of
interests" accounting treatment to be violated. It is expected
that Affiliates of Webster and Cordis will be able to sell shares
of Cordis Common Stock without registration subject to the
volume, manner of sale and other applicable limitations of the
Securities Act and the rules and regulations of the Commission
thereunder.
The Commission's accounting rules for "pooling of interests"
require, among other things, that the Affiliates of Webster and
Cordis not dispose of any shares of Cordis Common Stock owned by
them until the financial results of at least 30 days of post-
Merger combined operations of Cordis and Webster have been made
publicly available.
Regulatory Requirements
Cordis and Webster are aware of no governmental approvals
required for consummation of the Merger, other than the
<PAGE>
compliance with federal securities laws and state securities or
"Blue Sky" laws. In addition, the transaction is subject to
premerger notification under the HSR Act. Filings have been made
under the HSR Act by Cordis and by Wilton W. Webster, Jr. and
Helen E. Webster on behalf of Webster and on behalf of themselves
as shareholders of Webster. The HSR Act waiting period will
expire thirty days after completed premerger notifications have
been filed with the Federal Trade Commission and the Department
of Justice Antitrust Division, subject to either early
termination or extension by a request for additional information.
Dissenters' Rights
"Dissenting Shares," as that term is used in this Consent
Statement/Prospectus, means shares of Webster with respect to
which the holder thereof has perfected such holder's demand that
Webster purchase the holder's shares in accordance with Chapter
13 ("Chapter 13") of the California Code and with respect to
which the holder thereof has not effectively withdrawn or lost
such rights. "Dissenting Shareholder," as that term is used in
this Consent Statement/Prospectus, means a Webster shareholder of
record as of ____________, 1994, who wishes to exercise
dissenters' rights, or such holder's duly appointed
representative, or a transferee of record of a holder of
Dissenting Shares. If a Dissenting Shareholder exercises
dissenters' rights under Chapter 13 in connection with the
Merger, such holder's Dissenting Shares will not be converted
into the right to receive shares of Cordis Common Stock, but
rather will be converted into the right to receive such
consideration as may be determined to be due with respect to such
Dissenting Shares pursuant to the California Code.
A Dissenting Shareholder must not vote in favor of the
Agreements and the Merger. However, failure to vote in favor of
the Merger will not, in and of itself, be sufficient notice of a
Dissenting Shareholder's intention to dissent. Rather, any
Dissenting Shareholder wishing to exercise dissenters' rights
must comply with the procedures set forth in Chapter 13.
Required Procedures Under Chapter 13.
The following summary of the provisions of Chapter 13 is not
intended to be a complete statement of such provisions and is
qualified in its entirety by reference to the full text of
Chapter 13, a copy of which is attached to this Consent
Statement/Prospectus as Appendix B and is incorporated herein by
reference.
If the Merger is approved by the required vote of Webster's
shareholders and is not abandoned or terminated, each holder of
shares of Webster Common Stock who does not vote in favor of the
Merger and who follows the procedures set forth in Chapter 13
will be entitled to have such holder's shares of Webster Common
Stock purchased by Webster for cash at their fair market value.
The fair market value of shares of Webster Common Stock will be
determined as of the day before the first announcement of the
<PAGE>
terms of the Merger, excluding any appreciation or depreciation
in consequence of the Merger, but adjusted for any stock split,
reverse stock split, or share dividend that becomes effective
thereafter.
Within ten (10) days after approval of the Merger by
Webster's shareholders, Webster must mail a notice of such
approval (the "Approval Notice") to all Webster shareholders who
did not vote in favor of the Merger, together with a statement of
the price determined by Webster to represent the fair market
value of a Dissenting Share, a brief description of the
procedures to be followed in order to pursue dissenters' rights,
and a copy of Sections 1300 through 1304 of the California Code.
The statement of price made in the Approval Notice will
constitute an offer by Webster to purchase all Dissenting Shares
at the stated amount, unless such shares lose their status as
Dissenting Shares as described below.
A Dissenting Shareholder must make a written demand upon
Webster for the purchase of such holder's Dissenting Shares and
for payment to the Dissenting Shareholder in cash of the fair
market value of such shares. The written demand must state the
number and class of the shares of Webster Common Stock held of
record by the Dissenting Shareholder that the Dissenting
Shareholder demands that Webster purchase and must contain a
statement of what such Dissenting Shareholder claims to be the
fair market value of those shares as of the day before the
announcement of the Merger. The statement of fair market value
will constitute an offer by the Dissenting Shareholder to sell
the shares to Webster at such price. The written demand should
also specify the Dissenting Shareholder's name and mailing
address. In order for such demand to be effective, it must be
received by Webster within thirty (30) days after the date on
which the Approval Notice is mailed to the Dissenting
Shareholder. Within thirty (30) days after the date on which the
Approval Notice is mailed to the Dissenting Shareholder, the
Dissenting Shareholder must also submit to Webster the
certificate(s) representing such holder's Dissenting Shares for
endorsement as Dissenting Shares. The written demand and
certificate(s) representing the Dissenting Shares should be
delivered to Webster, 4750 Littlejohn Street, Baldwin Park,
California 91706, Attention: Secretary.
If Webster and a Dissenting Shareholder agree that the
Dissenting Shareholder's shares are Dissenting Shares and agree
upon the price of such shares, the Dissenting Shareholder will be
entitled to the agreed price with interest thereon at the legal
rate on judgments from the date of such agreement. Payment for
such Dissenting Shares must be made within thirty (30) days after
the later of the date of such agreement or the date on which all
statutory and contractual conditions to the Merger are satisfied,
and is subject to the surrender by the Dissenting Shareholder of
the certificate(s) representing the Dissenting Shares.
If Webster denies that a Dissenting Shareholder's shares
qualify as Dissenting Shares, or if Webster and a Dissenting
Shareholder fail to agree upon the fair market value of the
Dissenting Shares, then the Dissenting Shareholder may file a
<PAGE>
complaint in the Superior Court of Los Angeles County (the
"Court") requesting a determination as to whether the shares are
Dissenting Shares or as to the fair market value of the
Dissenting Shareholder's shares, or both. Such complaint must be
filed within six (6) months after the date on which the Approval
Notice is mailed to the Dissenting Shareholder. A Dissenting
Shareholder may also intervene in any action pending on such a
complaint. Two or more Dissenting Shareholders may join as
plaintiffs or be joined as defendants in any such action and two
or more such actions may be consolidated. The costs of the
action, including reasonable compensation to appraisers that may
be appointed by the Court, will be assessed or apportioned as the
Court considers equitable, and, except in the situations where
the appraised value exceeds the price offered by Webster and
Chapter 13 would require that Webster pay such expenses, may be
apportioned to the Dissenting Shareholders.
If any Dissenting Shareholder who demands the purchase of
such holder's shares of Webster Common Stock fails to perfect, or
effectively withdraws or loses the right to such purchase, the
shares of Webster Common Stock of such holder will be converted
into the right to receive that number of shares of Cordis Common
Stock equal to the Exchange Ratio or Recomputed Exchange Ratio,
as the case may be, multiplied by the number of shares of Webster
Common Stock held by such person, in accordance with the Merger
Agreement. Dissenting Shares lose their status as Dissenting
Shares if (i) the Merger is abandoned; (ii) the shares are
transferred prior to their submission for the required
endorsement; (iii) the Dissenting Shareholder and Webster do not
agree upon the status of the Dissenting Shareholder's shares as
Dissenting Shares or do not agree on the purchase price, but
neither the Dissenting Shareholder nor Webster files a complaint
or intervenes in a pending motion within six (6) months after the
Approval Notice is mailed to the Dissenting Shareholder; or (iv)
the Dissenting Shareholder, with Webster's consent, withdraws the
demand that Webster purchase such holder's Dissenting Shares. A
Dissenting Shareholder may not withdraw his or her demand for
purchase of his or her shares without Webster's consent.
Pursuant to the Brentwood Agreement, Brentwood, the sole
holder of Webster Preferred Stock, has contractually agreed to
convert all of its shares of Webster Preferred Stock into shares
of Webster Common Stock immediately prior to the Closing,
provided the Merger occurs. Therefore, the provisions of
Webster's Articles of Incorporation that would treat the Merger
as a liquidating event requiring the payment of a certain amount
to holders of Webster Preferred Stock in preference to amounts
due to Webster Dissenting Shareholders as described above are not
expected to be applicable.
<PAGE>
MARKET PRICES AND DIVIDENDS
Cordis
Cordis Common Stock is traded in the NASDAQ/NMS under the
symbol CORD. On January 20, 1994, the last full trading day for
Cordis Common Stock prior to the public announcement of the
Reorganization Agreement, the closing bid price of Cordis Common
Stock, as reported by NASDAQ, was $48-3/8 per share. The closing
bid price on , 1994, as reported by NASDAQ, was $_
per share.
The following table summarizes the high and low closing bid
prices for Cordis Common Stock by fiscal quarter for 1994, 1993
and 1992, as reported by NASDAQ. The prices shown represent
quotations among securities dealers, do not include retail
markups, markdowns, or commissions, and may not represent actual
transactions. SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET
QUOTATIONS.
<TABLE>
<CAPTION>
1994 1993 1993
High Low High Low High Low
<S> <C> <C> <C> <C> <C> <C>
First Quarter $35-1/2 $27-3/4 $30-3/4 $21-3/4 $37 $26-1/2
(Ended September 30)
Second Quarter 50-1/2 31-1/2 38 23-1/4 41 25-3/4
(Ended December 31)
Third Quarter _____ _____ 40-1/4 23-1/4 34-3/4 22-1/4
(Ended March 31)
Fourth Quarter _____ _____ 32-3/4 21-1/4 26-1/2 21
(Ended June 30)
</TABLE>
Cordis has not paid any cash dividends to date and has no
present intention to do so. Following the Merger, any future
payment of dividends will be at the discretion of Cordis' Board
of Directors and will depend upon the financial condition and
capital requirements of Cordis, as well as other factors that the
Board of Directors may deem relevant. At January 31, 1994, there
were 1,163 stockholders of record of Cordis Common Stock.
Webster
No established public trading market exists for Webster
Common Stock or Webster Preferred Stock. Webster has never paid
any cash dividends on any of its securities. As of
__________ __, 1994 there were seven shareholders of record of
Webster Common Stock and one shareholder of record of Webster
Preferred Stock.
<PAGE>
DESCRIPTION OF CORDIS COMMON STOCK
Cordis currently is authorized to issue 50,000,000 shares of
Cordis Common Stock and 2,500,000 shares of preferred stock, par
value $1.00 per share ("Cordis Preferred Stock"). As of January
31, 1994, 14,310,849 shares of Cordis Common Stock and no shares
of Cordis Preferred Stock were issued and outstanding,
respectively. At that date options with respect to 956,875
shares of Cordis Common Stock and no shares of Cordis Preferred
Stock were outstanding, respectively, and 2,075,000 shares of
Cordis Common Stock and no shares of Cordis Preferred Stock were
reserved for issuance pursuant to such options. Holders of
Cordis Common Stock are entitled to one vote per share on all
matters on which stockholders are entitled to vote. Since
the Cordis Common Stock does not have cumulative voting rights
in the election of directors, the holders of a majority of the
shares voting for the election of directors can elect all the
directors of Cordis if they choose to do so.
On September 12, 1986 Cordis' Board of Directors adopted a
Rights Agreement (the "Rights Agreement"), as subsequently
amended, authorizing a dividend distribution on each share of
Cordis Common Stock outstanding on the distribution date (as
defined in the Rights Agreement) in the form of a right to
purchase one-half of a share of Cordis Common Stock upon the
occurrence of certain events. The exercise price to purchase
one-half of a share of Cordis Common Stock, initially established
at $25, is subject to adjustment. The rights become exercisable
if an entity, person or group acquires beneficial ownership of
20% or more of the outstanding Cordis Common Stock or commences a
tender offer that would result in that entity, person or group
acquiring beneficial ownership of 30% or more of the outstanding
Cordis Common Stock. The rights, which do not entitle holders to
vote or receive dividends, expire on September 22, 1996 and may
be redeemed by Cordis at a price of $0.01 per right at any time
prior to the earlier of (i) the tenth day following the public
announcement of intent to acquire Cordis' stock as described
above or the date a majority of the Cordis Board of Directors
becomes aware of an acquiring entity, person or group (as defined
in the Rights Agreement) or (ii) the expiration date. As of
January 31, 1994 rights to purchase 6,619,770 shares of common
stock were outstanding.
The Florida Business Corporation Act (the "FBCA") contains
an affiliated transactions statute which provides that certain
transactions involving a corporation and a stockholder owning 10%
or more of the corporation's outstanding voting shares (an
"affiliated stockholder") must generally be approved by the
affirmative vote of the holders of two-thirds of the voting
shares other than those owned by the affiliated stockholder. The
transactions covered by the statute include, with certain
exceptions, (i) mergers and consolidations to which the
corporation and the affiliated stockholder are parties, (ii)
sales or other dispositions of substantial amounts of the
corporation's assets to the affiliated stockholder, (iii)
issuances by the corporation of substantial amounts of its
securities to the affiliated stockholder, (iv) the adoption of
any plan for the liquidation or dissolution of the corporation
proposed by or pursuant to an arrangement with the affiliated
stockholder, (v) any reclassification of the corporation's
securities which has the effect of substantially increasing the
percentage of the outstanding voting shares of the corporation
beneficially owned by the affiliated stockholder, and (vi) the
receipt by the affiliated stockholder of certain loans or other
financial assistance from the corporation. These special voting
requirements do not apply in any of the following circumstances:
(i) if the transaction was approved by a majority of the
<PAGE>
corporation's disinterested directors, (ii) if the corporation
did not have more than 300 stockholders of record at any time
during the preceding three years, (iii) if the affiliated
stockholder has been the beneficial owner of at least 80% of the
corporation's outstanding voting shares for the past five years,
(iv) if the affiliated stockholder is the beneficial owner of at
least 90% of the corporation's outstanding voting shares,
exclusive of those acquired in a transaction not approved by a
majority of disinterested directors, or (v) if the consideration
received by each stockholder in connection with the transaction
satisfies the "fair price" provisions of the statute. This
statute applies to any Florida corporation unless the original
articles of incorporation or an amendment to the articles of
incorporation or bylaws contain a provision expressly electing
not to be governed by this statute. Such an amendment to the
articles of incorporation or bylaws must be approved by the
affirmative vote of a majority of disinterested stockholders and
is not effective until 18 months after approval. Cordis'
Restated Articles of Incorporation, as amended (the "Cordis
Articles"), and Cordis' Bylaws (the "Cordis Bylaws") do not
contain a provision electing not to be governed by the statute.
The FBCA also contains a control share acquisition statute
which provides that a person who acquires shares in an issuing
public corporation in excess of certain specific thresholds will
generally not have any voting rights with respect to such shares
unless the voting rights are approved by a majority of the shares
entitled to vote, excluding interested shares. This statute does
not apply to acquisitions of shares of a corporation if, prior to
the pertinent acquisition of shares, the corporation's articles
of incorporation or bylaws provide that the corporation shall not
be governed by the statute. This statute also permits a
corporation to adopt a provision in its articles of incorporation
or bylaws providing for the redemption by the corporation of such
acquired shares in certain circumstances. Unless otherwise
provided in the corporation's article of incorporation or bylaws
prior to the pertinent acquisition of shares, in the event that
such shares are accorded full voting rights by the stockholders
of the corporation and the acquiring stockholder acquires a
majority of the voting power of the corporation, all stockholders
who did not vote in favor of according voting rights to such
acquired shares are entitled to dissenters' rights. The Cordis
Articles and Cordis Bylaws do not contain any provisions with
respect to this statute.
<PAGE>
COMPARATIVE RIGHTS OF CORDIS STOCKHOLDERS
AND WEBSTER SHAREHOLDERS
The shareholders of Webster should be aware that upon their
receipt of Cordis Common Stock, their rights as shareholders,
which are now governed by the laws of the State of California and
the Amended and Restated Articles of Incorporation and Bylaws of
Webster (the "Webster Articles" and the "Webster Bylaws,"
respectively), will be governed by the laws of the State of
Florida, the state of incorporation of Cordis, and the Cordis
Articles and the Cordis Bylaws. Upon the Effective Time of the
Merger, the rights of shareholders of Webster will be different,
and perhaps adversely affected, due to the differences between
the laws of the states of California and Florida and between the
Webster Articles and the Webster Bylaws and the Cordis Articles
and the Cordis Bylaws. Accordingly, the shareholders of Webster
should carefully review the following to understand how certain
of their rights as shareholders will be affected upon completion
of the Merger.
The following is a brief description of those differences.
This description does not purport to be a complete explanation of
all the differences between the rights of Webster shareholders
and Cordis stockholders. Furthermore, the identification of
specific differences is not meant to indicate that other
differences do not exist. The following summary is also
qualified in its entirety by reference to the Corporations Code
of the State of California ("California Law"), the FBCA, the
Webster Articles and Webster Bylaws and the Cordis Articles and
Cordis Bylaws.
Authorized Capital Stock
The authorized capital stock of Cordis consists of
50,000,000 shares of Cordis Common Stock and 2,500,000 shares of
Cordis Preferred Stock. All shares of Cordis Common Stock are
identical and have one vote per share. See "DESCRIPTION OF
CORDIS COMMON STOCK."
The authorized capital stock of Webster consists of
10,000,000 shares of Webster Common Stock and 4,000,000 shares of
Webster Preferred Stock. Each share of Webster Preferred Stock
is convertible into one share of Webster Common Stock. All
shares of Webster Common Stock are identical and have one vote
per share. 1,200,000 shares of Webster Preferred Stock have been
designated Series A Preferred Stock. All shares of Webster
Preferred Stock have one vote per share.
California Law dispenses with the concepts of par value of
shares as well as statutory definitions of capital, surplus and
the like. The concepts of capital and surplus also have been
eliminated from the FBCA, and the par value concept no longer has
significance.
<PAGE>
Preemptive Rights
Under both the FBCA and California Law, securityholders of a
corporation have only such preemptive rights as may be provided
in the corporation's articles of incorporation. Neither the
Cordis Articles nor the Webster Articles grant any preemptive
rights to securityholders.
Dividends and Other Distributions
Under California Law, a corporation generally may not make
any distribution (including dividends, whether in cash or other
property, and repurchases of its shares) to its shareholders
unless either the corporation's retained earnings immediately
prior to the proposed distribution equal or exceed the amount of
the proposed distribution or, immediately after giving effect to
such distribution, the corporation's assets (exclusive of
goodwill, capitalized research and development expenses and
deferred charges) would be at least equal to 1-1/4 times its
liabilities (not including deferred taxes, deferred income and
other deferred credits) and the corporation's current assets
would be at least equal to its current liabilities (or 1-1/4
times its current liabilities if the average pre-tax and pre-
interest expense earnings for the preceding two fiscal years
were less than the average interest expense for such years).
California Law also prohibits distributions by a corporation
to its shareholders if the corporation is, or as a result
of the distribution would be, likely to be unable to
meet its liabilities (except for those whose payment is
otherwise adequately provided for) as they mature. Such tests
are applied to California corporations on a consolidated
basis. Under California Law, there are certain exceptions
to the foregoing rules for repurchases of shares in connection
with certain rescission actions or pursuant to certain employee
stock plans.
Under the FBCA, a Florida corporation may make distributions
to stockholders as long as, after giving effect to such
distribution (i) the corporation would be able to pay its debts
as they become due in the usual course of business, and (ii) the
corporation's total assets would not be less than the sum of its
total liabilities plus (unless the articles of incorporation
permit otherwise, which the Cordis Articles do not) the amount
that would be needed if the corporation were to be dissolved at
the time of the distribution to satisfy the preferential rights
upon dissolution of stockholders whose preferential rights are
superior to those receiving the distribution. Under the FBCA, a
corporation's redemption of its own capital stock is deemed to be
a distribution.
The Webster Articles provide that holders of shares of
Webster Series A Preferred Stock are entitled, in the event
dividends are declared by the Webster Board of Directors, to a
preferential payment of $0.1336 per share prior to the payment of
any dividend on Webster Common Stock. The Cordis Articles
provide that as long as any Cordis Preferred Stock remains
outstanding, no dividends (other than dividends of Cordis Common
Stock), distributions, repurchases or redemptions shall be made
with respect to Cordis Common Stock unless all accrued and unpaid
dividends on Cordis Preferred Stock for all past and current
dividend periods shall have been paid, or declared and a sum
<PAGE>
sufficient set aside. The Cordis Articles also provide for
preferential distributions to holders of Cordis Preferred Stock
in the event of any liquidation, dissolution or winding up of the
affairs of Cordis.
Voting Requirements Generally
Under California Law, the affirmative vote of a majority of
the shares represented and voting at a duly held meeting at which
a quorum is present is deemed to be the act of the shareholders,
unless the vote of a greater number or voting by classes is
specifically required by the California Code or the corporation's
articles of incorporation. However, a super-majority voting
provision in a California corporation's articles of incorporation
(i) may not require a vote in excess of 66-2/3% of the
outstanding shares, or 66-2/3% of the outstanding shares of any
class or series, (ii) must be approved by at least the same
percentage of the outstanding shares as is required by the
provision for specified corporate actions and (iii) must be
renewed at least every two years in order to remain effective.
Such restrictions on super-majority voting provisions do not
apply to a corporation (i) with fewer than 100 shareholders or,
with respect to amendments filed after January 1, 1994, and (ii)
(A) with outstanding shares of more than one class or series of
stock, (B) with no class of equity securities registered under
Section 12(b) or 12(g) of the Exchange Act, (C) with outstanding
securities held of record by fewer than 300 persons, and (D) that
does not have, and never has had, a super-majority voting
provision subject to the two year renewal requirement.
Under the FBCA, unless otherwise provided in a corporation's
articles of incorporation, directors are elected by a plurality
of the votes cast by the stockholders entitled to vote at a
stockholders' meeting at which a quorum is present. With respect
to matters other than the election of directors, unless a greater
number of affirmative votes is required by the FBCA or a Florida
corporation's articles of incorporation (but not its bylaws), if
a quorum exists, action on any matter generally is approved by
the stockholders if the votes cast by the holders of the shares
represented at the meeting and entitled to vote on the matter
favoring the action exceed the votes cast opposing the action.
Accordingly, under the FBCA, abstentions have no impact on the
outcome of a vote. The Cordis Articles do not include a
provision requiring a greater vote on any matter than required by
the FBCA.
The Webster Bylaws also provide that on matters other than
the election of directors, the affirmative vote of a majority of
the shares represented at a meeting at which a quorum is present
shall be the action of the shareholders, unless a greater vote is
required by California Law or the Webster Articles. The Cordis
Bylaws provide that the Cordis Board of Directors are to be
chosen at Cordis' annual meeting of stockholders by a plurality
of votes cast. The Cordis Bylaws do not include a provision
requiring a greater vote on any matter than required by the FBCA.
See the subsections below for a description of voting
requirements with respect to certain events.
<PAGE>
Amendment of Articles of Incorporation; Amendment of Bylaws
Under California Law, an amendment to a corporation's
articles of incorporation requires the approval of the board of
directors and, unless otherwise specified in the corporation's
articles of incorporation, the approval of a majority of the
outstanding shares entitled to vote thereon. Under California
Law, the holders of the outstanding shares of a class are
entitled to vote as a separate class on a proposed amendment that
would (i) increase or decrease the aggregate number of shares of
such class, other than an increase necessary to permit the
conversion of options or conversion rights previously approved by
the outstanding shares, or an increase in connection with certain
stock splits; (ii) effect an exchange, reclassification or
cancellation of all or part of the shares of such class, other
than a stock split; (iii) effect an exchange, or create a right
of exchange, of all or part of the shares of another class into
the shares of such class; (iv) change the rights, preferences,
privileges or restrictions of the shares of such class;
(v) create a new class of shares having rights, preferences or
privileges prior to the shares of such class, or increase the
rights, preferences or privileges or the number of authorized
shares of any class having rights, preferences or privileges
prior to the shares of such class; (vi) in the case of preferred
shares, divide the shares of any class into series having
different rights, preferences, privileges or restrictions or
authorize the board to do so; or (vii) cancel or otherwise affect
dividends on the shares of such class which have accrued but have
not been paid. Different series of the same class do not
constitute different classes for the purpose of voting by classes
except when a series is adversely affected by an amendment in a
different manner than other shares of the same class.
Under California Law, an amendment to a corporation's bylaws
generally requires the approval of either the majority of the
outstanding shares or approval by the board of directors, subject
to any restriction in the corporation's bylaws or articles of
incorporation on the power of the board of directors to amend the
bylaws or any provision in the corporation's articles of
incorporation requiring a greater vote.
Under the FBCA, an amendment to a corporation's articles of
incorporation generally must be recommended by the Board of
Directors, and approved by the corporation's stockholders, except
that certain immaterial amendments specified in the FBCA may be
made by the board of directors. Unless a specific section of the
FBCA or a corporation's articles of incorporation require a
greater vote, an amendment to a corporation's articles of
incorporation generally must be approved by a majority of the
votes entitled to be cast on the amendment. The Cordis Articles
do not include any provision requiring greater than a majority of
shares to amend its articles of incorporation.
Under the FBCA, the board of directors of a corporation may
amend or repeal the corporation's bylaws, unless a corporation's
articles of incorporation or the FBCA reserve the power to amend
to the stockholders.
<PAGE>
The Webster Bylaws grant the board of directors the
authority to amend the Webster Bylaws, other than a bylaw
changing the authorized number of directors (except to fix the
authorized number of directors within a range set by a bylaw
provision providing for a variable number of directors). The
Cordis Bylaws provide that they may be amended, consistent with
any bylaws adopted by the stockholders, or any part thereof that
has not been adopted by the stockholders may be repealed, by the
Cordis board of directors, at any meeting by a majority vote of
the directors present and voting. The Cordis Bylaws also provide
that they may be amended or repealed, wholly or in part, by a
majority of the stockholders entitled to vote thereon present at
any stockholders' meeting.
Action by Written Consent
Under California Law, unless otherwise provided in a
corporation's articles of incorporation, any action that may be
taken at any annual or special meeting of shareholders may be
taken without a meeting and without prior notice, if a consent in
writing, setting forth the action so taken, is signed by the
holders of outstanding shares having not less than the minimum
number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon
were present and voted. However, California Law prohibits the
election of directors by written consent of the shareholders
unless the consent is unanimous or is for the purpose of filling
a vacancy not filled by the directors.
Under the FBCA, unless otherwise provided in a corporation's
articles of incorporation, any action that may be taken at an
annual or special meeting of stockholders may be taken without a
meeting, without prior notice and without a vote if the action is
taken by the written consent of the holders of shares
constituting not less than the minimum number of shares that
would be necessary to take such action at a meeting of
stockholders.
Neither the Webster Articles nor the Cordis Articles
restricts the ability of the shareholders of the corporation to
take action by written consent. The Webster Bylaws contain
provisions concerning shareholder actions by written consent
consistent with the provisions of California Law. The Cordis
Bylaws provide that when stockholders holding four-fifths of
Cordis' voting stock having the right to vote at any meeting
shall be present at such meeting, however called or notified, and
sign a written consent thereto on the record of the meeting, the
acts of the meeting are to be as valid as if legally called and
notified.
Special Meetings of Shareholders
Under California Law, a special meeting of shareholders may
be called by the board of directors, the chairman of the board,
the president, the holders of shares entitled to cast not less
than 10% of the votes at such meeting and such additional persons
as are authorized by the articles of incorporation or the bylaws.
Under the FBCA, special meetings of a corporation's stockholders
<PAGE>
may be called by its board of directors, by the persons
authorized to do so in its articles of incorporation or bylaws or
by the holders of not less than 10% of all votes entitled to be
cast on any issue proposed to be considered at the special
meeting unless a greater percentage not to exceed 50% is required
by the articles of incorporation. The Cordis Articles contain no
special requirements for the calling of special meetings by its
stockholders.
The Webster Bylaws contain provisions concerning special
meetings consistent with the provisions of California Law
described above, without naming additional persons entitled to
call a special meeting. The Cordis Bylaws provide that special
meetings of stockholders may be called by Cordis' president, its
board of directors, or when requested in writing by stockholders
who hold a majority of the stock having the right to vote and
entitled to vote at such meeting.
Voting in the Election of Directors
In an election of directors under cumulative voting, each
share of stock normally having one vote is entitled to a number
of votes equal to the number of directors to be elected. A
shareholder may then cast all such votes for a single candidate
or may allocate them among as many candidates as the shareholder
may choose. Without cumulative voting, the holders of a majority
of the shares voting in the election of directors would have the
power to elect all the directors to be elected, and no person
could be elected without the support of holders of a majority of
the shares.
In general, under California Law, cumulative voting in the
election of directors is an absolute right of shareholders.
However, a corporation may amend its articles of incorporation or
bylaws to eliminate the right to cumulative voting if it (i) has
outstanding shares listed on the New York Stock Exchange or
American Stock Exchange or (ii)(A) has outstanding securities
designated as qualified for trading as a National Market System
security on the National Association of Securities Dealers
Automatic Quotation System and (B) had at least 800 holders of
its equity securities as of the record date of its most recent
annual meeting of shareholders. Such an amendment must be
approved by the shareholders. Under California Law, elections
for directors need not be by written ballot unless a shareholder
demands election by ballot at the meeting and before the voting
begins or unless the bylaws so require.
Under the FBCA, cumulative voting is not mandatory, and
cumulative voting rights must be provided in a corporation's
articles of incorporation. The FBCA does not require that
elections of directors be by written ballot.
The Webster Bylaws do not require the election of directors
by written ballot. Neither the Cordis Articles nor the Cordis
Bylaws provide for cumulative voting or the voting by ballot upon
the demand of any stockholder.
<PAGE>
Number and Qualification of Directors
Under California Law, the size of a corporation's board of
directors generally may not be less than three. A corporation's
articles of incorporation or bylaws may state a minimum and
maximum number of directors, with the maximum not exceeding two
times the minimum less one, and with the exact number to be fixed
by approval of the board of directors or shareholders. No bylaw
or amendment to the articles of incorporation reducing the fixed
number or minimum number of directors below five may be adopted
if the votes cast against its adoption at a meeting or the shares
not consenting to its adoption in the case of action by written
consent are equal to more than 16-2/3 percent of the outstanding
shares entitled to vote thereon.
The FBCA provides that the board of directors must consist
of one or more members, and that a corporation's articles of
incorporation or bylaws must specify the number of directors or
provide how the number will be determined. The number of
directors may be increased or decreased by amendment to, or in
the manner provided in the bylaws or articles of incorporation,
but a decrease does not shorten or eliminate the term of any
sitting director.
The Webster Bylaws provide for a variable number of
directors between three and five, with the exact number currently
fixed at five. Both the Cordis Articles and the Cordis Bylaws
provide that Cordis shall not have less than three nor more than
nine directors, and provide that although the number of directors
may be increased or diminished from time to time by bylaws
adopted by its stockholders, there shall never be less than
three. The Cordis Bylaws also provide that the stockholders
and/or the directors may leave vacancies on the board of
directors as they shall designate and determine. There are
currently seven directors of Cordis.
None of California Law, the Webster Articles or the Webster
Bylaws set forth specific qualification requirements for
directors. The FBCA provides that all directors must be natural
persons who are 18 years of age or older. The Cordis Bylaws
provide that all members of the board of directors be of full
age, and that at least one director be a citizen of the United
States.
Classification of Board
A classified board is one in which a certain number, but not
all, of the directors are elected on a rotating basis each year.
This method of electing directors makes changes in the
composition of the board of directors, and thus a potential
change in control of a corporation, a lengthier and more
difficult process.
Under California Law, a corporation (i) with outstanding
shares listed on the New York Stock Exchange or the American
Stock Exchange or (ii)(A) with outstanding securities designated
as qualified for trading as a National Market System security on
the National Association of Securities Dealers Automatic
<PAGE>
Quotation System and (B) with at least 800 holders of its equity
securities as of the record date of its most recent annual
meeting, may amend its articles of incorporation to provide for a
board divided into two or three classes to serve for terms of two
or three years, respectively. Under California Law, a board
divided into two classes must be comprised of no less than six
directors, with one-half of the directors or as close an
approximation as possible to be elected at each annual meeting of
shareholders. A board divided into three classes must be
comprised of no less than nine directors, with one-third of the
directors or as close an approximation as possible to be elected
at each annual meeting of shareholders. Corporations not
qualified as described above must elect the entire board of
directors annually and may not have a classified board of
directors.
The FBCA permits, but does not require, a classified board
of directors, with staggered terms.
None of the Webster Articles, the Webster Bylaws, the Cordis
Articles or the Cordis Bylaws provides for a classified board of
directors.
Removal of Directors
Under California Law, any director or the entire board of
directors may be removed without cause, with the approval of a
majority of the outstanding shares entitled to vote. However, no
individual director may be removed, unless the entire board is
removed, if the number of votes cast against such removal or not
consenting to such removal in the case of action by written
consent would be sufficient to elect the director under
cumulative voting.
Under the FBCA, unless the articles of incorporation provide
otherwise, any director or the entire board of directors may be
removed by the stockholders with or without cause. A director or
directors may be removed at a meeting of stockholders called
expressly for that purpose. If the articles of incorporation
provide for the election of directors by classes, only the
stockholders of that voting group may participate in the vote to
remove that director. If cumulative voting is authorized, a
director may be removed only if the votes cast in favor of
retaining the director would have been insufficient to elect him
pursuant to cumulative voting at that meeting. If cumulative
voting is not authorized, a director can be removed if the votes
cast to remove him exceed the votes cast to retain him.
Filling Vacancies on the Board of Directors
Under California Law, any vacancy on the board of directors
other than one created by removal of a director may be filled by
the board. If the number of directors is less than a quorum, a
vacancy may be filled by the unanimous written consent of the
<PAGE>
directors then in office, by the affirmative vote of a majority
of the directors at a meeting held pursuant to notice or waivers
of notice or by a sole remaining director. A vacancy created by
removal of a director may be filled by the board only if the
board is so authorized by a corporation's articles of
incorporation or by a bylaw approved by the corporation's
shareholders. The shareholders may elect a director at any time
to fill any vacancy not filled by the directors. If, after the
filling of any vacancy by the directors, the directors then in
office who have been elected by the shareholders constitute less
than a majority of the directors then in office, then the holders
of an aggregate of five percent or more of the total number of
shares outstanding and entitled to vote for those directors may
cause a special meeting of shareholders to be called.
The FBCA provides that a vacancy on the board of directors
generally may be filled by the affirmative vote of a majority of
the remaining directors or by the stockholders, unless the
articles of incorporation provide otherwise. The Cordis Articles
do not alter this provision, however the Cordis Bylaws provide
that vacancies in the board of directors are to be filled until
the next annual meeting of stockholders by the board of directors
remaining in office.
The Webster Bylaws state that a vacancy created by the
removal of a director may be filled only by the affirmative vote
of a majority of the shares represented and voting at a duly held
meeting at which a quorum is present or by the unanimous written
consent of all shares entitled to vote thereon.
Transactions Involving Officers or Directors
Under California Law, no contract or other transaction
between a corporation and one or more of its directors, or
between a corporation and an entity in which one or more of its
directors has a material financial interest, is void or voidable
if (i) the material facts as to the transaction and as to such
director's interest are fully disclosed or known to the
shareholders and such contract or transaction is approved by the
shareholders in good faith without counting the shares owned by
the interested director; (ii) the material facts as to the
transaction and as to such director's interest are fully
disclosed or known to the board or committee and the board or
committee authorizes, approves or ratifies the contract or
transaction without counting the vote of the interested director,
and the contract or transaction is just and reasonable to the
corporation at the time it is authorized, approved or ratified;
or (iii) the person asserting the validity of the contract or
transaction sustains the burden of proof that the contract or
transaction was just and reasonable to the corporation at the
time it is authorized, approved or ratified. No contract or
other transaction between a corporation and an entity in which
one or more of its directors are directors is void or voidable if
(i) the material facts as to the transaction and as to such
director's other directorship are fully disclosed or known to the
board or committee and the board or committee authorizes,
approves or ratifies the contract or transaction without counting
the vote of the interested director; (ii) the contract or
transaction is approved by the shareholders; or (iii) the
contract or transaction is just and reasonable to the corporation
at the time it is authorized, approved or ratified. Under
California Law, a corporation may not make any loan or guaranty
<PAGE>
the obligation of a director or officer of the corporation or its
parent, unless such loan or guaranty, or a plan providing for
such loan or guarantee, is approved by shareholders owning a
majority of the outstanding shares of the corporation, without
counting the vote of any officer or director eligible to
participate therein. However, under California Law, if a
corporation has 100 or more shareholders of record on the date of
approval by the board, and has a bylaw approved by the
outstanding shares authorizing the board of directors alone to
approve loans or guaranties to or on behalf of officers, whether
or not such officers are directors, or an employee benefit plan
authorizing such a loan or guarantee to an officer, such a loan
or guarantee or benefit plan may be approved by the board alone
without counting the vote of any interested director, if the
board determines that any such loan or guaranty may reasonably be
expected to benefit the corporation.
Under the FBCA, a contract or other transaction between a
corporation and one or more of its directors or between a
corporation and an entity in which one or more of its directors
are financially interested shall not be void or voidable merely
because of the director's interest in the transaction if (i) the
transaction is approved or ratified, after disclosure of the
interest, by the disinterested directors or the stockholders or
(ii) the transaction or contract is fair and reasonable to the
corporation at the time it is authorized. For a transaction to
be approved by the disinterested directors after a disclosure of
the interested director's relationship or interest, the
affirmative vote of a majority of the directors on the board who
have no relationship or interest in the transaction is required.
The transaction may not, however, be authorized, approved or
ratified by one director acting alone. If a majority of the
disinterested directors approves the transaction, a quorum is
deemed to be present under the FBCA. If an interested director
is present or if a director votes on a matter in which the
director has an interest, the director's presence or vote will
not affect the validity of the action taken under the FBCA,
provided the transaction was otherwise approved by a sufficient
vote of disinterested directors. The presence or vote of
interested directors may be counted for purposes of determining
whether the transaction was approved under other sections of the
FBCA. As long as a majority of fully informed disinterested
directors apply business judgment in good faith to authorize the
transaction, or the transaction is approved by the stockholders
who are informed of the conflict, judicial inquiry into
substantive fairness is not appropriate and the business judgment
rule will remove the transaction from the scope of judicial
inquiry. The FBCA does not contain a similar provision relating
to officers. Thus, officers are subject to common law
guidelines.
The FBCA also provides that a corporation may lend money to,
guarantee an obligation of, or otherwise assist an officer,
director or employee of the corporation or of a subsidiary,
whenever, in the judgment of the board of directors, the loan,
guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with
or without interest and may be unsecured or secured in a manner
<PAGE>
approved by the board of directors, including a pledge of shares
of stock of the corporation. Such transactions are expressly
subject to the conflict of interest statute discussed above.
The Webster Bylaws contain a provision allowing the board
alone to approve loans or guarantees to an officer, which
provision is consistent with the conditions applicable to such a
bylaw under California Law as described above. Such provisions
have been approved by the shareholders of Webster. The Cordis
Articles and Cordis Bylaws do not address contracts, loans or
other transactions between the corporation and its directors or
officers.
Indemnification and Limitation of Liability
Under California Law, a corporation has the power to
indemnify any agent against expenses, judgments, fines and
settlements incurred in a proceeding other than an action by or
in the right of the corporation if the person acted in good faith
and in a manner that the person reasonably believed to be in the
best interests of the corporation and, in the case of a criminal
proceeding, had no reasonable cause to believe the conduct of the
person was unlawful. In the case of an action by or in the right
of the corporation, the corporation has the power to indemnify
any agent against expenses incurred in defending or settling the
action; provided, however, that (i) no such indemnification may
be made without court approval when a person is adjudged liable
to the corporation in the performance of that person's duty to
the corporation and its shareholders, unless a court determines
such person is entitled to indemnity for expenses, and then such
indemnification may be made only to the extent that such court
shall determine and (ii) no such indemnification may be made
without court approval in respect of amounts paid or expenses
incurred in settling or otherwise disposing of a threatened or
pending action or amounts incurred in defending a pending action
which is settled or otherwise disposed of without court approval.
California Law requires that to the extent an agent of a
corporation is successful on the merits in defense of any third-
party or derivative proceeding, or in defense of any claim, issue
or matter therein, the corporation indemnify the agent against
expenses incurred in connection therewith. The indemnification
authorized by California Law is not exclusive and a corporation
may grant its officers, directors and other agents additional
indemnification; provided that in the case of directors and
officers, such excess indemnification is authorized in the
corporation's articles of incorporation.
Under California Law, a corporation may adopt a provision in
its articles of incorporation limiting or eliminating the
liability of a director for monetary damages; provided, however,
that such liability cannot be eliminated where it is based upon
(i) intentional misconduct or knowing and culpable violation of
law; (ii) acts or omissions that a director believes to be
contrary to the best interests of the corporation or its
shareholders, or that involve the absence of good faith on the
part of the director; (iii) receipt of an improper personal
benefit; (iv) acts or omissions that show reckless disregard for
the director's duty to the corporation or its shareholders, where
the director in the ordinary course of performing a director's
duties should be aware of a risk of serious injury to the
corporation or its shareholders; (v) acts or omissions that
constitute an unexcused pattern of inattention that amounts to an
abdication of the director's duty to the corporation and its
shareholders; (vi) interested transactions between the
corporation and a director in which a director has a material
financial interest; and (vii) liability for improper
distributions, loans or guarantees.
Under the FBCA, a corporation has the power to indemnify its
officers, directors, employees and agents against liability
incurred in connection with a proceeding (other than derivative
actions), if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests
of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was
unlawful. A similar standard is applicable in derivative
actions, except that indemnification may be made only for (i)
expenses (including attorneys' fees) and certain amounts paid in
settlement, and (ii) in the event the person seeking
indemnification has been adjudicated liable, amounts deemed
proper, fair and reasonable by the appropriate court upon
application thereto. The FBCA provides that to the extent that
such persons have been successful in defense of any proceeding,
they must be indemnified by the corporation against expenses
actually and reasonably incurred in connection therewith. The
FBCA also provides that, unless a corporation's articles of
incorporation provide otherwise, if a corporation does not so
indemnify such persons, they may select, and a court may order,
indemnification under certain circumstances even if the board of
directors or stockholders of the corporation have determined that
the persons are not entitled to indemnification. The
indemnification authorized by the FBCA is not exclusive and the
corporation may grant its officers, directors, employees and
agents additional indemnification.
The FBCA provides that a director is not personally liable
for monetary damages to the corporation or any other person for
any act or omission as a director unless the director breached or
failed to perform his statutory duties as a director and such
breach or failure (i) constitutes a violation of criminal law,
unless the director had reasonable cause to believe his conduct
was lawful or had no reasonable cause to believe his conduct was
unlawful, (ii) constitutes a transaction from which the director
derived an improper personal benefit, (iii) results in an
unlawful distribution, (iv) in a derivative action or an action
by a stockholder, constitutes conscious disregard for the best
interests of the corporation or willful misconduct, or (v) in a
proceeding other than a derivative action or an action by a
stockholder, constitutes recklessness or an act or omission which
was committed in bad faith or with malicious purpose or in a
manner exhibiting wanton and willful disregard of human rights,
safety or property.
The Webster Articles contain provisions eliminating the
liability of directors for monetary damages to the fullest extent
permissible under California Law, and authorizing excess
indemnification of directors and officers to the fullest extent
permissible under California Law, and the Webster Bylaws contain
indemnification provisions consistent with the Webster Articles
and California Law. Webster has entered into indemnification
agreements with its officers and directors that require Webster
to indemnify such persons to the fullest extent permitted under
California Law.
The Cordis Bylaws contain a provision authorizing the
indemnification of Cordis' directors, officers, employees and
agents. This provision also states that such indemnification
shall in no way be exclusive of any other rights of
indemnification to which any of such persons would otherwise be
entitled under any other bylaw, agreement, vote of stockholders
or disinterested directors or otherwise.
Mergers, Tender Offers and Sales of Substantially all of the
Assets
Under California Law, the principal terms of a merger
generally require the approval of the shareholders of each of the
merging corporations and any parent of a merging corporation if
the parent's securities are to be issued or transferred in the
transaction; the principal terms of a sale of assets
reorganization (in which the acquired corporation's shareholders
receive equity securities or debt securities with a maturity of
more than five years that are not adequately secured in exchange
for substantially all of the assets of such acquired corporation)
generally require the approval of the shareholders of the
acquiring and the acquired corporation, and the parent of the
acquiring corporation if the parent's securities are to be issued
or transferred in the transaction; and the principal terms of a
share exchange tender offer require the approval of the
shareholders of the acquiring corporation and any other
corporation whose securities are to be used in the tender offer.
Shareholder approval generally must be by separate class vote,
except that approval by separate class vote of the holders of
preferred stock of an acquiring, surviving or parent corporation
is not required if the rights, preferences, privileges and
restrictions of such class remain unchanged in the transaction
and if the transaction does not involve an amendment to the
corporation's articles of incorporation that would otherwise
require such separate class vote. Notwithstanding the foregoing,
approval by the shareholders of a corporation is not required if
the corporation or its shareholders immediately before the
transaction, or both, will own immediately after the transaction
equity securities possessing more than five-sixths of the voting
power of the surviving, acquiring or parent corporation, or
corporation whose securities are used in a share exchange tender
offer. A disposition of substantially all of a corporation's
assets, other than pursuant to a sale of assets reorganization
described above, requires the approval of the outstanding shares
of the corporation.
Under the FBCA, the principal terms of a merger generally
require the approval of the stockholders of each of the merging
corporations, but do not require the approval of the stockholders
of any parent corporation, even when the parent corporation's
<PAGE>
securities are to be used as consideration for the merger. Share
exchanges must be approved by the majority of shares entitled to
vote of the target corporation. Shareholders of the surviving
corporation do not have voting rights if their corporation's
articles of incorporation do not differ (except for certain
enumerated amendments) from its articles before the merger and
the stockholders hold the same number of shares with identical
designations, preferences, limitations and relative rights
immediately after the merger. The FBCA also provides that a plan
of merger must be approved by each class or series of shares
voting separately if the plan contains a provision, which if
contained in an amendment to the articles of incorporation, would
entitle the class or series to vote as a separate voting group on
the proposed amendment. The FBCA also requires each class or
series of shares to approve a share exchange if (i) the share
exchange contains a provision, which if contained in an amendment
to the corporation's articles of incorporation, would entitle the
class or series to vote as a separate group on the proposed
amendment, or (ii) the class or series of shares is to be
converted or exchanged under a plan of share exchange. A
disposition of substantially all of a corporation's assets
generally requires the approval of the stockholders.
The Webster Articles provide that in the event of a sale of
substantially all of the assets of the company or an acquisition
of Webster by another entity by means of merger or consolidation,
the holders of outstanding shares of Webster Preferred Stock
shall be entitled to a preferential payment equal to $1.67 per
share plus accrued but unpaid dividends prior to any distribution
to the holders of Webster Common Stock, after which the holders
of Webster Common Stock shall be entitled to a payment equal to
$1.25 per share plus accrued but unpaid dividends prior to any
further distribution to the holders of Webster Preferred Stock,
after which all Webster shareholders shall participate ratably,
on an as-converted basis, in the remaining proceeds available for
distribution. Since the Reorganization Agreement provides that
the Webster Preferred Stock will be converted into Webster Common
Stock immediately prior to the Effective Time, no shares of
Webster Preferred Stock will be outstanding at the Effective
Time, and, accordingly, the preferential payment described above
is not required and will not be made.
None of the Webster Bylaws, Cordis Articles or Cordis Bylaws
contains any additional provisions relating to mergers, tender
offers or sales of substantially all of the corporation's assets.
Appraisal Rights
For a description of appraisal rights provided by California
Law and the Webster Articles, see "THE MERGER -- Dissenters'
Rights." California Law also makes dissenters' rights of
appraisal available to shareholders of a corporation whose assets
are acquired in a sale of assets reorganization. The appraisal
rights provided under California Law are not available with
respect to shares that are listed on the New York Stock Exchange,
are listed on the Pacific Stock Exchange Incorporated, are shares
of a corporation that has a security regularly listed on the
American Stock Exchange, are designated as national market system
<PAGE>
securities on the interdealer quotation system of the National
Association of Securities Dealers, Inc., or are listed on the
list of OTC margin stocks issued by the Board of Governors of the
Federal Reserve System; provided that such shares are not subject
to any restriction on transfer imposed by the corporation or by
any law or regulation; and provided, further, that demands for
payment are not filed with respect to five percent or more of the
outstanding shares of the class.
Under the FBCA, a stockholder of a Florida corporation, with
certain exceptions, has the right to dissent from, and obtain
payment of the fair value of his shares in the event of (i) a
merger or consolidation to which the corporation is a party, (ii)
a sale or exchange of all or substantially all of the
corporation's property other than in the usual and regular course
of business, (iii) the approval of a control share acquisition,
(iv) a statutory share exchange to which the corporation is a
party as the corporation whose shares will be acquired, (v) an
amendment to the articles of incorporation if the stockholder is
entitled to vote on the amendment and the amendment would
adversely affect the stockholder, and (vi) any corporate action
taken to the extent that the articles of incorporation provide
for dissenters' rights with respect to such action. The FBCA
provides that unless a corporation's articles of incorporation
provide otherwise, which Cordis' do not, a stockholder does not
have dissenters' rights with respect to a plan of merger, share
exchange or proposed sale or exchange of property if the shares
held by the stockholder are either registered on a national
securities exchange or held of record by 2,000 or more
stockholders.
None of the Webster Articles, Webster Bylaws, Cordis
Articles or Cordis Bylaws contains any additional provisions
relating to dissenters' rights of appraisal.
Anti-Takeover Provisions; Transactions with Interested
Stockholders
California Law requires that holders of nonredeemable common
stock receive nonredeemable common stock in a merger of the
corporation with the holder of more than 50% but less than 90% of
such common stock or its affiliate unless all of the holders of
such common stock consent to the transaction. This provision of
California Law may have the effect of making a "cash-out" merger
by a majority shareholder more difficult to accomplish.
California Law requires that the principal terms of a sale of
substantially all of a corporation's assets to a person in
control of or under common control with the corporation be
approved by at least 90% of the voting power of the corporation
unless the sale is in consideration of the nonredeemable common
shares of the purchasing corporation or its parent. California
Law also generally provides that when a tender offer or a
proposal for a reorganization or for a sale of assets is made by
an interested party (generally a controlling or managing party of
the target corporation), an affirmative opinion in writing as to
the fairness of the consideration to be paid to the shareholders
must be delivered to the shareholders. This fairness opinion
requirement does not apply to a corporation that does not have
shares held of record by at least 100 persons, or to a
transaction that has been qualified under California state
securities laws. If a tender of shares or vote is sought
pursuant to an interested party's proposal and a later proposal
is made by another party at least ten days prior to the date of
acceptance of the interested party proposal, the shareholders
must be informed of the later offer and be afforded a reasonable
opportunity to withdraw any vote, consent or proxy, or to
withdraw any tendered shares.
<PAGE>
For a description of the provisions of the FBCA governing
business combinations with interested stockholders and control
share acquisitions, see "DESCRIPTION OF CORDIS COMMON STOCK."
None of the Webster Articles, Webster Bylaws, Cordis
Articles or Cordis Bylaws contains any additional provisions
relating to transactions with interested shareholders or other
takeover situations.
Inspection of Shareholder List
California Law allows any shareholder to inspect and copy a
corporation's shareholder list for a purpose reasonably related
to such person's interest as a shareholder. California Law also
provides for an absolute right to inspect and copy the
corporation's shareholder list by persons holding an aggregate of
5% or more of a corporation's voting shares, or shareholders
holding an aggregate of 1% or more of such shares who have filed
a Schedule 14B with the Securities and Exchange Commission
relating to the election of directors.
Under the FBCA, a stockholder is entitled to inspect and
copy the articles of incorporation, bylaws, certain board and
stockholder resolutions, certain written communications to
stockholders a list of the names and businesses addresses of the
corporation's directors and officers and the corporation's most
recent annual report, during regular business hours if the
stockholder gives at least five business days' prior written
notice to the corporation. In addition, a stockholder of a
Florida corporation is entitled to inspect and copy other books
and records of the corporation during regular business hours if
the stockholder gives at least five business days' prior written
notice to the corporation and (i) the stockholders' demand is
made in good faith and for a proper purpose, (ii) the demand
describes with particularity its purpose and the records to be
inspected or copied and (iii) the requested records are directly
connected with such purposes. The FBCA also provides that a
corporation may deny any demand for inspection if the demand was
made for an improper purpose or if the demanding stockholder has,
within two years preceding such demand, sold or offered for sale
any list of stockholders of the corporation or any other
corporation, has aided or abetted any person in procuring a list
of stockholders for such purpose or has improperly used any
information secured through any prior examination of the records
of the corporation or any other corporation.
The Webster Bylaws contain provisions consistent with the
provisions of California Law with respect to the inspection of
<PAGE>
the shareholder list. The Cordis Bylaws provide that Cordis'
stock book or stock lists shall be open for at least three
business hours each business day for inspection by any person who
has been a record holder of not less than 1% of Cordis'
outstanding shares during the six months prior to such holder's
demand.
Shareholder Derivative Suits
California Law provides that a shareholder bringing a
derivative action on behalf of a corporation need not have been a
shareholder at the time of the matter in question, provided that
the plaintiff shareholder acquired such person's shares in the
corporation before there was disclosure to the public or the
shareholder of the wrongdoing which is the subject of the action,
and provided that certain other tests are met. California Law
also provides that the corporation or the defendant in a
derivative suit may make a motion to the court for an order
requiring the plaintiff shareholder to furnish a security bond of
up to $50,000.
Under the FBCA, a person commencing a proceeding in the name
of the corporation must have been a shareholder of the
corporation at the time of the transaction complained of or must
have become a stockholder through a transfer by operation of law
from a person who was a stockholder at the time of the
transaction that is the subject of the stockholders' derivative
action.
None of the Webster Articles, Webster Bylaws, Cordis
Articles or Cordis Bylaws contains any additional provisions
relating to shareholder derivative suits.
Dissolution
Under California Law, shareholders holding 50% or more of
the total voting power may authorize a corporation's dissolution,
with or without the approval of the corporation's board of
directors.
Under the FBCA, a Florida corporation may be voluntarily
dissolved if (i) the board of directors adopts, and a majority of
shares approve, a proposal for dissolution, or (ii) shareholders
approve dissolution by written consent without a meeting.
Application of California Code Provisions to Florida Corporations
Under California Law, a corporation that is incorporated in
another state, but that (i) meets certain property, payroll and
sales level tests designed to measure the significance of the
corporation's contacts with the State of California and (ii) has
over half of its outstanding shares held of record by persons
having addresses in the State of California (excluding as
outstanding those shares held by broker-dealers and nominees
unless such broker-dealers and nominees certify as to the
addresses of the beneficial owners), is subject to a number of
provisions of the California Code. Such provisions include those
relating to (i) the removal of directors without cause, (ii) the
<PAGE>
removal of directors by court proceedings, (iii) the filling of
director vacancies where less than a majority of the directors in
office were elected by the shareholders, (iv) indemnification of
directors, officers and others, (v) limitations on distributions,
(vi) cumulative voting rights, (vii) super-majority voting
requirements, (viii) the requirement for shareholder approval of
a sale of assets to an interested party, (ix) the requirement
that holders of nonredeemable common shares receive nonredeemable
common shares in certain mergers, (x) voting and other
requirements relating to mergers, sale of assets reorganizations
and share exchange tender offers, (xi) dissenters' rights and
(xii) rights of inspection. The provisions of the California
Code are not imposed upon a corporation incorporated in another
state, if such corporation's shares are listed on the New York
Stock Exchange, the American Stock Exchange, or are traded in the
NASDAQ National Market System, and such corporation had 800 or
more shareholders as of the record date for its most recent
annual meeting of shareholders (with such number of shareholders
calculated based on the number of record shareholders plus the
number of shareholders as to which a broker-dealer or nominee
makes the address certification referred to above). As of
January 31, 1994 Cordis had 1,163 stockholders of record and its
Common Stock is traded on the NASDAQ National Market System.
<PAGE>
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(Unaudited)
The following unaudited pro forma condensed combined
financial statements give effect to the Merger of Cordis and
Webster on a pooling of interests basis. The pro forma condensed
combined balance sheet assumes that the Merger took place on
December 31, 1993 and combines the balance sheet of each company
at that date. The pro forma condensed combined statements of
operations assume that the Merger took place as of the beginning
of each of the periods presented and combine the statements of
operations for Cordis for the fiscal years ended June 30, 1993,
1992 and 1991, for Webster for the twelve months ended June 30,
1993, 1992 and 1991 and for each company for the six months ended
December 31, 1993 and 1992. As Webster's fiscal year end of
November 30 differs by more than 93 days from Cordis' fiscal year
end of June 30, Webster's statement of operations was restated to
the twelve months ended June 30.
The pro forma condensed combined financial statements are
presented for illustrative purposes only and are not necessarily
indicative of the operating results that would have been achieved
had the Merger been consummated as of the beginning of such
periods and should not be construed as representative of future
operations.
These pro forma condensed combined financial statements
should be read in conjunction with the historical financial
statements and related notes thereto of Cordis and Webster
included elsewhere in this Consent Statement/Prospectus.
CORDIS CORPORATION AND WEBSTER LABORATORIES, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
(Dollars in Thousands)
(Unaudited)
ASSETS
Cordis at Webster at
December 31, December 31, Pro Forma Pro Forma
1993 1993 Adjustments Combined
Current assets:
Cash and cash equivalents $ 46,533 $ 3,232 $ 49,765
Accounts receivable, net 64,271 1,952 66,223
Inventories 39,322 2,727 42,049
Deferred income taxes
and other 13,100 641 13,741
Total current assets 163,226 8,552 171,778
Property, plant and
equipment, net 59,631 2,370 62,001
Deferred income taxes
and other 13,612 15 13,627
TOTAL ASSETS $236,469 $10,937 $247,406
<PAGE>
CORDIS CORPORATION AND WEBSTER LABORATORIES, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
(Dollars in Thousands)
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
Cordis at Webster at
December 31, December 31, Pro Forma Pro Forma
1993 1993 Adjustments Combined
Current liabilities:
Notes payable $ 4,061 $ - $ 4,061
Accounts payable 6,825 227 7,052
Accrued expenses 35,676 664 36,340
Income taxes payable 7,627 224 7,851
Current portion of
long-term obligations 1,034 - 1,034
Net liabilities of
discontinued operations 1,025 - 1,025
Other current liabilities 137 930 1,067
Total current liabilities 56,385 2,045 58,430
Long-term debt 1,204 - 1,204
Net liabilities of discontinued
operations and other 7,049 - 7,049
Total long-term liabilities 8,253 - 8,253
Total liabilities 64,638 2,045 66,683
Mandatorily redeemable stock:
Preferred stock-Webster - 2,279 (2,279) -
Common stock-Webster - 34 (34) -
Note receivable from sale of
common stock - (34) 34 -
Total mandatorily
redeemable stock - 2,279 (2,279) -
Shareholders' equity:
Common stock-Cordis 14,310 - 1,770 16,080
Common stock-Webster - 183 (183) -
Capital in excess of
par value 63,985 27 726 64,738
Retained earnings 89,210 6,470 95,680
Foreign currency translation
adjustments 4,326 - - 4,326
Note receivable from sale of
common stock - (67) (34) (101)
Total shareholders' equity 171,831 6,613 2,279 180,723
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $236,469 $10,937 $ - $247,406
See notes to unaudited pro forma condensed combined financial
statements.
<PAGE>
CORDIS CORPORATION AND WEBSTER LABORATORIES, INC.
PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands except per share amounts)
Six Months Ended
December 31, Years Ended June 30,
1993 1992 1993 1992 1991
Net sales $152,600 $130,049 $267,446 $230,477 $202,560
Operating costs and
expenses:
Cost of goods sold 59,931 49,273 105,097 92,782 83,223
Research and development 12,195 10,441 20,139 19,793 14,872
Selling, general and
administrative 52,607 46,610 94,092 82,185 74,921
Total operating costs
and expenses 124,733 106,324 219,328 194,760 173,016
Operating profit 27,867 23,725 48,118 35,717 29,544
Interest expense,
net and other (1,029) 3,543 5,409 560 2,344
Income from continuing
operations before
income taxes and
cumulative effect of
accounting change 28,896 20,182 42,709 35,157 27,200
Provision for income
taxes 11,088 6,088 11,243 9,426 7,115
Income from continuing
operations and
cumulative effect of
accounting change $ 17,808 $ 14,094 $ 31,466 $ 25,731 $ 20,085
Income per common
and common
equivalent share
from continuing
operations and cumula-
tive effect of
accounting change
- Maximum $ 1.07 $ .87 $ 1.92 $ 1.64 $ 1.31
- Minimum $ 1.10 $ .88 $ 1.96 $ 1.67 $ 1.33
See notes to unaudited pro forma condensed combined financial
statements.
<PAGE>
NOTES TO PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
(Unaudited)
1. The pro forma condensed combined balance sheet reflects
the issuance of the maximum possible number of shares of Cordis
Common Stock of 1,770,372 in exchange for all of the outstanding
shares of Webster Preferred Stock and Webster Common Stock as of
December 31, 1993. The pro forma condensed combined balance
sheet does not reflect the potential issuance of shares of Cordis
Common Stock upon the exercise of Webster stock options. If the
minimum possible number of shares of Cordis Common Stock of
1,448,424 were to be issued, Common Stock - Cordis would be
approximately $15,758,000 and capital in excess of par value
would be approximately $65,060,000.
2. The pro forma condensed combined income from continuing
operations before cumulative effect of accounting change per
common and common equivalent share is based on the weighted
average number of common and dilutive equivalent shares of Cordis
and Webster for each period presented assuming a maximum exchange
ratio of .301072 share of Cordis Common Stock for each share of
Webster Common Stock, Webster Options and Webster Preferred Stock
and a minimum exchange ratio of .246321 share of Cordis Common
Stock for each share of Webster Common Stock, Webster Options and
Webster Preferred Stock. The number of Cordis common and common
equivalent shares used in the calculations of pro forma income
from continuing operations before cumulative effect of accounting
change per common and common equivalent share are (in
thousands):
Maximum
Six Months
Ended December 31, Years Ended June 30,
1993 1992 1993 1992 1991
Cordis 14,623 14,508 14,531 14,340 14,006
Webster 1,967 1,746 1,860 1,327 1,323
Combined company 16,590 16,254 16,391 15,667 15,329
Minimum
Six Months
Ended December 31, Years Ended June 30,
1993 1992 1993 1992 1991
Cordis 14,623 14,508 14,531 14,340 14,006
Webster 1,609 1,428 1,522 1,086 1,082
Combined company 16,232 15,936 16,053 15,426 15,088
Pro forma income from continuing operations before
cumulative effect of accounting change per common and common
equivalent share for the six months ended December 31, 1993 and
1992 and for the fiscal years ended June 30, 1993, 1992 and 1991
is calculated on a primary basis in accordance with the modified
treasury stock method. The calculations are based upon the
weighted average number of common shares outstanding plus
equivalent shares related to the assumed exercise of outstanding
common stock options when dilutive. The computation of fully-
diluted earnings per share resulted in no material dilution.
3. The table below sets forth the composition of the
unaudited pro forma combined revenue and income (loss) from
continuing operations before cumulative effect of accounting
change for each of the periods shown:
Six Months Ended
December 31, Years Ended June 30,
1993 1992 1993 1992 1991
Net sales:
Cordis $144,546 $124,486 $255,458 $222,959 $198,907
Webster 8,054 5,563 11,988 7,518 3,653
Combined company $152,600 $130,049 $267,446 $230,477 $202,560
Income from con-
tinuing operations
before cumulative
effect of accounting
change:
Cordis $16,499 $12,971 $29,060 $24,014 $ 19,332
Webster 1,309 1,123 2,406 1,717 753
Combined company $17,808 $14,094 $31,466 $25,731 $ 20,085
4. There are no intercompany revenue and no significant
adjustments required to be made to the historical financial
statements of Cordis and Webster to arrive at the pro forma
condensed combined balance sheet and pro forma combined
statements of operations. Certain reclassifications have been
made to make classifications for similar items consistent between
the companies on a pro forma combined basis.
5. Total costs to be incurred by Cordis and Webster in
connection with the Merger are estimated at $1,000,000. The
substantial portion of these costs, relating to legal,
accounting, printing, financial advisory and other related
services will be charged against income of the combined company
in the second half of fiscal year 1994. Accordingly, the effects
of these costs have not been reflected in the pro forma condensed
combined financial statements.
<PAGE>
INFORMATION REGARDING CORDIS
General
Cordis was incorporated in the State of Florida in 1959.
Cordis has its principal headquarters at 14201 N.W. 60th Avenue,
Miami Lakes, Florida 33014 and its telephone number is (305) 824-
2000.
Cordis operates in a single industry segment consisting of
the design, manufacture and sale of medical devices, primarily
angiographic catheters, neuroscience devices and other related
medical devices (See Note 9 of Notes to Consolidated Financial
Statements of Cordis).
Business
Cordis' net sales, with approximate breakdowns by major
product class during the past three fiscal years, were as follows
(in thousands):
Years ended June 30
1993 1992 1991
Angiographic products $238,334 $206,202 $181,787
Neuroscience products 17,124 16,757 17,120
Total $255,458 $222,959 $198,907
Angiographic Products
Cordis manufactures an extensive line of angiographic
devices for the diagnosis of various cardiovascular diseases and
for use in interventional angiography. The diagnostic devices
include catheters and related equipment that are inserted into a
patient's circulatory system to allow introduction of contrast
media enabling a physician to study the heart, blood vessels and
other soft-tissue organs for the purpose of determining the
proper treatment of patients exhibiting disorders of such
tissues. The interventional devices include balloon dilatation
catheters, guiding catheters, steerable guidewires and accessory
products which are used to treat such patients.
Neuroscience Products
Cordis manufactures and sells several types of neuroscience
products, including implantable cerebrospinal fluid ("CSF") shunt
systems for the treatment of hydrocephalus (an excess
accumulation of CSF in the ventricles of the brain) and
disposable intracranial pressure monitoring and drainage systems.
Principal Markets, Methods of Distribution
Cordis' products are sold worldwide to hospitals and other
medical institutions and physicians. In the U.S., all products
are sold directly through full-time employee sales
representatives. Outside the U.S., they are sold through
employee sales representatives and distributors. Cordis
maintains inventories of products in various locations worldwide.
Periodically, backlog orders have occurred, but have not been
material to Cordis' business. An increasing number of hospitals
in the U.S. participate in group purchase organizations. These
organizations negotiate prices on behalf of their member
organizations. Cordis' business is generally not subject to
seasonal fluctuations.
Sources and Availability of Raw Materials
Cordis' products incorporate components manufactured
internally as well as those purchased from external suppliers.
Most purchased products could be obtained from multiple sources
if necessary.
Patents, Trademarks and Licenses
Cordis currently owns over 325 patents, has several patents
pending on certain of its products and files applications to
obtain patents on new inventions when practical. Additionally,
Cordis has and endeavors to obtain licenses from third parties
for technology it deems necessary or beneficial to the conduct of
its business. The industry in which Cordis competes has been
characterized by rapid technological advances and Cordis does not
believe its business is materially dependent on any individual
patent. For two consecutive years, Business Week magazine has
named Cordis as the leader in high impact patents (patents that
are frequently cited).
Competition
Cordis' products compete with those of a number of other
domestic and foreign manufacturers. Success in the medical
device field is dependent upon product quality, reliability,
design features, service, price, and the relationship between
Cordis and the physicians utilizing the products. Cordis
believes that its product lines are competitive with other
product lines in the market.
In the sale of angiographic products Cordis competes with
several manufacturers, including C. R. Bard, Inc., Scimed Life
Systems, Inc. and divisions of Eli Lilly and Company and Pfizer,
Inc., some of whom compete in the sale of diagnostic products,
others in the sale of interventional products, and some in both.
Based upon current information Cordis believes that it is a
leading provider of diagnostic angiographic products, and a less
substantial provider in the sale of interventional angiographic
products for which demand is growing rapidly.
With the rapid progress of medical technology Cordis'
products are always subject to the risk of obsolescence through
the introduction of new products or techniques.
International Operations
In addition to the U.S. manufacturing operations, Cordis
manufactures products at its facilities in Roden, The
Netherlands, and Biot, France. Cordis' European headquarters is
located in Brussels, Belgium, and Cordis has sales and marketing
offices in many European countries, Canada and Japan.
Operations in countries outside the U.S. are subject to
certain financial and other risks, including currency
restrictions, currency exchange fluctuations and changes in
foreign laws. Several countries in which Cordis does business
have enacted laws and regulations that are protectionist in
nature and that have resulted in increased costs and operational
efforts by Cordis in order to continue to effectively compete in
those countries. However, Cordis does not believe that such laws
and regulations will have a material adverse effect on Cordis'
foreign operations.
Research and Development
Cordis is continually engaged in product development and
improvement programs. A major portion of development resources
is devoted to interventional angiographic devices and to a lesser
extent to diagnostic devices. Additionally, Cordis invests a
portion of development funds on advanced technologies for the
treatment of vascular diseases. During the fiscal years ended
June 30, 1993, 1992 and 1991, Cordis spent approximately $19.1
million, $19.3 million and $14.7 million, respectively, on
research and development activities.
Government Regulation
Cordis' activities are regulated by the United States Food
and Drug Administration ("FDA") and several state and foreign
governmental authorities. The FDA regulations govern the
testing, marketing and registration of new medical devices, in
addition to regulating manufacturing practices, labeling and
record keeping procedures. The process of obtaining clearance
from the FDA to market products either through pre-market
approvals or pre-market notifications is costly and time
consuming and can delay the marketing and sale of Cordis'
products. Additionally, there is no assurance that such approval
will be granted. The FDA can subject Cordis to inspections of
its facilities and operations and may also restrain violations of
the Food, Drug and Cosmetic Act. See "INFORMATION REGARDING
CORDIS -- Cordis Management's Discussion and Analysis of
Financial Condition and Results of Operations"). Medical device
laws, ranging from device approval requirements to requests for
product data and price controls, are in effect in many countries
in which Cordis does business outside the United States. In
addition, government reimbursement policies for health care costs
are becoming increasingly important factors for medical device
companies. In 1993, the Clinton Administration commenced a
review of the Federal health care program and announced that it
will formulate proposals designed to broaden coverage and reduce
the cost of existing government and private insurance programs.
It is uncertain at this time what impact, if any, the Clinton
Administration's proposals will have on Cordis. Any changes that
limit or reduce reimbursement for Cordis' products could have a
material adverse effect on the financial condition of Cordis.
Cordis is also subject to federal, state and local laws
which regulate the discharge of materials into the environment
and which seek to protect the environment. Compliance with such
laws has not resulted in material expenditures nor are such
expenditures anticipated to have a material adverse effect on
Cordis' business.
Employees
As of January 31, 1994, Cordis and its subsidiaries had
approximately 3,030 employees.
Financial Information Relating to Foreign and
Domestic Operations and Export Sales
For a summary of foreign and domestic operations and segment
reporting, see Note 9 of Notes to Consolidated Financial
Statements of Cordis.
Properties
Cordis' principal facilities are located in Miami Lakes,
Florida, Roden, The Netherlands, and Biot, France and consist of
manufacturing plants and research and administrative offices,
which are owned by Cordis. Cordis owns most of its production
machinery and equipment. Cordis is evaluating its need for
expansion of facilities based on its expected growth. Management
believes Cordis' manufacturing facilities are adequate for
current levels of operation.
In September 1991 Cordis subleased its former Administrative
and Technical Center to a third party for a term equal to the
remaining term of its capitalized lease (see Note 3 of Notes to
Consolidated Financial Statements of Cordis).
Legal Proceedings
Cordis is engaged in various ordinary routine litigation and
administrative proceedings incidental to the business of Cordis,
some of which involve claims for substantial amounts of money and
include claims for punitive damages. Cordis does not, however,
anticipate that any amounts required to be paid by reason thereof
will, in the aggregate, have a material adverse effect on the
financial condition of Cordis.
Cordis self-insures a portion of its products liability
claims and maintains insurance coverage in excess of that
retention. Such insurance may not cover or indemnify awards of
punitive damages. Cordis believes its insurance coverage is
adequate to protect it against any product related losses that
could otherwise have a material adverse effect on the financial
condition of Cordis.
As part of a transaction involving the sale of Cordis'
pacing operations in 1987, the purchaser assumed certain
contingent liabilities including several pending lawsuits.
However, Cordis retained liability for any punitive damages
awarded in connection with pacer-related products liability
litigation involving products sold by Cordis prior to April 30,
1987. Since 1987 there have been no such punitive damage awards,
nor does Cordis anticipate that future awards, if any, would have
a material adverse effect on the financial condition of Cordis.
In December 1988, Cordis was sued in the U.S. District Court
for the Southern District of Florida by approximately 160 former
Cordis employees who became employed by the company which
purchased the pacing operations in 1987. The suit alleged that
these employees were entitled to severance benefits and pay in
lieu of notice as a result of their termination of employment
with Cordis. In January 1993, the Court granted Cordis' cross
motion for summary judgment. The former employees have appealed
the decision.
On or about May 1, 1990 a class action suit was filed by a
former employee of Cordis against Cordis, the Cordis Retirement
Plan, and the Cordis Retirement Plan Administration Committee, in
the U.S. District Court for the Southern District of Florida,
alleging that the former employees who became employed by the
purchaser of the pacing operations were entitled to lump sum
distributions under the Cordis Retirement Plan and that Cordis
failed to notify class members of their right under COBRA to
elect continued health insurance coverage under Cordis' health
insurance plans upon termination of their employment with Cordis,
thus entitling the class to statutory penalties. The District
Court Judge granted Cordis' motion to dismiss the lump sum claim.
The former employee voluntarily dismissed the COBRA claim and has
appealed the lump sum count.
In December 1989, Cordis' former Middle Eastern distributor
filed an action in the United States District Court for the
Southern District of Florida, alleging breach of contract,
intentional interference with business relationships and wrongful
termination and is seeking monetary damages against Cordis.
Cordis subsequently counterclaimed against the distributor for
damages relating to fraud, defamation and breach of contract.
The case is presently in the discovery stage with a trial date in
September 1994. Cordis believes that the distributor's claim is
without merit and intends to continue to vigorously contest the
action.
In October 1992, a suit was filed by Schneider (USA) Inc.
against Cordis in the United States District Court for the
District of Minnesota, Third Division, alleging that certain of
Cordis' angiographic catheters and Cordis' guiding catheters
infringe a Schneider patent. Cordis has counterclaimed by
alleging that certain of Schneider's guiding catheters infringe
one of Cordis' patents. Discovery proceedings are continuing,
with a cutoff period established for September 1994.
It is not expected that the outcome of the litigation
described above either individually or in the aggregate will have
a material adverse effect upon the financial condition of Cordis.
In November 1986, a product liability class action suit was
filed against Cordis and others in the United States District
Court for the Southern District of Ohio. The suit seeks
compensatory and punitive damages regarding certain of Cordis'
pacemakers. In 1989, a second pacemaker class action lawsuit was
filed against Cordis in the United States District Court for the
Eastern District of California. This case was transferred and
consolidated with the Ohio action in 1990.
Cordis has vigorously defended the pacemaker product
liability class action since its inception. In December 1992,
the court conditionally certified the proceedings as a class
action. The Complaint claims substantial compensatory and
punitive damages are due to the class members. However, the
number of claimants and nature and extent of damages allegedly
suffered by any purported class members are not yet known and
Cordis is unable to meaningfully assess the likely final outcome
of the class action litigation. Cordis believes it has defenses
to plaintiffs' claims and, as more fully described below, that it
has available adequate and effective indemnification and
insurance coverage.
Beginning in 1986 and thereafter, Cordis duly notified its
insurance carriers of the filing of the initial pacemaker class
action. In response, the carriers agreed to provide a defense to
Cordis, subject to various reservations of rights. Such
insurance may not cover or indemnify against awards of punitive
damages.
In 1987, subsequent to the filing of the pacemaker class
action claim, Cordis sold its pacemaker business to TNC Medical
Devices Pte, Ltd. ("TNC"). As part of that transaction, TNC
agreed to indemnify Cordis for contingent liabilities relating to
its pacemaker operations, including the pacemaker class action
litigation and other pacemaker product liability actions, except
for any award of punitive damages. This obligation was
guaranteed by Telectronics Holdings, Ltd., the parent of TNC. In
past pacemaker cases, there has never been an award of punitive
damages against Cordis.
In November and December 1993, Cordis' insurance carriers
filed two separate actions against Cordis and TNC in the United
States District Court for the Southern District of Florida,
seeking a declaratory adjudication of the extent of their duties
to defend and indemnify Cordis for claims made in the pacemaker
class action. Additionally the carriers seek an adjudication
that, in connection with TNC's acquisition of Cordis' pacemaker
business, TNC agreed to assume the primary obligation to defend
and indemnify Cordis for the pacemaker product liability
litigation. Cordis intends to vigorously respond to the
insurance carriers' lawsuits and urge the court to affirm the
responsibility of Cordis' insurance carriers and TNC for any
award of compensatory damages and all defense costs relating to
the pacemaker product liability class action. Only in the event
that the class action plaintiffs are successful in their claims
and Cordis' defenses are rejected, and there is an adjudication
that neither Cordis' insurance carriers nor TNC and its parent
have responsibility for any such liability (or Cordis is unable
to collect any amounts owed to it pursuant to the terms of TNC's
indemnity or the guarantee of TNC's parent), could these lawsuits
have a material adverse effect on Cordis' financial condition.
Based upon current facts, communications with outside counsel and
internal analyses of the cases, Cordis believes that such an
outcome is unlikely.
<PAGE>
Selected Consolidated Financial Data of Cordis
The following selected consolidated financial data has been
derived from Cordis' historical consolidated financial statements
and should be read in conjunction with such consolidated
financial statements, related notes thereto and with Cordis
Management's Discussion and Analysis of Financial Condition and
Results of Operations, all of which are contained elsewhere in
this Consent Statement/Prospectus. The selected consolidated
financial data as of June 30, 1991, 1990 and 1989 and for the
fiscal years ended June 30, 1990 and 1989, has been derived from
the consolidated financial statements of Cordis not included
herein. The selected consolidated financial data for the six-
month periods ended December 31, 1993 and 1992 is derived from
the unaudited financial statements of Cordis, which in the
opinion of Cordis management include all adjustments, consisting
only of normal recurring adjustments, necessary for a fair
statement of the results for the unaudited interim periods.
Operating results for the six months ended December 31, 1993 are
not necessarily indicative of the results that may be expected
for the entire fiscal year ending June 30, 1994.
<TABLE>
<CAPTION>
Six Months
Ended December 31, Fiscal Year Ended June 30,
1993 1992 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $144,546 $124,486 $255,458 $222,959 $198,907 $163,674 $141,220
Income from con-
tinuing opera-
tions before
income taxes,
equity in loss in
joint venture and
cumulative effect
of accounting
change $ 26,714 $ 18,311 $ 38,715 $ 32,289 $ 25,970 $ 17,196 $ 9,363
Provision for
income taxes 10,215 5,340 9,655 8,275 6,638 4,159 394
Equity in loss in
joint venture _ _ _ _ _ (2,880) (2,420)
Income from continuing
operations before
cumulative effect
of accounting
change $ 16,499 $ 12,971 $ 29,060 $ 24,014 $ 19,332 $ 10,157 $ 6,549
Earnings per share:
Income from continuing
operations before
cumulative effect
of accounting
change $ 1.13 $ .89 $ 2.00 $ 1.67 $ 1.38 $ .75 $ .49
Total assets $236,469 $183,054 $204,291 $168,154 $141,981 $145,778 $129,940
Long-term
liabilities $ 8,253 $ 8,733 $ 8,093 $ 9,677 $ 29,948 $ 36,855 $ 40,519
Cash dividends
declared per
common share $ _ $ _ $ _ $ _ $ _ $ _ $ _
/TABLE
<PAGE>
Cordis Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Six Months Ended December 31, 1993
Sales
For the six months ended December 31, 1993 net sales were
$144.5 million, up $20.1 million (16%) from the same period last
year. The increase in sales was principally due to increased
sales volumes of Cordis' interventional angiographic products.
Foreign sales, which also benefited from the increased
interventional angiography sales volumes, increased by
$11.6 million (16%) and accounted for 57% of total sales. Had
currency exchange rates remained constant throughout the periods,
foreign sales would have increased by 33%.
Sales of angiographic products were $136.9 million for the
six months ended December 31, 1993, which represented an increase
over the prior year of $21.4 million (19%). Sales of
neuroscience products decreased $1.4 million (15%) in the same
period, mainly due to a large order from Eastern Europe in the
prior year which did not recur in this period.
Operating Costs and Expenses
Cost of goods sold expressed as a percent of sales was 40%
in the six months ended December 31, 1993 compared to 38% of
sales in the corresponding period of the prior fiscal year. The
two percentage point decrease in the gross profit margin was
principally due to higher royalty and license fee expenses. In
the six months ended December 31, 1993, royalty and license fee
expenses were 3% of sales compared to 1% a year ago due to
increased royalty expenses on significantly higher sales
worldwide of PTCA balloon catheters and a $1.6 million charge
with respect to a license agreement with C. R. Bard for the
license of PTCA balloon catheter technology, of which
$1.3 million relates to the period from May 1991 to June 1993.
Offsetting these increases to a certain extent were lower product
costs due to a more favorable sales mix of products.
Research and development expenses for the six months ended
December 31, 1993 were $11.1 million, up $1.1 million (11%) from
the prior year. The increase in research and development
expenses was principally due to increased spending in the U.S. on
the development of interventional angiography and other products.
Expressed as a percent of sales, research and development
expenses were 8% in each period.
Selling, general and administrative expenses for the six
months ended December 31, 1993 were $49.9 million, up
$4.9 million (11%) from last year. The increase in selling,
general and administrative expenses was principally due to higher
legal expenses, increased sales commissions and promotional
expenses due to higher sales, and higher salaries and travel
expenses due to headcount increases. However, favorable currency
exchange rate effects in Europe partially offset these factors.
If currency rates had remained constant throughout the periods,
selling, general and administrative expenses would have
increased 19% over last year. Expressed as a percent of sales,
selling, general and administrative expenses were 35% in the
current period, compared to 36% in the same period last year.
Other Expenses (Income)
Interest and other income, net increased by $4.5 million in
the six months ended December 31, 1993. The increase was
principally due to lower currency transaction losses related to
inventory purchases, lower reserves for uncollectible investments
and other issues which did not recur in fiscal 1994.
Income Taxes
The consolidated effective income tax rate for the six
months ended December 31, 1993 was 38% compared to 29% in the
corresponding prior year period. The increase in the effective
rate was caused by the adoption of Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes" at the beginning of the current fiscal year (see Note 6 of
Notes to Consolidated Financial Statements of Cordis).
Cumulative Effect of Accounting Change
As stated in the preceding paragraph, and as more fully
explained in Note 6 of Notes to Consolidated Financial Statements
of Cordis, Cordis adopted SFAS No. 109 on July 1, 1993. The
effect of the adoption was reflected as a one time benefit of
$10.1 million ($0.69 per share) in the Consolidated Statement of
Operations under the caption "Cumulative Effect of Accounting
Change" in the first quarter of fiscal 1994.
Net Income
Income before the cumulative effect of an accounting change
for the six months ended December 31, 1993 was $16.5 million
($1.13 per share) compared to $13.0 million ($0.89 per share) in
the prior year period. Net income for the six months ended
December 31, 1993 was $26.6 million ($1.82 per share) compared to
$13.0 million ($0.89 per share) in the prior year period.
Fiscal Years Ended June 30, 1993, 1992 and 1991
Sales
Net sales in fiscal 1993 were $255.5 million, an increase of
$32.5 million (15%) over fiscal 1992. Sales in fiscal 1992 of
$223.0 million were $24.1 million (12%) higher than fiscal 1991.
Sales of angiographic products were $238.3 million in 1993,
an increase of $32.1 million (16%) from 1992. Most of this
increase occurred on sales outside the U.S., where, due to
increased sales volumes of both interventional cardiology
products (PTCA balloon catheters, guiding catheters and steerable
guidewires) and diagnostic cardiology products (cardiology
catheters and catheter sheath introducers), foreign sales
increased by $25.9 million (24%) from 1992, and accounted for 56%
of worldwide angiography sales in 1993 compared to 53% in 1992
and 52% in 1991. Sales of angiography products in the U.S. in
1993 were $103.9 million, an increase of $6.2 million (6%) over
1992. All of the U.S. sales increase was derived from higher
sales of interventional cardiology products.
In 1992, worldwide angiography sales were $206.2 million, an
increase of $24.4 million (13%) over 1991. U.S. sales increased
$10.1 million (12%) and foreign sales increased $14.3 million
(15%); the U.S. increase was caused by higher sales volumes of
PTCA balloon catheters and cardiology catheters. The foreign
increase was due to higher sales volumes of cardiology catheters
and guiding catheters and significant favorable currency exchange
rate effects.
Had currency exchange rates remained constant throughout the
three year period, the respective sales increases in 1993 over
1992 and 1992 over 1991 would have been 23% and 20% for foreign
angiography sales and 15% and 16% for worldwide angiography
sales.
Sales of neuroscience products in 1993 were $17.1 million,
$0.4 million (2%) higher than 1992; sales in 1992 of
$16.8 million were $0.3 million (2%) lower than 1991. The 1993
increase occurred principally on foreign sales due to higher
sales of pressure monitoring and drainage systems and other
products, while the decrease from 1991 to 1992 was principally
due to a large order in Eastern Europe in 1991 which did not
recur in 1992.
Operating Costs and Expenses
Cost of goods sold as a percent of net sales was 40% in 1993
and 1992, and was 41% in 1991. Compared to 1992, an increase in
the gross profit margin in 1993 due to proportionately higher
sales of higher margin cardiology products was offset by higher
product costs in Europe due to the effects of adverse currency
exchange rate changes upon the costs of products manufactured in
the U.S. and currency devaluations in certain countries, and
higher royalty expenses on sales of certain angioplasty
catheters. The increase in the 1992 gross profit margin over
1991 was principally due to lower unit angiography product costs
due to increased production volumes.
Research and development expenses were $19.1 million in
1993, a decrease of $0.2 million (1%) from 1992 which was
principally due to lower spending in Europe on diagnostic
cardiology products. Spending in the U.S. increased 13% over
1992, principally on interventional cardiology projects; however,
this increase was offset by the capitalization into inventory of
balloon-tipped catheters manufactured in engineering prior to the
permanent transfer of production to manufacturing. In 1992,
research and development expenses increased $4.6 million (31%) to
$19.3 million from $14.7 million in 1991. This increase was
principally due to higher spending in the U.S. on interventional
angioplasty products. As a result of this spending in 1992,
several new angioplasty products were introduced in 1993.
Expressed as a percent of net sales, research and development
spending was 7% in 1993, 9% in 1992 and 7% in 1991.
Selling, general and administrative expenses were
$90.3 million in 1993 compared to $81.0 million in 1992, an
increase of $9.3 million (11%). The increase was due to higher
employee related expenses, sales commissions, travel expenses and
promotional expenses. Comparing 1992 with 1991, selling, general
and administrative expenses increased $6.4 million (9%). The
increase was principally caused by the same factors affecting
1993 expenses. Had currency exchange rates remained constant
throughout the periods, the increases in selling, general and
administrative expenses in 1993 and 1992 would have been 10% and
11%, respectively. Expressed as a percent of net sales, selling,
general and administrative expenses were 35% in 1993, 36% in 1992
and 37% in 1991.
Other Expenses (Income)
Net interest expense in 1993 was $1.6 million lower than
1992, due principally to lower average outstanding debt, while in
1992 net interest expense was approximately the same as 1991.
Net other expense was $6.5 million higher in 1993 compared
to 1992, principally due to higher currency transaction losses on
inventory purchases in Europe and Canada ($2.3 million), a
reserve for uncollectible investment of $2.0 million (see Note 3
of Notes to Consolidated Financial Statements of Cordis) and
other items. In 1992, net other income was $1.7 million higher
than 1991 due to higher royalty income and lower reserves for
uncollectible notes receivable.
Income Taxes
Expressed as a percent of income from continuing operations
before income taxes, the income tax provisions were 25%, 26% and
26% in 1993, 1992 and 1991, respectively. The slight decrease in
the effective rate from 1992 to 1993 was principally due to lower
effective rates in Europe due to the utilization of net operating
loss carryforwards in France as a result of the generation of
profits in that subsidiary compared to losses in prior years for
which there was no carryback benefit.
Discontinued Operations
The $9.8 million loss from discontinued operations in 1991
related to the sublease of the Cordis' ATC facility in September
1991 (see the Liquidity and Capital Resources section, below, and
Note 3 of Notes to Consolidated Financial Statements of Cordis).
Net Income
Income from continuing operations was $29.1 million in 1993,
an increase of $5.0 million (21%) over 1992, and was
$24.0 million in 1992, an increase of $4.7 million (24%) over
1991. The increase in net income in 1993 was the same as
indicated above, while net income in 1992 was $14.5 million
(152%) higher than 1991 after the $9.8 million loss from
discontinued operations in 1991.
Earnings per share from continuing operations was $2.00 in
1993 compared to $1.67 in 1992 and $1.38 in 1991. Net income per
share was $2.00 in 1993 compared to $1.67 in 1992 and $0.68 in
1991.
Liquidity and Capital Resources
Cash and cash equivalents increased by $8.1 million to
$46.5 million at December 31, 1993 from $38.4 million at June 30,
1993. During the same period, working capital increased by
$19.8 million and the current ratio increased to 2.9 from 2.6.
The long-term debt to equity ratio remained constant at
approximately zero (exclusive of the capital lease liability
which has been classified as a net liability of discontinued
operations - see Note 3 of Notes to Consolidated Financial
Statements of Cordis). During the six months ended December 31,
1993, operations generated cash of approximately $20.7 million
compared to $9.8 million in the same period last year. The
$10.9 million increase was principally caused by increased cash
collections on higher sales, offset to a certain extent by
increased cash payments for incremental operating expenses. Net
cash used in investing activities, principally additions to
property, plant and equipment, increased to $7.4 million from
$5.4 million a year ago. Higher net retirement of debt,
principally short-term borrowings in Europe, and lower proceeds
from the sale of stock options caused cash of $5.3 million to be
used in financing activities for the six months ended December
31, 1993 compared to a net increase in cash of $6.9 million in
the year-earlier period. Total assets increased by $32.2 million
(16%) between December 31, 1993 and June 30, 1993. The major
items that contributed to the increase were as follows:
- - Cash and cash equivalents increased $8.1 million (21%) as
explained above,
- - Accounts receivable increased $5.9 million (10%) due to
proportionately higher sales in the six-month period ended
December 31, 1993 compared to the six-month period ended
June 30, 1993,
- - Inventories increased $4.6 million (13%) in response to the
increased demand for Cordis' products,
- - Current and non-current deferred income taxes combined
increased $15.0 million (354%) due to the adoption of SFAS
No. 109 at July 1, 1993 (see Note 6 of Notes to Con-
solidated Financial Statements of Cordis).
Cash and cash equivalents increased $25.3 million from
$13.1 million at June 30, 1992 to $38.4 million at June 30, 1993.
Working capital increased $22.4 million in the same period. The
current ratio increased to 2.6 from 2.5, and the long-term debt
to equity ratio remained at approximately zero (exclusive of the
capital lease liability which has been classified as a net
liability of discontinued operations - see Note 3 of Notes to
Consolidated Financial Statements of Cordis). In fiscal 1993,
cash of $30.2 million was generated from operations compared to
$23.9 million in fiscal 1992, mainly due to increased cash
collections from higher sales offset to a certain extent by
increased cash payments for incremental operating expenses.
Additions to property, plant and equipment were $3.3 million
higher in 1993 compared to 1992 which explained most of the
$2.9 million increase in cash used in investing activities. The
year-to-year increase in cash provided by financing activities
was $20.7 million, which was principally due to increased short-
term borrowings and lower debt reduction, and higher proceeds
from the sale of common stock. Total assets at June 30, 1993
increased by $36.1 million (21%) from June 30, 1992. The
increase occurred principally in the following areas:
- - Cash and cash equivalents increased by $25.3 million (192%)
for the reasons outlined above,
- - Accounts receivable increased by $3.3 million (6%) due
principally to higher sales in fiscal 1993's fourth quarter
compared to the same period in fiscal 1992. The fourth
quarter sales growth was 14%; the apparent disproportionate
change in accounts receivable balances compared to sales
growth was due to changes in the exchange rates of various
European currencies compared to the U.S. dollar. More than
half of the accounts receivable balances are denominated in
European currencies; had currency exchange rates remained
constant throughout the periods, the growth rates in sales
and accounts receivable balances would have been more
comparable,
- - Inventories increased by $3.8 million (12%) to meet the
increased demand for Cordis' products,
- - Other current assets increased by $1.7 million (30%) due
principally to the receivable portion of a foreign currency
contract entered into in fiscal 1993 offset by the reclass-
ification of a preferred stock investment to other assets
(see Note 3 of Notes to Consolidated Financial Statements
of Cordis).
Current liabilities increased by $13.4 million (32%) due
principally to increased short-term borrowings in Europe
($6.5 million) and the currency contract payable referred to
above ($3.9 million).
Cordis has a $25 million line of credit and a $2 million
letter of credit facility with a U.S. bank. No borrowings were
outstanding under the agreement either at December 31, 1993 or
June 30, 1993. In addition, Cordis continues its policy of
borrowing funds in Europe to provide financing of local
receivables and to partially hedge its foreign currency
positions. At December 31, 1993 such loans totaled $4.1 million
compared to $9.1 million at June 30, 1993.
In September 1991 Cordis subleased ATC which is held under a
capitalized lease until December 31, 2005 (see Note 3 of Notes to
Consolidated Financial Statements of Cordis). Under the terms of
the sublease the sublessee is responsible for substantially all
of the operating expenses of the property, in addition to rental
payments. As discussed in Note 3, Cordis recorded a charge of
$9.8 million to discontinued operations in fiscal 1991 as a
result of the discounted shortfall in rental income compared to
the underlying payments over the remaining term of the
capitalized lease. A significant part of the shortfall was
eliminated in fiscal 1992 with the payment to the sublessee of
$5 million in leasehold improvement allowances.
Management anticipates that cash generated from operations
and utilization of its credit lines, if necessary, will be
sufficient to meet Cordis' current operating requirements and to
cover the shortfall in rental income from the sublease of ATC
compared to the underlying lease payments over the lease term.
On a long-term basis, management will continue to address Cordis'
liquidity requirements and implement necessary financing
strategies.
<PAGE>
BENEFICIAL OWNERSHIP OF CORDIS COMMON STOCK
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth as of January 31, 1994 the
number of shares of Cordis Common Stock beneficially owned by
each Director and by each of the Executive Officers of Cordis
named below:
Number of Percentage
Common Shares of Ownership
Beneficially (* Designates
Beneficial Owners(1) Owned Less than 1%)
David R. Challoner, M.D. 8,700(2) *
Richard W. Foxen 9,000(2) *
Donald F. Malin, Jr. 8,500(2) *
Robert Q. Marston, M.D. 9,075(2) *
Jan L. de Ruyter van Steveninck 8,000(3) *
Patricia K. Woolf, Ph.D. 9,400(2) *
Robert C. Straus 159,848(4) 1.1%
Rudy J. Kranys 114,699(5) *
Alfred J. Novak 69,947(6) *
Egbert Ratering 102,811(7) *
Philip J. Monks 64,028(8) *
All Directors and Executive
Officers as a group (18)
including the above 845,327(9) 5.6%
___________________________
(1) Beneficial ownership, as listed in the chart, includes
shares of Cordis Common Stock directly owned or held by the
persons named and the group referred to, or by certain
members of their families.
(2) Includes 8,000 shares of Cordis Common Stock which may be
acquired, when vested, by the exercise of options granted
under the Cordis Corporation Director Non-Qualified Stock Option Plan.
(3) Consists of 8,000 shares of Cordis Common Stock which may
be acquired, when vested by the exercise of options granted
under the Cordis Corporation Director Non-Qualified Stock
Option Plan. Mr. van Steveninck exercised 9,400 shares
during fiscal 1993 with a value realized of $128,075.
(4) Includes 120,000 shares of Cordis Common Stock which may
be acquired, when vested, by the exercise of options
granted under the Cordis Corporation Non-Qualified Stock Option Plan.
(5) Includes 63,000 shares of Cordis Common Stock which may be
acquired, when vested, by the exercise of options granted
under the Cordis Corporation Non-Qualified Stock Option Plan.
(6) Includes 56,000 shares of Cordis Common Stock which may be
acquired, when vested, by the exercise of options granted
under the Cordis Corporation Non-Qualified Stock Option Plan.
(7) Includes 61,000 shares of Cordis Common Stock which may be
acquired, when vested, by the exercise of options granted
under the Cordis Corporation Non-Qualified Stock Option Plan.
(8) Includes 61,000 shares of Cordis Common Stock which may be
acquired, when vested, by the exercise of options granted
under the Cordis Corporation Non-Qualified Stock Option Plan.
(9) Includes 650,000 shares of Cordis Common Stock which may be
acquired, when vested, by the exercise of options granted
under the Cordis Corporation Non-Qualified Stock Option Plan
and Director Non-Qualified Stock Option Plan.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN OTHER BENEFICIAL OWNERS
The following chart names all beneficial owners (other than
management of Cordis) of Cordis' voting stock known to
Cordis to own more than 5% of the voting stock on February 10, 1994.
Name and Address Number of Common Percentage
of Beneficial Owner Shares Owned of Ownership
FMR Corp. 1,896,200 (1) 12.92% (1)
82 Devonshire Street
Boston, MA 02109-3614
Twentieth Century Companies, Inc. 975,000 (2) 6.8% (2)
4500 Main Street
P.O. Box 418210
Kansas City, MO 64141-9210
Attn: Patrick A. Looby
J. & W. Seligman & Co. Incorporated 836,700 (3) 5.86% (3)
100 Park Avenue
New York, New York 10017
_____________________
(1) Based on a Schedule 13G filed on February 14, 1994.
According to the Schedule 13G, FMR Corp. claims that it has
(i) sole power to vote or direct the vote of 52,300 shares;
(ii) shares power to vote or direct the vote of 0 shares;
(iii) has sole power to dispose or to direct the disposition
of 1,896,200 shares; and (iv) shares power to dispose or to
direct the disposition of 0 shares. The Schedule 13G also lists
Mr. Edward C. Johnson 3d ("Mr. Johnson") as a reporting
person, and provides that Mr. Johnson is the owner of 34% of
the outstanding voting common stock of FMR Corp.
(2) Based on a Schedule 13G filed on February 10, 1994 by Twentieth
Century Companies, Inc. ("TCC"), on its behalf and
on behalf of Investors Research Corporation ("IRC"), Twentieth
Century Investors, Inc. ("TCI") and James E. Stowers, Jr.
("Mr. Stowers"). According to the Schedule 13G: (i) IRC, an
investment advisor registered under Section 203 of the
Investment Advisors Act of 1940, is a wholly-owned subsidiary of
TCC; (ii) Mr. Stowers controls TCC by virtue of his ownership
of approximately 60% of the voting stock of TCC; (iii) as a
result of its status as an investment advisor to four investment
companies registered under Section 8 of the Investment Company
Act and to several institutional investors, IRC is deemed to be
the beneficial owner of and has sole authority to dispose of and
vote 975,000 shares (the "IRC Shares") or 6.8% of the outstanding
common stock of Cordis; (iv) TCC, as a result of its control of
IRC, and Mr. Stowers, as a result of his control of TCC, are
also deemed to beneficially own all such shares deemed to be
beneficially owned by IRC; and (v) Mr. Stowers, TCC and IRC
all disclaim beneficial ownership of the IRC Shares.
(3) Based on a Schedule 13G filed on February 11, 1994. According
to the Schedule 13G, J. & W. Seligman Co. Incorporated claims
that it (i) has sole power to vote or direct the vote of 388,700
shares; (ii) shares power to vote or direct the vote of
0 shares; (iii) has sole power to dispose or to direct the
disposition of 676,500 shares; and (iv) shares power to dispose
or to direct the disposition of 160,200 shares.
<PAGE>
DIRECTORS OF CORDIS
Cordis' Directors are elected annually by the stockholders of
Cordis. Cordis' bylaws provide for a Board of not less
than three, nor more than nine directors, but permits the stockholders
and/or the Directors to leave vacancies on the Board of Directors
as they shall designate or determine. Cordis' bylaws also provide
that the number of Directors may be increased or diminished from
time to time, by bylaws adopted by the stockholders, but shall
never be less than three.
There are currently seven Directors of Cordis. Directors who
are compensated as employees of Cordis receive no additional
compensation as Directors. Each Director who is not an employee
of Cordis receives, effective January 1, 1993, an annual retainer of
$20,000; a fee of $1,000 for each Board Meeting attended; and $750 for
each Committee Meeting attended. Committee Chairmen are paid $1,000
for each Committee Meeting attended. The Chairman of the Board of
Directors receives, effective January 1, 1993, an annual retainer
of $75,000, but receives no additional compensation for meeting attendance.
The following table indicates each of Cordis' Directors' age,
principal occupation or employment currently and for the past five
years, and the date each person was first elected as Director.
Year first
Principal Occupation elected
Name (age) or Employment a Director
Robert Q. Marston, Retired. President Emeritus, University 1985
M.D. (71) of Florida. Former Director, National
Institutes of Health. Member, Institute
of Medicine, National Academy of
Sciences. Former Director, Johnson &
Johnson Corporation. Director, The
Wackenhut Corporation and First National
Bank of Alachua, Florida.
David R. Challoner, Vice President for Health Affairs, 1990
M.D. (58) University of Florida. Chairman of the
Board, Shands Hospital at the University of
Florida. Former Dean, St. Louis University
School of Medicine. Member, Institute of
Medicine, National Academy of Sciences.
Member, Directors' Advisory Committee,
National Institutes of Health. Former
President, American Federation for Clinical
Research.
Richard W. Foxen (66) Retired. Until 1988, Senior Vice President, 1989
Strategic Management and International,
Rockwell International Corporation; Former
Vice-President, European Operations, General
Electric Corporation; Current Chairman of the
Board, Pittsburgh Mercy Health Systems;
Adjunct Professor, Business Administration,
Carnegie-Mellon University and University of
Pittsburgh.
Donald F. Malin, Jr. Retired. Until 1991, Partner, Simpson 1982
(66) Thacher & Bartlett, Attorneys at Law, New
York City.
Robert C. Strauss (52) President and Chief Executive Officer of 1987
Cordis since February 1987. Formerly
Senior Vice President and Chief Financial
Officer from 1986 to 1987 and Vice President
and Chief Financial Officer from 1983 to
1986. Trustee, University of Miami.
Director, Miami Children's Hospital, Health
Industry Manufacturers Association (HIMA) and
American Bankers Insurance Group.
Jan L. de Ruyter Retired. Senior Vice President, 1990
van Steveninck (63) European Operations of Cordis from
1987 to June, 1990. Before 1987, Vice
President, European Operations.
Patricia K. Woolf, Consultant, author, and lecturer, Department 1982
Ph.D. (59) of Molecular Biology, Princeton University.
Director, American Balanced Fund, Income Fund
of America, Growth Fund of America, and Small
Cap World Fund. Director, General Public
Utilities Corporation and National Life
Insurance Company of Vermont. Trustee,
New Economy Fund.
<PAGE>
EXECUTIVE OFFICERS
Executive officers of Cordis serve at the pleasure of the
Board of Directors and are elected by the Board annually
for a term extending through the election and qualification of
their successors. Information about the executive officers of
Cordis is given below.
The executive officers of Cordis as of January 31, 1994
are as follows:
Name Age Position
Robert C. Strauss 52 President and Chief Executive Officer
Richard J. Faleschini 46 Vice President, North American Marketing
and Sales
Jeffrey G. Gold 46 Vice President, and President, Cordis
Endovascular Systems Inc.
Daniel G. Hall 47 Vice President, Legal Affairs, Secretary
and General Counsel
Rudy J. Kranys 56 Senior Vice President, North American
Operations
Charles R. McDowell 57 Vice President, Corporate Relations and
Assistant Secretary
Philip J. Monks 46 Vice President, European Marketing and Sales
Alfred J. Novak 46 Vice President, Treasurer and Chief Financial
Officer
Barbara G. Ramseyer 46 Vice President, Regulatory Affairs and
Quality Assurance
Egbert Ratering 45 Vice President, European Operations
Fernando V. Sanchez 40 Vice President and Controller
George von Klan 64 Vice President, International Marketing
and Sales
Robert C. Strauss was elected President and Chief Executive
Officer of Cordis in February 1987. He joined Cordis in 1983 as
Vice President and Chief Financial Officer and was elected Senior
Vice President in March 1986.
Richard J. Faleschini was elected Vice President, North
American Marketing and Sales in June 1990. For the prior
five years he was Vice President, Marketing and Sales of
Biomagnetic Technologies, Inc.
Jeffrey G. Gold joined Cordis in May 1978 as Assistant
Program Manager, Angiographic Systems, and was promoted to
Director, Manufacturing and Development in February 1982, and
Vice President, Manufacturing, North American Operations
in February 1991. In August 1991, Mr. Gold was elected to the
position of Vice President, Research and Development,
North American Operations. In August 1993, Mr. Gold was
elected Vice President and President, Cordis Endovascular
Systems Inc.
Daniel G. Hall joined Cordis as General Counsel in
December 1981. He was elected to the additional position of
Assistant Secretary in February 1982 and Secretary in July 1982.
In April 1987, he was elected Vice President, Legal Affairs,
Secretary and General Counsel.
Rudy J. Kranys joined Cordis in October 1984 as Vice
President and President of the Angiographic Products Division.
In April 1987, he was elected Senior Vice President, North
American Operations.
Charles R. McDowell joined Cordis in January 1976 as
Assistant to the Executive Vice President. He was named
Assistant to the President in February 1977 and was elected to
the position of Assistant Secretary in July 1982. In February
1985, he was elected to the additional position of Vice President,
Corporate Relations.
Philip J. Monks joined Cordis in August 1978 as a sales
representative in the United Kingdom. From 1980 through
March 1985, he served as Division Manager for the United Kingdom
and as Sales Manager for Scandinavia. He became Director,
European Sales in April 1985, and was promoted to Division
Vice President, Sales and Marketing, Europe in March 1987.
In June 1990 he was elected Vice President, European Marketing
and Sales.
Alfred J. Novak was elected Vice President and Chief
Financial Officer in August 1989 and assumed the additional
title of Treasurer in August 1991. He joined Cordis in April
1984 as Manager, Affiliate Operations and in February 1987
was elected President and Chief Executive Officer of Norland
Corporation, a former subsidiary of Cordis. In July 1987,
he was elected Vice President, Corporate Development and
subsequently in February 1988 he was elected Vice President,
Administration.
Barbara G. Ramseyer was elected Vice President, Regulatory
Affairs and Quality Assurance in August 1991. Prior to joining
Cordis she was Director-Corporate Regulatory Affairs for the
Hospital Products Group of Pfizer Corporation since 1984.
Egbert Ratering joined Cordis' Roden, The Netherlands,
subsidiary in March 1974 as Finance and Accounting Manager.
He became European Controller in 1978, and was promoted to
Director of Finance, Europe in July 1984. In March 1987 he
was promoted to Division Vice President, Finance, Europe and
was elected to his current position as Vice President,
European Operations in June 1990.
Fernando V. Sanchez joined Cordis in January 1991 as
Vice President and Controller. Prior to joining Cordis he was
Vice President, Finance for Racal-Milgo, Inc., from June 1988.
For three years prior, he served as Controller for Racal-Milgo, Inc.
George von Klan joined Cordis in April 1984 as Director of
Sales, Europe and the Middle East. In February 1985, he was
elected Vice President, European Marketing. In April 1987, he
was elected Vice President, International Marketing and Sales.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following Summary Compensation Table represents, for
each of the last three fiscal years, the annual compensation
paid by Cordis, together with long-term and other compensation
for the Chief Executive Officer and the four most highly
compensated Executive Officers of Cordis:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
Other Restricted
Annual Stock LTIP All Other
Name and Salary Bonus Compensation Award(s) Options/ Payouts Compensation
Principal Position Year ($)(1) ($)(1)(2) ($) ($) SARs(#) ($) ($)(3)
<S> <C> <C> <C> <C> <C> <C>
Robert C. Strauss 1993 $420,000 $183,951 22,000 $8,088
President and Chief 1992 $397,500 $155,176 22,000 N/A
Executive Officer 1991 $352,706 $176,960 22,000 N/A
Rudy J. Kranys 1993 $215,000 $ 91,976 11,000 $7,036
Senior Vice President, 1992 $205,000 $ 77,588 11,000 N/A
North American 1991 $194,811 $ 88,480 11,000 N/A
Operations
Alfred J. Novak 1993 $215,000 $ 91,976 11,000 $4,066
Vice President, 1992 $202,500 $ 77,588 11,000 N/A
Treasurer and Chief 1991 $176,160 $ 88,480 11,000 N/A
Financial Officer
Egbert Ratering 1993 $192,061 $ 91,976 11,000 N/A
Vice President, 1992 $188,232 $ 77,588 11,000 N/A
European Operations 1991 $162,689 $ 88,480 11,000 N/A
Philip J. Monks 1993 $191,891 $ 91,976 $46,158(4) 11,000 N/A
Vice President, 1992 $188,248 $ 77,588 11,000 N/A
European Marketing 1991 $162,641 $ 88,480 11,000 N/A
</TABLE>
(1) Amounts shown include cash compensation earned by the named
executive during the year covered, including amounts
deferred at the election of those officers. Bonuses
are paid in the year following the year for which they are earned.
(2) In 1993 and 1992, the amounts awarded pursuant to Cordis' 1991
Performance Unit Award Plan were in the form of Cordis Stock.
The value of the units was calculated according to the fair market
value of Cordis stock on or about the date of payout based on
the number of units awarded and percentage of achievement.
The 1993 bonus was based on a one-year performance period
whereby the target amounts for return on assets and sales
growth yielded a bonus payment of 100.941%. The 1992 bonus
was based on a one-year performance period whereby the
target performance achievements for return on assets and
sales growth yielded a bonus payment of 87.3%. The 1991
bonus was a cash payment, pursuant to Cordis' Performance
Award Plan of 1987 and was based on a one-year performance
period whereby the targeted earnings per share yielded a bonus
payment of 79%.
(3) Cordis contributions to Cordis' Tax-Sheltered Investment Plan
and dollar value of life insurance premiums paid by Cordis.
European Officers do not participate in the Tax-Sheltered
Investment Plan.
(4) Includes reimbursements of $32,118 for schooling of dependents
under Cordis' Expatriate Policy and automobile reimbursement
allowance of $14,040.
OPTION/SAR GRANTS TABLE
The following table provides information on grants of options
to purchase Cordis' Common Stock pursuant to the Cordis Corporation
Non-Qualified Stock Option Plan during the fiscal year ended
June 30, 1993 to the named Executive Officers:
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation
Individual Grants for Options Term (10 Years)(2)
% of Total
Options/
SAR
Options/ Granted to Exercise
SARs Employees on Base
Granted in Fiscal Price Expiration
Name (#)(1) Year ($/Sh)(1) Date 0%($) 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C> <C>
Robert C. Strauss 22,000 11.2% $26.75 6/14/03 $0 $370,040 $937,860
Rudy J. Kranys 11,000 5.6% $26.75 6/14/03 $0 $185,020 $468,930
Alfred J. Novak 11,000 5.6% $26.75 6/14/03 $0 $185,020 $468,930
Egbert Ratering 11,000 5.6% $26.75 6/14/03 $0 $185,020 $468,930
Philip J. Monks 11,000 5.6% $26.75 6/14/03 $0 $185,020 $468,930
</TABLE>
(1) The Cordis Corporation Non-Qualified Stock Option Plan, by
its terms, became effective on August 31, 1987, and was
approved by the shareholders on November 19, 1991 and will be
available for the grant of options for a period of ten
(10) years from the effective date. Under the Plan, the vesting
schedule for the above executives is 10% during the second year,
20% during the third year, 30% during the fourth year, and the
balance during the fifth year. All remaining options are
exercisable and expire on the tenth anniversary of the date of
grant. The exercise price of each share subject to options
is equal to the fair market value of the share on the date of
grant. The Plan provides that if there is a change in
control all options outstanding become fully vested.
(2) Optionees will not realize value under the 1993 option
grants without a stock price appreciation which will benefit
all shareholders. If Cordis' stock does not appreciate in value
above the option price set forth above, there will be
no benefit to shareholders. If Cordis' stock appreciates 5%
in value, the potential appreciation in stock value to
shareholders would be $240,047,000. If Cordis' stock
appreciates 10% in value, the potential appreciation in stock
value to shareholders would be $608,396,000. Total number of
shares outstanding as of June 30, 1993 was 14,271,545.
The assumed rates of stock price appreciation are set by the
Securities and Exchange Commission's proxy statement
disclosure rules. These assumptions are not intended to
forecast future price appreciation of Cordis' stock price.
Cordis' stock price may increase or decrease over the time
period set forth above.
<PAGE>
OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE
The following table contains information relating to the
exercise of stock options by the named Executive Officers
in fiscal 1993 as well as the number and value of their
unexercised options as of June 30, 1993:
Aggregated Option/SAR Exercises in Last Fiscal Year,
and FY-End Option/SAR Values
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options/SARs In-the-Money
at FY-End Options/SARs
Shares Value (#) at FY-End($)(2)
Acquired on Realized Unexer- Exer- Unexer- Exer-
Name Exercise(#) ($)(1) cisable cisable cisable cisable
<S> <C> <C> <C> <C> <C> <C>
Robert C. Strauss 88,000 $1,400,750 66,800 53,200 $375,450 $715,550
Rudy J. Kranys 53,500 $ 940,563 33,800 29,200 $192,575 $400,050
Alfred J. Novak 19,500 $ 363,063 37,800 38,200 $258,575 $551,550
Egbert Ratering 31,500 $ 386,943 33,800 27,200 $192,575 $365,050
Philip J. Monks 21,500 $ 361,313 33,800 27,200 $192,575 $365,050
</TABLE>
(1) Market value of underlying securities at exercise minus the
exercise price.
(2) Market value of underlying securities at June 30, 1993 closing
($32.00), minus the option exercise price. The values were
calculated only for "In-the-Money" options, which consists of those
options with an exercise price below $32.00 per share.
LONG-TERM INCENTIVE PLAN AWARDS TABLE
The following table provides information relating to performance
units awarded to the named Executive Officers under the Cordis
Corporation 1991 Performance Unit Award Plan:
Long-Term Incentive Plans--Awards in Last Fiscal Year
Estimated Future Payouts
Under Non-Stock Price Based
Number of Performance or Plans
Shares, Units other Periods
or Other Until
Rights Maturation Threshold Target Maximum
Name (#)(1) or Payout (#) (#) (#)
Robert C. Strauss 6,000 7/1/93-6/30/96 0 6,000 11,250
Rudy J. Kranys 3,000 7/1/93-6/30/96 0 3,000 5,625
Alfred J. Novak 3,000 7/1/93-6/30/96 0 3,000 5,625
Egbert Ratering 3,000 7/1/93-6/30/96 0 3,000 5,625
Philip J. Monks 3,000 7/1/93-6/30/96 0 3,000 5,625
(1) The performance objectives for the 1994-1996 Performance Unit
Award Plan are based on the following weightings: 50%
of a payout is based on achievement of sales growth, 25% is based
on achievement of return on assets and 25% is based on
targeted sales per employee.
<PAGE>
RETIREMENT BENEFITS
The following table illustrates the estimated aggregate
annual retirement benefits under Cordis' U.S. Retirement Plan and
the U.S. Supplemental Executive Retirement Plan, assuming
retirement at age 65, based on years of credited service and the
highest five consecutive years average pay. (Primary Social
Security Benefits are not included. Effective July 1, 1989, the
benefit formula under the Plan was changed from a Social Security
Offset formula).
Pension Plan Table (U.S. Plan)
Annual Retirement
Years of Credited Service
________________________________________________
Average Salary 15 20 25 30 35
$150,000 $ 36,200 $ 48,300 $ 60,300 $ 60,300 $ 60,300
$200,000 $ 48,900 $ 65,300 $ 81,600 $ 81,600 $ 81,600
$250,000 $ 61,700 $ 82,300 $102,800 $102,800 $102,800
$300,000 $ 74,400 $ 99,300 $124,100 $124,100 $124,100
$350,000 $ 87,200 $116,300 $145,300 $145,300 $145,300
$400,000 $ 99,900 $133,300 $166,600 $166,600 $166,600
$450,000 $112,700 $150,300 $187,800 $187,800 $187,800
$500,000 $125,400 $167,300 $209,100 $209,100 $209,100
$550,000 $138,200 $184,300 $230,300 $230,300 $230,300
$600,000 $150,900 $201,300 $251,600 $251,600 $251,600
The Retirement Plan is a defined benefit plan to which
Cordis contributes amounts required to fund this Plan as computed
by standard actuarial methods. The Plan provides a monthly
pension to qualifying employees who terminate from Cordis with at
least five years of service. A participant who is eligible to
receive a retirement benefit will receive a monthly benefit equal
to the sum of: (1) 1.1% of his average monthly earnings (over his
five highest consecutive years of pay, including bonus and
overtime up to 50% of base pay) times his years of service
(maximum 25 years); and (2) 0.6% of the average monthly earnings
in excess of Covered Compensation (average of taxable wage bases
under Section 230 of the Social Security Act) times credited
service (maximum 25 years).
The credited years of service and current pay covered for
each of the individuals named in the Summary Compensation Table
is as follows:
Years 1993 Covered
Credited Compensation
Robert C. Strauss 10 $579,626
Rudy J. Kranys 9 $296,008
Alfred J. Novak 9 $293,644
Egbert Ratering (1) --
Philip J. Monks (1) --
(1) Egbert Ratering is covered under the Dutch Plan, as set
forth in the pension table below. Philip J. Monks is a member
of and contributes a percentage of his salary to the United
Kingdom Plan which does not provide a guaranteed pension at
retirement, but is based on funds accrued to purchase a
pension to the member's requirement. Cordis also contributes
a percentage of Mr. Monks' salary to the United Kingdom Plan.
The following table illustrates the estimated aggregate
annual retirement benefits under Cordis' Dutch Retirement Plan
based on years of credited service and last annual pay, as
defined:
Pension Plan Table (Dutch Plan)
Years of Credited Service
________________________________________________
Average Salary 15 20 25 30 35
$150,000 $ 34,868 $ 46,491 $ 58,113 $ 69,736 $ 81,359
$200,000 $ 47,993 $ 63,991 $ 79,988 $ 95,986 $111,984
$250,000 $ 61,118 $ 81,491 $101,863 $122,236 $142,609
$300,000 $ 74,243 $ 98,991 $123,738 $148,486 $173,234
$350,000 $ 87,368 $116,491 $145,613 $174,736 $203,859
$400,000 $100,493 $133,991 $167,488 $200,986 $234,484
$450,000 $113,618 $151,491 $189,363 $227,236 $265,109
$500,000 $126,743 $168,991 $211,238 $253,486 $295,734
$550,000 $139,868 $186,491 $233,113 $279,736 $326,359
$600,000 $152,993 $203,991 $254,988 $305,986 $356,984
The Dutch Plan, available to all employees, provides
supplemental retirement benefits calculated on the basis of the
number of years of service multiplied by 1.75% multiplied by the
pension earnings (annual salary minus the social security offset
of approximately $17,000 in 1993). The Dutch Plan is designed to
provide a pension benefit equal to 70% of the recipient's last
pension earnings after 40 years of service; however, salary
increases subsequent to age 55 are only partially taken into
account. Both Cordis and the employee contribute to the Plan.
<PAGE>
INFORMATION REGARDING WEBSTER
General
Webster designs, develops, manufactures and markets a full
line of electrophysiology catheters that are used to diagnose
cardiac tachyarrhythmias. In addition, Webster is currently
conducting human clinical trials under an investigational device
exemption ("IDE") from the FDA pursuant to which certain of its
deflectable catheters are being used for the treatment of
tachyarrhythmias. Tachyarrhythmias are abnormalities in the
electrical conduction system of the human heart muscle that
result in an abnormally rapid heart rate. Tachyarrhythmias may
be the result of congenitally defective or diseased cardiac
tissue that alters or interferes with the normal electrical
conduction system that governs the heart rate. Patients with
tachyarrhythmias may experience dizziness, fatigue,
unconsciousness, or even cardiac arrest and death. These
patients may be treated with long-term drug therapy, with an
implantable electronic device that requires an open-chest
surgical procedure or with electrophysiology. Electrophysiology
catheters provide a minimally invasive, cost-effective
alternative for patients with certain tachyarrhythmias.
Market research publications estimate that approximately
four million people in the United States suffer from some form of
tachyarrhythmia. Tachyarrhythmias are subdivided into two
principle categories: (i) SVT or supra-ventricular
tachycardias - tachyarrhythmias that originate in the atria, or
upper chambers of the heart, and (ii) VT or ventricular
tachycardias - tachyarrhythmias that originate in the
ventricles, the lower chambers of the heart. SVT often is caused
by congenitally diseased cardiac tissue and, hence, occurs more
frequently in younger patients. VT is typically a secondary
result of coronary artery disease and carries significantly
higher morbidity and mortality rates then SVT. Currently,
Webster's products are used to diagnose and, pursuant to an IDE
with respect to certain of its products, treat patients with
certain SVT tachyarrhythmias. Approximately 30,000 RF ablation
procedures were performed in 1992 and 45,000 RF ablation
procedures were performed in 1993 in the United States.
Webster's fixed-tip and deflectable electrophysiology
catheter product lines are used to diagnose or "map" the
patient's electrical system in order to identify and locate
electrical conduction abnormalities. Webster offers a full line
of electrophysiology catheters in order to provide the
electrophysiologist with the variety of catheters needed to
diagnose patients. Certain of Webster's deflectable catheters
are currently under clinical evaluation pursuant to an IDE from
the FDA for therapeutic or "ablation" purposes in selected
tachyarrhythmia patients. Ablation is the process of
producing a lesion within the heart by delivering radio frequency
("RF") energy to a localized area in order to destroy tissue that
is interfering with the patient's normal conduction system.
Unlike drug therapy and/or implantable devices, which are
palliative therapies, Webster believes that RF ablation offers a
longer term solution for certain forms of tachyarrhythmias.
Webster believes it is a leader in the field of
electrophysiology as a result of its development of the
deflectable tip multi-electrode electrophysiology catheter that
allows the electrophysiologist to access specific areas of the
heart with improved accuracy. Webster's products are sold and
distributed on a direct basis in the United States and through
independent distributors in 35 countries throughout the world.
Webster was founded in 1969 and incorporated in California in
1980. Webster's principal offices are located at 4750 Littlejohn
Street, Baldwin Park, CA, 91706. The telephone number is (818)
960-6404.
Business
Webster designs, develops, manufactures and sells a full
line of electrophysiology catheters that are used to diagnose
cardiac tachyarrhythmias. Webster's initial product offerings
include comprehensive lines of fixed, deflectable, and orthogonal
catheter designs that Webster believes represent one of the
broadest product offerings of any electrophysiology catheter
supplier. Webster first introduced its deflectable catheter in
1988, which allowed the electrophysiologist to access specific
areas of the heart with improved accuracy.
Initially, Webster designed, engineered and manufactured its
electrophysiology catheters and Mansfield, a division of Boston
Scientific Corporation ("BSC"), distributed Webster's products
under an exclusive worldwide arrangement. Upon mutual agreement,
the Webster/Mansfield relationship was dissolved with Webster and
Mansfield agreeing to co-market the Webster catheters until
December 1992.
Since March of 1992, Webster has formed a direct sales and
marketing team to represent Webster's products in the United
States, and has entered into international distributor
arrangements covering thirty-five countries. Webster believes it
is a leader in the sale of both deflectable and fixed-tip
electrophysiology catheters. Webster further believes it has
close ties and alliances with recognized electrophysiologists and
electrophysiology associations on a national and international
basis.
Products
Webster's products are regulated by the FDA and as such
require regulatory clearance prior to commercial sale. Certain
of Webster's products have received clearance for diagnostic
purposes and are labeled and sold accordingly. In addition,
Webster is currently seeking safety and efficacy data from human
clinical trials that are being conducted pursuant to an approved
IDE from the FDA for submission as part of a premarket approval
("PMA") application for certain of Webster's deflectable
catheters for RF cardiac ablation. PMA approval is required
prior to commercial sale of these catheters for therapeutic
applications. The PMA review and approval process generally has
taken one to three years to complete from the date of filing the
PMA, but may take longer and may be subject to post-approval
requirements.
The use of electrophysiology catheters during a diagnostic
procedure typically involves the use of several catheters in a
single patient study. Typically, at least three fixed-tip
catheters and one deflectable catheter are used to simultaneously
access different locations of the heart. The electrophysiologist
may need to place several deflectable catheters in the heart
until the appropriate catheter is identified. Currently, fixed
catheter prices range from $225 to $400 depending on the number
of electrodes on the catheter and whether the catheter has a
lumen, or passageway. Deflectable catheter prices currently
range from $400 to $995 depending on the number of electrodes on
the catheter and the complexity of design.
Fixed-tip Catheters
The fixed-tip catheter products are multi-electrode
catheters used to provide electrical stimulation or "pace" to the
heart muscle and/or sense electrical signals from the heart. The
catheters are termed "fixed-tip" catheters since the distal
portion (or part that is placed into various segments of the
heart) is fixed during the manufacturing process and cannot be
deflected. Several different configurations are offered by
Webster to meet the needs and preferences of the
electrophysiologist, and accommodate different anatomical
requirements that may vary from patient to patient. Webster
believes it offers one of the broadest and most complete lines of
fixed-tip catheters of any electrophysiology company.
Deflectable Catheters
Webster's deflectable catheter products are currently used
by electrophysiologists to pace, or provide electrical
stimulation to, the heart or receive electrical signals produced
by the heart muscle for diagnostic purposes. Like fixed-tip
catheters, the deflectable catheters are multi-electrode
catheters but differ from the fixed-tip catheters insofar as the
most distal portion of the deflectable catheter may be manually
deflected by the electrophysiologist during use. The ability to
deflect the tip of the catheter during use allows the
electrophysiologist to place the catheter in the exact or precise
location of the segment of the heart that is being studied or
mapped. Webster currently offers a broad line of deflectable
catheters to accommodate variations in patient anatomies,
requirements needed to access different segments of the heart and
to fulfill the individual preferences of the electrophysiologist.
Cables
Webster also manufactures, sells and distributes a full line
of cables that are used to interface between the catheter and the
capital equipment with which the catheters are used.
Patents and Trade Secrets
Webster's policy is to protect its proprietary position by,
among other things, filing United States and foreign patent
applications to protect technology, inventions and improvements
that are important to the development of its business. As of
January 31, 1994 Webster held seven issued United States patents
and had seven United States and one foreign patent applications
pending covering various aspects of its products and
technologies.
There can be no assurances that pending patent applications
will be approved or that issued patents will provide competitive
advantages for Webster's products or that such patents will not
be successfully challenged or circumvented by competitors.
Webster also relies upon trade secrets and technical know-
how and continuing technology innovation to develop and maintain
its competitive position. Webster typically requires its
employees, consultants and advisors to execute confidentiality
and assignment of inventions agreements in connection with the
services performed for Webster. There can be no assurances that
such agreements will not be breached or that Webster will have
adequate remedies for any such breach. Moreover, no assurance
can be given that competitors will not independently develop
substantially equivalent proprietary information and techniques
or otherwise gain access to Webster's proprietary technology, or
that Webster can satisfactorily protect its rights in unpatented
proprietary technology.
Sales and Marketing
Webster currently serves the United States customer base on
a direct basis and has a domestic sales force of nine
representatives and one sales manager. Webster also has one
clinical specialist.
The international segment of Webster's business is served by
independent distributors which typically represent Webster's
products on a country specific basis. Currently thirty-three
distributors represent Webster's products in thirty-five
countries around the world. In fiscal 1993, international sales
of Webster's products represented twenty-eight percent (28%) of
Webster's total sales volume.
As part of its sales and marketing strategy, Webster
believes it has been able to achieve and maintain a close
affiliation with leading electrophysiologists and
electrophysiology associations around the world.
Competition
Competition in the field of electrophysiology is intense and
is expected to increase in the future. Webster believes there
are at least twenty-six companies actively participating in the
electrophysiology field and expects that additional companies may
begin to compete in the future. Webster's products compete
directly against the products of, among others:
* Bard Electrophysiology, C.R. Bard, Inc.
* CardioRhythm, Inc. - A subsidiary of Medtronic, Inc.
* Daig Inc.
* Electro-Catheter Corporation
* E.P. Technologies, Inc.
* Mansfield - A division of Boston Scientific Corporation
In the future, other companies, including companies that
market lower-priced, site-specific diagnostic catheters, may
introduce products competing directly with Webster's existing
products. In addition, Webster may face competitive pricing
pressures that may have a material adverse effect on unit sales,
the average sales price of Webster's products, and profitability.
In addition to companies and products that directly compete
with Webster's products, Webster's products must compete with
other methods of diagnosing and treating arrhythmias, including
external monitoring through EKG or Holter devices, antiarrhythmic
drugs and implantable devices. In addition, interventional
cardiology is characterized by rapid technological innovation,
and Webster's products could be rendered obsolete as a result of
possible future innovations. Many of Webster's current and
potential competitors have substantially greater financial,
marketing, sales, distribution and technical resources than
Webster.
As noted above, Webster is currently conducting clinical
trials pursuant to an IDE from the FDA with certain of Webster's
deflectable catheters for RF ablation. Two of Webster's
competitors have already filed their PMA application with the FDA
for ablation and if these companies or other competitors were to
receive approval for their ablation catheters prior to Webster,
such approval(s) could have a material adverse effect on
Webster's business, financial condition and results of
operations.
<PAGE>
Selected Financial Data Of Webster
The data set forth below with respect to Webster's statement
of operations data for each of the three years in the period
ended November 30, 1993 and with respect to the balance sheet
data at November 30, 1992 and 1993 are derived from the financial
statements for Webster that have been audited by independent
auditors and that are included elsewhere in this Consent
Statement/Prospectus, and such financial data are qualified by
reference to such financial statements. The statement of
operations data for the year ended November 30, 1990 are derived
from audited financial statements not included in this Consent
Statement/Prospectus. The statement of operations data for the
year ended November 30, 1989 are derived from unaudited financial
statements not included in this Consent Statement/Prospectus.
The financial data set forth below should be read in conjunction
with the financial statements, related notes and other financial
information included elsewhere in this Consent
Statement/Prospectus.
November 30,
1993 1992 1991 1990 1989
(in thousands)
Statement of Operations Data:
Net Sales $14,487 $9,044 $5,173 $2,407 $1,934
Cost of products sold 3,736 2,933 2,390 1,471 1,334
Gross Profit 10,751 6,111 2,783 936 600
Operating Expenses:
Research and development 1,655 722 234 139 50
Selling, general and
administrative 4,715 2,295 534 361 342
Total operating expenses 6,370 3,017 768 500 392
Income from operations 4,381 3,094 2,015 436 208
Other income (expense), net 90 (6) 16 7 10
Income Taxes 1,770 1,238 817 172 81
Net income $ 2,701 $1,850 $1,214 $271 $137
As of November 30,
1993 1992 1991 1990 1989
(in thousands)
Balance Sheet Data:
Current Assets $8,790 $6,034 $2,129 $1,029 $321
Current Liabilities 2,471 940 423 422 129
Total Assets 11,127 6,885 2,514 1,120 760
Shareholders' Equity 6,395 3,892 2,092 2,095 601
<PAGE>
Webster Management's Discussion and Analysis of
Financial Condition and Results of Operations
The following discussion of Webster's financial condition
and results of operations should be read in conjunction with the
Financial Statements and notes thereto included elsewhere in this
Consent Statement/Prospectus.
Overview
Founded in 1969 and incorporated in California in 1980,
Webster designs, develops, manufactures and markets a full line
of electrophysiology catheters that are used to diagnose
tachyarrhythmias. In addition, Webster is conducting clinical
trials to test its deflectable catheter for therapeutic use in
the treatment of certain tachyarrhythmias. From 1987 until 1992,
nearly all of Webster's revenue was derived from sales through
one distributor, Mansfield, a division of BSC. In 1992, Webster
began to transition from being an original equipment manufacturer
("OEM") with a single outside distributor to being a fully
vertically integrated company. Webster now derives its revenues
through a direct domestic sales organization as well as through
33 independent international distributors, who distribute
Webster's products in 35 countries. As part of that transition
Webster recruited outside Directors to serve on its Board,
established a sales and marketing organization, and expanded its
executive management team.
Results of Operations
The following table sets forth, for the periods indicated,
certain statement of operations data as a percentage of net
sales:
Fiscal Year Ended
November 30,
1993 1992 1991
Net sales 100 100 100
Cost of products sold 26 33 46
Gross Profit 74 67 54
Operating expenses:
Research and 11 8 5
development
Selling, general and 33 25 10
administrative
Total operating 44 33 15
expenses
Income from operations 30 34 39
Other income (expense), net 0 0 0
Income Taxes 11 14 16
Net income 19 20 23
Fiscal Years Ended 1991, 1992, and 1993
Net Sales
Webster's 1992 net sales increased approximately $3.9
million (75%) over 1991 net sales, growing from $5.2 million to
$9.0 million. The increase was driven by increases in both
average unit selling price and volume due primarily to Webster's
transition from a development and manufacturing company to a
vertically integrated developer, manufacturer, marketer and
distributor of electrophysiology catheters and accessories.
During that transition Webster was able to realize higher direct
sales prices than were possible as an OEM supplier. Although
Webster continued to sell catheters to Mansfield, during 1992
Webster began to build a domestic sales and marketing
organization. In addition, distribution agreements with
international distributors resulted in export sales of $143,000.
Throughout 1992 the mix of product volume sold through Webster's
direct sales force increased as a percent of total sales, further
enhancing the revenue growth rate as Webster captured the
additional profitability from market level average-sales-prices,
versus the lower average-sales-prices associated with OEM sales
to Mansfield.
In 1993 net sales increased approximately $5.5 million (61%)
over 1992 net sales, growing from $9.0 million to $14.5 million.
As in 1992, the growth was primarily driven by higher average
selling prices and volume increases associated with Webster's
transition to a fully integrated electrophysiology product
company. Sales to Mansfield ended in March of 1993. Product
average selling prices continued to increase relative to 1992,
favorably leveraging the volume increases that resulted from a
growing user base for Webster's catheter products. During fiscal
1993 Webster's domestic sales force increased 43% over the prior
year, enhancing Webster's ability to cover the domestic market.
In 1993 domestic revenue increased 14% over 1992. Export revenue
in 1993 increased approximately $4.1 million over 1992, from
$143,000 to approximately $4.3 million, primarily as a result of
increased international coverage through additional distribution
arrangements. At 1993 fiscal year-end, international
distributors had increased from 24 distributors in 1992 to 33
distributors serving 35 countries in 1993.
Gross Margins
Gross margins increased from 54% of net sales in 1991 to 68%
in 1992, due primarily to Webster's transition from a development
and manufacturing company to a vertically integrated company.
Through direct sales, Webster was able to capture additional
profit previously earned by Mansfield for the distribution of
Webster's product. That trend continued into 1993, with sales to
Mansfield ending in March 1993. Consequently, 1993 gross margins
increased to 74% from 68% in 1992, reflecting the completion of
Webster's transition to direct sales. Additional contributing
factors were new, higher-margin products introduced in 1993 and
improved production yields.
Research and Development Expenses
Webster has substantially increased its investment in
product development, both in dollars and as a percentage of
sales, to accelerate the delivery of new products to the market.
Research and development expenses of $722,000 in 1992 (8% of
sales) represented an increase of $488,000 (209%) over the
$234,000 expended in 1991 (5% of sales), while 1993 expenses
increased to $1,655,000 (11% of sales), an increase of $933,000
(129%) over 1992 levels. The increase in both years is primarily
due to costs of clinical trials and other costs associated with
preparation to submit a PMA for Webster's deflectable catheters
for RF ablation. In addition, Webster has increased its product
development staff to provide innovative products for an expanded
range of tachyarrhythmias.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased from
$534,000 in 1991 to $2.3 million in 1992, and to $4.7 million in
1993. Approximately $1.3 million (74%) of the 1992 increase
resulted from the creation of a sales, marketing and distribution
organization to fulfill Webster's strategy to transition to a
fully vertically integrated company. Further, administrative
expenses increased due to additional staffing necessary to
support the continuing growth of Webster. Approximately $1.9
million (80%) of the 1993 increases was the result of continued
investment in the sales and marketing organization. Of this
amount, approximately $1,400,000 was related to staffing
additions and associated expenses while the remaining $500,000
was invested in new programs intended to increase market-
recognition of Webster through providing product samples to
physicians and participating in conventions, conferences and
promotions. General and administrative expenses increased by
nearly $500,000 in 1993 over the prior year, eighty percent of
which was due to the addition of three members to the executive
management team. Webster also increased its business development
activity in 1993, resulting in $100,000 in additional expenses
for professional services over the prior year.
Interest Income
While nominal and relatively stable from 1991 to 1992,
interest income increased by $100,000 in 1993 over the prior year
as Webster generated increased levels of cash from operations.
Moreover, Webster received approximately $2.0 million in cash
from the sale of redeemable convertible preferred stock in June
1992, which was subsequently invested in a money market fund.
Thirty-five percent of the increase in interest income in 1993
and 1992 is attributable to those funds having been invested for
the entire fiscal year.
Provision for Income Taxes
The provision for income taxes and Webster's effective tax
rates were $1.8 million and 40% in fiscal 1993, $1.2 million and
40% in fiscal 1992, and $817,000 and 40% in fiscal 1991.
Net Income and Earnings Per Share
As a result of the factors described above, net income
increased by 46.0 % to $2.7 million in fiscal 1993 from $1.8
million in fiscal 1992, and by 52.4% in fiscal 1992 from $1.2
million in fiscal 1991.
Liquidity and Capital Resources
Webster's primary sources of liquidity are cash flow from
operations and available credit under $3.0 million in financing
arrangements. Webster has not utilized existing lines of credit
and has no debt. In June 1992, Webster received approximately
$2.0 million from the sale of redeemable convertible preferred
stock.
Working capital at November 30, 1993 was $6.3 million
compared to $5.1 million at November 30, 1992. The increase was
primarily the result of net cash flow from operations generated
during fiscal 1993. Working capital at November 30, 1992
increased $3.4 million from $1.7 million in working capital at
November 30, 1991. The increase during fiscal 1992 was primarily
due to the sale of convertible preferred stock described above
and net cash flow from operations generated during fiscal 1992.
Accounts receivable totaled $2.0 million, $1.1 million and
$530,000 as of November 30, 1993, 1992 and 1991, respectively.
The increases of $900,000 and $570,000, respectively, were
primarily the result of the increases in sales during those
periods. To a lesser extent, the increases reflected slower
overall collections as the percentage of international sales
increased. Payment terms given to Webster's international
distributors were generally 30 days longer than terms given to
domestic customers. Inventories totaled $2.7 million, $1.8
million and $543,000 as of November 30, 1993, 1992, and 1991,
respectively. The increase in inventories was primarily due to
the expansion of Webster's raw materials, work-in-process and
finished goods inventories in order to meet anticipated future
demand for its products.
During the fiscal years ended November 30, 1993, 1992 and
1991, Webster's cash provided by operations was $2.4 million,
$937,000 and $457,000, respectively. During fiscal 1992, Webster
received $2.0 million from the sale of convertible preferred
stock, whereas cash flow from financing activities during fiscal
1991 and 1993 was not material. Cash and cash equivalents at
November 30, 1993, 1992 and 1991 were $3.4 million, $2.8 million
and $497,000, respectively. In October 1993 Webster obtained an
unsecured $2.0 million, two year revolving line of credit and an
unsecured $1.0 million term line of credit for capital
expenditure purposes. Neither credit facility has been used.
Webster acquired equipment and leasehold improvements during
fiscal 1993, 1992 and 1991 of $1.7 million, $600,000 and
$190,000, respectively. Equipment included manufacturing and
engineering equipment as well as furniture, office equipment, and
computer hardware and software. During fiscal 1993 $1.4 million
was spent on leasehold improvements related primarily to a new
facility designed to house Webster's primary controlled-
environment manufacturing operations as well as corporate
administrative offices. The 1993 expenditures included
remodeling a portion of Webster's existing manufacturing
facilities to house its marketing and sales organization.
Webster believes that inflation has not had a material
effect on its operations.
Effective December 1, 1991, Webster adopted Statement of
Financial Accounting Standards No. 109, Accounting for Income
Taxes. That adoption did not have a material effect on the
financial condition or operations of Webster.
<PAGE>
BENEFICIAL OWNERSHIP OF WEBSTER COMMON STOCK
The following table sets forth in the beneficial ownership
of Webster Common Stock as of January 31, 1994 as to (i) each
person who is known by Webster to own beneficially more than five
percent of Webster's Common Stock, (ii) each of Webster's
directors, (iii) each of the executive officers named in the
Summary Compensation Table, and (iv) all directors and executive
officers as a group.
Shares Beneficially
5% Shareholders, Directors, Named Owned (1)
Executive Officers, and Directors and Percent of
Executive Officers as a Group Number Total
Brentwood Associates V, L.P. 1,200,000 20.41%
1920 Main Street
Suite 820
Irvine, CA 92714
Wilton W. Webster, Jr. and Helen E. 3,600,000 61.22%
Webster as Community Property
Webster Laboratories, Inc.
5114 Commerce Drive
Baldwin Park, CA 91706
James R. Tyberg 400,000 6.80%
Webster Laboratories, Inc.
5114 Commerce Drive
Baldwin Park, CA 91706
Wilton W. Webster, Jr. (2) 3,600,000 61.22%
Webster Laboratories, Inc.
5114 Commerce Drive
Baldwin Park, CA 91706
Tony R. Brown, Ph.D. 266,667 4.53%
David W. Chonette (3) 1,200,000 20.41%
1920 Main Street
Suite 820
Irvine, CA 92714
Glendon E. French (4) 8,000 *
Ross A. Jaffe, M.D. 0 *
Robert W. Evans (5) 43,750 *
Barry Michaels (5) 9,375 *
Thomas Schroeder (5) 14,583 *
John Stevens (5) 5,833 *
All directors and executive officers as a 5,148,208 86.35%
group (9 persons) (6)
* Less than 1%.
(1) The persons named in this table have sole voting and
investment power with respect to all shares of Webster Common
Stock shown as beneficially owned by them, subject to
community property laws where applicable and the information
contained in the other footnotes to this table.
(2) Represents shares held by Wilton W. Webster, Jr. and
Helen E. Webster as community property.
(3) Represents shares held by Brentwood Associates V, L.P.
Mr. Chonette is a general partner of an entity that is the
general partner of Brentwood Associates V, L.P.
(4) Represents shares issuable upon exercise of options
exercisable within 60 days of January 31, 1994.
Exercisability of Mr. French's options have been accelerated
subject to the closing of the Merger.
(5) Represents shares issuable upon exercise of options
exercisable within 60 days of January 31, 1994.
(6) Includes an aggregate of 81,541 shares issuable upon
exercise of options exercisable within 60 days of January 31,
1994. Also includes 1,200,000 shares held by Brentwood
Associates V, L.P. See footnote (3) above.
<PAGE>
EXECUTIVE OFFICERS AND DIRECTORS OF WEBSTER
The following sets forth certain information as of January
31, 1994, with respect to the executive officers and directors of
Webster who are to serve as executive officers of the surviving
corporation:
Name Age Position
Wilton W. Webster, Jr. 66 Chairman of the Board of
Directors, Vice President
and Chief Engineer
Tony R. Brown, Ph.D. 54 President, Chief Executive
Officer and Director
Robert W. Evans 50 Vice President, Sales and
Marketing
Barry Michaels 44 Vice President, Finance and
Administration, Chief
Financial Officer
Thomas Schroeder 54 Vice President, Regulatory
Affairs and Quality
Assurance
John Stevens 48 Vice President,
Manufacturing
There are no family relationships among any directors or
executive officers of Webster.
Wilton W. Webster, Jr. is a co-founder of Webster and has
been Chairman of the Board since its founding. In April 1993,
Mr. Webster was elected Vice President and Chief Engineer. From
Webster's inception until April 1993, Mr. Webster served as its
President and Chief Executive Officer.
Tony R. Brown, Ph.D., has been President, Chief Executive
Officer and a director of Webster since April 1993. From August
1990 to April 1993, Dr. Brown was Chief Operating Officer of
Bio-Rad Laboratories, a manufacturer of clinical diagnostic, life
science and analytical instruments and products. Prior to
joining Bio-Rad in 1990, he held a variety of executive positions
with Baxter Healthcare Corporation ("Baxter") and American
Hospital Supply Corporation ("AHSC"). Dr. Brown joined AHSC in
1972 as Vice President of Research and Development for the
Pharmaseal Division and subsequently was appointed Vice President
of Business Planning and Development for the Medical Sector of
AHSC. Following Baxter's acquisition of AHSC in 1985, Dr. Brown
served as President of the Edwards Cardiovascular Surgery
Division and President of Bentley Laboratories. He began his
career with Midwest Applied Science Corporation and has a total
of 24 years of professional experience. Dr. Brown received his
Ph.D., M.S.M.E. and B.S.M.E. from Purdue University.
Robert W. Evans joined Webster in February 1992 as Vice
President, Sales and Marketing. Previously, Mr. Evans served as
Vice President of Sales and Marketing at Interpore Corporation
for more than five years. Prior to joining Interpore, he was
Vice President of Sales for Cardiovascular Devices, and previous
to that served in a variety of management and executive positions
for Edwards. Mr. Evans was employed at Edwards for 13 years,
most recently as Vice President of North American Sales.
Mr. Evans received his baccalaureate degree from Duquesne
University.
Barry Michaels joined Webster in June 1993 as Vice
President, Finance and Administration and Chief Financial
Officer. Prior to joining Webster, Mr. Michaels served as Vice
President, Worldwide Controller and Principal Financial Officer
at ICN Biomedicals ("ICN") from August 1991 to July 1992. Prior
to joining ICN in 1991, he served in a variety of executive
positions with Medtronic, Inc., Baxter and AHSC. Mr. Michaels
joined AHSC in 1980, where he served in a variety of management
and executive positions with the McGaw and Pharmaseal Divisions.
Following Baxter's acquisition of AHSC in 1985, he served as Vice
President, Finance of the NDM Division and subsequently as Vice
President and Controller of the Parental Products Group. He
joined Medtronic, Inc. as Vice President and Corporate Controller
in 1988. Mr. Michaels began his career with Ford Aerospace and
Communications Corporation and has more than 15 years of
professional experience. Mr. Michaels received his B.A. and
M.B.A. from San Diego State University.
Thomas Schroeder joined Webster in August 1992 as Vice
President, Regulatory Affairs and Quality Assurance. From
February 1990 to February 1992, Mr. Schroeder served as Vice
President of Quality Assurance and Regulatory Affairs at
Intertherapy, Inc. ("Intertherapy"). Prior to joining
Intertherapy, he served as Director of Quality Assurance for the
Paramax Division of Baxter for approximately five years. Mr.
Schroeder has an aggregate of over thirty years experience in the
engineering, quality and regulatory fields. Mr. Schroeder
received a B.S. in electrical engineering from the University of
Illinois.
John Stevens joined Webster in July 1993 as Vice President,
Manufacturing. Prior to joining Webster, Mr. Stevens served as
Vice President of Manufacturing for Intertherapy, a manufacturer
of intravascular ultrasound catheters and imaging equipment, from
March 1990 to January 1993. Prior to joining Intertherapy in
March 1990, he served as Director of Operations for Vision
Technologies International (1988-1990) and Director of
Manufacturing for Printronix (1986-1988). Mr. Stevens began his
career in 1971 with AHSC, where he served in a variety of
management positions, most recently as the Manufacturing
Engineering Manager for the Medical Specialties Division.
Mr. Stevens received a B.S. in operations management from
California State University, Long Beach.
EXECUTIVE COMPENSATION
The following table sets forth the compensation received for
Webster's 1993 fiscal year ("Fiscal 1993") by Webster's executive
officers, each of whom will serve as executive officers of Cordis
or the Surviving Corporation.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation
Compensation Awards
Securities
Restricted Underlying
Name and Principal Stock Option/
Position Salary(1) Bonus(2)(3) Awards($)(4) (Shares)(#)(5)
<S> <C> <C> <C> <C>
Tony R. Brown, Ph.D. (6) $ 93,333 $26,667 (7) --
President and Chief
Executive Officer
Wilton W. Webster, Jr. $103,958 $15,000 -- --
Chairman, Vice President
and Chief Engineer
Robert W. Evans $107,222 $13,000 -- 100,000
Vice President, Sales
and Marketing
Barry Michaels (8) $ 38,000 $10,000 -- 50,000
Vice President, Finance
and Administration and
Chief Financial Officer
Thomas Schroeder $ 86,488 $11,000 -- 33,333
Vice President,
Regulatory Affairs and
Quality Assurance
John Stevens (9) $ 27,740 $10,000 -- 40,000
Vice President,
Manufacturing
</TABLE>
(1) Consists of salary paid to the following executive
officers during the period beginning on their respective
employment commencement dates.
(2) Includes bonuses earned in the indicated year and paid in
the subsequent year. Excludes bonuses paid in the indicated
year but earned in the preceding year.
(3) Executive officers are entitled to discretionary bonuses
based on individual and corporate performance. These bonuses
are determined by the Board of Directors.
(4) At the end of Fiscal 1993, Dr. Brown held 266,667 shares
of restricted Webster Common Stock having a value of
$1,000,001, representing a fair market value at fiscal year-
end of $4.00 per share, the latest determination of the fair
market value of such stock during Fiscal 1993 by Webster's
Board of Directors, less the $0.25 per share paid by Dr. Brown
at the time of purchase. In connection with the issuance of
14,500 stock options to several employees of Webster in
December 1993, the Webster Board of Directors determined that
the fair market value of the Webster Common Stock was $8.00
per share. No other named executive officers held shares of
restricted stock at fiscal year-end. Dr. Brown's shares are
subject to a repurchase option to the company which lapses
ratably over a four-year period with his continued employment
by Webster. The repurchase option will expire upon, among
other things, the transfer of a majority of the voting
securities of Webster, and, accordingly, would lapse entirely
upon the consummation of the Merger. Dividends will be
payable on Dr. Brown's shares if and to the extent paid on
Webster Common Stock. See footnote (7) below.
(5) Webster stock options are issued pursuant to Webster's
1992 Stock Plan and generally carry a ten-year term and vest
ratably over a four-year period with the continued employment
of the optionee by Webster. Options are generally granted at
an exercise price equal to the fair market value of shares of
Webster Common Stock on the date of grant, as determined in
good faith by the Board of Directors.
(6) Dr. Brown commenced employment with Webster on April 5,
1993, and was elected as a director and the President and
Chief Executive Officer on April 14, 1993. Effective upon Dr.
Brown's election to the Presidency of Webster, Mr. Webster,
previously the Chairman, President and Chief Executive Officer
of Webster, became Vice President and Chief Engineer and
remained the Chairman of the Board of Directors.
(7) Dr. Brown purchased 266,667 shares of Webster Common
Stock at a purchase price of $0.25 per share via promissory
note on April 19, 1993. Such price was determined to be the
fair market value of a share of Webster Common Stock on the
date of the grant of the purchase right by the Board of
Directors at its meeting on April 14, 1993. See footnote (4)
above.
(8) Mr. Michaels commenced employment with Webster in June 1993.
(9) Mr. Stevens commenced employment with Webster in July 1993.
Option Grants in Last Fiscal Year
The following table sets forth information for the named
executive officers with respect to grants of options to purchase
Common Stock of Webster made in Fiscal 1993 and the potentially
realizable value of such options.
<TABLE>
<CAPTION>
Stock Option Grants in Fiscal 1993
Individual Grants
_________________________________________
Potential
Realizable
Number of % of Total Exer- Value at Assumed
Securities Options cise Annual Rates
Underlying Granted to or of Stock Price
Options Employees Base Expira- Appreciation for
Granted in Fiscal Price tion Option Term(4)
Name (#)(1)(2) Year(3) ($/Sh) Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Tony R. Brown, Ph.D. 0 0% $0 -- -- --
Wilton W. Webster, Jr. 0 0% $0 -- -- --
Robert W. Evans 100,000 24.90% $0.25 04/14/03 $15,722 $39,844
Barry Michaels 50,000 12.45% $1.00 06/22/03 $31,445 $79,687
Thomas Schroeder 33,333 8.30% $0.25 04/14/03 $5,241 $13,281
John Stevens 40,000 9.96% $2.00 08/11/03 $50,312 $127,499
</TABLE>
(1) For a description of the material terms of the options,
see footnote (5) to the Summary Compensation Table.
(2) Mr. Evans' and Mr. Schroeder's options were granted on
April 14, 1993, Mr. Michaels' on June 22, 1993, and Mr.
Stevens' on August 11, 1993.
(3) Webster granted options to employees for the purchase of
up to an aggregate of 401,566 shares of Webster Common Stock
during Fiscal 1993. Excludes options to purchase 21,000
shares issued to non-employee directors and consultants in
1993. See also footnote (5) to the Summary Compensation
Table.
(4) Gains are reported net of the option exercise price but
before taxes associated with exercise. These amounts
represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises would be dependent on
the future performance of Webster Common Stock, as well as the
optionee's continued employment through the vesting period.
There is no assurance that the amounts reflected would be
realized. The assumed appreciation rates do not give effect
to the Merger.
Option Exercises and Year-End Value Table
The following table sets forth information for the named
executive officers with respect to exercises in 1993 of options
to purchase Common Stock of Webster.
Aggregated Option Exercises in Fiscal 1993 and Year-End Option Values
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Shares Options at Options at
Acquired 11/30/93 11/30/93
on Value (Exercisable/ (Exercisable/
Name Exercise Realized Unexercisable) Unexercisable)(1)
Tony R. Brown, Ph.D. 0 0 0/0 $0/$0
Wilton W. Webster, Jr. 0 0 0/0 $0/$0
Robert W. Evans 0 0 35,417/64,583 $132,814/$242,186
Barry Michaels 0 0 0/50,000 $0/$150,000
Thomas Schroeder 0 0 11,805/21,528 $44,269/$80,730
John Stevens 0 0 0/40,000 $0/$80,000
(1) The fair market value of the Webster's Common Stock on
November 30, 1993, was $4.00 per share, which represents to
latest determination of the fair market value of such stock by
Webster's Board of Directors prior to the end of Webster's
fiscal year. In connection with the issuance of 14,500 stock
options to several employees of Webster in December 1993, the
Webster Board of Directors determined that the fair market
value of the Webster Common Stock was $8.00 per share.
Pursuant to an employment agreement with Webster dated March
15, 1993, Tony R. Brown, Ph.D., became Webster's President and
Chief Executive Officer at an initial base salary of $160,000 per
year and an initial bonus of $40,000 for fiscal 1993, pro-rated
for the portion of the fiscal year during which Dr. Brown was
actually employed by Webster. Dr. Brown's employment agreement
provides for the stock purchase described below in "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS" and for a thirty-day
notice prior to the termination of his employment at Webster.
Under his agreement, Dr. Brown is entitled to receive severance
pay equal to twelve months base salary if his employment is
terminated by Webster other than for good cause or by reason of
disability. Such severance obligation would be reduced by
amounts received by Dr. Brown from subsequent employers during
the twelve-month severance period and would cease upon the
commencement of comparable employment by Dr. Brown within the
severance period. The shares of Webster Common Stock held by Dr.
Brown are subject to a repurchase option to Webster, which
repurchase option lapses ratably over a four-year period with his
continued employment at Webster. Webster's repurchase option on
Dr. Brown's shares will lapse in its entirety upon a change-in-
control of Webster, and, accordingly, upon the closing of the
Merger.
On July 22, 1992, Webster and Thomas P. Schroeder entered
into an employment agreement pursuant to which Mr. Schroeder
joined Webster and assumed management responsibility for
regulatory affairs and quality assurance at an initial base
salary of $85,000 per year. Mr. Schroeder's agreement also
provides, among other things, for three weeks of paid vacation
and salary and benefit continuation for a minimum of three months
after Mr. Schroeder's involuntary termination from Webster.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In April 1993, Webster sold and issued to Tony R. Brown,
Ph.D., Webster's President and Chief Executive Officer, 266,667
shares of Webster Common Stock at a purchase price of $0.25 per
share, which price was determined to be the fair market value of
such shares on the date of grant by the Webster Board of
Directors. Dr. Brown paid for such shares with a full recourse
promissory note secured by a pledge of the shares. All principal
and accrued but unpaid interest on Dr. Brown's promissory note is
due and payable on April 19, 1997. At fiscal year-end, Dr.
Brown's promissory note carried an outstanding principal balance
of $66,667.
Webster has entered into indemnification agreements with
each of its directors and executive officers, which may require
Webster, among other things, to indemnify them against certain
liabilities that may arise by reason of their status or service
as directors or officers, to advance their expenses incurred as a
result of any proceeding against them as to which they could be
indemnified, and to obtain directors' and officers' liability
insurance if available on reasonable terms.
LEGAL MATTERS
The validity of the Cordis Common Stock to be issued in the
Merger will be passed upon for Cordis by Daniel G. Hall, Vice
President, Legal Affairs, Secretary and General Counsel of
Cordis. Venture Law Group, Menlo Park, California will provide
an opinion on the federal income tax consequences of the Merger
to Webster shareholders.
EXPERTS
The consolidated financial statements of Cordis as of June
30, 1993 and 1992 and for each of the three years in the period
ended June 30, 1993, included in this Consent
Statement/Prospectus and the related financial statement
schedules included elsewhere in the registration statement have
been audited by Deloitte & Touche, independent auditors, as
stated in their report appearing herein and elsewhere in this
Consent Statement/Prospectus and are included in reliance upon
the report of such firm given upon their authority as experts in
accounting and auditing.
The financial statements of Webster as of November 30, 1993
and 1992 and for each of the three years in the period ended
November 30, 1993, included in this Consent Statement/Prospectus
have been audited by Deloitte & Touche, independent auditors, as
stated in their report appearing herein and elsewhere in this
Consent Statement/Prospectus and are included in reliance upon
the report of such firm given upon their authority as experts in
accounting and auditing.
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF CORDIS
Page
Report of Independent Certified Public Accountants F-2
Management's Responsibility for Financial Reporting F-3
Consolidated Statements of Operations for the three years
in the period ended June 30, 1993 and the six months ended
December 31, 1993 and 1992 F-4-F-5
Consolidated Balance Sheets at December 31, 1993 and
June 30, 1993 and 1992 F-6-F-7
Consolidated Statements of Shareholders' Equity for the
three years in the period ended June 30, 1993 and the
six months ended December 31, 1993 F-8-F-9
Consolidated Statements of Cash Flows for the three
years in the period ended June 30, 1993 and the six
months ended December 31, 1993 and 1992 F-10-F-11
Notes to Consolidated Financial Statements F-12-F-27
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Cordis Corporation
We have audited the accompanying consolidated balance sheets of Cordis
Corporation and its subsidiaries as of June 30, 1993 and 1992 and the related
consolidated statements of operations, shareholders' equity, and cash flows
for each of the three years in the period ended June 30 1993. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the consolidated financial position of Cordis
Corporation and subsidiaries as of June 30, 1993 and 1992, and the results
of their operations and their cash flows for each of the three years in
the period ended June 30, 1993 in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE
Miami, Florida
August 10, 1993
<PAGE>
Management's Responsibility for Financial Reporting
Management is responsible for the preparation as well as the integrity
and objectivity of the Company's financial statements. The financial
statements have been prepared in conformity with generally accepted
accounting principles and, accordingly, include amounts which represent
the best estimates and judgments of management.
While no system of internal control can ensure elimination of errors and
irregularities, the systems employed by the Company have been designed to
provide reasonable assurance that assets are safeguarded, policies and
procedures are followed and transactions are properly executed and reported.
These systems are periodically reviewed and modified in response to changing
conditions.
The Audit Committee of the Board of Directors, which is comprised of
directors who are not officers or employees of the Company, meet with senior
management, the chief financial officer, the Company's internal auditor and
the independent certified public accountants to review audit plans and
results as well as management's actions taken in discharging its
responsibilities for accounting, financial reporting and internal control
systems. The Audit Committee reports its findings to the Board of Directors
and also recommends the selection and engagement of independent certified
public accountants. Management, the internal auditor and the independent
certified public accountants have direct and confidential access to the Audit
Committee.
ROBERT C. STRAUSS
Robert C. Strauss
President and Chief Executive Officer
ALFRED J. NOVAK
Alfred J. Novak
Vice President, Treasurer
and Chief Financial Officer
<PAGE>
Cordis Corporation
Consolidated Statements of Operations
Three Years ended June 30, 1993
(Dollars in thousands except per share amounts)
1993 1992 1991
Net sales $255,458 $222,959 $198,907
Operating costs and expenses:
Cost of goods sold 101,949 89,809 81,328
Research and development 19,097 19,290 14,690
Selling, general and administrative 90,266 80,987 74,563
Total operating costs and expenses 211,312 190,086 170,581
Operating profit 44,146 32,873 28,326
Other expenses (income):
Interest expense 1,639 3,156 2,916
Interest income (1,115) (1,000) (734)
Other, net 4,907 (1,572) 174
Total other expenses 5,431 584 2,356
Income from continuing operations
before income taxes 38,715 32,289 25,970
Provision for income taxes 9,655 8,275 6,638
Income from continuing operations 29,060 24,014 19,332
Loss from discontinued operations -- -- (9,800)
Net income $ 29,060 $ 24,014 $ 9,532
Earnings per share:
Income from continuing operations $ 2.00 $ 1.67 $ 1.38
Loss from discontinued operations -- -- (.70)
Net income $ 2.00 $ 1.67 $ .68
See accompanying notes.
<PAGE>
Cordis Corporation
Consolidated Statements of Operations
Six Months Ended December 31, 1993 and 1992
(Unaudited)
(Dollars in thousands except per share amounts)
1993 1992
Net sales $ 144,546 $ 124,486
Operating costs and expenses:
Cost of goods sold 57,765 47,672
Research and development 11,140 10,020
Selling, general and administrative 49,903 44,956
Total operating costs and expenses 118,808 102,648
Operating profit 25,738 21,838
Other expenses (income):
Interest expense 844 815
Interest income (974) (531)
Other, net (846) 3,243
Total other expenses (income) (976) 3,527
Income before income taxes and
cumulative effect of accounting change 26,714 18,311
Provision for income taxes 10,215 5,340
Income before cumulative
effect of accounting change 16,499 12,971
Cumulative effect of accounting change 10,115 --
Net income $ 26,614 $ 12,971
Earnings per share:
Income before cumulative effect of
accounting change $ 1.13 $ .89
Cumulative effect of accounting change .69 --
Net income $ 1.82 $ .89
See accompanying notes.
<PAGE>
Cordis Corporation
Consolidated Balance Sheets
At December 31, 1993 and June 30, 1993 and 1992
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31, June 30, June 30,
1993 1993 1992
(Unaudited)
Assets
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 46,533 $ 38,406 $ 13,146
Accounts receivable (less allowance
for doubtful accounts of $1,628 at
December 31, 1993, $1,617 at June 30,
1993 and $1,535 at June 30, 1992) 64,271 58,369 55,119
Inventories:
Finished goods 20,954 18,506 16,169
Work-in-process 10,222 9,213 8,330
Raw materials and supplies 8,146 7,002 6,393
39,322 34,721 30,892
Deferred income taxes 9,541 3,564 1,906
Other current assets 3,559 7,583 5,836
Total current assets 163,226 142,643 106,899
Property, plant and equipment, at cost:
Land 4,812 4,829 4,761
Buildings and improvements 51,233 49,940 50,413
Leasehold improvements 1,220 1,073 1,088
Machinery and equipment 53,720 50,653 48,576
Construction in progress 5,975 4,403 4,435
116,960 110,898 109,273
Less accumulated depreciation and
amortization 57,329 53,801 53,113
59,631 57,097 56,160
Deferred income taxes 9,665 663 725
Other assets 3,947 3,888 4,370
$ 236,469 $ 204,291 $ 168,154
</TABLE>
See accompanying notes.
<PAGE>
Cordis Corporation
Consolidated Balance Sheets
At December 31, 1993 and June 30, 1993 and 1992
(Dollars in thousands)
December 31, June 30, June 30,
1993 1993 1992
(Unaudited)
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable $ 4,061 $ 9,092 $ 2,638
Accounts payable 6,825 5,846 6,576
Accrued salaries and employee
benefits 17,417 15,288 12,182
Accrued taxes 6,746 6,528 4,041
Other accrued expenses 11,513 9,271 8,387
Income taxes 7,627 3,753 6,363
Current portion of long-term debt 1,034 903 945
Net liabilities of discontinued
operations 1,025 988 1,074
Other current liabilities 137 3,900 --
Total current liabilities 56,385 55,569 42,206
Long-term liabilities:
Long-term debt 1,204 1,112 2,181
Net liabilities of discontinued
operations 3,233 3,484 3,921
Other long-term liabilities 3,816 3,497 3,575
Total long-term liabilities 8,253 8,093 9,677
Total liabilities 64,638 63,662 51,883
Commitments and contingencies (Note 8)
Shareholders' equity:
Preferred stock, $1 par value;
authorized 2,500,000 shares; none issued -- -- --
Common stock, $1 par value;
authorized 50,000,000 shares, issued
and outstanding 14,309,617 shares at
December 31, 1993, 14,271,545 shares
at June 30, 1993 and 14,024,791 shares
at June 30, 1992 14,310 14,272 14,025
Capital in excess of par value 63,985 58,246 55,064
Retained earnings 89,210 62,596 33,536
Foreign currency translation
adjustments 4,326 5,515 13,646
Total shareholders' equity 171,831 140,629 116,271
$ 236,469 $ 204,291 $ 168,154
See accompanying notes.
<PAGE>
Cordis Corporation
Consolidated Statements of Shareholders' Equity
Three years ended June 30, 1993 and six months ended December 31, 1993
(Dollars and shares in thousands)
<TABLE>
<CAPTION>
Foreign
Retained Currency
Capital Earnings Trans-
in (Accu- lation
Common Stock Excess of mulated Adjust-
Shares Amount Par Value Deficit) ments Total
<S> <C> <C> <C> <C> <C> <C>
Balance at
June 30, 1990 13,527 $13,527 $47,549 $ (10) $ 8,555 $ 69,621
Stock issued under
employee retirement and
stock option plans 278 278 4,059 -- -- 4,337
Stock issued under
employee performance
award plan 69 69 947 -- -- 1,016
Foreign currency
translation adjustments -- -- -- -- (4,901) (4,901)
Net income -- -- -- 9,532 -- 9,532
Balance at
June 30, 1991 13,874 13,874 52,555 9,522 3,654 79,605
Stock issued under
employee retirement
and stock option plans 151 151 2,509 -- -- 2,660
Foreign currency
translation adjustments -- -- -- -- 9,992 9,992
Net income -- -- -- 24,014 -- 24,014
Balance at
June 30, 1992 14,025 14,025 55,064 33,536 13,646 116,271
Stock issued under
employee retirement
and stock option plans 429 429 6,559 -- -- 6,988
Tax benefit from exercise
of stock options -- -- 383 -- -- 383
Stock issued under
employee performance
award plan 31 31 893 -- -- 924
Purchases and retirement
of common stock (213) (213) (4,653) -- -- (4,866)
Foreign currency
translation adjustments -- -- -- -- (8,131) (8,131)
Net income -- -- -- 29,060 -- 29,060
Balance at
June 30, 1993 14,272 14,272 58,246 62,596 5,515 140,629
</TABLE>
(Continued)
<PAGE>
Cordis Corporation
Consolidated Statements of Shareholders' Equity
Three years ended June 30, 1993 and six months ended December 31, 1993
(Dollars and shares in thousands)
(Unaudited)
(Continued)
<TABLE>
<CAPTION>
Foreign
Retained Currency
Capital Earnings Trans-
in (Accu- lation
Common Stock Excess of mulated Adjust-
Shares Amount Par Value Deficit) ments Total
<S> <C> <C> <C> <C> <C> <C>
Balance at
June 30, 1993 14,272 $14,272 $58,246 $62,596 $ 5,515 $140,629
Stock issued under
employee retirement
and stock option plans 38 38 894 -- -- 932
Tax benefit from exercise
of stock options -- -- 4,826 -- -- 4,826
Stock issued under
employee performance
award plan 37 37 1,082 -- -- 1,119
Purchases and retirement
of common stock (37) (37) (1,063) -- -- (1,100)
Foreign currency
translation adjustments -- -- -- -- (1,189) (1,189)
Net income -- -- -- 26,614 -- 26,614
Balance at
December 31, 1993 14,310 $14,310 $63,985 $89,210 $ 4,326 $171,831
</TABLE>
See accompanying notes.
<PAGE>
Cordis Corporation
Consolidated Statements of Cash Flows
Three years ended June 30, 1993
(Dollars in thousands)
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Cash flows from operating activities:
Income from continuing operations $ 29,060 $ 24,014 $ 19,332
Noncash items included therein:
Depreciation and amortization 9,902 12,496 9,558
Deferred income tax benefit (3,346) (1,882) (411)
Provisions for inventory obsolescence,
doubtful accounts and uncollectible
investment 4,144 1,962 2,634
Currency transaction losses (gains) 2,604 332 (18)
Changes in assets and liabilities:
Increase in accounts receivable (11,937) (7,846) (3,779)
(Increase) decrease in inventories (7,975) (2,158) 2,830
Increase in other current assets (1,785) (1,088) (1,701)
Decrease (increase) in other assets 164 (3,709) (1,139)
Increase in accounts payable and accruals 9,611 4,510 2,495
Increase in current and deferred
income taxes payable, net 1,233 3,870 1,520
Decrease in net liabilities of
discontinued operations (523) (7,081) (3,220)
Other, net (926) 507 (1,505)
Net cash provided by operating
activities 30,226 23,927 26,596
Cash flows from investing activities:
Additions to property, plant and
equipment (14,085) (10,751) (9,141)
Proceeds from the sale of property,
plant and equipment 215 408 384
Proceeds from collections of notes
receivable 846 202 422
Net cash used in investing activities (13,024) (10,141) (8,335)
Cash flows from financing activities:
Bank loans 7,801 3,175 10,822
Debt retirement (1,077) (17,752) (30,555)
Proceeds from the sale of common stock 6,389 2,096 4,337
Repurchases of common stock (4,866) -- --
Net cash provided by (used in) financing
activities 8,247 (12,481) (15,396)
Effect of exchange rate changes on cash (189) 223 (438)
Increase in cash and cash equivalents 25,260 1,528 2,427
Cash and cash equivalents:
Beginning of year 13,146 11,618 9,191
End of year $ 38,406 $ 13,146 $ 11,618
</TABLE>
See accompanying notes.
<PAGE>
Cordis Corporation
Consolidated Statements of Cash Flows
Six Months Ended December 31, 1993 and 1992
(Unaudited)
(Dollars in thousands)
1993 1992
Cash flows from operating activities:
Net income $ 26,614 $ 12,971
Noncash items included therein:
Cumulative effect of accounting
change (10,115) --
Depreciation and amortization 4,588 4,338
Deferred income tax provision 1,926 203
Provisions for inventory obsolescence
and doubtful accounts 518 461
Loss on disposition of property, plant
and equipment 91 38
Currency transaction losses 569 2,140
Changes in assets and liabilities:
Increase in accounts receivable (7,519) (6,446)
Increase in inventories (5,388) (5,851)
Decrease in other current assets 279 569
Increase in other assets (403) (227)
Increase in accounts payable and accruals 7,241 3,389
Increase (decrease) in current and
deferred income taxes payable, net 2,316 (3,486)
Decrease in net liabilities of
discontinued operations (214) (266)
Other, net 245 1,978
Net cash provided by operating activities 20,748 9,811
Cash flows from investing activities:
Additions to property, plant and equipment (7,579) (5,486)
Proceeds from the sale of property, plant
and equipment 214 46
Net cash used in investing activities (7,365) (5,440)
Cash flows from financing activities:
Bank loans 906 2,644
Debt retirement (5,668) (624)
Proceeds from the sale of common stock 598 4,888
Repurchases of common stock (1,100) --
Net cash (used in) provided by financing
activities (5,264) 6,908
Effect of exchange rate changes on cash 8 (87)
Increase in cash and cash equivalents 8,127 11,192
Cash and cash equivalents:
Beginning of period 38,406 13,146
End of period $ 46,533 $ 24,338
See accompanying notes.
<PAGE>
Cordis Corporation
Notes to Consolidated Financial Statements
December 31, 1993 (Unaudited) and June 30, 1993, 1992 and 1991
1. Summary of significant accounting policies
a. Principles of consolidation
The Consolidated Financial Statements of Cordis Corporation include
the accounts of Cordis Corporation and its subsidiaries ("Cordis"). All
significant intercompany transactions have been eliminated.
b. Revenue recognition
Cordis' revenue is derived from sales of medical devices. Revenue from
such sales is generally recognized at the time of shipment to customers.
c. Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
net realizable value. Inventory costs include material, labor and manufacturing
overhead.
d. Property, plant and equipment
The lives used in calculating provisions for depreciation and amortization
of the principal assets using the straight-line method are as follows:
Buildings and improvements 10 - 30 years
Leasehold improvements 10 - 20 years
Machinery and equipment 3 - 10 years
e. Earnings per share
Primary earnings per share of common stock have been determined on the basis
of the average number of shares of common stock and common stock
equivalents outstanding during the year or period. The exercise of
outstanding options, computed under the treasury stock method based upon average
stock prices during the year or period, has been included in the
computation when dilutive. The computation of fully diluted earnings per share
resulted in no material dilution.
f. Foreign currency translation
Foreign currency translation adjustments, which result from translating the
assets and liabilities of foreign subsidiaries into the U.S. dollar,
have been excluded from each component of the Consolidated Statements of
Cash Flows. Aggregate exchange (losses) gains resulting from foreign
currency transactions during the years ended June 30, 1993, 1992 and 1991
were $(2,604,000), $(332,000) and $18,000, respectively, and are included
in the Consolidated Statements of Operations.
g. Cash and cash equivalents
For the purposes of reporting cash flows, cash and cash equivalents include
marketable securities with a maturity of three months or less at
acquisition, and approximate fair values at June 30, 1993 and 1992. One
investment, representing approximately 27% of the recorded balance at June
30, 1993, is a money market mutual fund maintained with a brokerage firm.
For the years ended June 30, 1993, 1992 and 1991, income taxes paid, net,
were $11,998,000, $7,430,000 and $5,413,000, and interest paid, including
interest on the capitalized lease (see Note 3), was $3,748,000, $4,664,000
and $4,995,000, respectively.
h. Foreign currency contracts
Cordis enters into foreign currency contracts as a hedge against assets and
liabilities denominated in foreign currencies. Such assets and
liabilities relate mainly to intercompany purchases of inventory. At the
end of each period, foreign currency contract balances are marked to
market, and the resulting gain or loss is recognized in the Consolidated
Statements of Operations. At June 30, 1993 the carrying value of such
contracts approximated fair value.
i. Reclassifications
Certain amounts in prior years have been reclassified to conform to the
fiscal 1994 Consolidated Financial Statement presentation.
j. Interim financial statements
The interim financial information for the six months ended December 31,
1993 and 1992 is unaudited. However, in the opinion of Management, such
information reflects all adjustments, consisting only of normal recurring
accruals, necessary for a fair presentation of the information shown.
The disclosures presented herein do not contain certain information as of
December 31, 1993 and the six months ended December 31, 1993 and 1992
normally included in Cordis' annual financial statements and notes.
Results for interim periods are not necessarily indicative of results expected
for the full year.
2. Inventory obsolescence
Cost of goods sold for the years ended June 30, 1993, 1992 and 1991 included
provisions for obsolescence of $1,061,000, $994,000 and $669,000,
respectively, for inventory which management considered to be in excess of
that required for future sales. At June 30, 1993 and 1992 inventories
are stated net of allowances for obsolescence of approximately $2,472,000
and $2,826,000, respectively.
3. Discontinued operations
During fiscal 1987, Cordis initiated a plan to dispose of all businesses
other than its angiographic and neuroscience product lines. This plan
included the disposal of the worldwide cardiac pacing operations, of which
the Administrative and Technical Center ("ATC") in Miami, Florida was
a principal asset.
In September 1991, Cordis entered into an agreement to sublease ATC.
Both the sublease and Cordis' existing capitalized lease expire on December
31, 2005. Under the terms of the sublease, the sublessee is responsible for
all taxes (except taxes on vacant land), insurance and operating
expenses, in addition to rental payments which commenced on January 1, 1992
of $1.2 million annually which increase annually to $2.2 million in the
final year of the sublease. During 1992 Cordis paid the sublessee $5.0 million
in leasehold improvement allowances. The sublease gives cancellation
options at the end of the fifth and tenth years to the sublessee which,
if exercised, will require repayments of leasehold improvement allowances
by the sublessee to Cordis of $3.8 million and $2.0 million, respectively.
The sublessee also has an option to extend the lease for five years or
to purchase the facility at December 31, 2005. In 1991 Cordis recorded a
charge to discontinued operations of $9.8 million, related to the
discounted shortfall in rental income from the sublease compared to the
underlying payments over the full term of its existing capitalized lease
as a reserve for future costs.
The net annual cost of the capitalized lease, which expires in December
2005, is approximately $2.2 million. Aggregate gross future payments under
the capitalized lease totaled approximately $30,193,000 at June 30, 1993.
Rental income received by Cordis in 1993 and 1992 was $1,237,000 and $595,000,
respectively. Future minimum sublease payments receivable under the
noncancellable portion are as follows:
Year Ending June 30 Amount
1994 $ 1,333,000
1995 1,438,000
1996 1,553,000
1997 (6 months) 807,000
Assets and liabilities of the discontinued operations are reflected below
(in thousands):
December 31, June 30, June 30,
1993 1993 1992
(Unaudited)
Property, plant & equipment $ 29,453 $ 30,411 $ 33,692
Less accumulated depreciation
and amortization (10,993) (10,944) (12,671)
18,460 19,467 21,021
Other assets, net 1,330 1,353 1,393
Capital lease liability (17,013) (17,380) (18,062)
Net capital lease asset 2,777 3,440 4,352
Reserve for future costs (7,035) (7,912) (9,347)
(4,258) (4,472) (4,995)
Amount included in current
liabilities 1,025 988 1,074
Net liabilities-non-current $ (3,233) $ (3,484) $ (3,921)
In fiscal 1990 Cordis disposed of its subsidiary Norland Corporation for
cash and Class A convertible preferred stock which was redeemable for $1.9
million in cash on September 30, 1992. In fiscal 1993, Cordis extended
the redemption date to April 30, 1994 in exchange for a revised redemption
price of approximately $2.0 million as of June 30, 1993. However, Cordis'
investment in Norland Corporation has been fully reserved at June 30,
1993. At June 30, 1992, the carrying value was $1,858,000, included in
other current assets.
<PAGE>
4. Notes payable and long-term debt
Notes payable:
Cordis' European subsidiaries have various lines of credit agreements
denominated in local currencies which are available to provide working capital
and to hedge foreign exchange exposures. The total amount of credit available
under these agreements was $22,300,000 at June 30, 1993. Amounts
outstanding were $9,092,000 at June 30, 1993 and $2,460,000 at June 30, 1992,
with interest rates ranging from 7% to 20-3/4% throughout the years
ended June 30, 1993 and 1992.
Long-term debt:
Cordis has a $25 million revolving line of credit and a $2 million letter of
credit facility with a U.S. bank, which terminates on December 31, 1995.
A one year extension of the termination date may be granted annually at
the discretion of the lender. During the revolving credit period, Cordis
has the option of borrowing at the prime interest rate, or at the London
Interbank Offered Rate plus 1-1/4%. A facility fee of 1/4% of the unused
portion of the $25 million commitment is payable quarterly. The agreement
contains various covenants, which require Cordis to maintain certain
financial ratios and meet certain net worth and indebtedness tests, and
which restrict the payment of cash dividends by Cordis. No borrowings were
outstanding under the agreement at June 30, 1993 or 1992. Interest rates
ranged from 6% to 6-1/2% throughout the years ended June 30, 1993 and 1992.
At June 30, 1993 and 1992, Cordis' European subsidiaries had long-term
borrowings totaling $1,930,000 and $3,027,000, respectively, under several
agreements. These loans, one of which is secured by tangible fixed assets,
are denominated in European currencies at interest rates ranging from
8-7/8% to 9-3/4% throughout the periods, due at various times through January
1997. The carrying amounts of these loans approximated their fair
values at June 30, 1993 and 1992.
Principal payments on existing long-term debt for the fiscal years ending
June 30, are as follows: 1994 - $903,000; 1995 - $681,000; 1996 -
$210,000; 1997 - $221,000.
5. Stock option plans
The Cordis Corporation Non-Qualified Stock Option Plan ("Non-Qualified
Plan") authorizes grants of options to purchase up to 1,875,000 shares of
Cordis' authorized but unissued common stock. The options granted pursuant
to the Plan either are exercisable after one year from the date of grant
or vest in increments over four years, must be exercised within either
five or ten years depending on the date of the grant, and must be granted
at a price not less than the market value on the date of grant.
At June 30, 1993, awards to purchase 1,553,100 shares under the Non-Qualified
Plan (net of cancellations and repurchases) had been granted. There
are 321,900 shares available for future grants under the Non-Qualified Plan.
Of the options granted, 377,650 shares were exercised under the
Non-Qualified Plan during 1993. At June 30, 1993 and 1992, 337,110 and 547,700
options, respectively, were exercisable under the Non-Qualified Plan.
The Cordis Corporation Incentive Stock Option Plan of 1982 ("Option Plan")
expired by its terms in October 1992. In 1993, 29,825 shares were
exercised under the Option Plan. No options were granted under this plan in
either fiscal 1993 or fiscal 1992, and 27,125 and 57,250 options were
outstanding and exercisable at June 30, 1993 and 1992, respectively.
Options under the Option Plan qualify as "incentive stock options" under the
Economic Recovery Tax Act of 1981.
The Cordis Corporation Director Non-Qualified Stock Option Plan provides
incentives in the form of stock option grants for the non-employee members
of Cordis' Board of Directors. Of the 100,000 shares authorized, 42,000
have been granted to Board members through June 30, 1993, and 28,000 and
14,000 of these were exercisable at June 30, 1993 and 1992, respectively.
The options, which are granted automatically each year, vest in full one
year after the anniversary of the date of the grant, must be exercised
within five years and are granted at a price equal to the market value on
the date of the grant.
<PAGE>
A summary of option transactions follows:
<TABLE>
<CAPTION>
1993 1992 1991
No. of Option No. of Option No. of Option
Shares Price per Share Shares Price per Share Shares Price per Share
<S> <C> <C> <C> <C> <C> <C>
Options outstanding
at beginning of
year 1,183,650 $14.50 to $36.75 1,094,075 $14.50 to $36.75 1,213,950 $10.88 to $19.88
Options granted 210,250 $22.50 to $26.75 221,550 $24.75 to $35.50 209,750 $19.50 tO $36.75
Options exercised (407,475) $14.50 to $27.25 (130,725) $14.50 to $19.88 (276,525) $11.00 to $19.88
Options cancele (11,200) $14.50 to $36.75 (1,250) $19.88 to $27.25 (53,100) $10.88 to $19.88
Options outstanding
at end of year 975,225 $14.50 to $36.75 1,183,650 $14.50 to $36.75 1,094,075 $14.50 to $36.75
</TABLE>
The income tax benefits derived from the exercise of non-qualified stock
options and disqualifying dispositions of incentive stock options, when
realized, are credited to capital in excess of par value.
6. Income taxes
Effective July 1, 1993, Cordis adopted Statement of Financial Accounting
Standards No. 109 ("SFAS No. 109"), "Accounting for Income Taxes." The
cumulative effect on prior periods of this accounting change of $10.1
million, or $.69 per share, is reported as a one time benefit in the
Consolidated Statement of Operations for the six months ended December
31, 1993. In addition, a one time adjustment of $4.2 million was recorded
to capital in excess of par value in the Consolidated Balance Sheet as of
December 31, 1993 due to the income tax benefits derived from the exercise
of non-qualified stock options and disqualifying dispositions of incentive
stock options.
SFAS No. 109 is an asset and liability approach that requires the recognition
of deferred tax assets and liabilities for the expected future tax
consequences of events that have been recognized in Cordis' financial
statements or tax returns. In estimating future tax consequences, SFAS No.
109 generally considers all expected future events other than enactments of
changes in the tax law or rates. Previously, Cordis used the Statement
of Financial Accounting Standards No. 96 ("SFAS No. 96"), "Accounting for
Income Taxes," asset and liability approach that gave no recognition to
future events other than the recovery of assets and settlement of
liabilities at their carrying amounts.
The tax effect of the significant temporary differences which comprised
the deferred tax assets and liabilities at July 1, 1993 was as follows (in
thousands):
Assets:
Discontinued operations $ 5,214
Intercompany profit adjustments in
inventories and other assets 3,152
Foreign, general business and AMT
tax credits 4,861
Other accrued expenses 3,561
Net operating loss carryforwards 3,351
Asset valuation reserves 1,870
Depreciation 1,322
Employee benefits 1,099
Other 60
24,490
Valuation allowance (3,338)
Total deferred tax assets 21,152
Liabilities:
Employee benefit plans (594)
Other (248)
Total deferred tax liabilities (842)
Net deferred tax asset $ 20,310
The valuation allowance relates primarily to net operating loss
carryforwards of Cordis' French subsidiary. As of June 30, 1993 the French
subsidiary had a net operating loss carryforward of approximately $9,200,000
of which $9,100,000 can be carried forward indefinitely and $100,000
expires in 1994. The French subsidiary utilized the net operating loss
carryforward due to expire in 1993.
Due to the adoption of SFAS No. 109, Cordis' effective income tax rate for
its year ending June 30, 1994 will approximate the statutory rates of
the countries in which it operates. For the six months ended December 31,
1993, Cordis' effective income tax rate was 38%. Included in the
provision for income taxes in the Consolidated Statement of Operations for
the six months ended December 31, 1993 is a one time benefit related to
Cordis increasing its net deferred tax asset by approximately $400,000, or
$0.03 per share, as a result of legislation enacted in August 1993
increasing the U.S. corporate tax rate from 34% to 35%.
As permitted under SFAS No. 109, financial statements for the years in the
period ended June 30, 1993, 1992 and 1991 and for the six months ended
December 31, 1992 have not been restated and are accounted for under SFAS
No. 96.
For the six months ended December 31, 1992, the provision for income taxes was
based on the U.S. statutory rate of 34%, adjusted for foreign tax
rate differentials, and the tax benefit of the utilization of tax credits
of $2,500,000.
The distribution of pretax income between domestic and foreign sources was as
follows for the years in the period ended June 30 (in thousands):
1993 1992 1991
Domestic $ 17,606 $ 15,549 $ 797
Foreign 21,109 16,740 15,373
Total $ 38,715 $ 32,289 $ 16,170
The provision (benefit) for income taxes for the years in the
period ended June 30 consists of (in thousands):
1993 1992 1991
Current:
Federal $ 3,455 $ 593 $ 250
State 303 178 65
Foreign 9,243 9,386 6,734
13,001 10,157 7,049
Deferred:
Federal (2,009) _ (9)
State (42) (3) 3
Foreign (1,295) (1,879) (405)
(3,346) (1,882) (411)
Provision for
income taxes -
continuing
operations $ 9,655 $8,275 $6,638
The provision (benefit) for income taxes includes deferred (prepaid)
taxes arising from reporting certain items of income and expense for tax
purposes in periods different from those used for financial statement
purposes. Tax credits are reflected as reductions of income tax expense using
the flow through method in the year they are utilized.
The principal temporary differences in the deferred tax (benefit) provision
for the years in the period ended June 30 were (in thousands):
1993 1992 1991
Intercompany profit adjustments in
foreign inventories $ (1,339) $ (122) $ (285)
Asset valuation reserves:
Domestic (263) -- --
Foreign -- 197 (205)
Foreign research and development
credits -- (1,954) 104
Deferred expenses (1,325) -- --
Other items, net (419) (3) (25)
Total $ (3,346) $ (1,882) $ (411)
<PAGE>
The effective income tax rates in the Consolidated Statements of Operations for
the years in the period ended June 30 differ from the statutory
federal income tax rates as follows:
1993 1992 1991
Statutory U.S. income tax rate 34.0% 34.0% 34.0%
Increase (decrease) resulting from:
Foreign statutory tax rates
differential 1.7 3.8 4.1
Foreign operating loss for which
no carryback
benefit is available .2 1.1 .3
Utilization of net operating losses (8.4) (16.4) (1.7)
Minimum tax 2.0 1.8 1.5
Foreign tax credits (9.3) _ _
Other items, net 4.7 1.3 2.9
Effective tax rates 24.9% 25.6% 41.1%
As of June 30, 1993 the remaining domestic net operating loss carryforward was
approximately $11,200,000 for financial reporting purposes which will
begin to expire in the year 2013. Temporary differences between income and
deductions reported for tax and financial statement purposes consist
of financial statement valuation accounts not currently deductible (including
the reserve for discontinued operations), inventory valuation
differences and depreciation and amortization. Cordis also has various foreign,
alternative minimum and general business tax credit carryforwards
totaling $4,900,000 of which $3,900,000 expires between 1994 and 2004; the
balance of which can be carried forward indefinitely.
Undistributed earnings of foreign subsidiaries of $60.8 million at June 30,
1993 are indefinitely reinvested in foreign operations; accordingly no
provision has been made for income taxes that might be payable upon remittance.
It is not practical to estimate the amount of tax that might be
payable on the eventual remittance of such earnings. On remittance, certain
foreign countries impose withholding taxes that are then available for
use as credits or deductions against U.S. tax liability, if any, subject to
certain limitations. The amount of withholding tax that would be payable
on remittance of the entire amount of undistributed earnings at June 30, 1993
would approximate $3.1 million.
7. Employee benefit plans
Cordis has a domestic non-contributory defined benefit pension plan (the "Plan")
which covers substantially all full-time domestic employees.
Cordis' policy is to contribute amounts as are necessary on an actuarial basis
to provide assets sufficient to meet the benefits requirements in
accordance with ERISA and federal income tax regulations. The assets of the
Plan consist mainly of common stock and intermediate bond investments.
Net periodic pension cost for each of the three years ended June 30, 1993, 1992
and 1991 included the following components (in thousands):
1993 1992 1991
Service cost - benefits earned
during the period $ 1,303 $ 1,148 $ 1,081
Interest cost on projected
benefit obligation 2,585 2,272 2,050
Return on assets (2,339) (2,990) 480
Net amortization and deferral 102 739 (2,710)
Net pension cost $ 1,651 $ 1,169 $ 901
The actuarial assumptions used in the three year period ended June 30, 1993
were as follows:
1992 and
1993 1991
Discount rates 8-1/2% 8-1/2%
Long-term rate of return on assets 9% 8-1/2%
Rates of increase in compensation levels:
To age 30 9% 10%
To age 40 7% 8%
Thereafter 5% 6%
<PAGE>
The following table sets forth the Plan's funded status and amounts recognized
in Cordis' Consolidated Balance Sheets at June 30, 1993 and 1992 (in
thousands):
1993 1992
Actuarial present value of benefit obligations:
Vested benefit obligation $ (27,756) $ (23,900)
Nonvested benefit obligation (404) (329)
Accumulated benefit obligation (28,160) (24,229)
Excess of projected benefit obligation over
accumulated benefit obligation (5,284) (5,039)
Projected benefit obligation (33,444) (29,268)
Plan assets at fair value 27,965 24,723
Projected benefit obligation in excess of
plan assets (5,479) (4,545)
Unrecognized net loss 4,886 3,283
Unrecognized prior service cost 3,633 4,165
Unrecognized net transition (asset) originating
July 1, 1986 (4,490) (5,238)
Accrued pension costs $ (1,450) $ (2,335)
Cordis sponsors a defined contribution retirement savings plan for its domestic
employees and matches a portion of employee contributions. Prior
to April 1991, Cordis contributed cash to the plan; commencing April 1991 the
contributions were in the form of Cordis' stock. Contributions made
to the plan for the years ended June 30, 1993, 1992 and 1991 were $599,000,
$564,000 and $262,000, respectively.
Certain of Cordis' foreign subsidiaries provide retirement and termination
indemnity benefits for employees through multiemployer and other types
of plans with insurance companies, which cover a majority of full-time
employees, based on compensation and years of service. Pension costs for
these plans for the years ended June 30, 1993, 1992 and 1991 were $828,000,
$778,000 and $662,000, respectively. At June 30, 1993 and 1992, unfunded
benefits included in current and other long-term liabilities were $939,000
and $1,021,000, respectively.
Cordis maintains a performance award plan for officers and key senior employees.
Awards are earned upon achievement of certain performance
objectives as determined annually by the Compensation Committee of the Board of
Directors. For the years ended June 30, 1993, 1992 and 1991, provisions
for this plan were $2,541,000, $1,005,000 and $1,416,000 respectively.
Cordis has deferred compensation or supplemental retirement agreements with
present and past key officers, directors and employees. The cost of
such plans is being or has been accrued over the period of active employment
from the contract or agreement date. Certain payments, insignificant
in amount, are charged to expense when due. Costs for these agreements
approximated $520,000, $471,000 and $501,000 for the years ended June 30,
1993, 1992 and 1991, respectively.
In December 1990, Statement of Financial Accounting Standards No. 106,
"Employers Accounting for Postretirement Benefits Other Than Pensions" was
issued, effective no later than Cordis' fiscal year ending June 30, 1994 for
U.S. plans and fiscal year ending June 30, 1996 for foreign plans.
In November 1992, SFAS No. 112, "Employers' Accounting for Postemployment
Benefits" was issued, effective for the fiscal year ending June 30, 1995.
Cordis does not believe that adoption of either of these standards will
have a significant effect on future operations.
8. Commitments and contingencies
Cordis has several long-term operating leases which expire at various
times through 2008. Most of the leases contain renewal options and require
Cordis to pay for maintenance, taxes and insurance. Rental expenses
charged to operations in 1993, 1992 and 1991 were $2,098,000, $1,753,000 and
$1,617,000, respectively. Future lease commitments are estimated as
follows: 1994 - $2,083,000; 1995 - $1,173,000; 1996 - $698,000; 1997 -
$494,000; 1998 - $484,000; thereafter - $1,188,000.
In April 1992, Cordis' manufacturing facility in France received a Warning
Letter from the U. S. Food and Drug Administration ("FDA") advising Cordis
that, during the inspection of that facility in January 1992, conditions
were observed which may constitute violations of the Food, Drug, and
Cosmetic Act and Good Manufacturing Practice regulations. Cordis filed
written responses to the allegations of deficiencies and produced
documentation to support the responses and corrective actions implemented
by Cordis. Due to the Warning Letter, devices manufactured by the French
facility were refused entry into the United States pending the completion
of the FDA process. In July 1992 the FDA reinspected the French facility
and issued no observations. In September 1992 the FDA lifted the import
ban into the United States.
Cordis is engaged in various ordinary routine litigation and administrative
proceedings incidental to the business of Cordis, some of which involve
claims for substantial amounts of money and include claims for punitive
damages. Cordis does not, however, anticipate that any amounts required
to be paid by reason thereof will, in the aggregate, have a material adverse
effect on the financial condition of Cordis.
Cordis self-insures a portion of its products liability claims and
maintains insurance coverage in excess of that retention. Such insurance may
not cover or indemnify awards of punitive damages. Cordis believes its
insurance coverage is adequate to protect it against any product related
losses that could otherwise have a material adverse effect on the financial
condition of Cordis.
As part of the transaction involving the sale of Cordis' pacing operations
in 1987, the purchaser assumed certain contingent liabilities including
several pending lawsuits. However, Cordis retained liability for any
punitive damages awarded in connection with pacer-related products liability
litigation involving products sold by Cordis prior to April 30, 1987.
Since 1987 there have been no such punitive damage awards, nor does Cordis
anticipate that future awards, if any, would have a material adverse effect
on the financial condition of Cordis.
In December 1988, Cordis was sued in the U.S. District Court for the Southern
District of Florida by approximately 160 former Cordis employees who
became employed by the company which purchased the pacing operations in 1987.
The suit alleged that these employees were entitled to severance
benefits and pay in lieu of notice as a result of their termination of
employment with Cordis. In January 1993, the Court granted Cordis' cross
motion for summary judgment. The former employees have appealed the decision.
On or about May 1, 1990 a class action suit was filed by a former employee of
Cordis against Cordis, Cordis' Retirement Plan ("the Plan"), and the
Plan Administration Committee, in the U.S. District Court for the Southern
District of Florida, alleging that the former employees who became
employed by the purchaser of the pacing operations were entitled to lump sum
distributions under the Plan and that Cordis failed to notify class
members of their right under COBRA to elect continued health insurance coverage
under Cordis' health insurance plans upon termination of their
employment with Cordis, thus entitling the class to statutory penalties.
The District Court Judge granted Cordis' motion to dismiss the lump sum
claim. The former employee voluntarily dismissed the COBRA claim and has
appealed the lump sum count.
In March 1991, a class action suit was filed in the U. S. District Court
for the Southern District of Florida by a former employee of Cordis, against
Cordis, Cordis' Tax Sheltered Investment Plan ("the Plan"), and the Plan
Administrative Committee, alleging entitlement to the distribution of his
Plan account as of June 30, 1987 after his employment was "terminated"
upon the sale of assets of the pacer division in which he worked, instead
of transferring his account balance to the purchaser's 401(k) Plan. At
the trial in June 1992 the court denied the motion to certify the class.
In May 1993, the court ruled in favor of Cordis. The former employee agreed
not to appeal the decision in exchange for Cordis' withdrawal of its
motion for attorney's fees.
In December 1989, Cordis' former Middle Eastern distributor filed an action
in the United States District Court for the Southern District of Florida,
alleging breach of contract, intentional interference with business
relationships and wrongful termination and is seeking monetary damages against
Cordis. Cordis subsequently counterclaimed against the distributor for damages
relating to fraud, defamation and breach of contract. The case is
presently in the discovery stage with a trial date in September 1994.
Cordis believes that the distributor's claim is without merit and intends
to continue to vigorously contest the action.
In June 1992, Cordis sued C. R. Bard, Inc. ("Bard") in the U. S. District
Court in Houston, Texas to vacate or modify a ruling by an independent
arbiter that certain of Cordis' balloon angioplasty catheters, including all
devices for coronary application, are covered by claims in patents held
by Bard. In March 1993, the court granted Bard's motion for summary judgment
and awarded attorneys' fees to Bard. In November 1993, Final Judgment
was entered in favor of Bard. Cordis elected not to litigate the matter further
and has paid the attorneys' fees awarded to Bard and the royalties
due pursuant to the original settlement agreement. The suit arose in connection
with a settlement agreement between Cordis and Bard in April 1991.
Under the terms of the settlement, Cordis will pay a predetermined royalty on
certain of its balloon catheters. In addition, Cordis intends to pay
the sum of $3,000,000 as a license fee pursuant to the provisions of the
settlement agreement. Of this amount Cordis has expensed $1.6 million of
the $3.0 million license fee during the six months ended December 31, 1993
utilizing a five year amortization period from the agreement date of May
1991. Such royalties have been accrued at June 30, 1993.
In October 1992, a suit was filed by Schneider (USA) Inc. against Cordis
in the United States District Court for the District of Minnesota, Third
Division, alleging that certain of Cordis' angiographic catheters and
Cordis' guiding catheters infringe a Schneider patent. Cordis has
counterclaimed by alleging that certain of Schneider's guiding catheters
infringe one of Cordis' patents. Discovery proceedings are continuing,
with a cutoff period established for September 1994.
It is not expected that the outcomes of the suits described above, either
individually or in the aggregate, will have a material adverse effect on
the financial condition of Cordis.
In November 1986, a product liability class action suit was filed against
Cordis and others in the United States District Court for the Southern
District of Ohio. The suit seeks compensatory and punitive damages
regarding certain of Cordis' pacemakers. In 1989, a second pacemaker class
action lawsuit was filed against Cordis in the United States District Court
for the Eastern District of California. This case was transferred and
consolidated with the Ohio action in 1990.
Cordis has vigorously defended the pacemaker product liability class action
since its inception. In December 1992, the court conditionally certified
the proceedings as a class action. The Complaint claims substantial
compensatory and punitive damages are due to the class members. However, the
number of claimants and nature and extent of damages allegedly suffered by any
purported class members are not yet known and Cordis is unable to
meaningfully assess the likely final outcome of the class action litigation.
Cordis believes it has defenses to plaintiffs' claims and, as more
fully described below, that it has available adequate and effective
indemnification and insurance coverage.
Beginning in 1986 and thereafter, Cordis duly notified its insurance carriers
of the filing of the initial pacemaker class action. In response,
the carriers agreed to provide a defense to Cordis, subject to various
reservations of rights. Such insurance may not cover or indemnify against
awards of punitive damages.
In 1987, subsequent to the filing of the pacemaker class action claim, Cordis
sold its pacemaker business to TNC Medical Devices Pte, Ltd. ("TNC").
As part of that transaction, TNC agreed to indemnify Cordis for contingent
liabilities relating to its pacemaker operations, including the pacemaker
class action litigation and other pacemaker product liability actions, except
for any award of punitive damages. This obligation was guaranteed
by Telectronics Holdings, Ltd., the parent of TNC. In past pacemaker cases,
there has never been an award of punitive damages against Cordis.
In November and December 1993, Cordis' insurance carriers filed two separate
actions against Cordis and TNC in the United States District Court for
the Southern District of Florida, seeking a declaratory adjudication of the
extent of their duties to defend and indemnify Cordis for claims made
in the pacemaker class action. Additionally the carriers seek an adjudication
that, in connection with TNC's acquisition of Cordis' pacemaker
business, TNC agreed to assume the primary obligation to defend and indemnify
Cordis for the pacemaker product liability litigation. Cordis intends
to vigorously respond to the insurance carriers' lawsuits and urge the court
to affirm the responsibility of Cordis' insurance carriers and TNC for
any award of compensatory damages and all defense costs relating to the
pacemaker product liability class action. Only in the event that the class
action plaintiffs are successful in their claims and Cordis' defenses are
rejected, and there is an adjudication that neither Cordis' insurance
carriers nor TNC and its parent have responsibility for any such liability
(or Cordis is unable to collect any amounts owed to it pursuant to the
terms of TNC's indemnity or the guarantee of TNC's parent), could these
lawsuits have a material adverse effect on Cordis' financial condition.
Based upon current facts, communications with outside counsel and
internal analyses of the cases, Cordis believes that such an outcome is
unlikely.
9. Foreign and domestic operations and segment reporting
Cordis operates in a single industry segment: the design, manufacture and
sale of medical devices. These products are sold to hospitals and other
medical institutions and physicians. In order to reduce credit risk, Cordis
performs credit evaluations of its customers on a regular basis, and
generally does not require collateral. Cordis has a large number of customers
worldwide with no single customer accounting for a significant portion
of trade accounts receivable. At June 30, 1993, the principal geographical
regions and their respective balances included in accounts receivable
were as follows (in thousands):
United States $14,598
Spain 8,270
Italy 8,079
France 5,847
<PAGE>
The following presents information on geographic segments for the fiscal
years ended June 30, 1993, 1992 and 1991 (in thousands):
<TABLE>
<CAPTION>
Adjustments
Domestic Foreign and
Operations Operations Eliminations Consolidated
1993
<S> <C> <C> <C> <C>
Sales to unaffiliated customers $ 124,855 $ 130,603 $ -- $ 255,458
Transfers between geographic areas 26,472 12,759 (39,231) --
Total revenues $ 151,327 $ 143,362 $ (39,231) $ 255,458
Operating profit from geographic
segments $ 33,238 $ 30,181 $ (1,084) $ 62,335
Research and development (19,097)
General corporate expense (3,998)
Interest expense, net (525)
Income from continuing operations
before income taxes $ 38,715
Identifiable assets $ 79,233 $ 89,732 $ (3,080) $ 165,885
Corporate assets 38,406
Total assets at June 30, 1993 $ 204,291
1992
Sales to unaffiliated customers $ 113,851 $ 109,108 $ -- $ 222,959
Transfers between geographic areas 18,540 11,298 (29,838) --
Total revenues $ 132,391 $ 120,406 $ (29,838) $ 222,959
Operating profit from geographic
segments $ 31,081 $ 25,818 $ 462 $ 57,361
Research and development (19,290)
General corporate expense (3,626)
Interest expense, net (2,156)
Income from continuing operations
before income taxes $ 32,289
Identifiable assets $ 69,332 $ 87,094 $ (1,418) $ 155,008
Corporate assets 13,146
Total assets at June 30, 1992 $ 168,154
1991
Sales to unaffiliated customers $ 102,126 $ 96,781 $ -- $ 198,907
Transfers between geographic areas 14,785 9,452 (24,237) --
Total revenues $ 116,911 $ 106,233 $ (24,237) $ 198,907
Operating profit from geographic
segments $ 24,429 $ 23,331 $ (1,477) $ 46,283
Research and development (14,690)
General corporate expense (3,441)
Interest expense, net (2,182)
Income from continuing operations
before income taxes $ 25,970
Identifiable assets $ 69,114 $ 66,955 $ (5,706) $ 130,363
Corporate assets 11,618
Total assets at June 30, 1991 $ 141,981
</TABLE>
Transfers between geographic areas are made at amounts which would approximate
those prices charged to unaffiliated distributors. Operating profits
from geographic segments represent total revenue less cost of goods sold and
direct operating expenses. It excludes research and development
expense, general corporate expense, net interest expense, income taxes, and
loss from discontinued operations.
Identifiable assets are those that are identified with the operations in
each geographic area. Corporate assets are cash and cash equivalents.
Total foreign assets at June 30, 1993, 1992 and 1991 are indicated above.
The corresponding liabilities for foreign operations were $29,038,000,
$27,136,000 and $19,234,000, respectively.
<PAGE>
10. Quarterly financial data
Quarterly financial data is as follows (unaudited) (dollars in thousands
except per share amounts):
First Second Third Fourth
Quarter Quarter Quarter Quarter
1994
Net sales $ 69,145 $ 75,401 - -
Gross profit 41,838 44,943 - -
Income before cumulative effect
of accounting change 7,908 8,591 - -
Net income 18,023 8,591 - -
Income before cumulative effect
of accounting change per share .54 .58 _ -
Net income per share 1.24 .58 _ _
1993
Net sales $ 62,515 $ 61,971 $ 64,219 $ 66,753
Gross profit 38,493 38,321 37,631 39,064
Net income 6,054 6,917 7,743 8,346
Net income per share .42 .47 .53 .58
1992
Net sales $ 50,129 $ 55,290 $ 59,062 $ 58,478
Gross profit 30,231 33,161 34,926 34,832
Net income 4,771 5,492 6,527 7,224
Net income per share .33 .38 .46 .50
11. Common stock purchase rights
On September 12, 1986 Cordis' Board of Directors adopted a Rights Agreement,
as subsequently amended, authorizing a dividend distribution on each
share of common stock, $1.00 par value, of Cordis' outstanding shares on
the distribution date, as defined, in the form of a right to purchase
one-half of a share of common stock upon the occurrence of certain events.
The exercise price to purchase one-half of a share of common stock,
initially established at $25, is subject to adjustment. The rights
become exercisable if an entity, person or group acquires beneficial
ownership of 20% or more of Cordis' outstanding common stock or commences
a tender offer that would result in that entity, person or group acquiring
beneficial ownership of 30% or more of the outstanding common stock of Cordis.
The rights, which do not entitle holders to vote or receive dividends, expire
on September 22, 1996 and may be redeemed by Cordis at a price of $0.01 per
right at any time prior to the earlier of (i) the tenth day following
the public announcement of intent to acquire Cordis' stock as described above
or the date a majority of the Board of Directors becomes aware of an
acquiring entity, person or group, as defined, or (ii) the expiration date.
As of June 30, 1993 rights to purchase 6,619,770 shares of common stock
were outstanding.
<PAGE>
INDEX TO FINANCIAL STATEMENTS OF WEBSTER
Page
Report of Independent Certified Accountants F-29
Balance Sheets at November 30, 1993 and 1992 F-30-F-31
Statements of Earnings for the three years
ended November 30, 1993 F-32
Statements of Stockholders' Equity for the
three years ended November 30, 1993 F-33
Statements of Cash Flows for the three years
ended November 30, 1993 F-34
Notes to Financial Statements F-35-F-40
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Webster Laboratories, Inc.
Baldwin Park, California
We have audited the accompanying balance sheets of Webster Laboratories, Inc.
as of November 30, 1993 and 1992, and the related statements of
earnings, stockholders' equity and cash flows for each of the three years in
the period ended November 30, 1993. These financial statements are
the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Webster Laboratories, Inc. as of
November 30, 1993 and 1992, and the results of its operations and its cash
flows for each of the three years in the period ended November 30, 1993,
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE
Costa Mesa, California
December 21, 1993
<PAGE>
WEBSTER LABORATORIES, INC.
BALANCE SHEETS
AS OF NOVEMBER 30, 1993 AND 1992
1993 1992
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Note 1) $3,449,415 $2,810,340
Accounts receivable, net of allowance for
doubtful accounts of $36,182 and $5,589
in 1993 and 1992, respectively 2,038,444 1,108,323
Deferred income tax asset, net (Note 3) 493,000 127,000
Inventories (Note 1):
Raw materials 491,893 874,709
Work in process 895,423 369,650
Finished goods 1,297,112 511,700
Total inventories 2,684,428 1,756,059
Prepaid expenses and other current assets 124,955 232,160
Total current assets 8,790,242 6,033,882
PROPERTY AND EQUIPMENT (Note 1):
Machinery and equipment 812,618 564,185
Furniture and fixtures 591,721 372,268
Leasehold improvements 1,633,490 277,284
Construction-in-progress 83,508
3,037,829 1,297,245
Less accumulated depreciation and amortization (738,228) (449,300)
Property and equipment, net 2,299,601 847,945
OTHER ASSETS 37,570 3,206
$11,127,413 $6,885,033
See notes to financial statements.
<PAGE>
WEBSTER LABORATORIES, INC.
BALANCE SHEETS
AS OF NOVEMBER 30, 1993 AND 1992
1993 1992
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $445,909 $390,768
Customer advances 192,851 24,365
Accrued liabilities 264,591 23,639
Accrued employee compensation 716,832 389,830
Income taxes payable (Notes 1 and 3) 41,019 111,625
Deferred income (Note 2) 810,177
Total current liabilities 2,471,379 940,227
COMMITMENTS AND CONTINGENCIES (Note 2)
MANDATORILY REDEEMABLE STOCK (Note 4):
Redeemable, convertible Series A preferred
stock (no par); 4,000,000 shares authorized;
1,200,000 shares issued and outstanding
(preferred liquidation preference
$2,004,000) 2,261,212 2,053,236
Common stock (no par), 400,000 shares
issued and outstanding
in 1993 and 1992 33,748 33,748
Note receivable from sale of mandatorily
redeemable common stock (33,748) (33,748)
Total mandatorily redeemable stock 2,261,212 2,053,236
STOCKHOLDERS' EQUITY (Note 4):
Common stock (no par); 10,000,000 shares
authorized; 4,277,067 and 4,000,000 shares
issued and outstanding 183,108 106,042
Additional paid-in capital (Note 3) 26,567 26,567
Retained earnings 6,251,813 3,758,961
Note receivable from sale of common stock (66,666)
Net stockholders' equity 6,394,822 3,891,570
$11,127,413 $6,885,033
See notes to financial statements.
<PAGE>
WEBSTER LABORATORIES, INC.
STATEMENTS OF EARNINGS
FOR THE YEARS ENDED NOVEMBER 30, 1993, 1992 AND 1991
1993 1992 1991
NET SALES (Notes 1 and 6) $14,487,317 $9,043,812 $5,173,169
COST OF GOODS SOLD 3,736,402 2,933,183 2,390,024
GROSS PROFIT 10,750,915 6,110,629 2,783,145
GENERAL AND ADMINISTRATIVE
EXPENSES 1,506,829 986,639 534,178
SALES AND MARKETING
EXPENSES 3,208,225 1,308,350
RESEARCH AND DEVELOPMENT
EXPENSES 1,655,279 721,611 234,441
EARNINGS FROM OPERATIONS 4,380,582 3,094,029 2,014,526
OTHER EARNINGS (EXPENSES), NET 90,246 (6,092) 16,243
EARNINGS BEFORE INCOME TAXES 4,470,828 3,087,937 2,030,769
INCOME TAXES (Notes 1 and 3) 1,770,000 1,238,000 817,000
NET EARNINGS $2,700,828 $1,849,937 $1,213,769
See notes to financial statements
<PAGE>
WEBSTER LABORATORIES, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED NOVEMBER 30, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
Note
receivable
Addi- from Net
Common Stock tional sale of stock-
paid-in Retained common holders
Shares Amount capital earnings stock equity
<S> <C> <C> <C> <C> <C> <C>
BALANCES, December 1, 1990 4,000,000 $106,042 $ -- $ 771,825 $ -- $ 877,867
Net earnings 1,213,769 1,213,769
BALANCES, November 30, 1991 4,000,000 106,042 1,985,594 2,091,636
Accretion to redemption value on
Series A preferred stock
(Note 4) (76,570) (76,570)
Tax benefit due to exercise of
stock option (Notes 3 and 4) 26,567 26,567
Net earnings 1,849,937 1,849,937
BALANCES, November 30, 1992 4,000,000 106,042 26,567 3,758,961 3,891,570
Accretion to redemption value on
Series A preferred stock (Note 4) (207,976) (207,976)
Exercise of stock options (Note 4) 266,667 66,666 (66,666)
Exercise of stock options (Note 4) 10,400 10,400 10,400
Net earnings 2,700,828 2,700,828
BALANCES, November 30, 1993 4,277,067 $183,108 $26,567 $6,251,813 $(66,666) $6,394,822
</TABLE>
See notes to financial statements.
<PAGE>
WEBSTER LABORATORIES, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED NOVEMBER 30, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
1993 1992 1991
<C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $2,700,828 $1,849,937 $1,213,769
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 288,930 137,066 62,059
Changes in assets and liabilities:
Accounts receivable (930,121) (578,258) (343,194)
Deferred income tax asset (366,000) (127,000)
Inventories (928,369) (1,212,734) (239,519)
Prepaid expenses and other current
assets 107,205 327,189 (472,839)
Other assets (34,364) (3,206)
Accounts payable 55,141 322,544 20,749
Customer advances 168,486 24,365
Accrued liabilities 240,952 4,210 17,309
Accrued employee compensation 327,002 109,263 146,829
Income taxes payable (70,606) 83,605 52,279
Deferred income 810,177
Net cash provided by
operating activities 2,369,261 936,981 457,442
CASH FLOWS FROM INVESTING ACTIVITIES -
Acquisitions of property and
equipment (1,740,586) (599,972) (189,732)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of Series
A preferred stock 1,976,666
Proceeds from issuance of common stock 10,400
Payments on note payable (56,431)
Net cash provided by (used in)
financing activities 10,400 1,976,666 (56,431)
NET INCREASE IN CASH AND CASH
EQUIVALENTS 639,075 2,313,675 211,279
CASH AND CASH EQUIVALENTS,
beginning of year 2,810,340 496,665 285,386
CASH AND CASH EQUIVALENTS,
end of year $3,449,415 $2,810,340 $ 496,665
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION -- Cash paid for:
Income taxes $2,205,500 $1,198,500 $ 785,000
Interest $ _ $ - $ 564
</TABLE>
<PAGE>
WEBSTER LABORATORIES, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED NOVEMBER 30, 1993, 1992 AND 1991
1. BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Webster Laboratories, Inc. ("Webster") manufactures and distributes
electrophysiology catheters. Webster was founded in 1969 as a sole
proprietorship and was incorporated as a California corporation in
December 1980.
Revenue Recognition - Sales are recorded on the date of shipment
of Webster's products to its customers.
Credit Risk - Webster sells products both on cash and credit terms.
Webster performs ongoing credit evaluations of its customers and generally
does not require collateral. Webster maintains reserves for potential
credit losses.
Cash and Cash Equivalents - Webster considers all cash on hand and
on deposit and debt securities with original maturities of less than three
months to be cash and cash equivalents.
Inventories - Inventories are stated at the lower of cost (first-in,
first-out) or market.
Property and Equipment - Property and equipment are stated at cost.
Depreciation and amortization are provided principally by the
straight-line method over the lesser of the lease term (if applicable) or
the estimated useful lives of the assets.
Depreciable lives used for the principal classes of assets are as
follows:
Machinery and equipment and furniture and fixtures 5 to 7 years
Leasehold improvements 10 years
Sales and Marketing Expenses - During May 1992, Webster terminated
its distribution agreement with a third party and began handling sales and
marketing activities internally.
Income Taxes - Effective December 1, 1991, Webster adopted Statement
of Financial Accounting Standards No. 109, Accounting for Income Taxes.
This adoption did not have a material impact on the financial condition or
operations of Webster.
2. COMMITMENTS AND CONTINGENCIES
Operating Leases - Aggregate future minimum net lease payments,
excluding the facility currently under a month-to-month lease, under
noncancelable facility operating leases are as follows:
Year ending November 30:
1994 $251,575
1995 249,552
1996 249,552
1997 249,552
1998 249,552
Thereafter 1,111,140
$2,360,923
In addition to minimum annual rentals, some leases contain provisions
whereby Webster is required to pay maintenance, insurance and other
expenses. Rental expense amounted to approximately $235,000, $130,000 and
$99,000 for the years ended November 30, 1993, 1992 and 1991,
respectively.
The leases also include options to renew and provide for increases in
rent based on a certain consumer index.
Royalty Agreement - Webster has a royalty agreement with a third party
requiring payments determined by sales of certain products by Webster.
During the years ended November 30, 1993, 1992 and 1991, Webster paid
approximately $35,000, $29,000 and $26,000 under this agreement, respectively.
Litigation - Webster is involved in litigation relating to matters
arising out of Webster's normal business activities. Management does not
expect the outcome of this litigation to have a material adverse effect on
the financial statements.
Employment Contract - Webster has one outstanding employment contract
with an officer. The contract, which has no definitive termination date,
calls for minimum annual aggregate payments totaling $160,000.
Distribution Agreement - In February 1993, Webster entered into a
distribution agreement with a third party whereby the third party has the
right to distribute Webster's products in Japan through December 31, 1997.
Under this agreement, Webster granted certain product pricing discounts
in exchange for a nonrefundable payment of $1,000,000. This payment has
been recorded as deferred income and is amortized as discounts are granted
to the third party. At November 30, 1993, approximately $190,000 of this
payment has been amortized to revenue.
Reclassifications - Certain reclassifications to the 1992 and 1991
financial statements have been made to conform them to the 1993
presentation.
3. INCOME TAXES
Income taxes are summarized as follows:
1993 1992 1991
Current income taxes
Federal $1,667,000 $1,074,000 $645,000
State 469,000 291,000 172,000
Total current 2,136,000 1,365,000 817,000
Deferred income taxes:
Federal (296,000) (125,000)
State (70,000) (2,000)
Total deferred (366,000) (127,000)
$1,770,000 $1,238,000 $817,000
Temporary differences which gave rise to deferred tax assets and
liabilities were as follows at November 30, 1993 and 1992:
Bad debt reserve $ 11,000 $ 2,000
Inventory reserves 2,000 6,000
State taxes 136,000 90,000
Vacation and sick pay accrual 52,000 42,000
Deferred income 351,000
Deferred income tax asset 552,000 140,000
Accelerated depreciation (28,000) (13,000)
Other (31,000)
Deferred income tax liability (59,000) (13,000)
Deferred income tax asset, net $493,000 $127,000
Webster recorded approximately $27,000 to additional paid-in capital
for the tax benefit of a stock option exercised by an employee of Webster
during the year ended November 30, 1992.
4. STOCKHOLDERS' EQUITY AND MANDATORILY REDEEMABLE STOCK
On July 16, 1992, a 2,000-for-1 stock split occurred on all outstanding
shares of common stock. All common share amounts in the accompanying
financial statements reflect the split.
Issuance of Preferred Shares - In July 1992, Webster issued 1,200,000
shares of Series A preferred stock for $1,976,666, net of costs of
$27,334 associated with the issuance. The Series A preferred stock has a
preferred liquidation preference of $1.67 per share plus any declared but
unpaid dividends. After a return of $1.25 per share plus any declared and
unpaid dividends for each common share, each preferred share, on an
if-converted basis, and each common share participate equally on remaining
distributions upon liquidation. In addition, the Series A preferred
stockholders have voting rights determined by the number of common shares
into which the preferred stock may be converted.
Dividends - Preferred Stock - Holders of Series A preferred stock are
entitled to receive noncumulative cash dividends at an annual rate of
$.1336 per share, payable in preference and priority to any dividend on
common stock, when and as declared by the Board of Directors. For the years
ended November 30, 1993 and 1992, no dividends were declared.
Redemption - Preferred Stock - The terms of the Series A preferred stock
provide for redemption at the option of the holder by Webster after
July 27, 1996, if such redemption has been requested by a majority of preferred
stockholders. The stock is redeemable at an amount equal to the
sum of (i) $1.67 per share, (ii) a rate of return of 10% per annum, compounded
annually, and (iii) any declared and unpaid dividends, and is payable
in three equal annual installments. During the years ended November 30, 1993
and 1992, Webster recorded $207,976 and $76,570, respectively, as an
increase to preferred stock and a decrease to retained earnings to reflect the
accretion of the difference between the net proceeds received from
the sale of the stock and the redemption value of the Series A preferred stock.
Conversion Rights - Preferred Stock - Each share of Series A preferred
stock is convertible at the option of the holder, at any time after
the date of issuance, into common stock based on the ratio of the conversion
price (initial liquidation preference of $1.67 per share plus
adjustments for antidilution) divided by $1.67 per share. The preferred stock
is mandatorily convertible upon the closing of an underwritten public
offering of Webster's common stock for at least $10,000,000 and a minimum of
$5.00 per share.
Stock Plan - During 1992, Webster adopted a Stock Plan (the Plan) under
which nonstatutory and incentive stock options to acquire shares of
Webster's common stock and rights to purchase shares of Webster's common
stock may be granted to directors, officers, employees or consultants of
Webster. The Plan is administered by the Board of Directors (the
Administrator) and permits the issuance of up to 1,066,667 shares of Webster's
common stock. Incentive stock options and rights to purchase shares of
common stock may be granted at an exercise or purchase price not less than
the fair market value of the underlying shares on the date of grant.
Non-statutory stock options may be granted at an exercise price of not less
than 85% of the fair market value of the underlying shares on the date of
grant. To date, no shares have been issued or options granted at a price
less than the fair market value on the date of grant. Options granted under
the Plan are exercisable over a period of time, not to exceed ten years,
designated by the Administrator and are subject to other terms and conditions
as determined by the Administrator.
The following table sets forth options and stock purchase rights granted,
canceled, forfeited and outstanding during the years ended November 30:
<TABLE>
<CAPTION>
1993 1992 1991
Price Price Price
per per per
Shares share Shares share Shares share
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of year 340,000 $0.25 400,000 $0.08 400,000 $0.08
Options/ shares granted 689,233 $0.25-$4.00 340,000 $0.25
Options exercised/shares
purchased (277,067) $0.25-$1.00 (400,000) $0.08
Options returned (4,500) $1.00
Outstanding, end of year 747,666 $0.25-$4.00 340,000 $.025 400,000 $0.08
</TABLE>
Exercise of Stock Options - Pursuant to the stock option and stock
repurchase agreement dated October 31, 1988, during fiscal 1988, Webster
granted to an employee an option to purchase 400,000 shares of common stock
at $.08 per share, the fair market value at the date of grant. In July
1992, the option was exercised. In consideration for the stock, Webster
received a note receivable for $33,748. This note receivable bears interest
at 5% and is due in July 1995. The tax benefit upon exercise of the
nonstatutory stock option was $26,567. At the election of the employee,
Webster may be required to repurchase these shares at a price equal to
Webster's book value under terms defined in the option agreement.
Pursuant to a restricted stock purchase agreement, in April 1993, Webster
sold 266,667 shares of Webster's common stock to an officer at $.25 per
share, which was determined to be the fair market value at the date of grant.
In consideration for the stock, Webster received a note receivable
for $66,667. This note receivable bears interest at 4% and is due and payable
on April 19, 1997 or 15 days following employment termination,
whichever occurs first. At the election of Webster, Webster may repurchase
these shares at a price equal to the original purchase price per share
under terms defined in the Restricted Stock Purchase Agreement.
5. LINES OF CREDIT
Effective October 1993, Webster obtained a new revolving line of credit
and a term line of credit with a new banking institution. The new
revolving line of credit and term line of credit permit indebtedness up to
$2,000,000 and $1,000,000, respectively, and are unsecured. The
outstanding principal balances of the revolving line of credit and term
line of credit bear interest at a rate per annum of prime rate plus .25%
and .5%, respectively. (The bank's prime rate was 6.0% at November 30,
1993.) The credit agreements contain various covenants, including the
maintenance of defined financial ratios. Webster was in compliance with
these covenants at November 30, 1993. Webster had no outstanding balances
at November 30, 1993.
6. EXPORT SALES AND SIGNIFICANT CUSTOMERS
Export sales amounted to approximately $4,282,000, $143,000 and $81,000
for the years ended November 30, 1993, 1992 and 1991, respectively.
Sales to one significant customer (see Notes 1 and 2 for information regarding
distribution agreements) were approximately zero, $5,458,000 and
$4,885,000 for the years ended November 30, 1993, 1992 and 1991, respectively.
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
CORDIS CORPORATION,
CORDIS ACQUISITION, INC.,
WEBSTER LABORATORIES, INC.,
and
CERTAIN OF THE SHAREHOLDERS OF
WEBSTER LABORATORIES, INC.
Dated as of January 20, 1994
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. 1
SECTION 1.02. Effective Time. 2
SECTION 1.03. Effect of the Merger. 2
SECTION 1.04. Articles of Incorporation;
By-Laws. 3
SECTION 1.05. Directors and Officers. 3
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE
OF CERTIFICATES
SECTION 2.01. Conversion of Securities. 3
SECTION 2.02. Exchange of Certificates. 5
SECTION 2.03. Stock Transfer Books. 9
SECTION 2.04. Stock Options. 9
SECTION 2.05. Dissenting Shareholders. 10
SECTION 2.06. Post-closing Adjustment. 10
SECTION 2.07. Closing. 12
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
SECTION 3.01. Organization and Qualification. 12
SECTION 3.02. Articles of Incorporation and By-
Laws. 13
SECTION 3.03. Capitalization; Subsidiaries. 13
SECTION 3.04. Authority. 15
SECTION 3.05. No Conflict; Required Filings and
Consents. 15
SECTION 3.06. Permits; Compliance. 16
SECTION 3.07. Financial Information; Books and
Records. 17
SECTION 3.08. Absence of Undisclosed
Liabilities. 17
SECTION 3.09. Absence of Certain Changes or
Events. 18
SECTION 3.10. Absence of Litigation. 19
SECTION 3.11. Contracts; No Default. 19
SECTION 3.12. Employee Benefit Plans; Labor
Matters. 21
SECTION 3.13. Taxes. 22
SECTION 3.14. FDA and Other Regulatory
Compliance. 24
SECTION 3.15. Customers. 25
SECTION 3.16. Certain Business Practices and
Regulations. 25
SECTION 3.17. Insurance. 26
SECTION 3.18. Potential Conflicts of Interest. 26
SECTION 3.19. Accounting and Tax Matters. 27
SECTION 3.20. Receivables; Inventories. 28
SECTION 3.21. Real Property; Leases. 29
SECTION 3.22. Books and Records. 31
SECTION 3.23. Title to Assets. 31
SECTION 3.24. No Infringement or Contest. 31
SECTION 3.25. Board Recommendation. 32
SECTION 3.26. Vote Required. 32
SECTION 3.27. Banks; Attorneys-in-fact. 32
SECTION 3.28. Affiliate Agreements. 33
SECTION 3.29. Brokers. 33
SECTION 3.30. Environmental Matters. 33
SECTION 3.31. Disclosure. 35
SECTION 3.32. Company Shareholders. 35
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY SHAREHOLDERS 36
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF THE SCHEDULE 2 SHAREHOLDERS 36
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF ACQUIROR AND ACQUIROR SUB
SECTION 6.01. Organization and Qualification;
Subsidiaries. 36
SECTION 6.02. Articles of Incorporation and By-
Laws. 37
SECTION 6.03. Authority. 37
SECTION 6.04. No Conflict; Required Filings and
Consents. 37
SECTION 6.05. Absence of Litigation. 38
SECTION 6.06. Ownership of Acquiror Sub; No
Prior Activities. 39
SECTION 6.07. Brokers. 39
SECTION 6.08. SEC Reports. 39
SECTION 6.09. Acquiror Common Stock. 40
SECTION 6.10. Taxes. 40
ARTICLE VII
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 7.01. Affirmative Covenants. 40
SECTION 7.02. Negative Covenants of the Company. 41
SECTION 7.03. Negative Covenants of Acquiror. 44
SECTION 7.04. Access and Information. 44
ARTICLE VIII
ADDITIONAL AGREEMENTS
SECTION 8.01. Registration Statement; Proxy
Statement. 45
SECTION 8.02. Meeting of Shareholders. 47
SECTION 8.03. Appropriate Action; Consents;
Filings; Other. 47
SECTION 8.04. Unaudited Financial Information. 48
SECTION 8.05. Letters of Accountants. 49
SECTION 8.06. Update Disclosure; Breaches. 49
SECTION 8.07. Affiliates; Accounting and Tax
Treatment. 49
SECTION 8.08. Public Announcements. 50
SECTION 8.09. NASD Listing. 50
SECTION 8.10. Employee Matters. 50
SECTION 8.11. Assumption of Agreements. 50
SECTION 8.12. Benefit Arrangements. 50
SECTION 8.13. Principal Offices. 51
SECTION 8.14. Obligations of Acquiror Sub;
Assets of Acquiror Sub. 51
SECTION 8.15. Approval of Merger. 51
SECTION 8.16. Tax Returns. 52
SECTION 8.17. Indemnification. 52
SECTION 8.18. Procedures; Conditions of
Indemnification. 53
SECTION 8.19. Agreement with Brentwood. 54
SECTION 8.20. Condition of Wilton Webster. 54
ARTICLE IX
CLOSING CONDITIONS
SECTION 9.01. Conditions to Obligations of
Acquiror and the Company Under This
Agreement. 55
SECTION 9.02. Additional Conditions to
Obligations of Acquiror. 56
SECTION 9.03. Additional Conditions to
Obligations of the Company. 58
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
SECTION 10.01. Termination. 60
SECTION 10.02. Effect of Termination. 61
SECTION 10.03. Expenses. 61
SECTION 10.04. Amendment. 62
SECTION 10.05. Waiver. 62
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01. Survival of Representations,
Warranties and Agreements After
Effective Time. 63
SECTION 11.02. Limitation of Liability of Company
Shareholders and Schedule 2
Shareholders. 63
SECTION 11.03. Notices. 64
SECTION 11.04. Certain Definitions. 65
SECTION 11.05. Headings. 66
SECTION 11.06. Severability. 66
SECTION 11.07. Entire Agreement. 66
SECTION 11.08. Assignment. 67
SECTION 11.09. Parties in Interest. 67
SECTION 11.10. Mutual Drafting. 67
SECTION 11.11. Governing Law. 67
SECTION 11.12. Counterparts. 67
EXHIBITS
EXHIBIT A FORM OF AGREEMENT OF MERGER
EXHIBIT B FORM OF ESCROW AGREEMENT
EXHIBIT C FORM OF AFFILIATE AGREEMENT
EXHIBIT D FORM OF BRENTWOOD AGREEMENT
EXHIBIT E-1 FORM OF WEBSTER EMPLOYMENT AGREEMENT
EXHIBIT E-2 FORM OF BROWN EMPLOYMENT AGREEMENT
<PAGE>
Index of Defined Terms
Section
Acquiror PREAMBLE
Acquiror Common Stock SECTION 2.01(a)(i)
Acquiror Disclosure Schedule ARTICLE VI PREAMBLE
Acquiror Material Adverse Effect SECTION 6.01
Acquiror Option SECTION 2.04
Acquiror Sub PREAMBLE
Acquiror Sub Common Stock SECTION 2.01(c)
Acquiror SEC Reports SECTION 6.08
Adjustment Date SECTION 2.06(a)(i)
Adjustment Escrow Shares SECTION 2.06(a)
Adjustment Property SECTION 2.06(a)(i)
affiliate SECTION 11.04(a)
Affiliate Agreement SECTION 3.28
Agreement PREAMBLE
Agreement of Merger SECTION 1.02
Amended Articles SECTION 1.04
Amended By-Laws SECTION 1.04
approvals SECTION 3.14
Assets SECTION 3.21(g)
Audited Balance Sheets SECTION 3.07(a)
Audited Statements SECTION 3.07(a)
Average Trading Price SECTION 2.01(a)(i)
beneficial owner SECTION 11.04(b)
best efforts SECTION 11.04(c)
Blue Sky Laws SECTION 3.05(a)
Bona Fide Proposal SECTION 7.02(g)
Brentwood SECTION 3.03
business day SECTION 11.04(d)
California Law PREAMBLE
Claim Amount SECTION 2.06(a)(iii)
Certificates SECTION 2.02(b)
Claims SECTION 8.18
Closing SECTION 2.07
Closing Date SECTION 2.07
Code PREAMBLE
Company PREAMBLE
Company Affiliates SECTION 3.28
Company Benefit Plans SECTION 3.12(a)
Company Common Stock SECTION 2.01(a)(i)
Company Contracts SECTION 3.11(a)
Company Disclosure Schedule ARTICLE III PREAMBLE
Company Material Adverse Effect SECTION 3.01
Company Options SECTION 2.04
Company Permits SECTION 3.06(a)
Company Preferred Stock SECTION 3.03
Company Shareholders PREAMBLE
Company Stock Plan SECTION 2.04
Competing Transaction SECTION 7.02(g)
Confidentiality Agreement SECTION 7.02(g)
control SECTION 11.04(e)
Damages SECTION 8.17
Disability SECTION 2.01(a)(iii)
Dissenting Shares SECTION 2.01(a)(i)
Dissenting Shareholder SECTION 2.05
Documents SECTION 3.21(g)
Effective Time SECTION 1.02
employee benefit plan SECTION 3.12(a)
Encumbrances SECTION 3.21(g)
Environmental Laws SECTION 3.30(h)
ERISA SECTION 3.12(a)
Escrow Agent SECTION 2.02(h)
Escrow Agreement SECTION 2.02(h)
excess parachute payment SECTION 3.12(b)
Exchange Act SECTION 3.05(a)
Exchange Agent SECTION 2.02(a)
Exchange Fund SECTION 2.02(a)
Exchange Ratio SECTION 2.01(a)(i)
FDA SECTION 3.14
Financial Statements SECTION 8.04
GAAP SECTION 3.07(b)
Governmental Entities SECTION 3.05(a)
group SECTION 7.02(g)
Hazardous Discharge SECTION 3.30(h)
Hazardous Materials SECTION 3.30(h)
Holders SECTION 2.06(a)(iii)
HSR Act SECTION 3.05(a)
Indemnification Amount SECTION 2.06(a)(ii)
Indemnified Person or Indemnified Persons SECTION 8.17
IRS SECTION 3.12(a)
knowledge SECTION 11.04(f)
Laws SECTION 3.05(a)
Maximum Liability Amount SECTION 11.02
MDRs SECTION 3.14
Merger PREAMBLE
NASD SECTION 3.05(a)
NASDAQ/NMS SECTION 2.01(a)(i)
Other Agreements SECTION 3.21(g)
PCBs SECTION 3.30(h)
person SECTION 11.04(g)
Plan SECTION 3.19(b)
PMA SECTION 3.14
Post-closing Adjustment Period SECTION 2.06(a)(i)
Pre-Merger Period SECTION 3.19(a)
Proxy Statement SECTION 8.01(a)
Real Property SECTION 3.21(g)
Recomputed Exchange Ratio SECTION 2.01(a)(ii)
Registration Rights Agreement SECTION 3.03
Registration Statement SECTION 8.01(a)
Representative SECTION 2.02(h)
Returns SECTION 3.13(d)
Review Period SECTION 8.15
Sale SECTION 3.19(b)
Schedule 2 Shareholders ARTICLE V
SEC SECTION 3.28
Securities Act SECTION 3.05(a)
Series A Preferred Stock Purchase
Agreement SECTION 3.03
Shareholders' Meeting SECTION 8.01(b)
Significant Subsidiary or Significant
Subsidiaries SECTION 11.04(h)
subsidiary or subsidiaries SECTION 11.04(i)
Surviving Corporation SECTION 1.01
Tax or Taxes SECTION 3.13(d)
Unaudited Balance Sheets SECTION 8.04
Unaudited Statements SECTION 8.04
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION, dated as of January 20,
1994 (this "Agreement"), among CORDIS CORPORATION, a Florida
corporation ("Acquiror"), CORDIS ACQUISITION, INC., a California
corporation ("Acquiror Sub") and a wholly owned subsidiary of
Acquiror, WEBSTER LABORATORIES, INC., a California corporation (the
"Company"), and each of the shareholders of the Company as named on
Schedule 1 hereto (the "Company Shareholders").
WHEREAS, Acquiror Sub, upon the terms and subject to the
conditions of this Agreement and in accordance with Sections 1100
et seq. of the Corporations Code of the State of California
("California Law"), will merge with and into the Company (the
"Merger");
WHEREAS, the Board of Directors of the Company has (i)
determined that the Merger is fair to the holders of Company
Common Stock (as defined in Section 2.01(a)) and Company
Preferred Stock (as defined in Section 3.03) and is in the best
interests of such shareholders and (ii) approved and adopted this
Agreement and the transactions contemplated hereby and
recommended approval and adoption of this Agreement by the
shareholders of the Company;
WHEREAS, the Board of Directors of Acquiror has determined
that the Merger is in the best interests of Acquiror and its
stockholders and the Boards of Directors of Acquiror and Acquiror
Sub have approved and adopted this Agreement and the transactions
contemplated hereby;
WHEREAS, for federal income tax purposes, it is intended
that the Merger shall qualify as a tax-free reorganization under
the provisions of Section 368(a) of the United States Internal
Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for accounting purposes, it is intended that the
Merger shall be accounted for as a "pooling of interests"
pursuant to APB Opinion No. 16, Staff Accounting Releases 130 and
135 and Staff Accounting Bulletins No. 65 and No. 76;
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements
set forth in this Agreement, the parties hereto agree as follows:
<PAGE>
ARTICLE I
THE MERGER
SECTION 1.01. The Merger.
Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with California Law, at the
Effective Time (as defined in Section 1.02) Acquiror Sub shall be
merged with and into the Company. As a result of the Merger, the
separate corporate existence of Acquiror Sub shall cease and the
Company shall continue as the surviving corporation of the Merger
(the "Surviving Corporation").
SECTION 1.02. Effective Time.
As promptly as practicable after the Closing (as defined in
Section 2.07), the parties hereto shall cause the Merger to be
consummated by filing the Agreement of Merger substantially in
the form attached hereto as Exhibit A (the "Agreement of Merger")
and the officers' certificates required to be filed therewith
with the Secretary of State of the State of California, in such
form as required by, and executed in accordance with the relevant
provisions of, California Law (the date and time of such filing
being the "Effective Time").
SECTION 1.03. Effect of the Merger.
At the Effective Time, the effect of the Merger shall be as
provided in the applicable provisions of California Law. Without
limiting the generality of the foregoing, and subject thereto, at
the Effective Time, the Surviving Corporation shall possess, and
succeed without other transfer to, all the rights, privileges,
powers, franchises and property as well of a public as of a
private nature, and be subject to all the restrictions,
disabilities and duties, of each of Acquiror Sub and the Company;
and all and singular, the rights, privileges, powers and
franchises of each of Acquiror Sub and the Company, and all
property, real, personal and mixed, and all debts due to either
Acquiror Sub or the Company on whatever account, as well as for
share subscriptions as all other things in action or belonging to
each of such corporations shall be vested in the Surviving
Corporation; and all property, rights, privileges, powers and
franchises, and all and every other interest, shall be thereafter
as effectually the property of the Surviving Corporation as they
were of Acquiror Sub and the Company, and the title to any real
estate vested, by deed or otherwise, under the laws of the State
of California or of any other state, in Acquiror Sub or the
Company, shall not revert or be in any way impaired by reason of
the California General Corporation Law; but all rights of
creditors and all liens upon any property of Acquiror Sub or the
Company shall be preserved unimpaired, and all debts, liabilities
and duties of Acquiror Sub and the Company shall thenceforth
attach to the Surviving Corporation (and the Surviving
Corporation shall be subject thereto) and may be enforced against
it to the same extent as if said debts, liabilities and duties
had been incurred or contracted by it. Any action or proceeding
pending by or against Acquiror Sub may be prosecuted to judgment,
which shall bind the Surviving Corporation, or the Surviving
Corporation may be proceeded against or substituted in its place.
The Surviving Corporation shall continue its corporate existence
under the laws of the State of California, and its name shall be
Cordis-Webster, Inc. (or a variation thereof as reasonably
determined by Acquiror).
SECTION 1.04. Articles of Incorporation; By-Laws.
At the Effective Time, the Articles of Incorporation and the
By-Laws of the Company, as amended as provided in the Agreement
of Merger (the "Amended Articles" and the "Amended By-Laws,"
respectively), shall be the articles of incorporation and the
by-laws of the Surviving Corporation, subject to any subsequent
amendment.
SECTION 1.05. Directors and Officers.
The directors of Acquiror Sub immediately prior to the Effective
Time shall be the initial directors of the Surviving Corporation,
each to hold office in accordance with the Amended Articles and
Amended By-Laws, and the officers of the Company immediately
prior to the Effective Time shall be the initial officers of the
Surviving Corporation, in each case until their respective
successors are duly elected or appointed and qualified, or until
their earlier death, resignation or removal.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Conversion of Securities.
At the Effective Time, as provided in the Agreement of Merger, by
virtue of the Merger and without any action on the part of the
Acquiror Sub, the Company or the holders of any of the following
securities:
(a)(i) Each share of common stock, no par value per share,
of the Company ("Company Common Stock") issued and outstanding
immediately prior to the Effective Time (other than any shares
of Company Common Stock to be canceled pursuant to Section
2.01(b) or shares ("Dissenting Shares") held by any Company
shareholder who elects to exercise appraisal rights under
Sections 1300 et seq. of California Law) shall be converted,
subject to Section 2.02(e), into the right to receive that
number of shares of common stock, par value $1.00 per share
("Acquiror Common Stock") of Acquiror determined by dividing
$12.81364 by the Average Trading Price (as defined below) of
a share of Acquiror Common Stock; provided, however, if the
Average Trading Price is greater than $52.02, such number
shall be deemed to be 0.246321 and if the Average Trading
Price is less than $42.56, such number shall be deemed to be
0.301072. Such number as so determined, including any
adjustments thereto made as provided below in this
Section 2.01(a)(i), shall be referred to as the "Exchange
Ratio". Based on the Exchange Ratio, the minimum and maximum
numbers of shares of Acquiror Common Stock issuable pursuant
to the Merger as contemplated under this Agreement (assuming
the conversion prior to the Effective Time of all shares of
Company Preferred Stock into Company Common Stock as
contemplated hereunder and assuming the issuance prior to the
Effective Time of all shares of Company Common Stock issuable
pursuant to Company Options (as defined in Section 2.04))
shall be 1,634,008 and 1,997,203, respectively. All such
shares of Company Common Stock shall no longer be outstanding
and shall automatically be canceled and retired and shall
cease to exist, and each certificate previously representing
any such shares shall thereafter represent the right to
receive a certificate representing the shares of Acquiror
Common Stock into which such Company Common Stock was
converted in the Merger. Certificates previously representing
shares of Company Common Stock shall be exchanged for
certificates representing whole shares of Acquiror
Common Stock issued in consideration therefor upon the
surrender of such certificates in accordance with the
provisions of Section 2.02, without interest. No fractional
share of Acquiror Common Stock shall be issued, and, in lieu
thereof, a cash payment shall be made pursuant to Section
2.02(e) hereof. In any event, if between the date of this
Agreement and the Effective Time the outstanding shares
Acquiror Common Stock, Company Common Stock or Company
Preferred Stock (as defined in Section 3.03) shall have been
changed into a different number of shares
or a different class, by reason of any stock dividend,
subdivision, reclassification, recapitalization, split,
combination or exchange of shares, the Exchange Ratio shall be
correspondingly adjusted to reflect such stock dividend,
subdivision, reclassification, recapitalization, split,
combination or exchange of shares. As used in this Agreement,
the term "Average Trading Price" shall mean the average of the
reported closing prices of a share of Acquiror Common Stock on
the NASDAQ National Market System ("NASDAQ/NMS") as reported
by NASDAQ for the 20 consecutive trading days immediately
preceding the third trading day before the date of the Closing
Date (as defined in Section 2.07).
(ii) Notwithstanding any other provision of this
Agreement, if between the date of this Agreement and the
Effective Time, Mr. Wilton Webster shall have died or suffered
a Disability (as defined below) based upon the notice
procedures described below in Section 2.01(a)(iii), the
Recomputed Exchange Ratio (as defined below) shall be used for
purposes of the Merger, this Agreement and the Agreement of
Merger so that wherever the term "Exchange Ratio" appears or
applies for such purposes, such term shall be deemed replaced
by the term "Recomputed Exchange Ratio." The Recomputed
Exchange Ratio shall be determined by dividing $12.05969 by
the Average Trading Price of a share of Acquiror Common Stock;
provided, however, if the Average Trading Price is greater
than $52.02, such number shall be deemed to be 0.231828, and
if the Average Trading Price is less than $42.56, such number
shall be deemed to be 0.283357, subject to adjustments of the
type described in the next-to-last sentence of Section
2.01(a)(i). Based on the Recomputed Exchange Ratio, the
minimum and maximum numbers of shares of Acquiror Common Stock
issuable pursuant to the Merger as contemplated under this
Agreement (assuming the conversion prior to the Effective Time
of all shares of Company Preferred Stock into Company Common
Stock as contemplated hereunder and assuming the issuance
prior to the Effective Time of all shares of Company Common
Stock issuable pursuant to Company Options (as defined in
Section 2.04)) shall be 1,537,805 and 1,879,669, respectively.
(iii) For purposes of Section 2.01(a)(ii) above, Mr.
Webster shall be deemed to have suffered a "Disability" if (A)
Mr. Webster would be unable to perform services for the Company
consistent with past practice and as contemplated under the
Employment Agreement referred to in Section 8.10 after the
Effective Time by virtue of a mental or physical condition and
either (B) Acquiror provides written notice to the Company of
Acquiror's belief that Mr. Webster has such mental or
physical condition and the Company fails to contest such
belief in a written notice to Acquiror provided by the Company
within two days of receipt of such notice from Acquiror or (C)
the Company contests such belief by written notice to Acquiror
within the period specified in clause (B) and a physician to
be selected by mutual agreement of Acquiror and the Company
or, if not mutually agreed to within 24 hours of Acquiror's
receipt of the Company's notice, by the chairperson of the
Department of Internal Medicine at the Stanford Medical
School, after examining Mr. Webster, confirms in writing to
the Company and Acquiror as promptly as practicable following
such examination that Mr. Webster suffers from a mental or
physical condition that in such physician's reasonable
judgment makes it reasonably likely that Mr. Webster
would be unable to perform services for the Company as
described in clause (A) after the Effective Time.
(b) Any shares of Company Common Stock or Company
Preferred Stock held in the treasury of the Company and any
shares of Company Common Stock or Company Preferred Stock
owned by Acquiror or any direct or indirect wholly owned
subsidiary of Acquiror or of the Company immediately prior to
the Effective Time shall be canceled and extinguished without
any conversion thereof and no payment shall be made with
respect thereto.
(c) Each share of common stock, par value $0.01 per
share, of Acquiror Sub ("Acquiror Sub Common Stock") issued
and outstanding immediately prior to the Effective Time shall
be converted into and exchanged for one newly and validly
issued, fully paid and non-assessable share of common stock of
the Surviving Corporation.
SECTION 2.02. Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, Acquiror
shall deposit, or shall cause to be deposited, with a bank or
trust company designated by Acquiror (the "Exchange Agent"), for
the benefit of the holders of shares of Company Common Stock, for
exchange in accordance with this Article II, through the Exchange
Agent, certificates representing the whole shares of Acquiror
Common Stock (such certificates for shares of Acquiror Common
Stock, together with any dividends or distributions with respect
thereto, being hereafter referred to as the "Exchange Fund")
issuable pursuant to Section 2.01 (excluding the Adjustment
Escrow Shares (as defined in Section 2.06) which Acquiror shall
deliver to the Escrow Agent (as defined in Section 2.02(h))
pursuant to Section 2.06 hereof) in exchange for outstanding
shares of Company Common Stock and cash in an amount sufficient
to permit payment of the cash payable in lieu of fractional
shares pursuant to Section 2.02(e) hereof; it being understood
that all outstanding shares of Company Preferred Stock shall have
been converted to Company Common Stock prior to the Closing
provided the Merger occurs. The Exchange Agent shall, pursuant
to irrevocable instructions, deliver the Acquiror Common Stock
contemplated to be issued pursuant to Section 2.01 out of the
Exchange Fund. Except as contemplated by Section 2.02(e) hereof,
the Exchange Fund shall not be used for any other purpose.
(b) Exchange Procedures. Promptly after the
Effective Time, Acquiror shall instruct the Exchange Agent to
mail to each holder of record of a certificate or certificates
which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock (the "Certificates")
(i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates
shall pass, only upon proper delivery of the Certificates to the
Exchange Agent and shall be in customary form) and (ii)
instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of
Acquiror Common Stock. Upon surrender of a Certificate for
cancellation to the Exchange Agent together with such letter of
transmittal, duly executed, and such other documents as may be
required pursuant to such instructions, the holder of such
Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Acquiror
Common Stock which such holder has the right to receive in respect
of the shares of Company Common Stock formerly represented by such
Certificates (after taking into account all shares of Company
Common Stock then held by such holder), less a number of shares
of Acquiror Common Stock constituting such holder's proportionate
interest of the shares held in escrow pursuant to Section 2.02(h)
hereof (based on such holder's respective proportionate interest
immediately following the Effective Time in the Acquiror Common
Stock into which the outstanding shares of Company Common Stock
have been converted, pursuant to Section 2.01 hereof) as set
forth in Schedule 2.01 together with cash in lieu of fractional
shares of Acquiror Common Stock to which such holder is entitled
pursuant to Section 2.02(e) and any dividends or other
distributions to which such holder is entitled pursuant to
Section 2.02(c), and the Certificates so surrendered shall
forthwith be canceled. In addition, the holder of such
Certificate subsequently may receive shares of Acquiror Common
Stock and other property after the post-closing adjustment
described in Section 2.06 hereof. In the event of a transfer of
ownership of shares of Company Common Stock which is not
registered in the transfer records of the Company, a certificate
representing the proper number of shares of Acquiror Common Stock
may be issued to a transferee if the Certificates representing
such shares of Company Common Stock are presented to the Exchange
Agent, accompanied by all documents required to evidence and
effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated
by this Section 2.02, each Certificate shall be deemed at any
time after the Effective Time to represent only the right to
receive upon such surrender the certificate representing shares
of Acquiror Common Stock, cash in lieu of any fractional shares
of Acquiror Common Stock to which such holder is entitled
pursuant to Section 2.02(e) and any dividends or other
distributions to which such holder is entitled pursuant to
Section 2.02(c).
(c) Distributions with Respect to Unexchanged Shares
of Acquiror Common Stock. No dividends or other distributions
declared or made after the Effective Time with respect to
Acquiror Common Stock with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of Acquiror Common Stock represented
thereby, and no cash payment in lieu of fractional shares shall
be paid to any such holder pursuant to Section 2.02(e), until the
holder of such Certificate shall surrender such Certificate.
Subject to the effect of escheat, tax or other applicable Laws
(as defined in Section 3.05(a)), following surrender of any such
Certificate, there shall be paid to the holder of the
certificates representing whole shares of Acquiror Common Stock
issued in exchange therefor, without interest, (i) promptly, the
amount of any cash payable with respect to a fractional share of
Acquiror Common Stock to which such holder is entitled pursuant
to Section 2.02(e) and the amount of dividends or other
distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of Acquiror
Common Stock, including Adjustment Escrow Shares (as defined in
Section 2.06(a)), subject to the provisions of Section 2.06
hereof, and (ii) at the appropriate payment date, the amount of
dividends or other distributions, with a record date after the
Effective Time but prior to surrender and a payment date
occurring after surrender, payable with respect to such whole
shares of Acquiror Common Stock, including Adjustment Escrow
Shares, subject to the provisions of Section 2.06 hereof.
(d) No Further Rights in Company Common Stock. All
shares of Acquiror Common Stock issued upon conversion of the
shares of Company Common Stock in accordance with the terms
hereof (including any cash paid pursuant to Sections 2.02(c) or
(e)) shall be deemed to have been issued in full satisfaction of
all rights pertaining to such shares of Company Common Stock.
(e) No Fractional Shares. No fractional shares of
Acquiror Common Stock shall be issued, but in lieu thereof each
holder of shares of Company Common Stock who would otherwise be
entitled to receive a fraction of a share of Acquiror Common
Stock, after aggregating all shares of Acquiror Common Stock to
which such holder would be entitled to receive under
Section 2.01(a), shall receive an amount in cash equal to the
Average Trading Price (provided, however, that for purposes of
this subparagraph (e), if the Average Trading Price is greater
than $52.02, the Average Trading Price shall be deemed to be
$52.02, and if the Average Trading Price is less than $42.56, the
Average Trading Price shall be deemed to be $42.56) multiplied by
the fraction of a share of Acquiror Common Stock to which such
holder would otherwise be entitled. Such payment in lieu of
fractional shares shall be administered by the Exchange Agent
pursuant to the procedures set forth in Section 2.02(b).
(f) Termination of Exchange Fund. Any portion of the
Exchange Fund which remains undistributed to the holders of
Company Common Stock for one year after the Effective Time shall
be delivered to Acquiror, upon demand, and any holders of Company
Common Stock who have not theretofore complied with this Article
II shall thereafter look only to Acquiror for the shares of
Acquiror Common Stock, any cash in lieu of fractional shares of
Acquiror Common Stock to which they are entitled pursuant to
Section 2.02(e) and any dividends or other distributions with
respect to Acquiror Common Stock to which they are entitled
pursuant to Section 2.02(c).
(g) No Liability. Neither Acquiror nor the Company
shall be liable to any holder of shares of Company Common Stock
for any such shares of Acquiror Common Stock (or dividends or
distributions with respect thereto) delivered to a public
official pursuant to any abandoned property, escheat or similar
Law.
(h) Escrowed Shares. At the Effective Time, ten
percent of the shares of Acquiror Common Stock issuable pursuant
to Section 2.01 hereof to the holders of Company Common Stock
theretofore outstanding shall be deposited by Acquiror with the
escrow agent pursuant to the Escrow Agreement to be entered into
by the Company, Acquiror, Acquiror Sub, the escrow agent
thereunder (the "Escrow Agent") and the representative of the
Company Shareholders (the "Representative") substantially in the
form attached hereto as Exhibit B (the "Escrow Agreement") to
provide for the post-closing adjustment described in Section 2.06
hereof (the execution and delivery of the Escrow Agreement
constituting a condition of this Agreement). The Acquiror, the
Company, Acquiror Sub and the Representative shall enter into the
Escrow Agreement with the Escrow Agent at the Closing. In the
event the person initially appointed as the Representative under
Section 2.06(a) shall be unable or unwilling to execute and
deliver the Escrow Agreement as required hereunder, the Company
Shareholders shall appoint another person or entity for such
purpose.
(i) Lost, Stolen or Destroyed Certificates. In the
event any certificates evidencing shares of Company Common Stock
shall have been lost, stolen or destroyed, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed
certificates, upon the making of an affidavit of that fact by the
holder thereof, such shares of Acquiror Common Stock and cash for
fractional shares, if any, as may be required pursuant to this
Article II; provided, however, that Acquiror may, in its
reasonable discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or
destroyed certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made
against Acquiror, the Surviving Corporation, or the Exchange
Agent with respect to the certificates alleged to have been lost,
stolen or destroyed.
SECTION 2.03. Stock Transfer Books.
At the Effective Time, the stock transfer books of the Company
shall be closed and there shall be no further registration of
transfers of shares of Company Common Stock or Company Preferred
Stock thereafter on the records of the Company. From and after
the Effective Time, the holders of certificates representing
shares of Company Common Stock or Company Preferred Stock
outstanding immediately prior to the Effective Time shall cease
to have any rights with respect to such shares of Company Common
Stock or Company Preferred Stock except as otherwise provided
herein or by Law. On or after the Effective Time, any
Certificates presented to the Exchange Agent or Acquiror for any
reason shall be converted into shares of Acquiror Common Stock,
any cash in lieu of fractional shares of Acquiror Common Stock to
which the holders thereof are entitled pursuant to Section
2.02(e) and any dividends or other distributions to which the
holders thereof are entitled pursuant to Section 2.02(c).
SECTION 2.04. Stock Options.
Prior to the Effective Time, the Company and Acquiror shall take
such action as may be necessary or appropriate for the Acquiror,
at its option, to assume or to issue a substitute option with
respect to each outstanding unexpired and unexercised option to
purchase shares of Company Common Stock (collectively, the
"Company Options") under the Company's 1992 Stock Plan (the
"Company Stock Plan"), so that at the Effective Time each Company
Option will become or be replaced by an option (an "Acquiror
Option") to purchase a number of whole shares of Acquiror Common
Stock equal to the number of shares of Company Common Stock that
could have been purchased (assuming full vesting) under the
Company Option multiplied by the Exchange Ratio (and eliminating
any fractional share), at a price per share of Acquiror Common
Stock equal to the per-share option exercise price specified in
the Company Option divided by the Exchange Ratio. Each
substituted Acquiror Option shall otherwise be subject to the
same terms and conditions as apply to the related Company Option.
The date of grant of each substituted Acquiror Option for
purposes of such terms and conditions shall be deemed to be the
date on which the corresponding Company Option was granted. As
to each assumed Company Option, at the Effective Time (i) all
references to the Company in the stock option agreements with
respect to the Company Options being assumed shall be deemed to
refer to Acquiror; (ii) Acquiror shall assume all of the
Company's obligations with respect to the related Company Option;
and (iii) Acquiror shall issue to each holder of a Company Option
a document evidencing the foregoing assumption by Acquiror.
Nothing in this Section 2.04 shall affect the schedule of vesting
with respect to the Company Options in accordance with the terms
of the Company Stock Plan. It is the purpose and intention of
the parties that, subject to applicable Law, the assumption of
Company Options or the substitution of Acquiror Options for
Company Options shall meet the requirements of Section 424(a) of
the Code and that each assumed Company Option or the substituted
Acquiror Option shall qualify immediately after the Effective
Time as incentive stock options as defined in Section 422 of the
Code to the extent that the related Company Option so qualified
immediately before the Effective Time and the foregoing
provisions of this Section 2.04 shall be interpreted to further
such purpose and intention. The Company represents and warrants
that the assumption of Company Options or substitution of
Acquiror Options therefor, as contemplated by this Section 2.04,
may be effected pursuant to the terms of the Company Options and
the Company Stock Plan without the consent of any holder of a
Company Option and without liability to any such holder.
SECTION 2.05. Dissenting Shareholders.
Subject to the terms and conditions hereof, at and after the
Effective Time, any holder of shares of Company Common Stock and
Company Preferred Stock who complies with Sections 1300 et seq.
of the California Law (a "Dissenting Shareholder") shall be
entitled to obtain payment from the Surviving Corporation of the
fair value of his shares of Company Common Stock or Company
Preferred Stock as determined pursuant to Sections 1300 et seq.
of the California Law; provided, however, that no such payment
shall be made unless and until such Dissenting Shareholder has
surrendered to the Exchange Agent the Certificate representing
the shares of Company Common Stock or Company Preferred Stock for
which payment is being made. The Company shall give Acquiror
prompt notice of any demands for appraisal or withdrawals of
demands for appraisal received by the Company and any other
documents obtained by the Company pursuant to the provisions of
Section 1300 et seq. of the California Law and, except with the
prior written consent of Acquiror, which shall not unreasonably
be withheld, shall not settle or offer to settle any such
demands.
SECTION 2.06. Post-closing Adjustment.
(a) The shares of Acquiror Common Stock held in escrow
pursuant to Section 2.02(h) hereof (the "Adjustment Escrow
Shares"),
(i) together with any property ("Adjustment Property")
that would have been distributed to the holders of such
Adjustment Escrow Shares as a result of any non-taxable stock
dividend, stock split, recapitalization, merger, combination
or similar transaction occurring during the period (the "Post-
closing Adjustment Period") beginning at the Effective Time
and ending on the date (the "Adjustment Date") that ends one
year after the Effective Time,
(ii) less any Adjustment Escrow Shares (determined
pursuant to Section 2.06(b)), and any Adjustment Property
distributed with respect thereto, that have been applied as
provided in Section 2.06(b) hereof and the Escrow Agreement in
satisfaction of any amounts owing to any Indemnified Persons
(as defined in Section 8.17) (an "Indemnification Amount"),
and
(iii) less any Adjustment Escrow Shares (determined
pursuant to Section 2.06(b)), and any Adjustment Property
distributed with respect thereto, determined pursuant to the
Escrow Agreement to be necessary to provide for any claim or
claims for Damages (as defined in Section 8.17) asserted in
writing by one or more of the Indemnified Persons pursuant
hereto during the Post-closing Adjustment Period but not finally
determined as provided in Section 2.06(b) hereof and the
Escrow Agreement (a "Claim Amount"),
shall be delivered as soon as practicable after the Adjustment
Date (and in any event within 90 days after the Adjustment Date)
as set forth in the Escrow Agreement to the Representative of the
Company Shareholders other than Dissenting Shareholders (such
non-Dissenting Shareholders are hereinafter referred to as the
"Holders"), or otherwise in accordance with written instructions
provided by such Representative, for redelivery to the Holders
based on each such Holder's proportionate interest immediately
following the Effective Time in the Acquiror Common Stock as set
forth in Schedule 2.01. Notwithstanding such delivery, any
remaining Adjustment Escrow Shares (and any Adjustment Property
distributed with respect thereto) held in escrow pursuant to
clause (iii) above shall continue to be held by the Escrow Agent
under the Escrow Agreement in accordance with the provisions of
the Escrow Agreement. By their execution and delivery of this
Agreement, the Company Shareholders hereby appoint David W.
Chonette as Representative of the Company Shareholders (other
than Dissenting Shareholders) for purposes of this Section 2.06.
(b) The procedure set forth in the Escrow Agreement
shall be used for the application of the Adjustment Escrow Shares
to satisfy indemnification obligations to Indemnified Persons
hereunder. The number of Adjustment Escrow Shares to which an
Indemnified Person shall be entitled in respect of an
Indemnification Amount or Claim Amount shall be determined by
dividing (i) the Indemnification Amount or Claim Amount, as the
case may be, by (ii) the Average Trading Price (provided,
however, that for purposes of this subparagraph (b), if the
Average Trading Price is greater than $52.02, the Average Trading
Price shall be deemed to be $52.02, and if the Average Trading
Price is less than $42.56, the Average Trading Price shall be
deemed to be $42.56). Any portion of the Adjustment Escrow
Shares applied to satisfy any indemnification obligations to
Indemnified Persons hereunder shall be delivered to the
Indemnified Persons (together with any Adjustment Property
distributed with respect thereto) as set forth in the Escrow
Agreement.
(c) If the Adjustment Escrow Shares (together with any
Adjustment Property distributed with respect thereto) are
insufficient to cover the full amount of the adjustments made
pursuant to Section 2.06(b) hereof, the Acquiror shall have
available such other remedies as may exist at law or in equity to
satisfy any claim or claims for Damages, subject to the
provisions of Sections 11.01 and 11.02.
(d) During the Post-closing Adjustment Period, the
Escrow Agent under the Escrow Agreement shall (to the extent
legally permissible) vote the Adjustment Escrow Shares and any
other shares of stock included in the Adjustment Property in
accordance with the written instructions of the Holders who would
receive such shares if all of the Adjustment Escrow Shares and
any other shares of stock included in the Adjustment Property
were delivered to the Holders pursuant to Section 2.06(a) hereof.
(e) Acquiror shall show the Adjustment Escrow Shares
as issued and outstanding on its balance sheet after the
Effective Time and such shares shall be duly authorized and
validly issued under applicable state law.
(f) Cash dividends paid with respect to the Adjustment
Escrow Shares shall be distributed as, if and when paid to the
Holders in proportion to each such Holder's proportionate
interest immediately following the Effective Time in the Acquiror
Common Stock as set forth in Schedule 2.01, subject to the
provisions of Section 2.02(b) and (c).
SECTION 2.07. Closing.
Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") will take place as soon as
practicable after satisfaction of the latest to occur or, if
permissible, waiver of the conditions set forth in Article IX
hereof (the "Closing Date"), at the offices of Hogan & Hartson,
Columbia Square, 555 13th Street, N.W., Washington, D.C. 20004,
unless another date or place is agreed to in writing by the
parties hereto; provided, however, that the Closing Date shall in
no event be less than thirty (30) days from the initial filing of
the Registration Statement (as defined in Section 8.01(a)).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Disclosure Schedule delivered by the
Company to Acquiror prior to the execution and delivery of this
Agreement (the "Company Disclosure Schedule"), which shall
identify exceptions by specific Section references, the Company
hereby represents and warrants to Acquiror and Acquiror Sub as
follows:
SECTION 3.01. Organization and Qualification.
The Company is a corporation duly organized, validly existing and
in good standing under the Laws of the State of California, has
all requisite corporate or other power and authority to own,
lease and operate its properties and to carry on its business as
it is now being conducted and is duly qualified and in good
standing to do business in each jurisdiction in which the nature
of the business conducted by it or the ownership or leasing of
its properties makes such qualification necessary, other than
where the failure to do so would not have a Company Material
Adverse Effect. The term "Company Material Adverse Effect" as
used in this Agreement shall mean any change or effect that,
individually or when taken together with all other such changes
or effects, is or is reasonably likely to be materially adverse
to the financial condition, business, results of operations or
prospects of the Company. Section 3.01 of the Company Disclosure
Schedule sets forth a list of the jurisdictions where the Company
is duly qualified to do business as a foreign corporation.
SECTION 3.02. Articles of Incorporation and By-Laws.
The Company has heretofore furnished to Acquiror a complete and
correct copy of the Articles of Incorporation and the By-Laws of
the Company, each as amended or restated and currently in effect.
The Company is not in violation of any of the provisions of its
Articles of Incorporation or By-Laws.
SECTION 3.03. Capitalization; Subsidiaries.
The authorized capital stock of the Company consists of (i)
10,000,000 shares of Company Common Stock of which: (w) 4,680,234
shares of Company Common Stock are issued and outstanding, all of
which are duly authorized, validly issued, fully paid and non-
assessable and not subject to preemptive rights created by
statute, the Company's Articles of Incorporation or By-Laws or
any agreement to which the Company is a party or is bound; (x) no
shares of Company Common Stock are or were held in the treasury
of the Company; and (y) 753,666 shares of Company Common Stock
were reserved for future issuance pursuant to outstanding
employee stock options under the Company Stock Plan and (ii)
4,000,000 shares of serial preferred stock, no par value per
share ("Company Preferred Stock"), of which 1,200,000 shares are
issued and outstanding, all of which are duly authorized, validly
issued, fully paid and non-assessable and not subject to
preemptive rights created by statute, the Company's Articles of
Incorporation or By-Laws, or any agreement to which the Company
is a party or is bound. Except as described in this Section
3.03, no shares of Company Common Stock are reserved for any
other purpose. Since November 30, 1993, no shares of Company
Common Stock have been issued by the Company, except pursuant to
the exercise of outstanding options in accordance with their
terms, and no shares of Company Preferred Stock have been issued
since such date. Except as contemplated by this Agreement, there
have been no changes in the terms of outstanding options since
November 30, 1993. Each of the outstanding shares of capital
stock of the Company were issued in compliance with all
applicable federal and state laws concerning the issuance of
securities, and, to the Company's knowledge, such shares are
owned by the Company Shareholders free and clear of all security
interests, liens, claims, pledges, agreements, limitations on
voting rights, charges or other encumbrances of any nature
whatsoever. Except as set forth in clause (i) above, there are
no options, warrants or other rights (including registration
rights), agreements, arrangements or commitments to which the
Company is a party of any character relating to the issued or
unissued capital stock of, or other equity interests in, the
Company or obligating the Company to grant, issue or sell any
shares of the capital stock of, or other equity interests in, the
Company, by sale, lease, license or otherwise. The names and
addresses of, and number of shares held by, all holders of
Company Common Stock and Company Preferred Stock as well as
similar information relating to the holders of all options,
warrants or rights to purchase Company Common Stock or Company
Preferred Stock are set forth in Section 3.03 of the Company
Disclosure Schedule. There are no obligations, contingent or
otherwise, of the Company to (x) repurchase, redeem or otherwise
acquire any shares of Company Common Stock or Company Preferred
Stock; or (y) provide funds to, or make any investment (in the
form of a loan, capital contribution or otherwise), or provide
any guarantee with respect to the obligations of, any other
person. The Company does not directly or indirectly own, nor has
the Company agreed to purchase or otherwise acquire, any of the
capital stock of, or other equity interests in, or any interest
convertible into or exchangeable or exercisable for, capital
stock of, or other equity interests in, any corporation,
partnership, joint venture or other business association or
entity. There are no agreements, arrangements or commitments
of any character (contingent or otherwise)
pursuant to which any person is or may be entitled to receive any
of the revenues or earnings, or any payment based thereon or
calculated in accordance therewith, of the Company. The Company
has no subsidiaries or equity or other interest in any entity
other than those listed in Section 3.03 of the Company Disclosure
Schedule. The outstanding shares of Company Preferred Stock as
of the date hereof are convertible into 1,200,000 shares of
Company Common Stock and no event or transaction has occurred or
is expected to occur between the date hereof and the Effective
Time that would increase or otherwise modify such number of
shares of Company Common Stock into which such shares of Company
Preferred Stock are convertible. The 1,200,000 shares of Company
Preferred Stock issued and outstanding on the date hereof will be
converted into an aggregate of 1,200,000 shares of Company Common
Stock prior to the Effective Time in accordance with the
agreement among the Company, Acquiror and Brentwood Associates V,
L.P. ("Brentwood") referred to in Section 8.19. The Company has
not declared any dividends on the Company Preferred Stock since
the date of issuance thereof and the Conversion Price of the
Company Preferred Stock (as defined in the Articles of
Incorporation of the Company) is $1.67 per share, and there has
been no adjustment to or readjustment of the Conversion Price or
event or circumstance that would cause any such adjustment or
readjustment. The Company has not engaged in any transactions
that have given rise to the right of first offer set forth in
Section 7.6 of the Series A Preferred Stock Purchase Agreement
dated as of July 17, 1992, between the Company and the purchasers
listed on Exhibit A thereto (the "Series A Preferred Stock
Purchase Agreement"). Brentwood is the only record and, to the
Company's knowledge, beneficial owner of the Company Preferred
Stock and, to the Company's knowledge, is the only person or
entity entitled to exercise and possess rights under the Series A
Preferred Stock Purchase Agreement and the Registration Rights
Agreement dated as of July 17, 1992 referred to therein and
executed and delivered by the parties in connection therewith
(the "Registration Rights Agreement").
SECTION 3.04. Authority.
The Company has the requisite corporate power and authority to
execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement by the Company and
the consummation by the Company of the transactions contemplated
hereby have been duly authorized by all necessary corporate
action and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby (other than, with
respect to the approval and adoption of this Agreement, by the
holders of a majority of the outstanding shares of Company Common
Stock and the holders of a majority of the outstanding shares of
Company Preferred Stock in accordance with California Law and the
Company's Articles of Incorporation and By-Laws). This Agreement
has been duly executed and delivered by the Company and, assuming
the due authorization, execution and delivery by Acquiror,
Acquiror Sub and each of the Company Shareholders, constitutes a
legal, valid and binding obligation of the Company, enforceable
in accordance with its terms, except as such enforceability may
be subject to the effect of any applicable bankruptcy, insolvency
(including, without limitation, all Laws relating to fraudulent
transfers), reorganization, moratorium or similar Laws affecting
creditors' rights generally and subject to the effect of general
principles of equity (whether considered in a proceeding in
equity or at law). To the Company's knowledge, this Agreement
has been duly executed and delivered by each of the Company
Shareholders and, to the Company's knowledge, constitutes a legal
and binding obligation of each Company Shareholder enforceable in
accordance with its terms, subject to the exceptions described in
the immediately preceding sentence.
SECTION 3.05. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the
Company do not, and the performance of this Agreement by the
Company shall not, (i) conflict with or violate the Articles of
Incorporation or By-Laws of the Company, (ii) subject to (x)
obtaining the requisite approval and adoption of this Agreement
by the holders of a majority of the outstanding shares of the
Company Common Stock and the holders of a majority of the
outstanding shares of Company Preferred Stock in accordance with
California Law and the Company's Articles of Incorporation and
By-Laws; (y) obtaining the consents, approvals, authorizations
and permits of, and making filings with or notifications to, any
governmental, quasi-governmental or regulatory authority,
domestic or foreign ("Governmental Entities"), pursuant to the
applicable requirements, if any, of the Securities Act of 1933,
as amended, and the rules and regulations thereunder (the
"Securities Act"), the Securities Exchange Act of l934, as
amended, and the rules and regulations thereunder (the "Exchange
Act"), state securities laws and the rules and regulations
thereunder ("Blue Sky Laws"), the National Association of
Securities Dealers, Inc. (the "NASD"), the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and
regulations thereunder (the "HSR Act"), and the filing and
recordation of appropriate transaction documents as required by
California Law; and (z) obtaining the consents, approvals,
authorizations or permits described in Section 3.05(b) of the
Company Disclosure Schedule, to the Company's knowledge, conflict
with or violate any foreign or domestic federal, state or local
law, statute, ordinance, rule, regulation, order, judgment or
decree (collectively, "Laws") applicable to the Company or by
which any of its properties is bound, or (iii) result in any
breach of or constitute a default (or an event that with notice
or lapse of time or both would become a default) under, or give
to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of the Company
pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument
or obligation to which the Company is a party or by which the
Company or any of its properties is bound or affected except for
any such conflicts or violations described in clause (ii) or
breaches or defaults described in clause (iii) (other than any
relating to Company Contracts as defined in Section 3.11(a)) that
would not have a Company Material Adverse Effect.
(b) The execution and delivery of this Agreement by
the Company do not, and the performance of this Agreement by the
Company shall not, require any consent, approval, authorization
or permit of, or filing with or notification to, any Governmental
Entities, except (i) for applicable requirements, if any, of the
Securities Act, Exchange Act, Blue Sky Laws, the NASD, the HSR
Act, the consents, approvals, authorizations or permits described
in Section 3.05(b) of the Company Disclosure Schedule and the
filing and recordation of appropriate transaction documents as
required by California Law or (ii) where the failure to obtain
such consents, approvals, authorizations or permits, or to make
such filings or notifications, would not adversely affect the
ability of the Company to consummate, or prevent or delay the
consummation of, the transactions contemplated by this Agreement
and where such failure would not result in losses to Acquiror or
any of its affiliates (after the Effective Time) or the Company
or any of its affiliates (before the Effective Time) in excess of
$10,000.
SECTION 3.06. Permits; Compliance.
(a) The Company is in possession of all franchises,
grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders necessary
for the Company to own, lease and operate its properties or to
carry on its business as it is now being conducted (the "Company
Permits") except where the failure to possess such Company Permits
would not have a Company Material Adverse Effect. To the Company's
knowledge, all Company Permits are valid, and no suspension or
cancellation of any of the Company Permits is pending or, to the
knowledge of the Company, threatened. To the Company's
knowledge, the Company is not in conflict with, or in default or
violation of, (i) any Law applicable to the Company or by which
any of its properties is bound or affected or (ii) any of the
Company Permits. To the Company's knowledge, the Company has not
failed to remedy any such previously existing conflict, default
or violation. Since December 1, 1991, the Company has not
received written, or, to the knowledge of the Company, oral
notice from any Governmental Entity of any such conflict, default
or violation.
(b) The Company has filed all forms, reports,
statements, and other documents required to be filed with any
Governmental Entities, including, without limitation, state
insurance and health regulatory authorities, except where the
failure to file such forms, reports, statements or other
documents under this clause (b) would not have a Company Material
Adverse Effect except for matters addressed in Section 3.12 or
3.13, which shall be governed by such Section 3.12 or 3.13,
respectively.
SECTION 3.07. Financial Information; Books and Records.
(a) The Company has caused to be prepared audited
balance sheets, as of November 30, 1993 and 1992, of the Company
(the "Audited Balance Sheets") and the related audited statement of
earnings and shareholders' equity and audited statement of cash
flows of the Company for each of the three fiscal years ended
November 30, 1993, 1992 and 1991 (the Audited Balance Sheets and
such statements of earnings and shareholders' equity and audited
statements of cash flows and any related notes and schedules are
hereinafter referred to collectively as the "Audited
Statements"), in each case, audited by Deloitte & Touche, in
accordance with generally accepted auditing standards. A true
and complete copy of each of the Audited Statements has been
delivered to Acquiror and is included as Section 3.07 to the
Company Disclosure Schedule.
(b) The Audited Statements (i) are complete and
correct in all material respects and have been prepared from the
books and records of the Company and (ii) fairly present the
financial position of the Company and the results of its
operations and its cash flows as of and for the respective time
periods in conformity with United States generally accepted
accounting principles ("GAAP") applied on a consistent basis.
(c) The financial books and records of the Company are
complete and correct and have been maintained in accordance with
reasonable business practices.
SECTION 3.08. Absence of Undisclosed Liabilities.
The Company has no liabilities or obligations (whether accrued,
absolute or contingent), including but not limited to liabilities
for Taxes (as defined in Section 3.13(d)), that are not reflected
on, or reserved against in, the Audited Statements except (a) as
described in Section 3.08 of the Company Disclosure Schedule or
(b) for liabilities or obligations incurred since November 30,
1993 in the ordinary course of business and consistent with past
practice.
SECTION 3.09. Absence of Certain Changes or Events.
Except as disclosed in Section 3.09 of the Company Disclosure
Schedule, (a) since November 30, 1992, the Company has conducted
its business only in the ordinary course and in a manner
consistent with past practice, and (b) since November 30, 1992,
there has not been: (i) any damage, destruction or loss (not
covered by insurance) with respect to any material assets of the
Company; (ii) any change by the Company in its accounting
methods, principles and practices, except any such change after
the date of this Agreement required by a change in GAAP adopted
after the date of this Agreement; (iii) any declaration, setting
aside or payment of any dividends or distributions in respect of
shares of Company Common Stock or Company Preferred Stock or any
redemption, purchase or other acquisition of any of the Company's
securities or any payment by the Company to any of its
affiliates; (iv) any increase in the benefits under, or the
establishment or amendment of, any bonus, insurance, severance,
deferred compensation, pension, retirement, profit sharing, stock
option, (including, without limitation, the granting of stock
options, stock appreciation rights, performance awards, or
restricted stock awards), stock purchase or other employee
benefit plan, or any other increase in the compensation payable
or to become payable to directors, officers or employees of the
Company, except for increases in salaries or wages payable or to
become payable in the ordinary course of business and consistent
with past practice to employees of the Company who are not
directors or officers of the Company; (v) any transaction or
contract material to the Company or any commitment to do the
same, entered into by the Company other than in the ordinary
course of business and consistent with past practice; (vi) any
transfer, mortgage, pledge, encumbrance or disposition by the
Company of any of its assets, other than in the ordinary course
of business and consistent with past practice and not material in
the aggregate; (vii) any cancellation or writing off as worthless
and uncollectible any inventory, debt, note or account receivable
of the Company, except where previously reserved against in the
Audited Statements; (viii) any receipt by the Company of written
or, to the knowledge of the Company, oral notice that any
material contract, agreement or arrangement to which it is a
party has been or will be canceled; (ix) any issuance by the
Company of any share of stock, bond, note, option, warrant or
other corporate security; (x) any individual capital expenditure
by the Company or commitment to make such capital expenditure in
excess of $10,000; (xi) any payment or incurring of liability to
pay any Taxes, assessments, fees, penalties, interest or other
governmental charges, other than those arising and discharged or
to be discharged in the ordinary course of business and
consistent with past practice; (xii) any loans in excess of
$10,000 made by the Company to any person or entity, including
but not limited to, any employee, officer or director of the
Company; (xiii) any incurring of indebtedness by the Company for
borrowed money or commitment by the Company to borrow money other
than in the ordinary course of business, consistent with past
practice; (xiv) a Company Material Adverse Effect; or (xv)
authorization, approval, agreement or commitment by the Company
to take any action described in clauses (i) through (xiii) above.
SECTION 3.10. Absence of Litigation.
(a) There is no claim, action, suit, litigation,
proceeding, arbitration or, to the knowledge of the Company,
investigation of any kind to which the Company is a party, at law
or in equity (including actions or proceedings seeking injunctive
relief), pending or, to the knowledge of the Company, threatened
nor, to the knowledge of the Company, is there any reasonable
basis therefor; and (b) the Company is not subject to any consent
decree, settlement agreement or other similar written agreement
with, or, to the knowledge of the Company, continuing order or
investigation by, any Governmental Entity, or any judgment,
order, writ, injunction, decree or award of any Governmental
Entity or arbitrator, including, without limitation, cease-and-
desist or other orders, in each case in this clause (b) relating
to the business conducted by the Company or otherwise applicable
to the Company or any of its officers or directors in connection
with the business conducted by the Company.
SECTION 3.11. Contracts; No Default.
(a) Section 3.11(a) of the Company Disclosure Schedule
sets forth as of the date of this Agreement a list of each contract
or agreement of the Company including, without limitation,
contracts or agreements between the Company, on the one hand, and
one or more persons who are affiliates of each other, on the other
hand (together with the contracts and agreements listed in Section
3.11(b) of the Company Disclosure Schedule, the "Company
Contracts"):
(i) involving an aggregate payment or commitment per
contract or agreement on the part of the counterparty or
counterparties thereto of more than $50,000 during the
12-month period ending November 30, 1993 or $50,000 during the
remaining term thereof from and after the date hereof;
(ii) with an individual or entity rendering
professional health care services as an employee of or
contractor to the Company under which, during the 12
month-month period ending November 30, 1993, the Company was
obligated or became committed to pay in excess of $50,000 or
under which, during the next 12 months, the Company is
reasonably expected to pay or to become obligated to pay in
excess of $50,000;
(iii) concerning a partnership or joint venture with
another person;
(iv) concerning employment or consulting arrangements
with the Company's directors, officers or employees (which
arrangements, in the case of employees other than the officers
and directors of the Company, provide for annual compensation
in excess of $50,000 to such persons), or providing for
severance payments to any such directors, officers or
employees.
(v) involving agreements or commitments with any
Governmental Entity or with any labor union;
(vi) involving any contract with independent
contractors or consultants (or similar arrangements) involving
a reasonably expected aggregate payment or commitment of more
than $50,000 for the 12-month period ended November 30, 1993
or $50,000 during the remaining term thereof from and after
the date of the Agreement or which are not cancelable without
penalty or without payment;
(vii) involving any sales agency, data processing or
insurance brokerage agreements which are not cancelable
without penalty upon thirty or fewer days' notice;
(viii) involving commitments for capital expenditures in
excess of $10,000 for any single project;
(ix) involving agreements or instruments relating to
the extension of credit not in the ordinary course of business
and consistent with past practice;
(x) involving agreements of guaranty in respect of any
obligation for borrowed money or otherwise;
(xi) involving agreements with any affiliate of the
Company;
(xii) with a supplier or distributor of the Company; and
(xiii) involving all other contracts, agreements,
commitments, or arrangements (including arrangements with sole
source suppliers) whether or not made in the ordinary course
of business which are material to the Company or the conduct
of its business or the absence of which would have a Company
Material Adverse Effect.
The Company has made available to Acquiror, or given access to
Acquiror to inspect, copies of all written Company Contracts
(including all amendments thereto). Section 3.11(a) of the
Company Disclosure Schedule includes a description of all
material terms of all unwritten Company Contracts.
(b) Section 3.11(b) of the Company Disclosure Schedule
lists each contract or agreement to which the Company or any of
its affiliates is a party limiting the right of the Company or
any of its affiliates prior to the Effective Time, or Acquiror or
any of its affiliates at or after the Effective Time, to engage
in, or to compete with any person in, any business, including
each contract or agreement containing exclusivity provisions
restricting the geographical area in which, or the method by
which, any business may be conducted by the Company or any of its
affiliates prior to the Effective Time, or Acquiror or any of its
affiliates after the Effective Time.
(c) Each Company Contract, and each other contract or
agreement of the Company which would have been required to be
disclosed in Section 3.11(a) of the Company Disclosure Schedule
had such contract or agreement been entered into prior to the
date of this Agreement, is, to the Company's knowledge, in full
force and effect and is a legal, valid and binding contract or
agreement and there is (i) no default (or any event which, with
the giving of notice or lapse of time or both, would be a
default) by the Company or, to the Company's knowledge, any other
party, in the timely performance of any obligation to be
performed or paid under any of the Company Contracts or any such
other contract or agreement, (ii) to the knowledge of the
Company, no threat of cancellation or termination of any Company
Contract, or (iii) no written or oral modification or amendment
or reasonably expected change to any Company Contract, except as
specifically described in Section 3.11(a) of the Company
Disclosure Schedule.
SECTION 3.12. Employee Benefit Plans; Labor Matters.
(a) Section 3.12(a) of the Company Disclosure Schedule
lists each employee benefit plan, program, arrangement and
contract (including, without limitation, any "employee benefit
plan", as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), applicable to
employees of the Company to which the Company has contributed or
under which the Company has any material liability (the "Company
Benefit Plans"). The Company has delivered to Acquiror a true
and correct copy of (i) the three most recent annual reports
(Form 5500 series) filed with the United States Internal Revenue
Service (the "IRS") with respect to each Company Benefit Plan,
(ii) each such Company Benefit Plan document, (iii) each trust
agreement or other funding vehicle relating to each such Company
Benefit Plan, (iv) the most recent summary plan description for
each Company Benefit Plan for which a summary plan description is
required, and (v) the most recent determination letter issued by
the IRS with respect to any Company Benefit Plan qualified under
Section 401(a) of the Code.
(b) Except as set forth in Section 3.12(a) of the
Company Disclosure Schedule: (i) the terms of, and benefits
provided under, the Company Benefit Plans have not been changed
since December 1, 1992, except as required by Law or by the terms
of the Company Benefit Plans as in effect on December 1, 1992;
(ii) none of the Company Benefit Plans is a multiemployer pension
plan as defined in Section 3(37) of ERISA; (iii) none of the
Company Benefit Plans promises or provides for medical or life
insurance benefits to any person after termination of employment
other than as required by Sections 601 through 608 of ERISA;
(iv) as to each Company Benefit Plan intended to be qualified
under Section 401(a) of the Code, the Company has received a
favorable determination letter from the IRS to the effect that
such Company Benefit Plan is so qualified and nothing has
occurred since the date of such letter to affect the qualified
status of such Company Benefit Plan; (v) no plan or arrangement
of the Company (including the Company Benefit Plans) in effect on
the date hereof provides, separately or in the aggregate, for any
payment that would constitute an "excess parachute payment"
within the meaning of Section 280G of the Code, or for which the
Company would not be entitled to a deduction under the Code,
assuming closing of the transactions contemplated by this
Agreement; (vi) each Company Benefit Plan has been operated in
all material respects in accordance with its terms and the
requirements of applicable Law and has been funded, or adequately
reserved or provided for in the Audited Statements, with respect
to all accrued benefits thereunder; (vii) except for the payment
of benefits provided for under the terms of the Company Benefit
Plans, the Company has not incurred, and does not reasonably
expect to incur, any material liability under the terms of such
Company Benefit Plans or any other applicable Law; and
(viii) none of the Company Benefit Plans is subject to Title IV
of ERISA, and the Company has not incurred, and does not
reasonably expect to incur, any direct or indirect liability
under or by operation of Title IV of ERISA.
(c) Section 3.12 (c) of the Company Disclosure Schedule
lists, as of the date of this Agreement, all collective bargaining
or other labor union contracts to which the Company is a party or
by which it is bound that are applicable to persons employed by the
Company. There is no pending or, to the knowledge of the Company,
threatened labor dispute, strike or work stoppage against the
Company which may interfere with the business activities of the
Company. To the Company's knowledge, neither the Company nor its
representatives or employees has committed any unfair labor
practices (as defined in 29 U.S.C. Section 158(a)) in connection with
the operation of the business of the Company, and there is no
pending or, to the knowledge of the Company, threatened charge or
complaint against the Company by the National Labor Relations
Board or any comparable state agency.
SECTION 3.13. Taxes.
(a) (i) All Returns (as defined below) in respect of
Taxes (as defined below) required to be filed by or on behalf of
the Company prior to the date hereof and any state Tax return that
includes the Company on a consolidated, combined or unitary basis
have been timely filed, and no extension of time within which to
file any such Return has been requested, which Return has not
since been filed; (ii) all Taxes required to be shown on such
Returns or otherwise due or payable by the Company prior to the
date of this Agreement have been timely paid and all payments of
estimated Taxes required to be made by or on behalf of the
Company under Section 6655 of the Code or any comparable
provision of state, local or foreign law prior to the date of
this Agreement for the current taxable years of the Company have
been made; (iii) all such Returns are true, correct and complete;
(iv) no adjustment relating to any of such Returns has been
proposed in writing by any Tax authority and, to the Company's
knowledge, no basis exists for any such adjustment; (v) there are
no outstanding subpoenas with respect to any Returns of the
Company or the Taxes reflected on such Returns; (vi) there are no
pending or threatened actions or proceedings for the assessment
or collection of Taxes against the Company or, to the Company's
knowledge, any corporation that was included in the filing of a
Return with the Company on a consolidated, combined or unitary
basis with respect to any period for which such corporation was
so included; (vii) the Company does not have and never has had
any subsidiaries or other corporate affiliates; (viii) no consent
under Section 341(f) of the Code has been filed with respect to
the Company; (ix) there are no Tax liens on any assets of the
Company other than liens for Taxes not yet due or payable or
which the Company is contesting in good faith through appropriate
proceedings which are disclosed in Section 3.13(a) of the Company
Disclosure Schedule; (x) neither the Company nor any affiliate of
the Company is a party to any agreement or arrangement that would
result, separately or in the aggregate, in the payment of any
"excess parachute payment" within the meaning of Section 280G of
the Code; (xi) the Company has not been at any time a member of
any partnership or joint venture or the holder of a beneficial
interest in any trust for a period for which the statute of
limitations for any Tax potentially applicable as a result of
such membership or holding has not expired; (xii) the Company has
not been a United States real property holding corporation within
the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the
Code; (xiii) the Company does not owe any amount pursuant to any
Tax sharing agreement or arrangement, and the Company will not
have any liability after the date hereof in respect of any Tax
sharing agreement or arrangement executed or agreed to prior to
the date hereof with respect to any company that has been sold or
disposed of by the Company, whether any such agreement or
arrangement is written or unwritten; (xiv) all Taxes required to
be withheld, collected or deposited by the Company have been
timely withheld, collected or deposited and, to the extent
required prior to the date hereof, have been paid to the relevant
Tax authority; (xv) any adjustment of Taxes of the Company made
by the IRS that is required to be reported to any state, local or
foreign Tax authority timely has been so reported; and (xvi) the
books and records of the Company reflect reserves that are
adequate for the payment of all Taxes not yet due and payable
that are properly accruable thereon as of the date hereof
(including Taxes being contested), and there is no difference
between the amounts of the book basis and the tax basis of assets
(net of liabilities) that is not accounted for by an accrual on
the books for federal income tax purposes.
(b) (i) There are no outstanding waivers or
agreements extending the statute of limitations for any period
with respect to any Tax to which the Company may be subject;
(ii) the Company has not participated in or cooperated with an
international boycott within the meaning of Section 999 of the
Code; (iii) the Company has not had any income reportable for a
period ending after the Closing but attributable to a transaction
(e.g., an installment sale) occurring in or a change in
accounting method made for a period ending at or prior to the
Closing which resulted in a deferred reporting of income from
such transaction or from such change in accounting method (other
than a deferred intercompany transaction involving in excess of
$50,000 in any case); and (iv) there are no written requests for
rulings currently outstanding that could affect the Taxes of the
Company, or any similar matters pending with respect to any Tax
authority.
(c) (i) Section 3.13(c) of the Company Disclosure
Schedule lists all income, franchise and similar Returns
(federal, state, local and foreign) filed on behalf of the
Company for taxable periods ended on or after January 1, 1989,
indicates the most recent income, franchise or similar Return for
each relevant jurisdiction for which an audit has been completed
and indicates all Returns that currently are the subject of
audit; (ii) the Company has made available and, when requested,
has delivered to Acquiror correct and complete copies of all
federal, state and foreign income, franchise, sales and use, and
real and personal property Tax Returns and made available all
other Returns, elections relating to Taxes of the Company,
examination reports, and statements of deficiencies assessed
against or agreed to by the Company since January 1, 1989;
(iii) the Company has delivered to Acquiror a true and complete
copy of any Tax sharing or allocation agreement or arrangement to
which the Company is a party and a true and complete description
of any such agreement or arrangement that is unwritten or
informal; (iv) Section 3.13(c) of the Company Disclosure Schedule
sets forth information with respect to the Company as of the most
recent practicable date (and, in each case, specifying such date)
regarding the aggregate tax basis of the Company in its assets.
(d) For purposes of this Agreement, "Tax" or "Taxes"
shall mean any and all taxes, charges, fees, levies, and other
governmental assessments and impositions of a similar kind,
payable to any federal, state, local or foreign governmental
taxing authority or agency, including, without limitation, (i)
income, franchise, profits, gross receipts, minimum, alternative
minimum, estimated, ad valorem, value added, sales, use, service,
real or personal property, capital stock, license, payroll,
withholding, disability, employment, social security, workers
compensation, unemployment compensation, utility, severance,
production, excise, stamp, occupation, premiums, windfall
profits, transfer and gains taxes, (ii) customs duties, imposts,
charges, levies or other similar assessments of any kind, and
(iii) interest, penalties and additions to tax imposed with
respect thereto; and "Returns" shall mean any and all returns,
reports, and information statements with respect to Taxes
required to be filed with the IRS or any other Governmental
Entity or Tax authority or agency, whether domestic or foreign,
including without limitation, consolidated, combined and unitary
tax returns.
SECTION 3.14. FDA and Other Regulatory Compliance.
Schedule 3.14 of the Company Disclosure Schedule sets forth a
complete and accurate list, referencing relevant records and
documents, for the last five years, of (a) all Food and Drug
Administration ("FDA") and any other Governmental Entity
inspector lists of observations or similar documents made at
inspections, including, but not limited to, Form(s) FDA-483, with
respect to the Company; (b) Regulatory or Warning Letters,
Notices of Adverse Findings or Section 305 notices issued by the
Food and Drug Administration or any similar letters or notices
issued by any other Governmental Entity to the Company; (c) all
United States Pharmacopoeia product problem reporting program
complaints or reports and MedWatch FDA forms 3500, device
experience network complaints received by the Company and Medical
Device Reports ("MDRs") filed by the Company; (d) all product
recalls and safety alerts conducted by or issued to the Company;
(e) any civil penalty actions begun by FDA or any other
Governmental Entity against the Company and known about by the
Company; and (f) all 510(k) substantial equivalence letters or
premarket approval ("PMA") letters (hereinafter jointly referred
to as "approvals") for devices sold by the Company and all
assurances, written and/or oral, that any modifications to
devices subject to such 510(k)s or PMAs remain covered by such
FDA and any other Governmental Entity approvals. The Company has
delivered to Acquiror copies of all documents referred to in
Section 3.14 of the Company Disclosure Schedule. The Company has
obtained all consents, approvals, certifications, authorizations
and permits of, and has made all filings with, or notifications
to, all Governmental Entities pursuant to applicable requirements
of all FDA laws, rules and regulations, and all corresponding
state and, to the Company's knowledge, foreign laws, rules and
regulations applicable to the Company and relating to its medical
device business. To the Company's knowledge, the Company is in
compliance with all FDA laws, rules and regulations, and all
corresponding state and, to the Company's knowledge, foreign
laws, rules and regulations (including Good Manufacturing
Practices) relating to medical device manufacturers and
distributors or otherwise applicable to the Company's business
and the Company has no reason to believe that any of its
consents, approvals, authorizations, registrations,
certifications, permits, filings or notifications which it has
received or made to operate its business have been or are being
revoked or questioned. To the Company's knowledge, there is no
investigation or inquiry pending or threatened relating to the
operation of the Company's business and its compliance with
applicable Laws relating to its medical device business.
SECTION 3.15. Customers.
To the Company's knowledge, the relationships of the Company with
its customers are good commercial working relationships. During
the 12 months prior to the date of this Agreement, no customer of
the Company which accounted for in excess of $50,000 of the
revenues of the Company during such 12 months has canceled or
otherwise terminated its relationship with the Company.
SECTION 3.16. Certain Business Practices and Regulations.
Neither the Company, nor any of its officers, directors, or to
the Company's knowledge, its shareholders, employees or agents
has (i) made or agreed to make any contribution, payment or gift
to any customer, supplier, governmental official, employee or
agent where either the contribution, payment or gift or the
purpose thereof was illegal under any Law, (ii) established or
maintained any unrecorded fund or asset for any purpose or made
any false entries on its books and records for any reason,
(iii) made or agreed to make any contribution, or reimbursed any
political gift or contribution made by any other person, to any
candidate for federal, state or local public office in violation
under any Law, or (iv) engaged in any activity constituting fraud
or abuse under the Laws relating to healthcare, insurance or the
regulation of professional corporations. In addition, to the
Company's knowledge, it has (a) complied in all material respects
with all applicable Laws relating to employee and civil rights
and relating to employment opportunities and (b) filed in a
timely manner all reports and documents required to be filed with
Governmental Entities (and the information contained therein was
correct and complete in all material respects) under applicable
Law.
SECTION 3.17. Insurance.
Section 3.17 of the Company Disclosure Schedule lists all
policies of title, asset, fire, hazard, casualty, liability,
life, worker's compensation and other forms of insurance of any
kind owned or held by the Company. All such policies: (a) are
with insurance companies reasonably believed by the Company to be
financially sound and reputable; (b) are, to the Company's
knowledge, in full force and effect; (c) are sufficient for
compliance by the Company with all requirements of law and of all
material agreements to which the Company is a party; (d) are, to
the Company's knowledge, valid and outstanding policies
enforceable against the insurer; (e) insure against risks of the
kind customarily insured against by companies engaged in similar
businesses and provide adequate insurance coverage for the
businesses and assets of the Company; and (f) provide that they
will remain in full force and effect through the respective dates
set forth in Section 3.17 of the Company Disclosure Schedule.
SECTION 3.18. Potential Conflicts of Interest.
None of the officers or directors of the Company, or any entity
controlled by any of the foregoing or any member of the immediate
family of any of the foregoing and, with respect to subparagraphs
(b), (c), (d), (e) and (f), none of the other employees of the
Company with salaries in excess of $60,000 and/or a member of
their immediate families:
(a) owns, directly or indirectly, any interest in (except
for stock holdings not in excess of two percent (2%) held
solely for investment purposes in securities which are listed
on a national securities exchange or which are regularly
traded in the over-the-counter market), or is an owner, sole
proprietor, stockholder, partner, director, officer, employee,
provider, consultant or agent of any person which is a
competitor, lessor, lessee or customer of, or supplier of
goods or services to, the Company, except where the value to
such individual of any such arrangement with the Company has
been less than $10,000 in the last 12 months;
(b) owns directly or indirectly, in whole or in part,
any real property, leasehold interests, tangible property or
intangible property with a fair market value of $10,000 or
more which the Company currently uses in its business;
(c) to the Company's knowledge, has any cause of action
or other suit, action or claim whatsoever against, or owes any
amount to the Company, except for claims in the ordinary
course of business, such as for accrued vacation pay, accrued
benefits under Company Benefit Plans and similar matters; or
(d) has sold to, or purchased from, the Company any
assets or property for consideration in excess of $10,000 in
the aggregate since January 1, 1990;
(e) is a party to any contract or participates in any
arrangement, written or oral, pursuant to which the Company
provides office space to any such individual or entity, or
provides services of any nature to any such individual or
entity, except where such individual is an employee of the
Company, in each case, where the amount involved has been
greater than $10,000 in the last 12 months or is reasonably
expected to be greater than $10,000 in the 12 months following
the date hereof;
or
(f) has, since January 1, 1990, engaged in any other
material transaction with the Company (other than in
connection with such person's employment relationship, if
any).
As used in this Section 3.18, a person's immediate family shall
mean such person's spouse, parents, children, siblings, mothers and
fathers-in-law, sons and daughters-in-law, and brothers and
sisters-in-law.
SECTION 3.19. Accounting and Tax Matters.
(a) At least ninety percent (90%) of the fair market
value of the net assets and at least seventy percent (70%) of the
fair market value of the gross assets held by the Company
immediately prior to the Merger will be held by the Company at the
Effective Time. For the purpose of determining the percentage of
the Company's net and gross assets held by the Company at the
Effective Time, the following assets will be treated as property
held by the Company immediately prior to but not at the Effective
Time: (i) assets disposed of by the Company prior to the Merger
and in contemplation thereof (including without limitation any
asset disposed of by the Company, other than in the ordinary
course of business, pursuant to a plan or intent existing during
the period ending at the Effective Time and beginning with the
commencement of negotiations (whether formal or informal) with
the Acquiror regarding the Merger (the "Pre-Merger Period")),
(ii) assets used by the Company to pay shareholders perfecting
dissenters' rights or other expenses or liabilities incurred in
connection with the Merger and (iii) assets used to make
distributions, redemptions or other payments in respect of the
Company Common Stock or Company Preferred Stock or rights to
acquire such stock (including payments treated as such for tax
purposes but excluding regular, normal dividends) that are made
in contemplation of the Merger or related thereto.
(b) The Company has no knowledge of, and believes that
there does not exist, any plan or intention on the part of the
Company's shareholders (a "Plan") to engage in a sale, exchange,
transfer, distribution (including, without limitation, a
distribution by a partnership to its partners or by a corporation
to its shareholders), pledge, disposition or any other
transaction which results in a reduction in the risk of ownership
or a direct or indirect disposition (a "Sale") of a number of
shares of Acquiror Common Stock to be issued to such shareholders
in the Merger, which would reduce the Company's shareholders'
ownership of Acquiror Common Stock to a number of shares having
an aggregate fair market value, as of the Effective Time of the
Merger, of less than fifty percent (50%) of the aggregate fair
market value, immediately prior to the Merger, of all outstanding
shares of Company Common Stock. For purposes of this paragraph,
shares of Company Common Stock (i) with respect to which a
Company Shareholder receives consideration in the Merger other
than Acquiror Common Stock (including, without limitation, cash
received pursuant to the exercise of dissenters' rights or in
lieu of fractional shares of Acquiror Common Stock) and/or
(ii) shares of Company Common Stock or Company Preferred Stock
with respect to which a Sale occurs prior to and in contemplation
of the Merger, shall be considered shares of outstanding Company
Common Stock exchanged for Acquiror Common Stock in the Merger
and then disposed of pursuant to a Plan.
(c) No shares of Company Common Stock or Company
Preferred Stock have been owned during the past five years by
Acquiror.
(d) The Company is not an investment company as
defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
(e) As of the Effective Time, the fair market value of
the assets of the Company will exceed the sum of its liabilities,
plus the amount of liabilities, if any, to which its assets are
subject.
(f) The Company is not under the jurisdiction of a
court in a Title 11 or similar case within the meaning of Section
368(a)(3)(A) of the Code.
(g) The Company has not taken or agreed to take any
action that would prevent the transactions contemplated by this
Agreement from being effected as a pooling of interests.
SECTION 3.20. Receivables; Inventories.
The accounts receivable of the Company shown on the Audited
Balance Sheets or thereafter acquired by the Company, have been
collected or are collectible in amounts not less than the amounts
thereof carried on the books of the Company, without right of
recourse, defense, deduction, counterclaim, offset or setoff on
the part of the obligor, and can reasonably be expected to be
collected within 120 days of the date incurred, except for an
allowance of $36,000 for doubtful accounts plus an additional
$25,000. Except as set forth in Section 3.20 of the Company
Disclosure Schedule, the accounts receivable of the Company
acquired after November 30, 1993 have been collected or are
collectible in amounts not less than the face amount thereof less
an allowance of $36,000 for doubtful accounts plus an additional
$25,000, without right of recourse, defense, deduction,
counterclaim, offset or setoff on the part of the obligor, and
can reasonably be expected to be collected within 120 days of the
date incurred. The inventories reflected in the Financial
Statements and those inventories held by the Company on the date
hereof are in good, merchantable and usable condition and have
been reflected in the Financial Statements at the lower of cost
or market, in accordance with GAAP, and include no obsolete or
discontinued items, except to the extent reserved against in the
Financial Statements or except as disclosed in Section 3.20 of
the Company Disclosure Schedule.
SECTION 3.21. Real Property; Leases.
(a) Section 3.21(a) of the Company Disclosure Schedule
lists all of the Real Property (as defined below) currently used
by the Company and its officers and directors in the course of
the Company's business, and all such Real Property is suitable
and adequate for the uses for which it is currently devoted. The
Company does not own any Real Property except to the extent that
its leasehold interests constitute ownership.
(b) To the Company's knowledge, all buildings,
structures, fixtures and other improvements on the Real Property
are in good repair, free of defects (latent or patent), and fit
for the uses to which they are currently devoted. To the
Company's knowledge, all such buildings, structures, fixtures and
improvements on the Real Property conform to all Laws. To the
Company's knowledge, the buildings, structures, fixtures and
improvements on each parcel of the Real Property lie entirely
within the boundaries of such parcel of the Real Property as set
forth in Section 3.21(a) of the Company Disclosure Schedule, and
no structures of any kind encroach on the Real Property.
(c) To the Company's knowledge, none of the Real
Property is subject to any Other Agreement (as defined below) or
other restriction of any nature whatsoever (recorded or
unrecorded) preventing or limiting the Company's right to use it.
(d) To the Company's knowledge, no portion of the Real
Property or any building, structure, fixture or improvement
thereon is the subject of, or affected by, any condemnation,
eminent domain or inverse condemnation proceeding currently
instituted or pending, and the Company has no knowledge that any
of the foregoing are, or will be, the subject of, or affected by,
any such proceeding.
(e) The Real Property has direct and unobstructed
access to adequate electric, gas, water, sewer and telephone
lines, and public streets, all of which are adequate for the uses
to which the Real Property is currently devoted.
(f) Section 3.21(f) of the Company Disclosure Schedule
lists and briefly describes all leases and Other Agreements under
which the Company is lessee or lessor of any Asset (as defined
below), or holds, manages or operates any Asset owned by any
third party, or under which any Asset owned by the Company is
held, operated or managed by a third party. The Company is the
owner and holder of all the leasehold estates purported to be
granted by the Documents (as defined below) described in the
Company Disclosure Schedule to it and is the owner of all
equipment, machinery and other Assets thereon or in buildings and
structures thereon, in each case free and clear of all
Encumbrances (as defined below). Each such lease and Other
Agreement is in full force and effect and constitutes
a legal, valid and binding obligation of, and is
legally enforceable against, the respective parties thereto and
grants the leasehold estate it purports to grant free and clear
of all Encumbrances. All necessary governmental approvals with
respect thereto have been obtained, all necessary filings or
registrations therefor have been made, and there have been no
threatened cancellations thereof and there are no outstanding
disputes thereunder. The Company has in all material respects
performed all obligations thereunder required to be performed by
it to date. To the Company's knowledge, no party is in default
in any material respect under any of the foregoing, and, to the
Company's knowledge, there has not occurred any event which
(whether with or without notice, lapse of time or the happening
or occurrence of any other event) would constitute such a
default. All of the Assets subject to such leases are in good
operating condition and repair, normal wear and tear excepted.
(g) "Real Property" means the real property owned or
used by the Company as of November 30, 1993, and any additional
real property owned or used since that date and set forth on
Section 3.21(a) of the Company Disclosure Schedule; "Encumbrance"
means any mortgage, lien, pledge, encumbrance, security interest,
deed of trust, option, encroachment, reservation, order, decree,
judgment, condition, restriction, charge, Other Agreement, claim
or equity of any kind; "Other Agreements" means any concurrence
of understanding and intention between two or more persons (or
entities) with respect to their relative rights and/or
obligations or with respect to a thing done or to be done
(whether or not conditional, executory, express, implied, in
writing or meeting the requirements of contract), including,
without limitation, contracts, leases, promissory notes,
covenants, easements, rights of way, covenants, commitments,
arrangements and understandings; "Assets" means assets of every
kind and everything that is or may be available for the payment
of liabilities (whether inchoate, tangible or intangible),
including, without limitation, real and personal property; and
"Documents" means any paper or other material (including, without
limitation, computer storage media) on which is recorded (by
letters, numbers or other marks) information that may be used,
including, without limitation, legal opinions, mortgages,
indentures, notes, instruments, leases, Other Agreements,
insurance policies, reports, studies, financial statements
(including, without limitation, the notes thereto), other written
financial information, schedules, certificates, charts, maps,
plans, photographs, letters, memoranda and all similar materials.
SECTION 3.22. Books and Records.
The books of account, stock records, minute books and other
records of the Company are complete and correct and have been
maintained in accordance with good business practices, and the
matters contained therein are appropriately and accurately
reflected in the Financial Statements.
SECTION 3.23. Title to Assets.
Except as otherwise noted in Section 3.23 of the Company
Disclosure Schedule, the Company is the sole owner of and has,
and at the Effective Time will have, good title to all of its
assets, free and clear of all liens, mortgages, security
interests, encumbrances, restrictions, agreements, defects or
equities of any kind. All material tangible assets of the
Company are in good operating condition and repair, normal wear
and tear excepted.
SECTION 3.24. No Infringement or Contest.
Section 3.24 of the Company Disclosure Schedule (i) identifies
each fictitious business name, trademark, service mark, trade
name, copyright and all registrations and applications for any of
the foregoing owned or used by the Company; (ii) lists each
patent, invention, industrial model, process, design and all
registrations and applications for any of the foregoing owned or
used by the Company; and (iii) lists all contracts and other
agreements to which the Company is a party, either as licensee or
licensor, for each such item of intangible personal property.
Using its best efforts, the Company has delivered to Acquiror a
list of all trade secrets of the Company and certain related
information. None of the Company's affiliates, including any of
its shareholders, has any interest in, owns, possesses or
otherwise holds in any manner any patent, invention, industrial
model, process, design, registration, application, know-how, or
other technical data, trade secret or other business information
used by the Company. To the Company's knowledge, all patents,
copyrights, trademarks, state, federal and foreign registrations
and applications, and other rights and property listed in
Section 3.24 of the Company Disclosure Schedule are valid and in
full force and effect and are not subject to any taxes,
maintenance fees, or actions falling due within ninety (90) days
after the date hereof. The Company owns or has the irrevocable
right to use all patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), trademarks, service marks,
trade names, trade dress, labels and logos developed or used in
connection with the business now operated by it. The Company has
taken all reasonable security measures to protect the secrecy,
confidentiality and value of its trade secrets. To the Company's
knowledge, all trade secrets of the Company are presently valid
and protectible, and are not part of the public knowledge or
literature, nor to the knowledge of the Company have they been
used, divulged, or appropriated for the benefit of any person other
than the Company or to the detriment of the Company. The Company
has not received any notice of infringement of or conflict with
asserted rights of others with respect to any of the foregoing, and
there is no claim, action, suit or proceeding pending or, to the
knowledge of the Company, threatened or reasonably anticipated
against the Company with respect thereto. Except as set forth in
Section 3.24 of the Company Disclosure Schedule, the Company is
not required to pay any royalty to anyone with respect to any
such patent, patent right, license, invention, copyright, know-
how, trademark, service mark, trade name, trade dress, label or
logo owned or used by the Company. The Company irrevocably
possesses the right to use all such trademarks, service marks,
trade names, trade dress, labels and logos necessary for the
conduct of its business and, to the Company's knowledge, such use
has not and will not conflict with, infringe upon, or violate any
patent or other proprietary right of any other person, and the
Company has not infringed or is not now infringing any
proprietary rights belonging to any other person.
SECTION 3.25. Board Recommendation.
At a meeting duly called and held in compliance with
California Law, the Board of Directors of the Company has adopted
by unanimous vote a resolution (i) determining that the Merger is
fair to the holders of Company Common Stock and Company Preferred
Stock and is in the best interests of such Company Shareholders
and (ii) approving and adopting this Agreement and the Agreement
of Merger and the transactions contemplated hereby and thereby
and recommending approval and adoption of this Agreement and the
Agreement of Merger and the transactions contemplated hereby and
thereby by the shareholders of the Company.
SECTION 3.26. Vote Required.
The affirmative vote of the holders of a majority of the
outstanding shares of Company Common Stock and the holders of a
majority of the outstanding shares of Company Preferred Stock are
the only votes of the holders of any class or series of capital
stock of the Company necessary to approve the transactions
contemplated under this Agreement and the Agreement of Merger.
SECTION 3.27. Banks; Attorneys-in-fact.
Section 3.27 of the Company Disclosure Schedule sets forth a
complete list showing the name of each bank or other financial
institution in which the Company has accounts (including a
description of the names of all persons authorized to draw thereon
or to have access thereto). Such list also shows the name of
each person holding a power of attorney from the Company and a
brief description thereof.
SECTION 3.28. Affiliate Agreements.
In accordance with Section 8.07, the officers, directors and
certain shareholders of the Company specified in Section 3.28 of
the Company Disclosure Schedule ("Company Affiliates") have
agreed to execute and deliver the affiliate agreements in
substantially the form attached hereto as Exhibit C (the
"Affiliate Agreements") and each such Affiliate Agreement, when
so executed and delivered, will, to the knowledge of the Company,
constitute a legal, valid and binding obligation of the
respective Company Affiliate who is a party thereto, enforceable
against such Company Affiliate in accordance with its terms.
Except as set forth in Section 3.28 of the Company Disclosure
Schedule, there are no affiliates of the Company as of the date
hereof as that term is used in Securities and Exchange Commission
(the "SEC") Accounting Series Release Nos. 130 and 135 and SEC
Rule 145.
SECTION 3.29. Brokers.
No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with
the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company.
SECTION 3.30. Environmental Matters.
(a) The Company has complied and is in compliance with,
and the Real Property and all improvements thereon during the
Company's occupation of the Real Property are in compliance with,
all Environmental Laws (as defined below), except where the
failure to comply would not have an Environmental Adverse Effect
(as defined below).
(b) There are no pending or, to the Company's
knowledge, threatened actions, suits, claims, legal proceedings
or other proceedings based on, and neither the Company, nor any
officer, director or, to the Company's knowledge, any Company
Shareholder has directly or indirectly received any formal or
informal notice of, any complaint, order, directive, citation,
notice of responsibility, notice of potential responsibility, or
information request from any governmental authority or any other
person or entity or knows of any incidents which are reasonably
likely to form the basis for any such actions or notices arising
out of or attributable to: (i) the current or past presence at
any part of the Real Property of Hazardous Materials (as defined
below) or any substances that pose a hazard to human health or an
impediment to working conditions; (ii) the current or past
release or threatened release by the Company into the environment
from the Real Property (including, without limitation, into any
storm drain, sewer, septic system or publicly owned treatment
works) of any Hazardous Materials or any substances that pose a
hazard to human health or an impediment to working conditions;
(iii) the off-site treatment or disposal of Hazardous Materials
by or for the Company, its businesses or Assets; (iv) any
facility operations, procedures or designs of the Company which
do not conform to requirements of the Environmental Laws; or (v)
any violation of Environmental Laws at any part of the Real
Property during the Company's occupation thereof or otherwise
arising from the Company's activities involving Hazardous
Materials, in each case other than those which would not have an
Environmental Adverse Effect.
(c) The Company has been duly issued, and currently
has and will maintain through the Effective Time, all permits,
licenses, certificates and approvals required under any
Environmental Law. A true and complete list of such permits,
licenses, certificates and approvals, all of which are, to the
knowledge of the Company, valid and in full force and effect, is
set out in Section 3.30(c) of the Company Disclosure Schedule.
Except in accordance with such permits, licenses, certificates
and approvals, there has been no discharge by the Company of any
other material regulated by such permits, licenses, certificates
or approvals, nor any other Hazardous Discharge (as defined
below).
(d) To the Company's knowledge, the Real Property
contains no underground storage tanks, or underground piping
associated with such tanks, used currently or in the past for the
storage, throughput or other management of Hazardous Materials.
(e) The Company has furnished to Acquiror accurate and
complete information in the Company's possession pertaining to
the operations of the Company and compliance with Environmental
Laws by the Company.
(f) The Company will promptly furnish to Acquiror
written notice of any Hazardous Discharge or of any actions or
notices described in Section 3.30(b) occurring after the date
hereof and prior to the Effective Time which are not disclosed on
the Company Disclosure Schedule.
(g) To the Company's knowledge, neither PCBs (as
defined below) nor asbestos-containing materials are present on
or in the Real Property.
(h) "Environmental Laws" means any Laws (including,
without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act), including any regulations or
orders promulgated pursuant to such Laws previously in effect or
in effect at the Effective Time, relating to the protection of
human health or the environment, to noise control, or to the
generation, production, use, storage, treatment, transportation,
disposal, release, spilling, leaking, discharging or emitting of
Hazardous Materials; "Environmental Adverse Effect" means any
situation involving compliance and/or non-compliance with
Environmental Laws that, individually or when taken with all
other such situations, could result in any losses, costs,
damages, liabilities, expenses or payments by the Company (before
the Effective Time) or by the Surviving Corporation (after the
Effective Time) in connection with the remediation of any such
situation and/or any fines, taxes, assessments, fees, penalties,
losses, costs, damages, liabilities, expenses or other payments
related thereto in excess of $50,000; "Hazardous Materials" means
any wastes, substances or materials (whether solids, liquids or
gases) that are deemed hazardous, toxic, pollutants or
contaminants, including, without limitation, substances defined
as "hazardous wastes," "hazardous substances," "toxic
substances," "radioactive materials," or other similar
designations in, or otherwise subject to regulation under, any
Environmental Laws, and includes PCBs, asbestos, lead-based
paints, and petroleum and petroleum products (including, without
limitation, crude oil or any fraction thereof);
"Hazardous Discharge" means any emission, spill, release or
discharge (whether on Real Property, on property adjacent to the
Real Property, or at any other location or disposal site) into or
upon the air, soil or improvements, surface water or ground
water, or the sewer, septic system, or waste treatment, storage
or disposal systems servicing the Real Property, in each case of
Hazardous Materials used, stored, generated, treated or disposed
of at the Real Property; and "PCBs" means polychlorinated
biphenyls.
SECTION 3.31. Disclosure.
(a) None of the information supplied by the Company
expressly for inclusion (and so included or relied on for
information included) in (i) the Registration Statement (as
defined in Section 8.01(a)) and (ii) the Proxy Statement (as
defined in Section 8.01(a)), at the respective times that (i) the
Registration Statement is filed with the SEC, (ii) the
Registration Statement becomes effective, (iii) the Proxy
Statement is mailed and (iv) any meeting of shareholders (and any
adjournment thereof) is held to consider, or written consents are
effective with respect to approval of, the transactions
contemplated by this Agreement, shall contain any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
(b) All facts of material importance to the business
and prospects of the Company have been fully and truthfully disc-
losed to Acquiror in this Agreement. No representation or
warranty by the Company, and no document, statement, certificate,
schedule or exhibit furnished or to be furnished to Acquiror
pursuant to this Agreement or otherwise in connection therewith,
contains or will contain any untrue statement of a material fact
or omits or will omit to state any material fact necessary in
order to make the statements contained therein not misleading.
The Company has previously provided to the Acquiror its current
business plan, which was prepared in good faith and on the basis
of reasonable assumptions, which have been fully disclosed to
Acquiror, and, to the Company's knowledge, no events or
circumstances have occurred that would lead the Company and its
officers and directors to believe that any changes are required
in the assumptions underlying such business plan.
SECTION 3.32. Company Shareholders.
Except as set forth in Section 3.32 of the Company Disclosure
Schedule, all holders of Company Common Stock and Company
Preferred Stock are residents of the State of California.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY SHAREHOLDERS
Except as set forth in the Company Disclosure Schedule delivered
to Acquiror by the Company prior to the execution and delivery of
this Agreement, which shall identify exceptions by specific
Section references, each of the Company Shareholders hereby
severally but not jointly represent and warrant to the Acquiror
and Acquiror Sub that to such Company Shareholder's knowledge, no
representation or warranty by the Company, and no document,
statement, certificate, schedule or exhibit furnished or to be
furnished to Acquiror pursuant to this Agreement or otherwise in
connection therewith, contains or will contain any untrue
statement of a material fact or omits or will omit to state any
material fact necessary in order to make the statements contained
therein not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
THE SCHEDULE 2 SHAREHOLDERS
Except as set forth in the Company Disclosure Schedule delivered
to Acquiror by the Company prior to the execution and delivery of
this Agreement, which shall identify exceptions by specific
Section references, those shareholders of the Company named on
Schedule 2 hereto (the "Schedule 2 Shareholders") hereby
severally but not jointly represent and warrant to Acquiror and
Acquiror Sub that the representations and warranties contained in
Sections 3.07, 3.08, 3.22, 3.31(a) and the first and third
sentences of Section 3.31(b) are true and correct.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF ACQUIROR AND ACQUIROR SUB
Except as set forth in the Disclosure Schedule delivered by
Acquiror and Acquiror Sub to the Company prior to the execution
and delivery of this Agreement (the "Acquiror Disclosure
Schedule"), which shall identify exceptions by specific Section
references, Acquiror and Acquiror Sub hereby jointly and
severally represent and warrant to the Company as follows:
SECTION 6.01. Organization and Qualification; Subsidiaries.
Each of Acquiror, Acquiror Sub and Acquiror's Significant
Subsidiaries (as defined in Section 11.04(h)) is a corporation
duly organized, validly existing and in good standing under the
Laws of the jurisdiction of its incorporation or organization,
has all requisite corporate or other power and authority to own,
lease and operate its properties and to carry on its business as
it is now being conducted and each of Acquiror and its
Significant Subsidiaries is duly qualified and in good standing
to do business in each jurisdiction in which the nature of the
business conducted by it or the ownership or leasing of its
properties makes such qualification necessary, other than where
the failure to do so would not have an Acquiror Material Adverse
Effect. The term "Acquiror Material Adverse Effect" as used in
this Agreement shall mean any change or effect that, individually
or when taken together with all such other changes or effects, is
or is reasonably likely to be materially adverse to the financial
condition, business or results of operations of Acquiror and its
subsidiaries, taken as a whole.
SECTION 6.02. Articles of Incorporation and By-Laws.
Acquiror has heretofore furnished to the Company a complete and
correct copy of the Articles of Incorporation and the By-Laws, as
amended or restated, of each of Acquiror and Acquiror Sub.
Neither Acquiror nor Acquiror Sub is in violation of any of the
provisions of its Articles of Incorporation or By-Laws.
SECTION 6.03. Authority.
Each of Acquiror and Acquiror Sub has the requisite corporate
power and authority to execute and deliver this Agreement, to
perform its obligations hereunder, and to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement by Acquiror and Acquiror Sub, and the consummation
by Acquiror and Acquiror Sub of the transactions contemplated
hereby, have been duly authorized by all necessary corporate
action and no other corporate proceedings on the part of Acquiror
or Acquiror Sub are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement
has been duly executed and delivered by Acquiror and Acquiror Sub
and, assuming the due authorization, execution and delivery by
the Company and the Company Shareholders, constitutes a legal,
valid and binding obligation of Acquiror and Acquiror Sub in
accordance with its terms, except as such enforceability may be
subject to the effect of any applicable bankruptcy, insolvency
(including, without limitation, all Laws relating to fraudulent
transfers), reorganization, moratorium or similar Laws affecting
creditors' rights generally and subject to the effect of general
principles of equity (whether considered in a proceeding in
equity or at law).
SECTION 6.04. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by
Acquiror and Acquiror Sub do not, and the performance of this
Agreement by Acquiror and Acquiror Sub shall not, (i) conflict
with or violate the Articles of Incorporation or By-Laws or
equivalent organizational documents of Acquiror, Acquiror Sub or
any of Acquiror's Significant Subsidiaries, (ii) subject to
(x) obtaining the consents, approvals, authorizations and permits
of, and making filings or notifications to, any Governmental
Entities pursuant to the applicable requirements, if any, of the
Securities Act, the Exchange Act, Blue Sky Laws, the NASD, the
HSR Act and the filing and recordation of appropriate merger
documents as required by California Law and (y) obtaining the
consents, approvals, authorizations or permits described in
Section 6.04(b) of the Acquiror Disclosure Schedule, conflict
with or violate any Laws applicable to Acquiror, Acquiror Sub or
any of Acquiror's Significant Subsidiaries or by which any of
their respective properties is bound or affected, or (iii) result
in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration
or cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of Acquiror,
Acquiror Sub or any of Acquiror's Significant Subsidiaries
pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument
or obligation to which Acquiror, Acquiror Sub or any of
Acquiror's Significant Subsidiaries is a party or by which
Acquiror, Acquiror Sub or any of Acquiror's Significant
Subsidiaries or any of their respective properties is bound or
affected, except for any such conflicts or violations described
in clause (ii) or any breaches or defaults described in clause
(iii) that would not have an Acquiror Material Adverse Effect.
(b) The execution and delivery of this Agreement by
Acquiror and Acquiror Sub do not, and the performance of this
Agreement by Acquiror and Acquiror Sub shall not, require any
consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Entities, except (i) for
applicable requirements, if any, of the Securities Act, the
Exchange Act, Blue Sky Laws, the NASD, the HSR Act, the consents,
approvals, authorizations or permits described in Section 6.04(b)
of the Acquiror Disclosure Schedule and the filing and
recordation of appropriate merger documents as required by
California Law or (ii) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or
notifications, would not adversely affect the ability of Acquiror
to consummate, or prevent or delay the consummation of, the
transactions contemplated by this Agreement.
SECTION 6.05. Absence of Litigation.
(a) There is no claim, action, suit, litigation,
proceeding, arbitration, or, to the knowledge of Acquiror,
investigation of any kind to which Acquiror or any of its
Significant Subsidiaries are a party, at law or in equity
(including actions or proceedings seeking injunctive relief),
pending or, to the knowledge of Acquiror, threatened, except for
claims, suits, litigations, proceedings, arbitrations or
investigations which individually or in the aggregate cannot
reasonably be expected to have an Acquiror Material Adverse
Effect; and (b) neither Acquiror nor any of its Significant
Subsidiaries is subject to any continuing order of, consent
decree, settlement agreement or other similar written agreement
with, or, to the knowledge of Acquiror, continuing investigation
by, any Governmental Entity, or any judgment, order, writ,
injunction, decree or award of any Governmental Entity or
arbitrator, including, without limitation, cease-and-desist or
other orders, except for such matters which are not reasonably
expected to have an Acquiror Material Adverse Effect.
SECTION 6.06. Ownership of Acquiror Sub; No Prior Activities.
(a) Acquiror Sub was formed solely for the purpose of
engaging in the transactions contemplated by this Agreement.
(b) As of the Effective Time, all of the outstanding
capital stock of Acquiror Sub will be owned directly by Acquiror.
As of the Effective Time, there will be no options, warrants or
other rights (including registration rights), agreements,
arrangements or commitments to which Acquiror Sub is a party of
any character relating to the issued or unissued capital stock
of, or other equity interests in, Acquiror Sub or obligating
Acquiror Sub to grant, issue or sell any shares of the capital
stock of, or other equity interests in, Acquiror Sub, by sale,
lease, license or otherwise. There are no obligations,
contingent or otherwise, of Acquiror Sub to repurchase, redeem or
otherwise acquire any shares of the capital stock of Acquiror
Sub.
(c) As of the date hereof and the Effective Time,
except for obligations or liabilities incurred in connection with
its incorporation or organization and the transactions
contemplated by this Agreement, Acquiror Sub has not and will not
have incurred, directly or indirectly, through any subsidiary or
affiliate, any obligations or liabilities or engaged in any
business activities of any type or kind whatsoever or entered
into any agreements or arrangements with any person.
SECTION 6.07. Brokers.
No broker or finder (other than Grayson & Co.) or investment
banker (other than Cowen & Company) is entitled to any brokerage,
finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Acquiror.
SECTION 6.08. SEC Reports.
Acquiror has filed all forms, reports, statements and other
documents required to be filed with the SEC since January 1, 1991
by Acquiror, including, without limitation, (A) all Annual
Reports on Form 10-K, (B) all Quarterly Reports on Form 10-Q, (C)
all proxy statements relating to meetings of shareholders
(whether annual or special), (D) all reports on Form 8-K, (E) all
other reports or registration statements and (F) all amendments
and supplements to all such reports and registration statements
(collectively, the "Acquiror SEC Reports"). As of their
respective filing dates the Acquiror SEC Reports complied as to
form in all material respects with the requirements of the
Exchange Act and the Securities Act. To the Acquiror's
knowledge, the Acquiror SEC Reports did not at the time they were
filed 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 therein, in the light of the circumstances
under which they were made, not misleading.
SECTION 6.09. Acquiror Common Stock.
Acquiror Common Stock, when issued and delivered to the
shareholders of the Company pursuant to the Merger, will be duly
authorized, validly issued, fully paid and non-assessable.
SECTION 6.10. Taxes.
(a) Acquiror has no present plan or intention following
the Effective Time to cause the Company to issue additional shares
of stock that would result in Acquiror losing control of the
Company within the meaning of Section 368(c)(1) of the Code.
(b) Acquiror has no present plan or intention
following the Effective Time to reacquire any shares of Acquiror
Common Stock issued in the Merger.
(c) Acquiror has no present plan or intention
following the Effective Time to liquidate the Company, merge the
Company with or into another corporation, sell or otherwise
dispose of the stock of the Company (except for transfers of
stock to corporations controlled by Acquiror) or cause the
Company to sell or otherwise dispose of any of its assets or of
any of the assets acquired by it from Acquiror Sub, except for
dispositions made in the ordinary course of business or transfers
of assets to corporations controlled by the Company.
(d) Acquiror and Acquiror Sub are not investment
companies as defined in Section 368(a)(2)(F)(iii) and (iv) of the
Code.
ARTICLE VII
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 7.01. Affirmative Covenants.
The Company hereby covenants and agrees that, from the date of
this Agreement until the Effective Time, unless otherwise
expressly contemplated by this Agreement or consented to in
writing by Acquiror, the Company will:
(a) operate its business only in the usual and
ordinary course consistent with past practice;
(b) use its best efforts to preserve intact its
business organization and assets, maintain its rights and
franchises, retain the services of its officers and key
employees and maintain the relationships with its customers
and suppliers; and
(c) use its best efforts to keep in full force and
effect liability and other insurance and bonds comparable in
amount and scope of coverage to that currently maintained.
SECTION 7.02. Negative Covenants of the Company.
Except as expressly contemplated by this Agreement, as set forth
in Section 7.02 of the Company Disclosure Schedule or otherwise
consented to in writing by Acquiror, from the date of this
Agreement until the Effective Time the Company shall not do any
of the following:
(a) (i) increase the compensation payable or to
become payable to any director, officer or employee, except
for increases in salary or wages payable or to become
payable in the ordinary course of business and consistent
with past practice to employees of the Company who are not
directors or officers of the Company; (ii) grant any
severance or termination pay (other than pursuant to the
normal severance policy of the Company or as required under
an existing agreement listed in Section 7.02 of the Company
Disclosure Schedule in effect on the date of this Agreement)
to, or enter into any severance agreement with, any
director, officer or employee, or enter into any employment
agreement with any director, officer or employee of the
Company; or (iii) establish, adopt, enter into or amend any
employee benefit plan or arrangement, except as may be
required to comply with applicable Law;
(b) declare or pay any dividend on, or make any other
distribution in respect of, outstanding shares of capital
stock;
(c) (i) redeem, purchase or otherwise acquire any
shares of its capital stock or any securities or obligations
convertible into or exchangeable for any shares of its
capital stock, or any options, warrants or conversion
or other rights to acquire any shares of its capital stock or
any such securities or obligations; (ii) effect any
reorganization or recapitalization; or (iii) split, combine or
reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in
lieu of or in substitution for, shares of its capital stock
(except for the issuance of shares upon the exercise of
options or warrants in accordance with their terms);
(d) issue, deliver, award, grant or sell, or authorize
the issuance, delivery, award, grant or sale (including the
grant of any security interests, liens, claims, pledges,
limitations in voting rights, charges or other encumbrances)
of, any shares of any class of its capital stock (including
shares held in treasury), any securities convertible into or
exercisable or exchangeable for any such shares, or any
rights, warrants or options to acquire, any such shares
(except for the issuance of shares upon the exercise of
outstanding options or warrants in accordance with their
terms), or amend or otherwise modify the terms of any such
rights, warrants or options the effect of which shall be to
make such terms more favorable to the holders thereof;
(e) except as contemplated by agreements, arrangements
or letters of intent which have been identified in Section
7.02 of the Company Disclosure Schedule, acquire or agree to
acquire, by merging or consolidating with, by purchasing an
equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership,
association or other business organization or division
thereof, or otherwise acquire or agree to acquire any assets
of any other person (other than the purchase of assets from
suppliers or vendors in the ordinary course of business and
consistent with past practice);
(f) sell, lease, exchange, mortgage, pledge, transfer
or otherwise dispose of, or agree to sell, lease, exchange,
mortgage, pledge, transfer or otherwise dispose of, any of
its assets, except for dispositions in the ordinary course
of business and consistent with past practice;
(g) initiate, solicit or encourage (including by way
of furnishing information or assistance), or take any other
action to facilitate, any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to
lead to, any Competing Transaction (as such term is defined
below), or enter into discussions or furnish any information
or negotiate with any person or entity or otherwise
cooperate in any way in furtherance of such inquiries or to
obtain a Competing Transaction, or agree to or endorse any
Competing Transaction, or authorize any of the officers,
employees, agents, representatives or directors of the
Company to take any such action, and the Company shall
direct and instruct and use its best efforts to cause the
directors, officers, employees, agents and representatives
of the Company (including, without limitation, any
investment banker, financial advisor, attorney or accountant
retained by the Company) not to take any such action, and
the Company shall promptly notify Acquiror if any such
inquiries or proposals are received by the Company or any of
its or their respective officers, directors, employees,
agents, investment bankers, financial advisors, attorneys,
accountants or other representatives, and the Company shall
promptly inform Acquiror as to the material terms of such
inquiry or proposal and, if in writing, promptly deliver or
cause to be delivered to Acquiror a copy of such inquiry or
proposal, and the Company shall keep Acquiror informed, on a
current basis, of the nature of any such inquiries and the
status and terms of any such proposals; provided, however,
that nothing contained in this subsection (g) shall prohibit
the Board of Directors of the Company from (i) furnishing
information to, or entering into discussions or negotiations
with, any person or entity that makes an unsolicited bona
fide proposal to acquire the Company pursuant to a merger,
consolidation, share exchange, business combination or other
similar transaction (a "Bona Fide Proposal"), if, and only
to the extent that, (A) the Board of Directors of the
Company, after consultation with and based upon the written
advice of independent legal counsel (a copy of which is
furnished to Acquiror), determines in good faith that the
Bona Fide Proposal is financially superior to the Merger, is
otherwise in the best interests of the shareholders of the
Company and is reasonably financeable and that accordingly
such action is required for the Board of Directors of the
Company to comply with its fiduciary duties to shareholders
imposed by California Law, (B) prior to furnishing such
information to, or entering into discussions or negotiations
with, such person or entity, the Company provides written
notice to Acquiror to the effect that it is furnishing
information to, or entering into discussions or negotiations
with, such person or entity, (C) prior to furnishing such
information to such person or entity, the Company receives
from such person or entity an executed confidentiality
agreement with terms no less favorable to the Company than
those contained in the nondisclosure agreement, dated
October 22, 1993, between Acquiror and the Company (the
"Confidentiality Agreement") and (D) the Company keeps
Acquiror informed, on a current basis, of the status of any
such discussions or negotiations; or (ii) complying with
Rule 14e-2 promulgated under the Exchange Act with regard to
a Competing Transaction. For purposes of this Agreement,
"Competing Transaction" shall mean any of the following
involving the Company (other than the transactions
contemplated by this Agreement): (i) any merger,
consolidation, share exchange, business combination, or
other similar transaction; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of ten
percent or more of the assets of the Company or issuance of
ten percent or more of the outstanding voting securities of
the Company in a single transaction or series of
transactions; (iii) any tender offer or exchange offer for
ten percent or more of the outstanding shares of capital
stock of the Company or the filing of a registration
statement under the Securities Act in connection therewith;
(iv) any solicitation of proxies in opposition to approval
by the Company's shareholders of the Merger; (v) any person
shall have acquired beneficial ownership or the right to
acquire beneficial ownership of, or any "group" (as such
term is defined under Section 13(d) of the Exchange Act)
shall have been formed which beneficially owns or has the
right to acquire beneficial ownership of, ten percent or
more of the then outstanding shares of capital stock of the
Company; or (vi) any agreement to, or public announcement by
the Company or any other person of a proposal, plan or
intention to, do any of the foregoing;
(h) adopt any amendments to its Articles of
Incorporation or By-Laws;
(i) (A) change any of its methods of accounting in
effect at November 30, 1993 or (B) make or rescind any
express or deemed election relating to taxes, settle or
compromise any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to
taxes, or change any of its methods of reporting income or
deductions for federal income tax purposes from those
employed in the preparation of the federal income tax
returns for the taxable year ending November 30, 1992,
except in either case as may be required by Law, the IRS or
generally accepted accounting principles;
(j) incur any obligation for borrowed money or
purchase money indebtedness, whether or not evidenced by a
note, bond, debenture or similar instrument, except for
additional borrowings made with the prior written consent of
Acquiror;
(k) take any action or fail to take any action which
could reasonably be expected to have a Company Material
Adverse Effect prior to or after the Effective Time or an
Acquiror Material Adverse Effect after the Effective Time,
or that could reasonably be expected to adversely effect the
ability of the Company prior to the Effective Time, or
Acquiror or any of its subsidiaries after the Effective Time,
to obtain consents of third parties or approvals of
Governmental Entities required to consummate the transactions
contemplated in this Agreement; or
(l) agree in writing or otherwise to do any of the
foregoing.
SECTION 7.03. Negative Covenants of Acquiror.
Except as expressly contemplated by this Agreement or otherwise
consented to in writing by the Company, from the date of this
Agreement until the Effective Time, Acquiror shall not do, and
shall not permit any of its subsidiaries to do, any of the
following:
(a) amend any of the material terms or provisions of
Acquiror's securities, except for any such amendments which
affect equally all shares of Acquiror Common Stock;
(b) knowingly take any action which would result in a
failure to maintain the trading of Acquiror Common Stock on
NASDAQ/NMS without causing such stock to be listed for
trading on a national securities exchange at or prior to the
termination of its trading on NASDAQ/NMS;
(c) agree in writing or otherwise to do any of the
foregoing.
SECTION 7.04. Access and Information.
(a) For so long as this Agreement is in effect, the
Company and Acquiror shall (and shall cause their respective
subsidiaries to) afford to each other and their respective
officers, employees, accountants, consultants, legal counsel and
other representatives reasonable access during normal business
hours to all information concerning the business, properties,
contracts, records and personnel of the Company or Acquiror, as
the case may be, or their respective subsidiaries as such other
party may reasonably request.
(b) The parties and their respective officers,
employees, accountants, consultants, legal counsel and other
representatives will comply with all of their respective
obligations under the Confidentiality Agreement.
ARTICLE VIII
ADDITIONAL AGREEMENTS
SECTION 8.01. Registration Statement; Proxy Statement.
(a) As promptly as practicable after the execution of
this Agreement, Acquiror shall prepare and file with the SEC a
registration statement on Form S-4 (the registration statement
together with the amendments thereto being the "Registration
Statement"), containing a proxy statement/prospectus, in
connection with the registration under the Securities Act of the
Acquiror Common Stock, the vote of the Company's shareholders
with respect to the Merger (such proxy statement/prospectus,
together with any amendments thereof or supplements thereto, in
each case in the form or forms mailed to the Company's
shareholders, being the "Proxy Statement") and the other
transactions contemplated by this Agreement. Each of Acquiror
and the Company will use all reasonable efforts to have or cause
the Registration Statement to become effective as promptly as
practicable, and shall take any action required to be taken under
any applicable federal or state securities laws in connection
with the issuance of shares of Acquiror Common Stock in the
Merger. Each of Acquiror and the Company shall furnish all
information concerning it and the holders of its capital stock as
the other may reasonably request in connection with such actions.
As promptly as practicable after the Registration Statement shall
have become effective, the Company shall mail the Proxy Statement
to its shareholders. The Proxy Statement shall include the
recommendation of the Company's Board of Directors to
shareholders to vote in favor of the Merger unless otherwise
required by the applicable fiduciary duties of the directors of
the Company, as determined by such directors in good faith after
consultation with and based upon the written advice of
independent legal counsel under the circumstances described in
the proviso in Section 7.02(g).
(b) The information supplied by the Company for
inclusion in the Registration Statement shall not, at the time
the Registration Statement is declared effective, 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 not misleading. The information supplied
by the Company for inclusion in the Proxy Statement to be sent to
the shareholders of the Company in connection with the meeting of
the Company's shareholders to consider the Merger (the
"Shareholders' Meeting") shall not, at the date the Proxy
Statement (or any amendment thereof or supplement thereto) is
first mailed to shareholders, at the time of the Shareholders'
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 the light of the circumstances under which they are
made, not misleading. If at any time prior to the Effective Time
any event or circumstance relating to the Company or any of its
affiliates, or its or their respective officers or directors,
should be discovered by the Company which should be set forth in
an amendment to the Registration Statement or a supplement to the
Proxy Statement, the Company shall promptly inform Acquiror. All
documents that the Company is responsible for filing with the SEC
in connection with the transactions contemplated herein will
comply as to form and substance in all material respects with the
applicable requirements of the Securities Act and the rules and
regulations thereunder and the Exchange Act and the rules and
regulations thereunder.
(c) The information supplied by Acquiror for inclusion
in the Registration Statement shall not, at the time the
Registration Statement is declared effective, 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 not misleading. The information supplied by
Acquiror for inclusion in the Proxy Statement to be sent to the
shareholders of the Company in connection with the Shareholders'
Meeting shall not, at the date the Proxy Statement (or any
amendment thereof or supplement thereto) is first mailed to
shareholders, at the time of the Shareholders' 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 the
light of the circumstances under which they are made, not
misleading. If at any time prior to the Effective Time any event
or circumstance relating to Acquiror or any of its respective
affiliates, or its or their respective officers or directors,
should be discovered by Acquiror which should be set forth in an
amendment to the Registration Statement or a supplement to the
Proxy Statement, Acquiror shall promptly inform the Company. All
documents that Acquiror is responsible for filing with the SEC in
connection with the transactions contemplated herein will comply
as to form and substance in all material respects with the
applicable requirements of the Securities Act and the rules and
regulations thereunder and the Exchange Act and the rules and
regulations thereunder.
(d) The Company and Acquiror each hereby (i) consents
to the use of its name and, on behalf of its subsidiaries and
affiliates, the names of such subsidiaries and affiliates and to
the inclusion of financial statements and business information
relating to such party and its subsidiaries and affiliates (in
each case, to the extent required by applicable securities laws)
in any registration statement or proxy statement prepared by the
Company or the Acquiror, (ii) agrees to use its best efforts to
obtain the written consent of any person or entity retained by it
which may be required to be named (as an expert or otherwise) in
such registration statement or proxy statement; and (iii) agrees
to cooperate, and agrees to use its best efforts to cause its
subsidiaries and affiliates to cooperate, with any legal counsel,
investment banker, accountant or other agent or representative
retained by any of the parties specified in clause (i) in
connection with the preparation of any and all information
required, as determined after consultation with each party's
counsel, to be disclosed by applicable securities laws in any
such registration statement or proxy statement.
SECTION 8.02. Meeting of Shareholders.
The Company shall promptly after the date of this Agreement take
all action necessary in accordance with California Law and its
Articles of Incorporation and By-Laws to convene the
Shareholders' Meeting, and the Company shall consult with
Acquiror in connection therewith. The Company shall use its best
efforts to solicit from the shareholders of the Company proxies
or consents in favor of the Merger and shall take all other
actions necessary or advisable to secure the vote or consent of
shareholders required by California Law to approve the Merger,
unless otherwise required by the applicable fiduciary duties of
directors of the Company, as determined by such directors in good
faith after consultation with and based upon the written advice
of independent legal counsel under the circumstances described in
the proviso in Section 7.02(g).
SECTION 8.03. Appropriate Action; Consents; Filings; Other.
(a) The Company and Acquiror shall use best efforts to
(i) take, or cause to be taken, all appropriate action, and do, or
cause to be done, all things necessary, proper or advisable under
applicable Law or otherwise to consummate and make effective the
transactions contemplated by this Agreement as promptly as
practicable, (ii) obtain from any Governmental Entities any
consents, licenses, permits, waivers, approvals, authorizations
or orders required to be obtained or made by Acquiror or the
Company or any of their subsidiaries in connection with the
authorization, execution and delivery of this Agreement and the
consummation of the transactions contemplated herein, including,
without limitation, the Merger, and (iii) make all necessary
filings, and thereafter make any other required submissions, with
respect to this Agreement and the Merger required under (A) the
Securities Act and the Exchange Act, and any other applicable
federal or state securities laws, (B) the HSR Act and (C) any
other applicable Law; provided that Acquiror and the Company
shall cooperate with each other in connection with the making of
all such filings, including providing copies of all such
documents to the non-filing party and its advisors prior to
filing and, if requested, to accept all reasonable additions,
deletions or changes suggested in connection therewith. The
Company and Acquiror shall furnish to each other all information
required for any application or other filing to be made pursuant
to the rules and regulations of any applicable Law (including all
information required to be included in the Proxy Statement and
the Registration Statement) in connection with the transactions
contemplated by this Agreement.
(b) (i) The Company and Acquiror shall give
(or shall cause their respective subsidiaries to give) any
notices to third parties, and use, and cause their respective
subsidiaries to use, best efforts to obtain any third party
consents, (A) necessary, proper or advisable to consummate the
transactions contemplated in this Agreement, (B) disclosed or
required to be disclosed in the Company Disclosure Schedule or
the Acquiror Disclosure Schedule, as the case may be, or (C)
required to prevent a Company Material Adverse Effect from
occurring prior to or after the Effective Time or an Acquiror
Material Adverse Effect from occurring after the Effective Time.
(ii) In the event that either party
shall fail to obtain any third party consent described in
subsection (b)(i) above, such party shall use best efforts, and
shall take any such actions reasonably requested by the other
party hereto, to minimize any adverse effect upon the Company and
Acquiror, their respective subsidiaries, and their respective
businesses resulting, or which could reasonably be expected to
result after the Effective Time, from the failure to obtain such
consent.
(c) From the date of this Agreement until the
Effective Time, the Company shall promptly notify Acquiror in
writing of any pending or, to the knowledge of the Company,
threatened action, proceeding or investigation by any
Governmental Entity or any other person (i) challenging or
seeking damages in connection with the Merger or the conversion
of the Company Common Stock into Acquiror Common Stock pursuant
to the Merger or (ii) seeking to restrain or prohibit the
consummation of the Merger or otherwise limit the right of
Acquiror or, to the knowledge of the Company, its subsidiaries to
own or operate all or any portion of the businesses or assets of
the Company.
(d) The Company shall take the actions called for by
Section 8.03(d) of the Company Disclosure Schedule with respect
to certain oral and written agreements.
SECTION 8.04. Unaudited Financial Information.
The Company will cause to be prepared (and furnish to Acquiror)
as promptly as possible on a monthly basis unaudited balance
sheets, beginning as of December 31, 1993, and quarterly
unaudited balance sheets beginning as of February 28, 1994, of
the Company (the "Unaudited Balance Sheets") and the related
unaudited statement of earnings and shareholders' equity and
statement of cash flow to the Company for the respective one-
month and three-month periods (such statements of earnings and
shareholders' equity and statements of cash flows, together with
the Unaudited Balance Sheets, are referred to in this Agreement
as the "Unaudited Statements" and, together with the Audited
Statements, as the "Financial Statements"). The Unaudited
Statements will be complete and correct in all material respects
and will be prepared from the books and records of the Company
and will fairly present the financial position of the Company and
the results of its operations and its cash flows as of and for
the respective time periods in conformity with GAAP applied on a
consistent basis, except as noted thereon and subject to normal
and recurring year-end adjustments.
SECTION 8.05. Letters of Accountants.
The Company shall use its best efforts to cause to be
delivered to Acquiror "cold comfort" letters of Deloitte &
Touche, its independent public accountant, dated the date on
which the Registration Statement shall become effective and as of
the Effective Time, respectively, and addressed to Acquiror, in
form and substance reasonably satisfactory to Acquiror and
reasonably customary in scope and substance for letters delivered
by independent public accountants in connection with registration
statements similar to the Registration Statement and transactions
such as those contemplated by this Agreement.
SECTION 8.06. Update Disclosure; Breaches.
From and after the date of this Agreement until the Effective
Time, each party hereto shall promptly notify the other party
hereto by written update to its Disclosure Schedule of (i) the
occurrence, or non-occurrence, of any event the occurrence, or
non-occurrence, of which would be likely to cause any condition
to the obligations of any party to effect the Merger and the
other transactions contemplated by this Agreement not to be
satisfied, or (ii) the failure of the Company or Acquiror, as the
case may be, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it pursuant to this
Agreement which would be likely to result in any condition to the
obligations of any party to effect the Merger and the other
transactions contemplated by this Agreement not to be satisfied;
provided, however, that the delivery of any notice pursuant to
this Section 8.06 shall not cure any breach of any representation
or warranty requiring disclosure of such matter prior to the date
of this Agreement or otherwise limit or affect the rights and
remedies available hereunder to the party receiving such notice,
subject to the provisions of Section 8.17; provided, further,
that the delivery of any notice pursuant to this Section 8.06
shall be deemed accepted by the party to whom it is addressed as
an updated disclosure for purposes of Sections 8.17 and 11.02
only if the Closing occurs hereunder.
SECTION 8.07. Affiliates; Accounting and Tax Treatment.
Prior to the Effective Time, the Company shall obtain
Affiliate Agreements from each person listed in Section 3.28 of
the Company Disclosure Schedule and any person who may be deemed
to have become an affiliate of the Company (under SEC Rule 145 of
the Securities Act or otherwise under applicable SEC accounting
releases with respect to pooling-of-interests accounting
treatment) after the date of this Agreement and on or prior to
the Effective Time, provided that the Company shall use its best
efforts to obtain Affiliate Agreements from each such person as
soon as practicable after the date of this Agreement or the date
on which such person attains such status, as the case may be.
Each party hereto, including Company Shareholders, as the case
may be, shall use their best efforts to cause the Merger to
qualify, and shall not take any actions which could prevent the
Merger from qualifying, for pooling-of-interests accounting
treatment and as a reorganization qualifying under the provisions
of Section 368(a) of the Code.
SECTION 8.08. Public Announcements.
Acquiror and the Company shall consult with each other before
issuing any press release or otherwise making any public
statements with respect to the Merger and shall not issue any
such press release or make any such public statement prior to
such consultation, except as may be required by Law or any
listing agreement with the NASD.
SECTION 8.09. NASD Listing.
Acquiror shall use all reasonable efforts to cause the shares of
Acquiror Common Stock to be issued in the Merger to be approved
for listing on the NASDAQ/NMS prior to the Effective Time.
SECTION 8.10. Employee Matters.
The Company and Acquiror shall offer to and endeavor to enter
into employment agreements at the Effective Time with the
officers and employees of the Company listed in Section 8.10 of
the Company Disclosure Schedule on terms reasonably satisfactory
to Acquiror and summarized therein. By their execution and
delivery of this Agreement, the Company and each of Wilton
Webster and Tony Brown acknowledge having been advised by
Acquiror that the execution and delivery by Messrs. Webster and
Brown of such employment agreements at the Closing are material
inducements to Acquiror to consummate the Merger as contemplated
under this Agreement because of the importance of Messrs. Webster
and Brown to the future operating and financial performance and
future prospects of the Surviving Corporation.
SECTION 8.11. Assumption of Agreements.
The Surviving Corporation shall execute written consents, where
required, to assume the obligations of the Company, which
consents shall be in form and substance reasonably satisfactory
to Acquiror and the Company.
SECTION 8.12. Benefit Arrangements.
Except as otherwise expressly contemplated in Section 8.12 of the
Company Disclosure Schedule, to which Acquiror and the Company
hereby agree, for a period of one year from and after the
Effective Time or until such employee benefit plans or
arrangements are integrated with Acquiror's employee benefit
plans and arrangements, whichever is earlier, Acquiror shall
endeavor to, or shall endeavor to cause the Surviving Corporation
to, provide employee benefit plans and arrangements for the
benefit of the employees of the Surviving Corporation that are
reasonably comparable in the aggregate to the employee benefit
plans and arrangements of the Company as in effect on the date
hereof; provided, however, that Acquiror reserves the right to
make any changes to such employee benefit plans and arrangements
as are necessary to comply with, or respond to changes in,
applicable Law or are otherwise deemed reasonably appropriate by
the Acquiror as being in the best interests of Acquiror and the
Surviving Corporation. Except in the sole discretion of Acquiror
or as otherwise set forth in Section 8.12 of the Company
Disclosure Schedule, the Acquiror shall not give full credit for
eligibility, vesting or benefit accrual for each participant's
period of service with the Company prior to the Effective Time.
SECTION 8.13. Principal Offices.
As of the Effective Time, the principal offices of the Surviving
Corporation shall be located at the current principal offices of
the Company in Baldwin Park, California.
SECTION 8.14. Obligations of Acquiror Sub; Assets of
Acquiror Sub.
Acquiror shall take all action necessary to cause Acquiror Sub to
perform its obligations under this Agreement and to consummate
the Merger on the terms and conditions set forth in this
Agreement.
SECTION 8.15. Approval of Merger.
Subject to the rights of each such shareholder to terminate the
voting agreement as to such shareholder hereafter described in
this Section, each of the Company Shareholders listed in
Section 8.15 of the Company Disclosure Schedule shall vote all
shares of Company Common Stock and Company Preferred Stock owned
by him or her in favor of approval of the Merger on the terms and
conditions set forth herein, and each such shareholder that is a
member of the Board of Directors of the Company, shall (subject
to any fiduciary obligations to the contrary) recommend that the
shareholders of the Company approve the Merger on the terms and
conditions set forth herein, when the same is presented to the
shareholders of the Company for consideration. After Acquiror
and the Company shall have delivered to the shareholders of the
Company the Proxy Statement prior to the Shareholders' Meeting or
any action by written consent approving the Merger described in
Section 8.01(b) hereof, the Company Shareholders listed in
Section 8.15 of the Company Disclosure Schedule shall have the
right to cancel the aforementioned voting agreement by written
notice delivered to Acquiror within the period (the "Review
Period") beginning on the date of his or her initial receipt of
such Proxy Statement and ending on the earlier of (i) five days
after such initial receipt or (ii) the meeting of the
shareholders of the Company held to consider the Merger or any
action by written consent of shareholders of the Company
approving the Merger. This right to so cancel the aforementioned
voting agreement shall irrevocably terminate after the expiration
of the Review Period; provided, however, that if Acquiror
updates, amends or supplements the Proxy Statement, a new Review
Period shall commence, beginning on the date of the Company
Shareholders' initial receipt of such update, amendment or
supplement and ending on the earlier of (i) five days after
receipt of such update, or (ii) the meeting of the shareholders
of the Company held to consider the Merger or any action by
written consent of shareholders of the Company approving the
Merger.
SECTION 8.16. Tax Returns.
(a) To the extent permitted under applicable tax laws,
the Merger shall be reported as a "reorganization" within the
meaning of Section 368(a)(1)(A) and Section 368(a)(2)(E) of the
Code in all federal, state and local tax returns filed after the
Effective Time. Notwithstanding any other provision of this
Agreement, the obligations set forth in this Section 8.16 shall
survive the Effective Time without limitation as to time or in
any other respect.
(b) Acquiror will cause the Company to hold following
the Merger at least 90% of the fair market value of its net
assets and, assuming the accuracy of the representation in
Section 3.19 hereof, at least 70% of the fair market value of its
gross assets, and at least 90% of the fair market value of
Acquiror Sub's net assets and 70% of the fair market value of
Acquiror Sub's gross assets held immediately prior to the Merger.
For purposes of this subsection (b), amounts paid by the Company
or Acquiror Sub to dissenters, to shareholders who receive cash
or other property, to pay reorganization expenses, and in
connection with redemptions and distributions (except for
regular, normal distributions) will be treated as assets of the
Company or Acquiror Sub, respectively, immediately prior to the
Merger.
(c) Following the Merger, Acquiror will cause the
Company to continue its historic business or use a significant
portion of its business assets in a business.
SECTION 8.17. Indemnification.
From time to time after the Effective Time, the Company
Shareholders shall jointly and severally indemnify and hold
harmless Acquiror, the Surviving Corporation and their respective
officers and directors, and each person, if any, who controls or
may control Acquiror or the Surviving Corporation within the
meaning of the Securities Act (all such persons hereinafter are
referred to individually as an "Indemnified Person" and
collectively as "Indemnified Persons," but in no event shall any
shareholder of the Company be such an Indemnified Person), from
and against any and all losses, costs, damages, liabilities and
expenses, including attorneys' fees and expenses, ("Damages")
actually suffered (after giving effect to any insurance proceeds)
and arising out of the breach of the representations, warranties,
covenants and agreements given or made by the Company and the
Company Shareholders in this Agreement, in the Agreement of
Merger or in the Exhibits or Schedules hereto or in any
certificate or document delivered by or on behalf of the Company
pursuant hereto, after giving effect to any updated disclosure
made pursuant to Section 8.06 hereof. The indemnity obligation
of the Company Shareholders under this Section 8.17 shall be
satisfied through the application by Acquiror of the Adjustment
Escrow Shares held in escrow pursuant to this Agreement to
amounts owing to Indemnified Persons pursuant to this
Section 8.17, and the maximum liability of the Company
Shareholders for indemnification under this Section 8.17 shall be
limited to an amount equal to the number of Adjustment Escrow
Shares multiplied by the Average Trading Price (provided,
however, that for purposes of this Section 8.17, if the Average
Trading Price is greater than $52.02, the Average Trading Price
shall be deemed to be $52.02, and if the Average Trading Price is
less than $42.56, the Average Trading Price shall be deemed to be
$42.56), provided, further, that Company Shareholders shall have
no liability under this Section 8.17 or the Escrow Agreement to
the extent claims for Damages hereunder do not exceed $250,000;
provided, however, that if such Damages exceed $250,000, then the
indemnification provided for hereunder shall apply to all
Damages without regard to the $250,000 threshold provided for
above. It shall be a condition of the right of each Indemnified
Person to indemnification pursuant to this Section 8.17 that such
Indemnified Person shall assert a claim for such indemnification
on or prior to the Adjustment Date. Notwithstanding the
foregoing, or anything in this Agreement to the contrary, the
application by Acquiror of the Adjustment Escrow Shares held in
escrow pursuant to this Agreement to amounts owing to Indemnified
Persons shall not be the exclusive remedy pursuant to which
Acquiror may satisfy claims for Damages as defined in this
Section 8.17 against the Company Shareholders and the Schedule 2
Shareholders but shall be the exclusive remedy for satisfying the
indemnity obligation under this Section 8.17. Such other
remedies shall be subject to the provisions of Sections 11.01 and
11.02 hereof and shall give effect to any updated disclosure made
under Section 8.06 hereof.
SECTION 8.18. Procedures; Conditions of Indemnification.
With respect to any indemnification provided pursuant to this
Agreement, the Indemnified Person agrees to give prompt written
notice to the indemnifying party of any claim or other assertion
of liability by third parties (hereinafter called collectively
"Claims"), it being understood that the failure to give such
notice shall not affect the Indemnified Person's right to
indemnification and the indemnifying party's obligation to
indemnify as set forth in this Agreement, unless that
indemnifying party's rights with respect to such Claim are
thereby demonstrably and materially prejudiced.
The obligations and liabilities of the parties hereto with
respect to their respective indemnities pursuant to this
Agreement resulting from any Claim shall be subject to the
following terms and conditions:
(a) The indemnifying party shall have the right to
undertake, by counsel or other representatives of its own
choosing, the defense of such Claim.
(b) In the event that the indemnifying party shall
elect not to undertake such defense, or within a reasonable time
after notice of any such Claim from the Indemnified Person shall
fail to defend, the Indemnified Person (upon further written
notice to the indemnifying party) shall have the right to
undertake the defense, compromise or settlement of such Claim, by
counsel or other representatives of its own choosing, on behalf
of and for the account and risk of the indemnifying party
(subject to the right of the indemnifying party to assume defense
of such Claim at any time prior to settlement, compromise or
final determination thereof).
(c) Anything in this Section 8.18 to the contrary
notwithstanding, (i) if the Indemnified Person notifies the
indemnifying party that the Indemnified Person has concluded that
a Claim may materially and adversely affect the Indemnified
Person other than as a result of money damages or other money
payments, the Indemnified Person shall have the right, at its own
cost and expense to participate in the defense, compromise or
settlement of the Claim, (ii) the indemnifying party shall not,
without the Indemnified Person's written consent, settle or
compromise any Claim or consent to entry of any judgment that
does not include as an unconditional term thereof the giving by
the claimant or the plaintiff to the Indemnified Person of a
release from all liability in respect of such Claim, and (iii) in
the event that the indemnifying party undertakes defense of any
Claim, the Indemnified Person, by counsel or other representative
of its own choosing and at its sole cost and expense, shall have
the right to consult with the indemnifying party and its counsel
or other representatives concerning such Claim and the
indemnifying party and the Indemnified Person and their
respective counsel or other representatives shall cooperate with
respect to such Claim.
(d) Notwithstanding any other provision of this
Section 8.18, the Indemnified Person may at any time assume full
control over the responsibility for any Claim, by written notice
to the indemnifying party releasing the indemnifying party from
any further indemnity obligation pursuant to this Agreement with
respect to said Claim.
SECTION 8.19. Agreement with Brentwood.
Upon execution and delivery of this Agreement, Brentwood, the
Company and the Acquiror shall have entered into an agreement in
substantially the form attached hereto as Exhibit D. Brentwood
and the Company shall perform their obligations under such
agreement.
SECTION 8.20. Condition of Wilton Webster.
Within 30 days after the date of execution and delivery of this
Agreement, Wilton Webster shall submit to be examined by a
physician or physicians, selected by Acquiror, at a convenient
time and place in order to assess the insurability of Mr. Webster
and his condition generally. Mr. Webster agrees to submit to be
examined by a physician or physicians and otherwise to cooperate
in good faith in order to facilitate implementation of the
procedures set forth in Section 2.01(a)(iii).
ARTICLE IX
CLOSING CONDITIONS
SECTION 9.01. Conditions to Obligations of Acquiror and the
Company Under This Agreement.
The respective obligations of Acquiror and the Company to effect
the Merger and the other transactions contemplated herein shall
be subject to the satisfaction at or prior to the Effective Time
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) Effectiveness of the Registration Statement. The
Registration Statement shall have been declared effective by
the SEC under the Securities Act. No stop order suspending
the effectiveness of the Registration Statement shall have
been issued by the SEC and no proceedings for that purpose
shall have been initiated or, to the knowledge of Acquiror
or the Company, threatened by the SEC. Acquiror shall
have received all other federal or state securities permits
and other authorizations necessary to issue Acquiror Common
Stock in exchange for Company Common Stock and to consummate
the Merger.
(b) Shareholder Approval. This Agreement, the
Agreement of Merger and the Merger shall have been approved
and adopted by the requisite vote of the shareholders of the
Company.
(c) No Order. No Governmental Entity or federal or
state court of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any statute, rule,
regulation, executive order, decree, judgment, injunction or
other order (whether temporary, preliminary or permanent),
in any case which is in effect and which prevents or
prohibits consummation of the Merger or any other
transactions contemplated in this Agreement; provided,
however, that the parties shall use their best efforts to
cause any such decree, judgment, injunction or other order
to be vacated or lifted.
(d) HSR Act. The applicable waiting period, together
with any extensions thereof, under the HSR Act shall have
expired or been terminated.
(e) Other Approvals. All consents, waivers, approvals
and authorizations required to be obtained, and all filings
or notices required to be made, by Acquiror and the Company
prior to consummation of the transactions contemplated in
this Agreement (other than the filing of merger documents in
accordance with California Law) shall have been obtained
from and made with all required Governmental Entities.
(f) Escrow Agreement. The Escrow Agent shall execute
and deliver the Escrow Agreement with the other parties
thereto.
SECTION 9.02. Additional Conditions to Obligations of Acquiror.
The obligations of Acquiror to effect the Merger and the other
transactions contemplated herein are also subject to the
following conditions, any or all of which may be waived, in whole
or in part, to the extent permitted by applicable Law:
(a) Representations and Warranties. Each of the
representations and warranties of the Company, Company
Shareholders and Schedule 2 Shareholders contained in this
Agreement, without giving effect to any update to the
Company Disclosure Schedule under Section 8.06, shall be
true and correct as of the date of this Agreement and shall
be true and correct in all material respects (except that
where any statement in a representation or warranty
expressly includes a standard of materiality, such statement
shall be true and correct in all respects giving effect to
such standard) as of the Effective Time as though made as of
the Effective Time, except that those representations and
warranties which address matters only as of a particular
date shall remain true and correct in all material respects
(except that where any statement in a representation or
warranty expressly includes a standard of materiality, such
statement shall be true and correct in all respects giving
effect to such standard) as of such date. Acquiror shall
have received a certificate of the Chief Executive Officer
or Chief Financial Officer of the Company and from each
Company Shareholder and Schedule 2 Shareholder to that
effect.
(b) Agreements and Covenants. The Company, each
Company Shareholder and each Schedule 2 Shareholder shall
have performed or complied in all material respects with all
agreements and covenants required by this Agreement to be
performed or complied with by them on or prior to the
Effective Time. Acquiror shall have received a certificate
of the Chief Executive Officer or Chief Financial Officer of
the Company, each Company Shareholder and each Schedule 2
Shareholder to that effect.
(c) Consents Under Agreements. The Company shall have
obtained the consent or approval of each person whose
consent or approval shall be required in connection with the
Merger under all loan or credit arrangements, notes,
mortgages, indentures, leases or other agreements or
instruments to which it is a party.
(d) Opinion of Counsel. Acquiror shall have received
from independent counsel to the Company reasonably
satisfactory to Acquiror one or more opinions dated the
Effective Time, in form and substance reasonably
satisfactory to Acquiror, covering the matters set forth in
the form of opinion delivered to such counsel prior to
execution of this Agreement.
(e) Fractional Shares; Dissenters. The aggregate of
(i) the fractional share interests in Acquiror Common Stock
to be paid in cash pursuant to Section 2.02(e) of this
Agreement and (ii) the shares of Acquiror Common Stock that
otherwise would be issuable by virtue of the Merger with
respect to the shares of Company Common Stock outstanding on
the record date for the Shareholders' Meeting that will not
be converted into Acquiror Common Stock due to the
shareholders of the Company demanding an appraisal of the
fair value of such shares pursuant to Section 1300 et seq.
of California Law and Section 2.05 hereof, if applicable,
shall not be more than 2% of the maximum aggregate number of
shares of Acquiror Common Stock which could be issued as a
result of the Merger.
(f) No Challenge. There shall not be pending any
action, proceeding or investigation by any Governmental
Entity (i) challenging or seeking material damages in
connection with the Merger or the conversion of Company
Common Stock into Acquiror Common Stock pursuant to the
Merger or (ii) seeking to restrain or prohibit the
consummation of the Merger or otherwise limit the right of
Acquiror or its subsidiaries to own or operate all or any
portion of the business or assets of the Company.
(g) Accountant Letters. Acquiror shall have received
from the Company "cold comfort" letters of Deloitte & Touche
dated the date on which the Registration Statement shall
become effective and the Effective Time, respectively, and
addressed to Acquiror, in form and substance satisfactory to
Acquiror, and reasonably customary in scope and substance
for letters delivered by independent public accountants in
connection with registration statements similar to the
Registration Statement and transactions such as those
contemplated by this Agreement.
(h) Pooling Opinion. Acquiror shall have received the
opinion of Deloitte & Touche, dated as of the date on which
the Registration Statement shall become effective and the
Effective Time, to the effect that the Merger qualifies for
pooling-of-interests accounting treatment if consummated in
accordance with this Agreement.
(i) Affiliate Agreements. Acquiror shall have
received from each person listed in Section 3.28 of the
Company Disclosure Schedule and any other person who may be
deemed to have become an affiliate of the Company (under SEC
Rule 145 of the Securities Act or otherwise under applicable
SEC accounting releases with respect to pooling-of-interests
accounting treatment) after the date of this Agreement and
on or prior to the Effective Time a signed Affiliate
Agreement.
(j) Fairness Opinion. The opinion of Cowen & Company,
dated January 20, 1994 to the effect that the consideration
to be paid by Acquiror in the Merger pursuant to this
Agreement is fair from a financial point of view to the
holders of Acquiror Common Stock has not been modified or
withdrawn.
(k) Conversion of Company Preferred Stock. Brentwood
shall have converted the Company Preferred Stock into
Company Common Stock in accordance with the provisions of
the agreement among Brentwood, the Company and Acquiror
referred to in Section 8.19.
(l) Employment Agreements. Acquiror shall have
received executed copies of employment agreements in
substantially the forms attached hereto as Exhibits E-1 and
E-2 with the individuals listed in Section 8.10 of the
Company Disclosure Schedule.
(m) Company Material Adverse Effect. Since
November 30, 1993, there shall not have been a Company
Material Adverse Effect; it being understood that the death
or disability of Wilton Webster shall not be deemed a
Company Material Adverse Effect for purposes of this
subparagraph (m), subject to the implementation of Section
2.01(a)(iii) hereof.
(n) Additional Company Actions. The Company shall
have taken the actions with respect to certain oral and
written agreements called for by Section 8.03(d) of the
Company Disclosure Schedule.
SECTION 9.03. Additional Conditions to Obligations of the
Company.
The obligations of the Company to effect the Merger and the other
transactions contemplated in this Agreement are also subject to
the following conditions any or all of which may be waived, in
whole or in part, to the extent permitted by applicable Law:
(a) Representations and Warranties. Each of the
representations and warranties of Acquiror contained in this
Agreement, without giving effect to any update to the
Acquiror Disclosure Schedule under Section 8.06, shall be
true and correct in all material respects (except that where
any statement in a representation or warranty expressly
includes a statement of materiality, such statement shall be
true and correct in all respects giving effect to such
standard) as of the Effective Time, as though made on and as
of the Effective Time, except that those representations and
warranties which address matters only as of a particular
date shall remain true and correct in all material respects
(except that where any statement in a representation or
warranty expressly includes a standard of materiality, such
statement shall be true and correct in all respects giving
effect to such standard) as of such date. The Company shall
have received a certificate of the Chief Executive Officer
or Chief Financial Officer of Acquiror to that effect.
(b) Agreements and Covenants. Acquiror shall have
performed or complied in all material respects with all
agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the
Effective Time. The Company shall have received a
certificate of the Chief Executive Officer or Chief
Financial Officer of Acquiror to that effect.
(c) Opinion of Counsel. The Company shall have
received from the General Counsel to the Acquiror one or
more opinions dated the Effective Time, in form and
substance reasonably satisfactory to the Company, covering
the matters set forth in the form of opinion delivered to
such counsel prior to execution of this Agreement.
(d) No Challenge. There shall not be pending any
action, proceeding or investigations by any Governmental
Entity (i) challenging or seeking material damages in
connection with the Merger or the conversion of Company
Common Stock and Company Preferred Stock into Acquiror
Common Stock pursuant to the Merger or (ii) seeking to
restrain or prohibit the consummation of the Merger or
otherwise limit the right of Acquiror or its subsidiaries to
own or operate all or any portion of the businesses or
assets of the Company, which in either case is reasonably
likely to have an Acquiror Material Adverse Effect after the
Effective Time.
(e) Acquiror Material Adverse Effect. Since
September 30, 1993, there shall not have been an Acquiror
Material Adverse Effect; it being understood that the
matters described in the Acquiror Disclosure Schedule shall
not be deemed an Acquiror Material Adverse Effect for
purposes of this subparagraph (e).
(f) Quotation of Acquiror Common Stock on NASDAQ/NMS.
The Company shall have received from Acquiror or NASDAQ/NMS
evidence reasonably satisfactory to the Company that the
shares of Acquiror Common Stock to be issued to Company
Shareholders in the Merger shall be quoted on NASDAQ/NMS
immediately after the Effective Time.
(g) Tax Representations. The representations,
warranties and covenants of Acquiror and Acquiror Sub
contained in Sections 6.10 and 8.16 shall be true and
correct in all material respects at all times from the date
of this Agreement through the Effective Time.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
SECTION 10.01. Termination.
This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of this
Agreement, the Agreement of Merger and the Merger by the
shareholders of the Company:
(a) by mutual written consent of Acquiror and the
Company;
(b) (i) by Acquiror, if there has been a breach by
the Company, Company Shareholders or the Schedule 2
Shareholders of any of their representations, warranties,
covenants or agreements contained in this Agreement, or any
such representation and warranty shall have become untrue,
in any such case such that Section 9.02(a) or Section
9.02(b) will not be satisfied and such breach or condition
has not been promptly cured within 10 days following receipt
by the Company of written notice of such breach;
(ii) by the Company, if there has been a breach by
the Acquiror of any of its representations, warranties,
covenants or agreements contained in this Agreement, or any
such representation and warranty shall have become untrue,
in any such case such that Section 9.03(a) or Section
9.03(b) will not be satisfied and such breach or condition
has not been promptly cured within 10 days following receipt
by Acquiror of written notice of such breach;
(c) by either Acquiror or the Company if any decree,
permanent injunction, judgment, order or other action by any
court of competent jurisdiction or any Governmental Entity
preventing or prohibiting consummation of the Merger shall
have become final and nonappealable;
(d) by either Acquiror or the Company if the Merger
shall not have been consummated by May 15, 1994; provided,
however, that this Agreement may be extended not more than
60 days by either party by written notice to the other party
if the Merger shall not have been consummated as a direct
result of the other party having failed by such date to
receive all regulatory approvals or consents required to be
obtained by such party with respect to the Merger; provided
further, however, that the right to terminate this Agreement
under this Section 10.01(d) shall not be available to any
party whose willful failure to fulfill any obligation under
this Agreement has been the cause of, or resulted in, the
failure of the Effective Time to occur on or before such
date;
(e) by either Acquiror or the Company if the Agreement
shall fail to receive the requisite vote for approval and
adoption by the shareholders of the Company at the
Shareholders' Meeting;
(f) by Acquiror, if the Board of Directors of the
Company shall have recommended to the shareholders of the
Company any Bona Fide Proposal or resolved to do so under
the circumstances described in the proviso in
Section 7.02(g);
(g) by the Company, if the Board of Directors of the
Company shall have recommended to the shareholders of the
Company any Bona Fide Proposal or resolved to do so under
the circumstances described in the proviso in
Section 7.02(g); provided that any termination of this
Agreement by the Company pursuant to this Section 10.01(g)
shall not be effective until the close of business on the
second full business day after notice thereof to Acquiror;
and
(h) by either Acquiror or the Company if circumstances
arise which make it impossible, in the reasonable judgment
of either Acquiror or the Company, as the case may be, for a
condition to such party's obligation to effect the Merger
and the other transactions contemplated herein, as set forth
in Article IX, to be satisfied prior to May 15, 1994;
provided, however, that the right to terminate this
Agreement under this Section 10.01(h) shall not be available
to any party whose act or failure to act or whose breach of
any obligation under this Agreement is responsible for such
circumstances arising.
SECTION 10.02. Effect of Termination.
In the event of termination of this Agreement by either Acquiror
or the Company as provided in Section 10.01, this Agreement shall
forthwith become void and there shall be no liability or
obligation on the part of Acquiror, Acquiror Sub, the Company
Shareholders, the Schedule 2 Shareholders or the Company or any
of their respective officers or directors except (i) as set forth
in Sections 10.03 and 11.01 hereof, (ii) nothing herein shall
relieve any party from liability for any breach hereof,
(iii) each party shall be entitled to any remedies at law or in
equity for such breach and (iv) this Section 10.02 and
Sections 7.04(b), 10.03 and Article XI shall remain in full force
and effect and survive any termination of this Agreement.
SECTION 10.03. Expenses.
(a) Subject to subsection (b) of this Section 10.03,
whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement, the Agreement of
Merger and the transactions contemplated hereby and thereby shall
be paid by the party incurring such expense, except that expenses
incurred in connection with printing the documents distributed to
shareholders (including the Proxy Statement) and the Registration
Statement, registration and filing fees incurred in connection
with the Registration Statement and the listing of additional
shares pursuant to Section 8.09 and fees, costs and expenses
associated with compliance with applicable state securities laws
in connection with the Merger shall be shared equally by Acquiror
and the Company.
(b) If this Agreement is terminated pursuant to
Section 10.01(f) or (g), then the Company shall promptly pay to
Acquiror a termination fee of (i) $2 million in cash plus
(ii) 35% of the difference, if any, between the value of the
consideration offered to the Company in the Bona Fide Proposal,
in cash, and $85 million plus (iii) reasonable fees and expenses
incurred by Acquiror in connection with this Agreement and the
Agreement of Merger and the transactions contemplated hereby and
thereby, not to exceed $500,000.
(c) If this Agreement is terminated pursuant to
Section 10.01(e), then the Company shall promptly pay to Acquiror
a termination fee of $2 million plus reasonable fees and expenses
incurred by Acquiror in connection with this Agreement and the
Agreement of Merger and the transactions contemplated hereby and
thereby, not to exceed $500,000.
SECTION 10.04. Amendment.
This Agreement may be amended by the parties hereto by action
taken by or on behalf of their respective Boards of Directors at
any time prior to the Effective Time; provided, however, that,
after approval of the Merger by the shareholders of the Company,
no amendment may be made which would reduce the amount or change
the type of consideration into which each share of Company Common
Stock shall be converted pursuant to this Agreement upon
consummation of the Merger. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
SECTION 10.05. Waiver.
At any time prior to the Effective Time, any party hereto may (a)
extend the time for the performance of any of the obligations or
other acts of the other party hereto, (b) waive any inaccuracies
in the representations and warranties of the other party
contained herein or in any document delivered pursuant hereto and
(c) waive compliance by the other party with any of the
agreements or conditions contained herein. Any such extension or
waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be found thereby.
ARTICLE XI
GENERAL PROVISIONS
SECTION 11.01. Survival of Representations, Warranties and
Agreements After Effective Time.
The representations and warranties of the Company contained in
Article III hereof shall survive the Effective Time; it being
understood that the only remedy available for a breach by the
Company of such representations and warranties in such Article
III are the post-closing adjustment provisions contained in
Section 2.06 hereof and the indemnification provisions contained
in Section 8.17 hereof. The representations and warranties of
the Company Shareholders contained in Article IV and of the
Acquiror contained in Article VI shall survive the Effective Time
for a period of three years. The representations and warranties
of the Schedule 2 Shareholders contained in Article V shall
survive the Effective Time for a period of 18 months. Any claim
for Damages resulting from a breach of any representations and
warranties of the Company Shareholders contained in Article IV
and the Schedule 2 Shareholders contained in Article V shall be
subject to the limitations contained in this Section 11.01 and
Section 11.02 hereof.
SECTION 11.02. Limitation of Liability of Company Shareholders
and Schedule 2 Shareholders.
In the event of any claim for Damages made against Company
Shareholders or Schedule 2 Shareholders for breaches of
representations or warranties contained in Articles IV and V
hereunder, each Company Shareholder or Schedule 2 Shareholder, as
the case may be, shall have maximum liability for such breaches
in an amount ("Maximum Liability Amount") not to exceed the sum
of (i) the number of shares of Acquiror Common Stock received by
such Company Shareholder or Schedule 2 Shareholder at the Closing
plus (ii) the number of Adjustment Escrow Shares to which each
such Company Shareholder or Schedule 2 Shareholder is entitled
(after giving effect to claims made against Adjustment Escrow
Shares pursuant to Section 2.06 hereof), multiplied by the
Average Trading Price (provided, however, that for purposes of
this Section 11.02, if the Average Trading Price is greater than
$52.02, the Average Trading Price shall be deemed to be $52.02,
and if the Average Trading Price is less than $42.56, the Average
Trading Price shall be deemed to be $42.56); provided, further,
however, that in the case of a Schedule 2 Shareholder, the
maximum liability shall not exceed 95% of the Maximum Liability
Amount. In the event Acquiror seeks to recover amounts for
breaches of representations and warranties contained in Articles
III, IV or V, Acquiror shall first make claims against the
Adjustment Escrow Shares, to the extent such shares are available
and to the extent permitted under the terms of this Agreement and
the Escrow Agreement.
SECTION 11.03. Notices.
All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly
given or made as of the date delivered, mailed or transmitted,
and shall be effective upon receipt, if delivered personally,
mailed by registered or certified mail (postage prepaid, return
receipt requested) to the parties at the following addresses (or
at such other address for a party as shall be specified by like
changes of address) or sent by electronic transmission to the
telecopier number specified below:
(a) If to Acquiror or Acquiror Sub:
Cordis Corporation
14201 N.W. 60th Avenue
Miami Lakes, FL 33014
Telecopier No.: (305) 824-2440
Attention: Daniel Hall, Esq. - Vice President, Legal Affairs,
Secretary and General Counsel
With a copy (which shall not constitute notice) to:
Hogan & Hartson
Columbia Square
555 Thirteenth Street, N.W.
Washington, DC 20004
Telecopier No.: (202) 637-5910
Attention: Howard I. Flack, Esq.
(b) If to the Company:
Webster Laboratories, Inc.
5114 Commerce Drive
Baldwin Park, CA 91706
Telecopier No.: (818) 960-7463
Attention: Tony Brown, Ph.D.
With a copy (which shall not constitute notice) to:
Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
Telecopier No.: (415) 854-1121
Attention: Michael W. Hall
<PAGE>
SECTION 11.04. Certain Definitions.
For purposes of this Agreement, the term:
(a) "affiliate" means a person that directly or
indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the first
mentioned person;
(b) "beneficial owner" means with respect to any
shares of Company Common Stock or Acquiror Common Stock a person
who shall be deemed to be the beneficial owner of such shares (i)
which such person or any of its affiliates or associates
beneficially owns, directly or indirectly, (ii) which such person
or any of its affiliates or associates (as such term is defined
in Rule 12b-2 of the Exchange Act) has, directly or indirectly,
(A) the right to acquire (whether such right is exercisable
immediately or subject only to the passage of time), pursuant to
any agreement, arrangement or understanding or upon the exercise
of conversion rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any agreement,
arrangement or understanding, (iii) which are beneficially owned,
directly or indirectly, by any other persons with whom such
person or any of its affiliates or associates has any
agreement, arrangement or understanding for the purpose of
acquiring, holding voting or disposing of any such shares or (iv)
pursuant to Section 13(d) of the Exchange Act and any rules or
regulations promulgated thereunder;
(c) "best efforts" shall mean, as to a party hereto,
an undertaking by such party to perform or satisfy an obligation
or duty or otherwise act in a manner reasonably calculated to
obtain the intended result by action or expenditure not
disproportionate or unduly burdensome in the circumstances, which
means, among other things, that such party shall not be required
to (i) expend funds other than for payment of the reasonable and
customary costs and expenses of employees, counsel, consultants,
representatives or agents of such party in connection with the
performance or satisfaction of such obligation or duty or other
action or (ii) institute litigation or arbitration as a part of
its best efforts.
(d) "business day" shall mean any day other than a day
on which banks in the State of Florida are authorized or
obligated to be closed;
(e) "control" (including the terms "controlled by" and
"under common control with") means the possession, directly or
indirectly or as trustee or executor, of the power to direct or
cause the direction of the management or policies of a person,
whether through the ownership of stock or as trustee or executor,
by contract or credit arrangement or otherwise;
(f) "knowledge" will be deemed to be present (i) with
respect to the Company or Acquiror, when the matter in question
was brought to the attention of or, if due diligence had been
exercised, would have been brought to the attention of, any
officer or responsible employee of the Company or Acquiror, as
the case may be; and (ii) with respect to a Company Shareholder
or a Schedule 2 Shareholder, as the case may be, when the matter
was brought to the attention of, or should have been reasonably
known to, the Company Shareholder or Schedule 2 Shareholder, as
the case may be, in each case in light of, among other things,
the particular circumstances applicable to such Company
Shareholder or Schedule 2 Shareholder.
(g) "person" means an individual, corporation,
partnership, association, trust, unincorporated organization,
other entity or group (as defined in Section 13(d) of the
Exchange Act);
(h) "Significant Subsidiary" or "Significant
Subsidiaries" means any subsidiary of the Acquiror disclosed in
its most recent Annual Report on Form 10-K, and any other
subsidiary that would constitute a "Significant Subsidiary" of
such party within the meaning of Rule 1-02 of Regulation S-X of
the SEC; and
(i) "subsidiary" or "subsidiaries" of the Company,
Acquiror, the Surviving Corporation or any other person, means
any corporation, partnership, joint venture or other legal entity
of which the Company, Acquiror, the Surviving Corporation or such
other person, as the case may be (either alone or through or
together with any other subsidiary), owns, directly or
indirectly, 50% or more of the stock or other equity interests
the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of
such corporation or other legal entity.
SECTION 11.05. 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.
SECTION 11.06. 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 hereby 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 an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent
possible.
SECTION 11.07. Entire Agreement.
This Agreement (together with the Exhibits, the Company and
Acquiror Disclosure Schedules and the other documents delivered
pursuant hereto) and the Confidentiality Agreement constitute the
entire agreement of the parties and supersede all prior
agreements and undertakings, both written and oral, between the
parties, or any of them, with respect to the subject matter
hereof and, except as otherwise expressly provided herein, are
not intended to confer upon any other person any rights or
remedies hereunder.
SECTION 11.08. Assignment.
This Agreement shall not be assigned by operation of law or
otherwise.
SECTION 11.09. Parties in Interest.
This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement,
express or implied, other than the right to receive the
consideration payable in the Merger pursuant to Article II, is
intended to or shall confer upon any other person any right,
benefit or remedy of any nature whatsoever under or by reason of
this Agreement.
SECTION 11.10. Mutual Drafting.
Each party hereto has participated in the drafting of this
Agreement, which each party acknowledges is the result of
extensive negotiations between the parties.
SECTION 11.11. Governing Law.
This Agreement shall be governed by, and construed in accordance
with, the Laws of the State of Florida, regardless of the Laws
that might otherwise govern under applicable principles of
conflicts of law.
SECTION 11.12. Counterparts.
This Agreement may be executed and delivered in one or more
counterparts, and by the different parties hereto in separate
counterparts, each of which when executed and delivered shall be
deemed to be an original but all of which taken together shall
constitute one and the same agreement.
IN WITNESS WHEREOF, Acquiror, Acquiror Sub and the Company
have caused this Agreement to be executed and delivered, and each
Company Shareholder has executed and delivered this Agreement in
their name and on their behalf, as of the date first written
above.
CORDIS CORPORATION
By:/s/ Robert C. Strauss
Name: Robert C.Strauss
Title: President and
Chief Executive Officer
CORDIS ACQUISITION, INC.
By:/s/ Robert C. Strauss
Name: Robert C. Strauss
Title: President, Chief
Executive Officer and
Chief Financial
Officer
WEBSTER LABORATORIES, INC.
By:/s/ Tony R. Brown
Name: Tony R. Brown
Title: President and Chief
Executive Officer
COMPANY SHAREHOLDERS:
BRENTWOOD ASSOCIATES V, L.P.
By:Brentwood V Ventures, L.P.,
its General Partner
By:/s/ David W. Chonette
Title: General Partner
/s/ Wilton W. Webster, Jr.
Company Shareholder
/s/ Helen E. Webster
Company Shareholder
/s/ Tony R. Brown
Company Shareholder
/s/ Richard B. Webster
Company Shareholder
/s/ Alec J. Webster
Company Shareholder
/s/ James R. Tyberg
Company Shareholder
/s/ Theodore M. Joyce
Company Shareholder
Company Shareholder
<PAGE>
SCHEDULE 1
Shareholders
Tony R. Brown
Ted Joyce
James R. Tyberg
Alec J. Webster
Richard B. Webster
Wilton W. Webster, Jr.
Helen E. Webster
Brentwood Associates V, L.P.
<PAGE>
SCHEDULE 2.01
Proportionate
Shares of Interest in
Shareholders Company Common Company Common
Stock* Stock*/**
Tony R. Brown 266,667 0.045350
Ted Joyce 10,400 0.001769
James R. Tyberg 400,000 0.068024
Alec J. Webster 200,000 0.034012
Richard B. Webster 200,000 0.034012
Wilton W. Webster, Jr.
and Helen E. Webster, as
community property 3,600,000 0.612221
Yvette Hill 3,167 0.000539
Brentwood Associates V,L.P.* 1,200,000 0.204073
Total* 5,880,234
* After giving effect to conversion of Company Preferred Stock
into Company Common Stock
**These percentages will be amended if options are exercised
between signing and closing.
<PAGE>
SCHEDULE 2
Shareholders
Tony R. Brown
Alec J. Webster
Richard B. Webster
Wilton W. Webster, Jr.
Helen E. Webster
<PAGE>
EXHIBIT A
AGREEMENT OF MERGER
This Agreement of Merger (the "Agreement of Merger") is
entered into as of _____________ ___, 1994 by and between Cordis
Acquisition, Inc., a newly formed California corporation and a
wholly owned subsidiary of Acquiror (as defined below) ("Acquiror
Sub"), and Webster Laboratories, Inc., a California corporation
(the "Company" or, after the Effective Time (as defined below),
the "Surviving Corporation"). The Company and Acquiror Sub are
herein at times collectively referred to as the "Constituent
Corporations."
RECITALS
A. Cordis Corporation, a Florida corporation ("Acquiror"),
directly owns all of the outstanding shares of capital stock of
Acquiror Sub.
B. The Constituent Corporations, Acquiror and each of the
shareholders of the Company (the "Company Shareholders") have
entered into an Agreement and Plan of Reorganization dated as of
January ___, 1994 (the "Reorganization Agreement") providing for
certain representations, warranties and agreements.
C. The Boards of Directors of the Constituent Corporations
deem it advisable and in the best interests of the Constituent
Corporations and in the best interests of their respective
shareholders that Acquiror Sub be merged with and into the
Company (the "Merger") pursuant and subject to the terms and
conditions of the Reorganization Agreement and this Agreement of
Merger and in accordance with the provisions of Section 1100 et
seq. of the California Corporations Code.
D. The Merger is intended to qualify a a "reorganization"
under the provisions of Section 368(a)(1)(A) and Section
368(a)(2)(E) of the Internal Revenue Code of 1986, as amended
(the "Code"), and to be accounted for as a pooling of interests
pursuant to APB Opinion No. 16, Staff Accounting Releases 130 and
135 and Staff Accounting Bulletins No. 65 and No. 76.
NOW THEREFORE, the Constituent Corporations hereby agree as
follows:
ARTICLE I
Capitalization of the Constituent Corporations
1.01 Organization of the Company.
(a) The Company was incorporated under the laws of the
State of California on December 17, 1980.
(b) The Company has an authorized capitalization of
(i) 10,000,000 shares of common stock, without par value
("Company Common Stock"), of which 4,680,234 shares were issued
and outstanding as of the date hereof, and (ii) 4,000,000 shares
of serial preferred stock, without par value ("Company Preferred
Stock"), of which 1,200,000 shares were issued and outstanding as
of the date hereof. Prior to the Effective Time, all outstanding
shares of the Company Preferred Stock shall have been converted
into Company Common Stock as provided for an in accordance with
the Articles of Incorporation of the Company then in effect and
that certain agreement referred to in Section 8.19 of the
Reorganization Agreement.
1.02 Organization of Acquiror Sub.
(a) Acquiror Sub was incorporated under the laws of
the State of California on January 12, 1994.
(b) Acquiror Sub has an authorized capitalization of
1,000 shares of common stock, par value $0.01 per share
("Acquiror Sub Common Stock"), of which 1,000 shares are issued
and outstanding on the date hereof, all of which are owned by
Acquiror.
ARTICLE II
The Merger
2.01 Effective Time of the Merger. The Merger shall become
effective upon acceptance for filing by the California Secretary
of State (the "Secretary") of this Agreement of Merger and the
officers' certificates required to be filed with the Secretary of
State (the "Effective Time"), as contemplated under Section 1.02
of the Reorganization Agreement.
2.02 Effect of the Merger. At the Effective Time, the
effect of the Merger shall be as provided in the applicable
provisions of Sections 1100 et seq. of the Corporations Code of
the State of California ("California Law"). Without limiting the
generality of the foregoing, and subject thereto, at the
Effective Time, the Surviving Corporation shall possess, and
succeed without other transfer to, all the rights, privileges,
powers, franchises and property as well of a public as of a
private nature, and be subject to all the restrictions,
disabilities and duties, of each of Acquiror Sub and the Company;
and all and singular, the rights, privileges, powers and
franchises of each of Acquiror Sub and the Company, and all
property, real, personal and mixed, and all debts due to either
Acquiror Sub or the Company on whatever account, as well as for
share subscriptions as all other things in action or belonging to
each of such corporations shall be vested in the Surviving
Corporation; and all property, rights, privileges, powers and
franchises, and all and every other interest, shall be thereafter
as effectually the property of the Surviving Corporation as they
were of Acquiror Sub and the Company, and the title to any real
estate vested, by deed or otherwise, under the laws of the State
of California or of any other state, in Acquiror Sub or the
Company, shall not revert or be in any way impaired by reason of
the California General Corporation Law; but all rights of
creditors and all liens upon any property of Acquiror Sub or the
Company shall be preserved unimpaired, and all debts, liabilities
and duties of Acquiror Sub and the Company shall thenceforth
attach to the Surviving Corporation (and the Surviving
Corporation shall be subject thereto) and may be enforced against
it to the same extent as if said debts, liabilities and duties
had been incurred or contracted by it. Any action or proceeding
pending by or against Acquiror Sub may be prosecuted to judgment,
which shall bind the Surviving Corporation, or the Surviving
Corporation may be proceeded against or substituted in its place.
The Surviving Corporation shall continue its corporate existence
under the laws of the State of California, and its name shall be
Cordis-Webster, Inc. (or a variation thereof as reasonably
determined by Acquiror).
ARTICLE III
Articles of Incorporation, By-Laws and
Directors and Officers of the Surviving Corporation
3.01 Articles of Incorporation. The Articles of
Incorporation of the Company in effect immediately prior to the
Effective Time shall be the Articles of Incorporation of the
Surviving Corporation unless and until amended as provided by law
and such Articles of Incorporation, except to the extent that
such articles shall be deemed to be amended hereby to reflect the
change of the Company's corporate name to "Cordis-Webster, Inc."
3.02 By-Laws. The By-Laws of the Company in effect
immediately prior to the Effective Time of the Merger shall be
the By-Laws of the Surviving Corporation unless and until amended
or repealed as provided by law, the Articles of Incorporation of
the Surviving Corporation and such By-Laws.
3.03 Directors and Officers. The directors of the Company
immediately prior to the Effective Time shall tender their
resignations as of the Effective Time, and the directors of
Acquiror Sub immediately prior to the Effective Time shall be the
initial directors of the Surviving Corporation, each to hold
office in accordance with the Articles of Incorporation and By-
Laws of the Company, and the officers of the Company immediately
prior to the Effective Time shall be the initial officers of the
Surviving Corporation, in each case until their respective
successors are duly elected or appointed and qualified or until
their earlier death, resignation or removal.
ARTICLE IV
Manner And Basis Of Converting Securities
of the Constituent Corporations
4.01 Conversion of Securities in the Merger. At the
Effective Time, as provided in this Agreement of Merger, by
virtue of the Merger and without any action on the part of the
Acquiror Sub, the Company or the holders of any of the following
securities:
(a) Each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than
any shares of Company Common Stock to be canceled pursuant to
Section 4.01(b) or shares ("Dissenting Shares") held by any
Company shareholder who elects to exercise appraisal rights under
Sections 1300 et seq. of California Law) shall be converted,
subject to Section 4.02(e), into the right to receive _____
shares of common stock, par value $1.00 per share ("Acquiror
Common Stock") of Acquiror (the "Exchange Ratio"). All such
shares of Company Common Stock shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to
exist, and each certificate previously representing any such
shares shall thereafter represent the right to receive a
certificate representing the shares of Acquiror Common Stock into
which such Company Common Stock was converted in the Merger.
Certificates previously representing shares of Company Common
Stock shall be exchanged for certificates representing whole
shares of Acquiror Common Stock issued in consideration therefor
upon the surrender of such certificates in accordance with the
provisions of Section 4.02, without interest. No fractional
share of Acquiror Common Stock shall be issued, and, in lieu
thereof, a cash payment shall be made pursuant to Section 4.02(e)
hereof.
(b) Any shares of Company Common Stock or Company
Preferred Stock held in the treasury of the Company and any
shares of Company Common Stock or Company Preferred Stock owned
by Acquiror or any direct or indirect wholly owned subsidiary of
Acquiror or of the Company immediately prior to the Effective
Time shall be canceled and extinguished without any conversion
thereof and no payment shall be made with respect thereto.
(c) Each share of Acquiror Sub Common Stock issued and
outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one newly and validly issued,
fully paid and non-assessable share of common stock of the
Surviving Corporation.
4.02 Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time,
Acquiror shall deposit, or shall cause to be deposited, with a
bank or trust company designated by Acquiror (the "Exchange
Agent"), for the benefit of the holders of shares of Company
Common Stock, for exchange in accordance with this Article IV,
through the Exchange Agent, certificates representing the whole
shares of Acquiror Common Stock (such certificates for shares of
Acquiror Common Stock, together with any dividends or
distributions with respect thereto, being hereafter referred to
as the "Exchange Fund") issuable pursuant to Section 4.01
(excluding the Adjustment Escrow Shares (as defined in Section
2.06 of the Reorganization Agreement) which Acquiror shall
deliver to the Escrow Agent (as defined in Section 4.02(h))
pursuant to Section 2.06 of the Reorganization Agreement) in
exchange for outstanding shares of Company Common Stock and cash
in an amount sufficient to permit payment of the cash payable in
lieu of fractional shares pursuant to Section 4.02(e) hereof; it
being understood that all outstanding shares of Company Preferred
Stock shall have been converted to Company Common Stock prior to
the Closing provided the Merger occurs. The Exchange Agent
shall, pursuant to irrevocable instructions, deliver the Acquiror
Common Stock contemplated to be issued pursuant to Section 4.01
out of the Exchange Fund. Except as contemplated by Section
4.02(e) hereof, the Exchange Fund shall not be used for any other
purpose.
(b) Exchange Procedures. Promptly after the Effective
Time, Acquiror shall instruct the Exchange Agent to mail to each
holder of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding
shares of Company Common Stock (the "Certificates") (i) a letter
of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the
Exchange Agent and shall be in customary form) and (ii)
instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of
Acquiror Common Stock. Upon surrender of a Certificate for
cancellation to the Exchange Agent together with such letter of
transmittal, duly executed, and such other documents as may be
required pursuant to such instructions, the holder of such
Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Acquiror
Common Stock which such holder has the right to receive in
respect of the shares of Company Common Stock formerly
represented by such Certificates (after taking into account all
shares of Company Common Stock then held by such holder), less a
number of shares of Acquiror Common Stock constituting such
holder's proportionate interest of the shares held in escrow
pursuant to Section 4.02(h) hereof (based on such holder's
respective proportionate interest immediately following the
Effective Time in the Acquiror Common Stock into which the
outstanding shares of Company Common Stock have been converted,
pursuant to Section 4.01 hereof) as set forth in Schedule 4.01
together with cash in lieu of fractional shares of Acquiror
Common Stock to which such holder is entitled pursuant to
Section 4.02(e) and any dividends or other distributions to which
such holder is entitled pursuant to Section 4.02(c), and the
Certificates so surrendered shall forthwith be canceled. In
addition, the holder of such Certificate subsequently may receive
shares of Acquiror Common Stock and other property after the post-
closing adjustment described in Section 2.06 of the
Reorganization Agreement. In the event of a transfer of
ownership of shares of Company Common Stock which is not
registered in the transfer records of the Company, a certificate
representing the proper number of shares of Acquiror Common Stock
may be issued to a transferee if the Certificates representing
such shares of Company Common Stock are presented to the Exchange
Agent, accompanied by all documents required to evidence and
effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated
by this Section 4.02, each Certificate shall be deemed at any
time after the Effective Time to represent only the right to
receive upon such surrender the certificate representing shares
of Acquiror Common Stock, cash in lieu of any fractional shares
of Acquiror Common Stock to which such holder is entitled
pursuant to Section 4.02(e) and any dividends or other
distributions to which such holder is entitled pursuant to
Section 4.02(c).
(c) Distributions with Respect to Unexchanged Shares
of Acquiror Common Stock. No dividends or other distributions
declared or made after the Effective Time with respect to
Acquiror Common Stock with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of Acquiror Common Stock represented
thereby, and no cash payment in lieu of fractional shares shall
be paid to any such holder pursuant to Section 4.02(e), until the
holder of such Certificate shall surrender such Certificate.
Subject to the effect of escheat, tax or other applicable Laws
(as defined in Section 3.05(a) of the Reorganization Agreement),
following surrender of any such Certificate, there shall be paid
to the holder of the certificates representing whole shares of
Acquiror Common Stock issued in exchange therefor, without
interest, (i) promptly, the amount of any cash payable with
respect to a fractional share of Acquiror Common Stock to which
such holder is entitled pursuant to Section 4.02(e) and the
amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such
whole shares of Acquiror Common Stock, including Adjustment
Escrow Shares (as defined in Section 2.06(a) of the
Reorganization Agreement), subject to the provisions of Section
2.06 of the Reorganization Agreement, and (ii) at the appropriate
payment date, the amount of dividends or other distributions,
with a record date after the Effective Time but prior to
surrender and a payment date occurring after surrender, payable
with respect to such whole shares of Acquiror Common Stock,
including Adjustment Escrow Shares, subject to the provisions of
Section 2.06 of the Reorganization Agreement.
(d) No Further Rights in Company Common Stock. All
shares of Acquiror Common Stock issued upon conversion of the
shares of Company Common Stock in accordance with the terms
hereof (including any cash paid pursuant to Sections 4.02(c) or
(e)) shall be deemed to have been issued in full satisfaction of
all rights pertaining to such shares of Company Common Stock.
(e) No Fractional Shares. No fractional shares of
Acquiror Common Stock shall be issued, but in lieu thereof each
holder of shares of Company Common Stock who would otherwise be
entitled to receive a fraction of a share of Acquiror Common
Stock, after aggregating all shares of Acquiror Common Stock to
which such holder would be entitled to receive under
Section 4.01(a), shall receive an amount in cash equal to
$_______ multiplied by the fraction of a share of Acquiror Common
Stock to which such holder would otherwise be entitled. Such
payment in lieu of fractional shares shall be administered by the
Exchange Agent pursuant to the procedures set forth in Section
4.02(b).
(f) Termination of Exchange Fund. Any portion of the
Exchange Fund which remains undistributed to the holders of
Company Common Stock for one year after the Effective Time shall
be delivered to Acquiror, upon demand, and any holders of Company
Common Stock who have not theretofore complied with this Article
IV shall thereafter look only to Acquiror for the shares of
Acquiror Common Stock, any cash in lieu of fractional shares of
Acquiror Common Stock to which they are entitled pursuant to
Section 4.02(e) and any dividends or other distributions with
respect to Acquiror Common Stock to which they are entitled
pursuant to Section 4.02(c).
(g) No Liability. Neither Acquiror nor the Company
shall be liable to any holder of shares of Company Common Stock
for any such shares of Acquiror Common Stock (or dividends or
distributions with respect thereto) delivered to a public
official pursuant to any abandoned property, escheat or similar
law.
(h) Escrowed Shares. At the Effective Time, ten
percent of the shares of Acquiror Common Stock issuable pursuant
to Section 4.01 hereof to the holders of Company Common Stock
theretofore outstanding shall be deposited by Acquiror with the
escrow agent pursuant to the Escrow Agreement (the "Escrow
Agreement") to be entered into by the Company, Acquiror, Acquiror
Sub, the escrow agent thereunder (the "Escrow Agent") and the
representative of the Company Shareholders (the "Representative")
to provide for the post-closing adjustment of the number of
shares of Acquiror Common Stock issuable to the holders of
Company Common Stock to reflect certain indemnification
obligations of the holders of Company Common Stock to Indemnified
Persons, such terms and such obligations being defined and set
forth in the Reorganization Agreement, respectively. The
Acquiror, the Company, Acquiror Sub and the Representative shall
enter into the Escrow Agreement with the Escrow Agent at the
Closing. In the event the person initially appointed as the
Representative under Section 2.06(a) of the Reorganization
Agreement shall be unable or unwilling to execute and deliver the
Escrow Agreement as required hereunder, the Company Shareholders
shall appoint another person or entity for such purpose.
(i) Lost, Stolen or Destroyed Certificates. In the
event any certificates evidencing shares of Company Common Stock
shall have been lost, stolen or destroyed, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed
certificates, upon the making of an affidavit of that fact by the
holder thereof, such shares of Acquiror Common Stock and cash for
fractional shares, if any, as may be required pursuant to this
Article IV; provided, however, that Acquiror may, in its
reasonable discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or
destroyed certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made
against Acquiror, the Surviving Corporation, or the Exchange
Agent with respect to the certificates alleged to have been lost,
stolen or destroyed.
4.03 Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be
no further registration of transfers of shares of Company Common
Stock or Company Preferred Stock thereafter on the records of the
Company. From and after the Effective Time, the holders of
certificates representing shares of Company Common Stock or
Company Preferred Stock outstanding immediately prior to the
Effective Time shall cease to have any rights with respect to
such shares of Company Common Stock or Company Preferred Stock
except as otherwise provided herein or by law. On or after the
Effective Time, any Certificates presented to the Exchange Agent
or Acquiror for any reason shall be converted into shares of
Acquiror Common Stock, any cash in lieu of fractional shares of
Acquiror Common Stock to which the holders thereof are entitled
pursuant to Section 4.02(e) and any dividends or other
distributions to which the holders thereof are entitled pursuant
to Section 4.02(c).
4.04 Stock Options. Prior to the Effective Time, the
Company and Acquiror shall take such action as may be necessary
or appropriate for the Acquiror, at its option, to assume or to
issue a substitute option with respect to each outstanding
unexpired and unexercised option to purchase shares of Company
Common Stock (collectively, the "Company Options") under the
Company's 1992 Stock Plan (the "Company Stock Plan"), so that at
the Effective Time each Company Option will become or be replaced
by an option (an "Acquiror Option") to purchase a number of whole
shares of Acquiror Common Stock equal to the number of shares of
Company Common Stock that could have been purchased (assuming
full vesting) under the Company Option multiplied by the Exchange
Ratio (and eliminating any fractional share), at a price per
share of Acquiror Common Stock equal to the per-share option
exercise price specified in the Company Option divided by the
Exchange Ratio. Each substituted Acquiror Option shall otherwise
be subject to the same terms and conditions as apply to the
related Company Option. The date of grant of each substituted
Acquiror Option for purposes of such terms and conditions shall
be deemed to be the date on which the corresponding Company
Option was granted. As to each assumed Company Option, at the
Effective Time (i) all references to the Company in the stock
option agreements with respect to the Company Options being
assumed shall be deemed to refer to Acquiror; (ii) Acquiror shall
assume all of the Company's obligations with respect to the
related Company Option; and (iii) Acquiror shall issue to each
holder of a Company Option a document evidencing the foregoing
assumption by Acquiror. Nothing in this Section 4.04 shall
affect the schedule of vesting with respect to the Company
Options in accordance with the terms of the Company Stock Plan.
It is the purpose and intention of the parties that, subject to
applicable Law, the assumption of Company Options or the
substitution of Acquiror Options for Company Options shall meet
the requirements of Section 424(a) of the Code and that each
assumed Company Option or the substituted Acquiror Option shall
qualify immediately after the Effective Time as incentive stock
options as defined in Section 422 of the Code to the extent that
the related Company Option so qualified immediately before the
Effective Time and the foregoing provisions of this Section 4.04
shall be interpreted to further such purpose and intention. The
Company represents and warrants that the assumption of Company
Options or substitution of Acquiror Options therefor, as
contemplated by this Section 4.04, may be effected pursuant to
the terms of the Company Options and the Company Stock Plan
without the consent of any holder of a Company Option and without
liability to any such holder.
4.05 Dissenting Shareholders. Subject to the terms and
conditions hereof, at and after the Effective Time, any holder of
shares of Company Common Stock and Company Preferred Stock who
complies with Sections 1300 et seq. of the California Law (a
"Dissenting Shareholder") shall be entitled to obtain payment
from the Surviving Corporation of the fair value of his shares of
Company Common Stock or Company Preferred Stock as determined
pursuant to Sections 1300 et seq. of the California Law.
ARTICLE V
Termination and Amendment
5.01 Termination. This Agreement of Merger may be
terminated at any time prior to the Effective Time, whether
before or after approval of this Agreement of Merger and the
Merger by the shareholders of the Company:
(a) by mutual written consent of Acquiror and the
Company;
(b) (i) by Acquiror, if there has been a breach by
the Company, Company Shareholders or the Schedule 2 Shareholders
(as defined in Article V of the Reorganization Agreement) of any
of their representations, warranties, covenants or agreements
contained in the Reorganization Agreement, or any such
representation and warranty shall have become untrue, in any such
case such that Section 9.02(a) or Section 9.02(b) of the
Reorganization Agreement will not be satisfied and such breach or
condition has not been promptly cured within 10 days following
receipt by the Company of written notice of such breach;
(ii) by the Company, if there has been a breach by
the Acquiror of any of its representations, warranties, covenants
or agreements contained in the Reorganization Agreement, or any
such representation and warranty shall have become untrue, in any
such case such that Section 9.03(a) or Section 9.03(b) of the
Reorganization Agreement will not be satisfied and such breach or
condition has not been promptly cured within 10 days following
receipt by Acquiror of written notice of such breach;
(c) by either Acquiror or the Company if any decree,
permanent injunction, judgment, order or other action by any
court of competent jurisdiction or any Governmental Entity (as
defined in Section 3.05(a) of the Reorganization Agreement)
preventing or prohibiting consummation of the Merger shall have
become final and nonappealable;
(d) by either Acquiror or the Company if the Merger
shall not have been consummated by May 15, 1994; provided,
however, that this Agreement of Merger may be extended not more
than 60 days by either party by written notice to the other party
if the Merger shall not have been consummated as a direct result
of the other party having failed by such date to receive all
regulatory approvals or consents required to be obtained by such
party with respect to the Merger; provided further, however, that
the right to terminate this Agreement of Merger under this
Section 5.01(d) shall not be available to any party whose willful
failure to fulfill any obligation under this Agreement of Merger
has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before such date; and
(e) by either Acquiror or the Company if circumstances
arise which make it impossible, in the reasonable judgment of
either Acquiror or the Company, as the case may be, for a
condition to such party's obligation to effect the Merger and the
other transactions contemplated in the Reorganization Agreement,
as set forth in Article IX of the Reorganization Agreement, to be
satisfied prior to May 15, 1994; provided, however, that the
right to terminate this Agreement under this Section 5.01(e)
shall not be available to any party whose act or failure to act
or whose breach of any obligation under this Agreement is
responsible for such circumstances arising.
5.02 Effect of Termination. In the event of termination of
this Agreement of Merger by either Acquiror or the Company as
provided in Section 5.01, this Agreement of Merger shall
forthwith become void and there shall be no liability or
obligation on the part of Acquiror, Acquiror Sub, the Company
Shareholders, the Schedule 2 Shareholders or the Company or any
of their respective officers or directors except (i) as set forth
in Sections 10.03 and 11.01 of the Reorganization Agreement,
(ii) nothing herein shall relieve any party from liability for
any breach hereof, (iii) each party shall be entitled to any
remedies at law or in equity for such breach and
(iv) Section 10.02 and Sections 7.04(b), 10.03 and Article XI of
the Reorganization Agreement shall remain in full force and
effect and survive any termination of this Agreement of Merger.
5.03 Amendment. This Agreement of Merger may be amended by
the parties hereto by action taken by or on behalf of their
respective Boards of Directors at any time prior to the Effective
Time; provided, however, that, after approval of the Merger by
the shareholders of the Company, no amendment may be made which
would reduce the amount or change the type of consideration into
which each share of Company Common Stock shall be converted
pursuant to this Agreement of Merger upon consummation of the
Merger. This Agreement of Merger may not be amended except by an
instrument in writing signed by the parties hereto.
5.04 Waiver. At any time prior to the Effective Time, any
party hereto may (a) extend the time for the performance of any
of the obligations or other acts of the other party hereto, (b)
waive any inaccuracies in the representations and warranties of
the other party contained herein or in any document delivered
pursuant hereto and (c) waive compliance by the other party with
any of the agreements or conditions contained herein. Any such
extension or waiver shall be valid if set forth in an instrument
in writing signed by the party or parties to be found thereby.
IN WITNESS WHEREOF, the parties have caused this Agreement
of Merger to be executed and delivered as of the date first
written above.
CORDIS ACQUISITION, INC.
By:_______________________________
Name:
Title:
WEBSTER LABORATORIES, INC.
By:_______________________________
Name:
Title:
<PAGE>
EXHIBIT B
ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("Escrow Agreement") is
entered into as of _______ __, 1994 by and among Cordis
Corporation, a Florida corporation ("Acquiror"), Cordis
Acquisition, Inc., a California corporation and wholly owned
subsidiary of Cordis ("Acquiror Sub"), Webster Laboratories,
Inc., a California corporation (the "Company"), ____________
(the "Escrow Agent"), and David W. Chonette, as representative
of and on behalf of the shareholders of the Company (the
"Representative") set forth on Schedule 1 hereto (the "Company
Shareholders").
WHEREAS, pursuant to the Agreement and Plan of
Reorganization dated as of _____________, 1994 (the
"Reorganization Agreement") by and among Acquiror, Acquiror
Sub, the Company and the Company Shareholders and the related
Agreement of Merger (the "Agreement of Merger") between
Acquiror Sub and the Company, Acquiror Sub is being merged
with and into the Company;
WHEREAS, the adoption and approval of the
Reorganization Agreement and the Agreement of Merger by the
holders of Company Common Stock and Company Preferred Stock
also constitutes their approval of the specific terms of the
Reorganization Agreement and the Agreement of Merger provided
therein (including this escrow), of the terms and provisions
of this Escrow Agreement, of the appointment of the Escrow
Agent, and of the appointment of the Representative to act on
behalf of the Company Shareholders;
WHEREAS, pursuant to the terms of the Reorganization
Agreement, the parties thereto have agreed, as a condition to
their respective obligations thereunder, to enter into this
Escrow Agreement;
WHEREAS, the Escrow Agent has agreed to act as
Escrow Agent hereunder, in accordance with the terms and
conditions hereinafter set forth; and
WHEREAS, capitalized terms used and not defined
herein shall have the meanings specified in the Reorganization
Agreement and Agreement of Merger;
NOW, THEREFORE, in consideration of the foregoing
and of the mutual covenants and agreements set forth herein,
the parties hereto hereby agree as follows:
1. Appointment of Escrow Agent; Compensation
Acquiror, the Company and the Representative hereby
mutually appoint and designate the Escrow Agent as escrow
agent to receive, hold and disburse the Shares (as defined in
Section 2 hereof), and the Escrow Agent hereby accepts such
appointment and designation. Acquiror shall pay all
reasonable fees and expenses of the Escrow Agent as set forth
in Schedule 2 hereto.
2. Escrow Deposit
At the Effective Time, Acquiror shall deliver to the
Escrow Agent certificates representing the Adjustment Escrow
Shares. In connection with any delivery of any Adjustment
Escrow Shares pursuant to this Escrow Agreement, all
Adjustment Property distributed with respect thereto shall be
delivered with such Adjustment Escrow Shares to the recipient
thereof. The Adjustment Escrow Shares together with any
Adjustment Property are sometimes collectively referred to
herein as the "Shares." The Shares shall be registered in the
name of the Escrow Agent as escrow agent hereunder. The
Escrow Agent shall hold the Shares for the accounts of the
Company Shareholders in accordance with each Company
Shareholder's respective interest in the Adjustment Escrow
Shares (as determined pursuant to Section 2.02(b) of the
Reorganization Agreement), and shall (to the extent legally
permissible) vote the Adjustment Escrow Shares and any other
shares of stock included in the Adjustment Property in
accordance with the written instructions of the Company
Shareholder for whose account such Adjustment Escrow Shares
and other stock are held. Any cash dividends and any taxable
stock dividends paid with respect to the Shares shall be paid
to the Company Shareholders in accordance with each Company
Shareholder's respective proportionate interest in the
Adjustment Escrow Shares.
3. Conditions of Escrow
The Escrow Agent shall hold the Shares for the
exclusive benefit of Acquiror, the Indemnified Persons and the
Company Shareholders, as provided in this Escrow Agreement,
the Reorganization Agreement and the Agreement of Merger, and
shall deliver the Shares to Acquiror, the Indemnified Persons
and/or the Company Shareholders only in accordance with the
following terms and conditions:
3(a) If an Indemnified Person is entitled to
payment of an Indemnification Amount, then such Indemnified
Person may provide written notice (an "Adjustment Notice") to
the Escrow Agent of the amount of such payment, the basis upon
which such payment is required to be made, and the number of
Adjustment Escrow Shares deliverable to such Indemnified
Person (calculated pursuant to Section 2.06(b) of the
Reorganization Agreement) with respect thereto. A copy of
such Adjustment Notice shall be personally delivered or
deposited in the mail in accordance with the provisions of
Section 8 hereof, addressed to the Representative, within
three business days after the delivery of such Adjustment
Notice to the Escrow Agent, and a certification of the latest
date on which such personal delivery or deposit in the mail
shall have occurred (the "Adjustment Notice Date") shall be
furnished by the Indemnified Person to the Escrow Agent.
(i) If the Representative does not deliver to the
Escrow Agent a notice contesting the number of
Adjustment Escrow Shares deliverable to the
Indemnified Person as specified in the
Adjustment Notice within 20 business days after
the Adjustment Notice Date, then the Escrow
Agent shall deliver to such Indemnified Person
the number of Adjustment Escrow Shares specified
in such notice (together with any Adjustment
Property distributed with respect thereto) on
the 16th business day after the Adjustment
Notice Date.
(ii) If the Representative delivers to the Escrow
Agent a notice contesting the delivery of all or
any portion of the Adjustment Escrow Shares to
the Indemnified Person as specified in the
Adjustment Notice within 20 business days after
the Adjustment Notice Date, then the Escrow
Agent shall deliver to the Indemnified Person
only the number of Adjustment Escrow Shares not
so contested (together with any Adjustment
Property distributed with respect thereto) on
the 21st business day after the Adjustment
Notice Date. Unless the Indemnified Person and
the Representative deliver a notice to the
Escrow Agent modifying the provisions of the
Adjustment Notice, the Adjustment Escrow Shares
(together with any Adjustment Property
distributed with respect thereto) contested and
not so distributed as provided in the preceding
sentence shall be distributed to the Indemnified
Person in accordance with the Adjustment Notice
on the 50th business day following the delivery
of the contesting notice to the Escrow Agent,
provided that the Escrow Agent shall have not
received an order of a court of competent
jurisdiction directing that such delivery not be
made by the Escrow Agent to the Indemnified
Person. If it is determined by a final non-
appealable order of a court of competent
jurisdiction that delivery of the Adjustment
Escrow Shares should not be made to the
Indemnified Person, the Indemnified Person shall
pay the costs incurred by the Representative in
obtaining such court order.
3(b) At any time prior to the close of
business on the Adjustment Date, Acquiror may provide written
notices ("Claim Notices") of the number of Adjustment Escrow
Shares that Acquiror shall have determined to be necessary to
provide for Damages actually suffered (after giving effect to
any insurance proceeds) pursuant to Section 8.17 of the
Reorganization Agreement ("Claim Shares"). As soon as
practicable after the Adjustment Date (and in any event within
90 days after the Adjustment Date), the Escrow Agent shall:
(i) Deliver to the respective Indemnified Persons
any Adjustment Escrow Shares to which any
Indemnified Person remains entitled to under
Section 3(a) above, together with any
Adjustment Property distributed with respect
thereto;
(ii) Set aside for the retention by it for
application in accordance with the terms of
Section 3(a) of this Escrow Agreement any Claim
Shares identified pursuant to this Section 3(b); and
(iii) Deliver any remaining Adjustment Escrow
Shares (together with any Adjustment Property
distributed with respect thereto) to the
Company Shareholders in accordance with
Section 2.06(a) of the Reorganization Agreement
based on each such Company Shareholder's
respective proportionate interest in the
Adjustment Escrow Shares (as determined
pursuant to Section 2.02(b) of the
Reorganization Agreement).
3(c) Notwithstanding the foregoing, in each
circumstance under any of the foregoing provisions in which
shares of Acquiror Common Stock are deliverable to Acquiror or
an Indemnified Person, the number of shares so deliverable
shall be rounded downward to the nearest whole number.
3(d) Notwithstanding the foregoing, in the
event that, under any of the foregoing provisions, the Escrow
Agent would be required to deliver fractional interests in
shares of Acquiror Common Stock to Company Shareholders,
Acquiror shall be entitled at its option to purchase from the
Escrow Agent such number of shares of Acquiror Common Stock
(or fractional interests therein) as shall be necessary to
eliminate such fractional interests, at a purchase price equal
to the Average Trading Price (provided, however, that for the
purposes of this Section 3(d), if the Average Trading Price is
greater than $_____, the Average Trading Price shall be deemed
to be $_____, and if the Average Trading Price is less than
$_____, the Average Trading Price shall be deemed to be
$_____). In such event, the Escrow Agent shall distribute to
the Company Shareholders who would otherwise have been
entitled to fractional interests in shares of Acquiror Common
Stock the cash equivalent of such fractional interests (based
on the purchase price calculated as described above).
4. Indemnification of Escrow Agent
4(a) The Escrow Agent may rely and shall be
protected in acting or refraining from acting upon any
certificate or affidavit furnished to it hereunder and
believed by it to be genuine and to have been signed or
presented by the proper party or parties.
4(b) The Escrow Agent shall not be liable for
any action taken by it in good faith and without negligence
and believed by it to be authorized or within the rights or
powers conferred upon it by this Escrow Agreement.
4(c) Acquiror hereby agrees to indemnify the
Escrow Agent for, and hold it harmless against, any loss,
liability or expense incurred without negligence or bad faith
on the part of the Escrow Agent arising out of or in
connection with its entering into this Escrow Agreement and
carrying out its duties hereunder, including costs and
expenses of defending itself from any claims of liability with
respect thereto.
4(d) The Escrow Agent (and any successor
Escrow Agent) may at any time resign as such by delivering the
Shares to any successor Escrow Agent jointly designated in
writing by Acquiror and the Representative or to any court of
competent jurisdiction, whereupon the Escrow Agent shall be
discharged of and from any and all further obligations arising
in connection with this Escrow Agreement. The resignation of
the Escrow Agent will take effect on the earlier of (i) the
appointment of a successor (including a court of competent
jurisdiction) or (ii) the day which is 30 days after the date
of delivery of its written notice of resignation to Acquiror
and the Representative. If at that time the Escrow Agent has
not received a designation of a successor Escrow Agent, the
Escrow Agent's sole responsibility after that time shall be to
safekeep the Shares until receipt of a designation of
successor Escrow Agent or a joint written disposition
instruction by Acquiror and the Representative or a final
order of a court of competent jurisdiction.
4(e) This Escrow Agreement expressly sets
forth all the duties of the Escrow Agent with respect to any
and all matters pertinent hereto. No implied duties or
obligations shall be read into this Escrow Agreement against
the Escrow Agent. The Escrow Agent shall not be bound by the
provisions of any agreement between Acquiror, the Company
and/or the Representative except this Escrow Agreement and,
solely for the purposes of defining the Escrow Agent's
responsibilities with respect to this Escrow Agreement, the
Reorganization Agreement and the Agreement of Merger.
5. Termination
This Escrow Agreement shall be terminated when the
Shares have been finally disbursed as provided in Section 3
hereof and may be terminated prior thereto by written
instruction signed by Acquiror and the Representative.
6. Waiver
The waiver by the Representative of a breach of this
Escrow Agreement by the Escrow Agent shall not constitute a
waiver of any right or remedy the Representative or the Company
Shareholders may have against Acquiror under the Reorganization
Agreement, the Agreement of Merger or hereunder. The waiver by
Acquiror of a breach of this Escrow Agreement by the Escrow Agent
shall not constitute a waiver of any right or remedy it may have
against the Representative or the Company Shareholders under the
Reorganization Agreement, the Agreement of Merger or hereunder.
No delay or failure on the part of any party hereto in exercising
any right, power, or privilege under this Escrow Agreement or
under any other agreement or instrument given or entered into in
connection with or pursuant to this Escrow Agreement shall impair
any such right, power, or privilege or be construed as a waiver
of any event of default hereunder or any acquiescence therein.
No single or partial exercise of any such right, power, or
privilege shall preclude the further exercise of such right,
power, or privilege, or the exercise of any other right, power,
or privilege. No waiver shall be valid against any party hereto
unless made in writing and signed by the party against whom
enforcement of such waiver is sought and then only to the extent
expressly specified therein.
7. Additional Actions and Documents
Each of the parties hereto hereby agrees to take or
cause to be taken such further actions, to execute, deliver
and file or cause to be executed, delivered and filed such
further documents and instruments, and to obtain such consents
as may be necessary or as may be reasonably requested in order
to fully effectuate the purposes, terms and conditions of this
Escrow Agreement.
8. Notices
All notices, demands, requests, or other
communications that may be required to be given, served or
sent by any party to any other party pursuant to this Escrow
Agreement shall be in writing and shall be mailed by first-
class, registered or certified mail, return receipt requested,
postage prepaid, or transmitted by hand-delivery, telegram,
telex or facsimile transmission addressed as follows:
8(a) if to Acquiror and/or Acquiror Sub:
Cordis Corporation
14201 N.W. 60th Avenue
Miami Lakes, Florida 33014
Telecopier No.: (305) 824-2440
Attention: Daniel G. Hall, Esq.
with a copy (which shall not constitute notice)
to:
Hogan & Hartson
Columbia Square
555 Thirteenth Street, N.W.
Washington, D.C. 20004-1109
Telecopier No.: (202) 637-5910
Attention: Howard I. Flack, Esq.
8(b) if to the Representative:
David W. Chonette
c/o Brentwood Associates
1920 Main Street, Suite 820
Irvine, CA 92714
Telecopier No.: (714) 251-1011
8(c) if to the Company:
Webster Laboratories, Inc.
5114 Commerce Drive
Baldwin Park, CA 91706
Telecopier No.: (818) 960-7463
Attention: Tony Brown, Ph.D.
with a copy (which shall not constitute notice)
to:
Venture Law Group
2800 Sand Hill Road
Menlo Park, CA 94025
Telecopier No.: (415) 854-1121
Attention: Michael W. Hall, Esq.
8(d) if to the Escrow Agent:
________________________
________________________
________________________
________________________
________________________
Each party may designate by notice in writing a new address to
which any notice, demand, request or communication may
thereafter be so given, served or sent. Each notice, demand,
request, or communication that shall be mailed, delivered or
transmitted in the manner described above shall be deemed sufficiently
given, served, sent and received for all purposes at such time
as it is delivered to the addressee (with the return receipt,
the delivery receipt or the affidavit of messenger being
deemed conclusive evidence of such delivery) or at such time
as delivery is refused by the addressee upon presentation.
9. Representative
9(a) David W. Chonette has been designated as
the initial Representative and in such capacity shall act as
representative and agent of each of the Company Shareholders
in connection with this Escrow Agreement. If such
Representative shall resign, become disabled or die, a
successor Representative (and, if necessary, further successor
Representatives), reasonably satisfactory to Acquiror, shall
be appointed by the Company Shareholders.
9(b) The Company Shareholders hereby jointly
and severally agree to indemnify each Representative, ratably
according to the respective number of shares of Acquiror
Common Stock to be received by each Company Shareholder from
the escrow (including the Representative), from and against
any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against any Representative
in any way relating to or arising out of this Escrow
Agreement, the Reorganization Agreement, the Agreement of
Merger or any other related documents or any action taken or
omitted to be taken by any Representative under this Escrow
Agreement, the Reorganization Agreement, the Agreement of
Merger or any other related documents; provided, however, that
no Company Shareholders shall be liable for any portion of
such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements if
the same results from the Representative's gross negligence or
willful misconduct.
9(c) The parties hereto hereby agree that the
terms of Section 9(b) above are solely for the purpose of
determining the rights and obligations of the Company
Shareholders and the Representative vis-a-vis each other, and
shall in no way impose any obligations on Acquiror other than
those explicitly set forth herein.
10. Binding Effect; Assignment
This Escrow Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns. This Escrow
Agreement shall not be assignable by any party without the
prior consent of each of the other parties hereto.
11. Entire Agreement; Amendment
This Escrow Agreement, the Reorganization Agreement
(together with the Exhibits, the Company and Acquiror
Disclosure Schedules and the other documents delivered
pursuant thereto) and the Agreement of Merger constitute the
entire agreement among the parties hereto with respect to the
subject matter hereof, and supersede all prior oral or written
agreements, commitments or understandings with respect to the
matters provided for herein. This Escrow Agreement shall not
be amended, altered or modified except by instrument in
writing duly executed by each of the parties hereto.
12. Headings
The headings of the Sections of this Escrow
Agreement are inserted for convenience of reference only and
do not form a part or affect the meaning hereof.
13. Governing Law
This Escrow Agreement, the rights and obligations of
the parties hereto, and any claims or disputes relating
thereto, shall be governed by and in accordance with the laws
of the State of Florida (but not including the choice-of-law
rules thereof).
14. Counterparts
This Escrow Agreement may be signed in two or more
counterparts, none of which need contain the signatures of all
of the parties hereto, each of which shall be deemed to be an
original, and all of which taken together shall constitute one
and the same instrument. It shall not be necessary in making
proof of this Escrow Agreement to produce or account for more
than the number of counterparts containing the respective
signatures on behalf of all the parties hereto.
IN WITNESS WHEREOF, each of the parties hereto has
executed and delivered this Escrow Agreement, or caused this
Escrow Agreement to be duly executed and delivered in its name
and on its behalf, as of the day and year first hereinabove
set forth.
CORDIS CORPORATION
By_________________________________
Name:
Title:
CORDIS ACQUISITION, INC.
By_________________________________
Name:
Title:
WEBSTER LABORATORIES, INC.
By_________________________________
Name:
Title:
[ESCROW AGENT]
By_________________________________
Name:
Title:
THE REPRESENTATIVE, ON
BEHALF OF THE SHAREHOLDERS
OF WEBSTER LABORATORIES, INC.
_____________________________ <PAGE>
SCHEDULE 1
<PAGE>
SCHEDULE 2
<PAGE>
EXHIBIT C
AFFILIATE AGREEMENT
THIS AFFILIATE AGREEMENT (the "Affiliate Agreement") is
entered into as of the ____ day of ____________, 199__ between
Cordis Corporation, a Florida corporation ("Acquiror"), and the
undersigned shareholder (the "Shareholder") of Webster
Laboratories, Inc., a California corporation (the "Company").
RECITALS
A. The Company, Acquiror, Cordis Acquisition, Inc., a
newly formed California corporation and a wholly-owned subsidiary
of Acquiror ("Acquiror Sub"), and each of the shareholders of the
Company (the "Company Stockholders") have entered into an
Agreement and Plan of Reorganization dated as of _____________,
1994 (the "Reorganization Agreement"), pursuant to which Acquiror
Sub will be merged with and into the Company (the "Merger"), and
the Company will become a wholly owned subsidiary of Acquiror.
B. Upon the consummation of the Merger and in connection
therewith, the undersigned Shareholder will become the owner of
shares of Common Stock of Acquiror (the "Acquiror Shares").
C. The Merger is intended to qualify as a "reorganization"
under the provisions of Section 368(a)(1)(A) and Section
368(a)(2)(E) of the Internal Revenue Code of 1986, as amended
(the "Code"), and to be accounted for as a pooling of interests
pursuant to APB Opinion No. 16, Accounting Series Releases No.
130 and No. 135 and Staff Accounting Bulletins No. 65 and No. 76.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements, provisions and covenants set forth in the
Reorganization Agreement and in this Affiliate Agreement, it is
hereby agreed as follows:
1. The undersigned Shareholder hereby agrees that:
(a) The undersigned Shareholder is/may be deemed to be
(but does not hereby admit to be) an "affiliate" of the Company
within the meaning of Rule 145 under the Securities Act of 1933,
as amended (the "Securities Act"), and Accounting Series Release
No. 130, as amended, of the Securities and Exchange Commission
(the "SEC") ("Release No. 130").
(b) The undersigned Shareholder will not sell,
exchange, transfer, pledge, dispose of or otherwise reduce the
undersigned Shareholder's risk relative to the Acquiror Shares or
any part thereof until such time after the Effective Time as
financial results covering at least thirty (30) days of the
combined operations of Acquiror and the Company after the
Effective Time have been, within the meaning of said Release No.
130, filed by Acquiror with the SEC or published by Acquiror in
an Annual Report on Form 10-K, a Quarterly Report on Form 10-Q, a
Current Report on Form 8-K, a quarterly earnings report, a press
release or other public issuance that includes combined sales and
income of the Company and Acquiror. Acquiror shall have sole
discretion to decide whether to make a special filing or
publication for such purpose but will comply with all applicable
requirements under the federal securities laws. The undersigned
will not, during the thirty (30) day period prior to the
Effective Time, sell, exchange, transfer, pledge, dispose of or
otherwise reduce the undersigned Shareholder's risk relative to
the Acquiror Shares or any part thereof.
(c) Subject to paragraph (b) of this Section 1, the
undersigned Shareholder agrees not to offer, sell, exchange,
transfer, pledge or otherwise dispose of any of the Acquiror
Shares unless at that time either:
(i) such transaction is permitted pursuant to the
provisions of Rule 145(d) under the Securities Act;
(ii) counsel representing the undersigned
Shareholder, satisfactory to Acquiror, shall have advised
Acquiror in a written opinion letter satisfactory to
Acquiror and Acquiror's counsel, and upon which Acquiror
and its counsel may rely, that no registration under the
Securities Act is required in connection with the proposed
sale, transfer or other disposition;
(iii) a registration statement under the
Securities Act covering the Acquiror Shares proposed to be
sold, transferred or otherwise disposed of, describing the
manner and terms of the proposed sale, transfer or other
disposition, and containing a current prospectus, is filed
with the SEC and made effective under the Securities Act;
or
(iv) an authorized representative of the SEC
shall have rendered written advice to the undersigned
Shareholder (sought by the undersigned Shareholder or
counsel to the undersigned Shareholder, with a copy thereof
and of all other related communications delivered to
Acquiror) to the effect that the SEC will take no action,
or that the staff of the SEC will not recommend that the
SEC take action, with respect to the proposed offer, sale,
exchange, transfer, pledge or other disposition if
consummated.
(d) All certificates representing the Acquiror Shares
deliverable to the undersigned Shareholder pursuant to the
Reorganization Agreement and in connection with the Merger and
any certificates subsequently issued with respect thereto or in
substitution therefor shall, unless one or more of the
alternative conditions set forth in the subparagraphs of
paragraph (c) of this Section 1 shall have occurred, bear a
legend substantially as follows:
"The shares represented by this certificate may
not be offered, sold, exchanged, transferred,
pledged or otherwise disposed of except in
accordance with the requirements of the Securities
Act of 1933, as amended, and the other conditions
specified in that certain Affiliate Agreement
dated as of ________ 1994 between Cordis
Corporation and _____________________, a copy of
which Affiliate Agreement may be inspected by the
holder of this certificate at the offices of
Cordis Corporation, 14201 N.W. 60th Avenue, Miami
Lakes FL 33014, or Cordis Corporation will
furnish, without charge, a copy thereof to the
holder of this certificate upon written request
therefor."
Acquiror, at its discretion, may cause stop transfer orders to be
placed with its transfer agent with respect to the certificates
for the Acquiror Shares but not as to the certificates for any
part of the Acquiror Shares as to which said legend is no longer
appropriate when one or more of the alternative conditions set
forth in the subparagraphs of paragraph (c) of this Section 1
shall have occurred.
(e) The undersigned Shareholder will observe and
comply with the Securities Act and the General Rules and
Regulations thereunder, as now in effect and as from time to time
amended and including those hereafter enacted or promulgated, in
connection with any offer, sale, exchange, transfer, pledge or
other disposition of the Acquiror Shares or any part thereof.
(f) The undersigned Shareholder undertakes and agrees
to indemnify and hold harmless Acquiror, the Company and each of
their respective current and future officers and directors and
each person, if any, who now or hereafter controls or may control
Acquiror or the Company within the meaning of the Securities Act
(an "Indemnified Person") from and against any and all claims,
demands, actions, causes of action, losses, costs, damages,
liabilities and expenses ("Claims") based upon, arising out of or
resulting from any breach or nonfulfillment of any undertaking,
covenant or agreement made by the undersigned Shareholder in
subparagraph (b), (c) or (e) of this Section 1, or caused by or
attributable to, directly or indirectly, the undersigned
Shareholder, or the undersigned Shareholder's agents or
employees, or representatives, brokers, dealers and/or
underwriters insofar as they are acting on behalf of and in
accordance with the instruction of or with the knowledge of the
undersigned Shareholder, in connection with or relating to any
offer, sale, pledge, transfer or other disposition of any of the
Acquiror Shares by or on behalf of the undersigned Shareholder,
which claim or claims result from any breach or nonfulfillment as
set forth above. The indemnification set forth herein shall be
in addition to any liability that the undersigned Shareholder may
otherwise have to the Indemnified Persons.
(g) Promptly after receiving definitive notice of any
Claim in respect of which an Indemnified Person may seek
indemnification under this Affiliate Agreement, such Indemnified
Person shall submit notice thereof to the undersigned
Shareholder. The omission by the Indemnified Person so to notify
the undersigned Shareholder of any such Claim shall not relieve
the undersigned Shareholder from any liability the undersigned
Shareholder may have hereunder except to the extent that (i) such
liability was caused or increased by such omission, or (ii) the
ability of the undersigned Shareholder to reduce or defend
against such liability was adversely affected by such omission.
The omission of the Indemnified Person so to notify the
undersigned Shareholder of any such Claim shall not relieve the
undersigned Shareholder from any liability the undersigned
Shareholder may have otherwise than hereunder. The Indemnified
Persons and the undersigned Shareholder shall cooperate with and
assist one another in the defense of any Claim and any action,
suit or proceeding arising in connection therewith.
2. Reports. From and after the Effective Time and for so
long as necessary in order to permit the undersigned Shareholder
to sell the Acquiror Shares pursuant to Rule 145 and, to the
extent applicable, Rule 144 under the Securities Act, Acquiror
will use its best efforts to file on a timely basis all reports
required to be filed by it pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, referred to in paragraph (c)(1)
of Rule 144 under the Securities Act (or, if applicable, Acquiror
will use its best efforts to make publicly available the
information regarding itself referred to in paragraph (c)(2) of
Rule 144), in order to permit the undersigned Shareholder to
sell, pursuant to the terms and conditions of Rule 145 and the
applicable provisions of Rule 144, the Acquiror Shares.
3. Waiver. No waiver by any party hereto of any condition
or of any breach of any provision of this Affiliate Agreement
shall be effective unless in writing.
4. Notices. All notices, requests, demands or other
communications that are required or may be given pursuant to the
terms of this Affiliate Agreement shall be in writing and shall
be deemed to have been duly given if delivered by hand or mailed
by registered or certified mail, postage prepaid, as follows:
(a) If to the Shareholder, at the address set forth
below the Shareholder's signature at the end hereof.
(b) If to Acquiror, the Company or the other
Indemnified Persons:
Cordis Corporation
14201 N.W. 60th Avenue
Miami Lakes, FL 33014
Telecopier No.: (305) 824-2440
Attention: Daniel Hall, Esq. - Vice President,
Legal Affairs, Secretary and General Counsel
With a copy (which shall not constitute notice)
to:
____________________
____________________
____________________
____________________
Attention: _________
or to such other address as any party hereto or any Indemnified
Person may designate for itself by notice given as herein
provided.
5. Counterparts. For the convenience of the parties
hereto, this Affiliate Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same document.
6. Successors and Assigns. This Affiliate Agreement shall
be enforceable by, and shall inure to the benefit of and be
binding upon, the parties hereto and their respective successors
and assigns. Moreover, this Affiliate Agreement shall be
enforceable by, and shall inure to the benefit of, the
Indemnified Persons and their respective successors and assigns.
As used herein, the term "successors and assigns" shall mean,
where the context so permits, heirs, executors, administrators,
trustees and successor trustees, and personal and other
representatives.
7. Governing Law. This Affiliate Agreement shall be
governed by and construed, interpreted and enforced in accordance
with the laws of the State of Florida (but not including the
choice-of-law rules thereof).
8. Effectiveness: Severability. This Affiliate Agreement
shall become effective at the Effective Time. If a court of
competent jurisdiction determines that any provision of this
Affiliate Agreement is unenforceable or enforceable only if
limited in time and/or scope, this Affiliate Agreement shall
continue in full force and effect with such provision stricken or
so limited.
9. Attorneys' Fees. In the event of any legal action or
proceeding to enforce or interpret the provisions hereof, the
prevailing party shall be entitled to reasonable attorneys' fees,
whether or not the proceeding results in a final judgment.
10. Effect of Headings. The section headings herein are
for convenience only and shall not affect the construction or
interpretation of this Affiliate Agreement.
11. Definitions. All capitalized terms used herein shall
have the meaning defined in the Reorganization Agreement, unless
otherwise defined herein.
IN WITNESS WHEREOF, the parties have caused this Affiliate
Agreement to be executed and delivered as of the date first above
written.
CORDIS CORPORATION SHAREHOLDER
By: _______________________ _______________________________
Name: (Signature)
Title:
_______________________________
(Print Name)
_______________________________
(Print Address)
_______________________________
(Print Address)
________________________________
(Print Telephone Number)
<PAGE>
EXHIBIT D
AGREEMENT
THIS AGREEMENT (the "Agreement") is made this ___ day of
___________, 1994, by and among Webster Laboratories, Inc., a
California corporation (the "Company"), Cordis Corporation, a
Florida corporation ("Acquiror"), and Brentwood Associates V,
L.P., a ___________________ ("Brentwood").
WHEREAS, the Company and Brentwood have entered into that
certain Series A Preferred Stock Purchase Agreement dated as of
July 17, 1992 (the "Purchase Agreement"), pursuant to which
Brentwood purchased 1,200,000 shares of the Series A Preferred
Stock of the Company (the "Company Preferred Stock").
WHEREAS, the Company's Articles of Incorporation provide for
the rights, preferences and privileges of the Company Preferred
Stock.
WHEREAS, the Company and Acquiror now propose to enter into
an Agreement and Plan of Reorganization (the "Reorganization
Agreement"), whereby a newly formed wholly-owned subsidiary of
Acquiror ("Acquiror Sub") will be merged with and into the
Company and whereby it presently is contemplated that, in
consideration thereof, each share of the then outstanding common
stock of the Company will be converted into the right to receive
a certain number of shares of the common stock of Acquiror
("Acquiror Common Stock"), as set forth in the Reorganization
Agreement based upon the Exchange Ratio (as defined in the
Reorganization Agreement) or the Recomputed Exchange Ratio (as
defined in the Reorganization Agreement), as the case may be
(such transaction hereinafter being referred to as the "Merger").
WHEREAS, the Merger is intended to (i) qualify as a tax-free
reorganization within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended, and (ii) be accounted for as a
pooling of interests pursuant to APB Opinion No. 16.
WHEREAS, the Reorganization Agreement calls for the parties
hereto to enter into this Agreement.
WHEREAS, the Reorganization Agreement and the Merger must be
submitted to the shareholders of the Company for approval.
NOW, THEREFORE, in view of the foregoing and in
consideration of the benefits to the Company, Brentwood and
Acquiror as a result of the Merger, the sufficiency of which
hereby is acknowledged, the parties hereto agree as follows:
A. Conversion of Company Preferred Stock. Effective after
the shareholders of the Company and the sole stockholder of
Acquiror Sub have approved the Reorganization Agreement, but
immediately prior to the closing of the Merger (and provided the
Merger occurs), Brentwood shall convert all of the Company
Preferred Stock into common stock of the Company in accordance
with the Company's Articles of Incorporation. As a result of
such conversion, the rights, preferences and privileges
(including, without limitation, the right to receive payment for
any dividend thereon and to have the Merger considered as a
liquidation of the Company) set forth in the Company's Articles
of Incorporation with respect to the Company Preferred Stock
shall be eliminated and shall be of no further force or effect,
and the Company Preferred Stock shall be canceled and retired,
all as set forth in the Company's Articles of Incorporation.
B. Affiliate Agreement. Prior to the Closing (as defined in
the Reorganization Agreement), Brentwood will execute and deliver
to Acquiror an Affiliate Agreement, substantially in the form
attached hereto as Exhibit A, as called for in Sections 3.28 and
9.02(i) of the Reorganization Agreement.
C. Termination of Certain Agreements. Effective as of the
Effective Time (as defined in the Reorganization Agreement), the
Company and Brentwood agree that the Purchase Agreement and the
Registration Rights Agreement (as defined in the Reorganization
Agreement) and all rights and obligations thereunder shall be
terminated and no longer of any force or effect.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed and
delivered this Agreement as of the day and year first set forth
above.
WEBSTER LABORATORIES, INC.
By:________________________________
Title:_____________________________
CORDIS CORPORATION
By:_________________________________
Title:______________________________
BRENTWOOD ASSOCIATES V, L.P.
By: Brentwood V Ventures, L.P.,
its General Partner
By:_______________________________
Title:____________________________
<PAGE>
EXHIBIT E-1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered
into as of this _______ day of ____________, 1994, by and among
Wilton W. Webster, Jr., residing at 7388 Crest Drive, Altadena,
California, 91001 ( the "Employee"), and Cordis Corporation, a
Florida corporation, having its principal place of business
located at 14201 N.W. 60th Avenue, Miami Lakes, Florida 33014
(the "Corporation"), and Cordis Webster, Inc., a California
corporation, having its principal place of business located at
5114 Commerce Drive, Baldwin Park, California 91706 (the
"Subsidiary").
W I T N E S S E T H:
WHEREAS, the Corporation is the sole owner of all of the
stock of the Subsidiary, and
WHEREAS, the Corporation and the Subsidiary desire to obtain
the services of the Employee as Vice President and Senior
Scientific Advisor of the Corporation and as Vice President
Research & Development and Chief Engineer of the Subsidiary, and
the Employee is willing to render such services to the
Corporation and the Subsidiary upon the terms and conditions
herein set forth.
NOW, THEREFORE, in consideration of the mutual promises set
forth herein and other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto agree
as follows:
1. SALARY, DUTIES AND BENEFITS.
1.1 Salary and Benefits.
The Corporation and the Subsidiary agree to employ the
Employee and the Employee agrees to accept employment by the
Corporation on a full-time basis as Vice President and Senior
Scientific Advisor of the Corporation and as Vice President
Research & Development and Chief Engineer of the Subsidiary at
an annual salary of $115,000, payable during the Term of
Employment (as defined in Section 2 hereof). Such salary shall
be payable in equal installments during each year of employment
pursuant to this Agreement in accordance with the payment
schedule of employees of the Subsidiary or such other pay period
established from time to time by the Corporation, pursuant to the
standard employment practices of the Corporation or the
Subsidiary, as the case may be, and shall be subject to deduction
for withholding, other applicable taxes and benefit
contributions. During the Term of Employment, the Employee shall
be governed by the Corporation and the Subsidiary's policies
applicable to other Employees of the Corporation and the
Subsidiary, as applicable, with respect to periodic reviews and
increases in salary and fringe benefits as hereinafter described,
provided for such employees. The Employee shall be entitled to
participate in all fringe benefit programs established for or on
behalf of employees of the Subsidiary and all fringe benefit
programs established by the Board of Directors for employees of
the Corporation similarly situated to the Employee, including any
pension, retirement, hospitalization, vacation, and sick leave,
medical or insurance plan or any other benefit policy, plan or
other practice that under applicable law constitutes a benefit of
employment to which employees of the Corporation, similarly
situated to Employee are generally entitled. The Employee's
participation in other benefits or incentive payments shall be at
the discretion of the Board of Directors of the Corporation or
Subsidiary, as applicable.
1.2 Duties.
The Employee shall perform duties which shall include, but
not be limited to, the following:
(i) Service as an advisor to the Board of Directors
and management of the Corporation with regard to the research,
development and engineering of medical devices and products;
(ii) Service as the senior engineering officer of the
Subsidiary, directing the research, development, new product
development and investigation and engineering of medical devices
and products of the Subsidiary;
(iii) Service in such additional capacities
appropriate to Employee's responsibilities and skills as shall be
designated by the Corporation. The Employee shall conduct
business in a manner that will reflect favorably on the
Corporation and the Subsidiary, their products and good names,
and avoid any deceptive, misleading or unethical practice or
practices that is, or might be, detrimental to the Corporation,
the Subsidiary or any of the products of the Corporation or
Subsidiary and he shall carry out the other terms and conditions
of this Agreement diligently and in good faith.
1.3 Extent of Service.
The Employee shall carry out his duties under the general
supervision of the President of the Corporation or his designee
and the President of the Subsidiary or his designee and the
Board of Directors of the Subsidiary. The Employee shall
devote his entire business time, attention and energies to the
business of the Company during the Term of Employment (as
defined in Section 2.1 below) with the Company. The foregoing,
however, shall not preclude the Employee from engaging in
appropriate civic, charitable or religious activities or from
devoting a reasonable amount of time to private investments or
from serving on the boards of directors of other entities, as
long as such activities and service do not interfere or conflict
with his responsiblities to the Company. The Corporation and
the Subsidiary reserve the right to change, from time to time,
the nature and scope of the Employee's duties and the place where
such duties shall be performed, but the Employee shall not be
required to be based outside of the United States.
1.4 Expenses.
The Employee shall be reimbursed periodically for
reasonable travel and other expenses, as approved from time to
time by the President of the Corporation or his designee, or the
Board of Directors of the Subsidiary which are incurred and
accounted for in accordance with the normal practices for
reimbursement of such expenses established by the Corporation or
the Subsidiary.
1.5 Vacation.
The Employee shall be entitled to vacation of three weeks
or the amount of vacation time allowable under his contract in
effect just prior to the execution of this Agreement, whichever
is greater during each year of his employment pursuant to this
Agreement, which vacation shall be in accordance with the
standard vacation policies of the Subsidiary and which shall be
taken at such time or times and for such periods as shall be
mutually agreed upon by the Employee, the Corporation and the
Subsidiary. Carryover of vacation shall be limited to one week
each year that may be taken the following year. The Employee
shall also be entitled to all public holidays observed by the
Subsidiary.
1.6 Travel.
The Employee shall undertake such travel as may be required
in the performance of his duties.
2. TERM OF EMPLOYMENT.
2.1 Term of Employment.
The "Term of Employment" as used herein during which the
Corporation and the Subsidiary will employ or continue to
employ the Employee in their businesses, and the Employee will
work or continue to work for the Corporation and the Subsidiary,
shall initially be a period of two years from the effective date
of this Agreement or any period shorter than two years marked by
the termination of the Employee pursuant to the terms hereof or
by mutual agreement. Subsequent to the initial two-year term,
the Term of Employment shall then continue from year-to-year
thereafter, unless and until such employment hereunder shall have
been terminated at the end of any such period or any such year,
upon one-month advance notice from one party to the others, or
unless and until such employment hereunder shall have been
otherwise terminated as hereinafter provided.
2.2 Termination.
2.2(a)
Notwithstanding any other provisions of this Agreement, the
employment of the Employee pursuant to this Agreement shall be
terminated immediately upon (i) the death of the Employee; (ii)
a determination by the Board of Directors or the President of the
Corporation or the Board of Directors of the Subsidiary as the
case may be, acting in good faith, but made in the sole
discretion of such Board or President, that the Employee (A) has
become physically or mentally incapacitated or unable to perform
his duties under this Agreement and that such incapacity or
inability has continued for three consecutive calendar months,
(B) has materially breached any of the terms of this Agreement,
(C) has willfully failed to perform his duties, (d) has committed
a willful act which constitutes gross misconduct, or (E) has
committed a violation of a federal or a state law or regulation
applicable to the business of the Company.
2.2(b)
The Employee, the Corporation or the Subsidiary may
terminate this Agreement at any time, without cause, by giving
not less than 30 days advance written notice to the other
parties.
2.2(c)
(A). If the Corporation or the Subsidiary terminates the
Employee's Term of Employment without cause, pursuant to
paragraph 2.2(b) above, the Employee shall be entitled to
receive severance pay in an amount equal to twelve months annual
salary at his annual salary level in effect at the time of such
termination; provided, however, that such payment shall be
reduced to the extent of any other compensation that the Employee
receives from a subsequent employer and the Corporation's or
Subsidiary's obligation to pay severance shall cease in the event
the Employee obtains comparable new employment prior to the end
of the twelve months. Such payment shall be in lieu of any
other severance or severance-type benefits to which the Employee
may be entitled under Company or Subsidiary benefit plans and
programs. Any severance payments to which the Employee is
entitled pursuant to this section 2.2(c) shall be paid
periodically, in accordance with the Subsidiary's normal payroll
schedule.
(B). In the event, however, that the Employee resigns his
employment with the Corporation or the Subsidiary or the
Employee's Term of Employment is terminated pursuant to any of
the provisions of Section 2.2(a) above, the Employee shall not be
entitled to any severance or other benefits except as may be
payable to the Employee under the Company's or Subsidiary's then
existing benefit plans or programs.
3. OTHER COMPENSATION.
The Employee shall be entitled to participate in, and
receive compensation from, any bonus compensation, incentive
compensation, stock option plans or any and all other executive
bonus compensation plans available to officers of the Corporation
or the Subsidiary. Participation in the plans, payment of any
bonus compensation or the grant of any stock options thereunder
to be in the sole discretion of the Board of Directors of the
Corporation or the Subsidiary, as applicable.
4. EMPLOYEE ACKNOWLEDGEMENTS
4.1 Confidential Information.
The Employee acknowledges (i) that the use, misappropriation
or disclosure of the Confidential Information (as defined in
Section 5.2(c)) would constitute a breach of trust and cause
irreparable injury to the Corporation and the Subsidiary, (ii)
that all such Confidential Information is the property of the
Corporation or the Subsidiary , as applicable, and (iii) that it
is essential to the protection of the business and goodwill of
the Corporation and the Subsidiary and to the maintenance of the
competitive position of the Corporation and the Subsidiary that
the Confidential Information be kept secret and that the
Confidential Information not be disclosed by the Employee to
others or used by the Employee for his own advantage or the
advantage of others. The Employee further acknowledges that the
Employee's agreement to the provisions of Article 5 and the
enforceability of such provisions against the Employee are an
essential element of this Agreement and that, absent
enforceability thereof, the Corporation and the Subsidiary would
not (i) employ or continue the employment of the Employee, or
(ii) permit the Employee access to or the use of Confidential
Information.
4.2 Competition.
The Employee further recognizes and acknowledges that it is
essential for the proper protection of the business of the
Corporation and the Subsidiary that the Employee be restrained
from competing against the Corporation or the Subsidiary during
the Term of Employment.
5. RESTRICTIVE COVENANTS.
5.1 Exclusive Arrangements.
5.1(a)
The Employee shall not at any time during the Term of
Employment engage in any business on behalf of any other
corporation or other business organizations or himself and shall
not directly or indirectly own, or own an interest in (except for
a less than 5% stock ownership in a publicly traded corporation),
manage, operate, join, control, be employed by, act as an agent
for or participate, either directly or indirectly, in the
ownership, management, operation or control of, or be connected
in any manner with, any business selling to or doing business
with the Corporation or the Subsidiary or any business which is
competitive with the business of the Corporation or the
Subsidiary.
5.1(b)
During the Term of Employment, the Employee shall not,
directly or indirectly, on his own behalf or on behalf of, or as
an employee or agent of, any other person or business, contact or
approach any person or business, wherever located, with a view to
selling or assisting others to sell products or services
competing with any products or services of the Corporation or the
Subsidiary, or sell or solicit orders for the sale of such
products or services.
5.2 Confidential Information.
5.2(a)
Unless authorized or instructed in writing by the
Corporation or the Subsidiary, the Employee shall not, during or
at any time after the Term of Employment, except as required in
the conduct of the Corporation or Subsidiary's business, disclose
to others, or use, or permit to be disclosed to others or use,
any of the Corporation or the Subsidiary's inventions,
discoveries, works, ideas, information, knowledge or data
(whether in oral, written, or machine-readable form) which the
Employee may develop or obtain during the course of, or in
connection with, the Employee's employment, including such
inventions, discoveries, works, ideas, information, knowledge, or
data relating to machines, equipment, products, systems,
software, research and/or development, designs, compositions,
formula, processes, manufacturing procedures or business methods,
whether or not developed by the Employee, by others in the
Corporation or the Subsidiary, or obtained by the Corporation or
the Subsidiary from third parties, and irrespective of whether
or not such inventions, discoveries, works, ideas, information,
knowledge or data have been identified by the Corporation or
Subsidiary as secret or confidential, unless and until, and then
to the extent and only to the extent that, such inventions,
discoveries, works, ideas, information, knowledge or data become
available to the public other than by the Employee's wrongful
act or omission.
5.2(b)
During the Term of Employment and thereafter the Employee
shall not, except as required in the conduct of the Corporation's
or Subsidiary's business, disclose to others, or use, any of the
information relating to present and prospective customers of the
Corporation or Subsidiary, business dealings with such customers,
prospective marketing, promotion, sales and advertising programs
and strategies, and agreements with representatives or
prospective representatives of the Corporation or the Subsidiary,
including but not limited to customers, customer lists, costs,
prices and earnings, whether or not such information is developed
by the Employee, by others in the Corporation or Subsidiary, or
obtained by the Corporation or Subsidiary from third parties, and
irrespective of whether or not such information has been
identified by the Corporation as secret or confidential, unless
and until, and then only to the extent that, such information
becomes available to the public or other than by the Employee's
wrongful act or omission.
5.2(c)
All inventions, discoveries, works, ideas, information,
knowledge, and data described or referred to in Section 5.2(a)
and 5.2(b) are referred to herein collectively as "Confidential
Information").
5.3 Assignment Of Proprietary Rights.
5.3(a)
The Employee agrees to disclose immediately to the
Corporation and the Subsidiary and hereby assigns to the
Corporation or the Subsidiary, at the discretion of the
Corporation, all proprietary rights including, but not limited
to, all patents, copyrights, trade secrets and trademarks, the
Employee might otherwise have, by operation of law or otherwise,
in all inventions, discoveries, works, ideas, information,
knowledge and data (i) related to the Employee's access to
Confidential Information; or (ii) made, developed, prepared,
created, discovered, conceived or first reduced to practice by
the Employee, solely or jointly with others, during the Term of
Employment (either during or outside of the Employee's working
hours and either on or off the Corporation or the Subsidiary's
premises), which inventions, discoveries, works, ideas,
information, knowledge or data are or were made, developed,
prepared, created, discovered or conceived either in the course
of such employment, or with the use of the Corporation's or the
Subsidiary's time, material, facilities or funds, or which relate
to, or are suggested by, any subject matter with which the
Employee's employment by the Corporation or the Subsidiary may
bring the Employee into contact, or which relate to any
investigations or obligations undertaken by the Corporation or
the Subsidiary.
5.3(b)
The Employee further agrees to execute and deliver any
additional documents, instruments, applications, oaths or other
writings necessary or desirable to further evidence the
assignment described in Section 5.3(a) ("Supporting Documents").
If the Employee fails or refuses to execute or deliver any
Supporting Documents, Employee hereby agrees, for himself and his
successors, assigns, donees, executors, administrators,
transferees and personal representatives, to the fullest extent
permitted by law, that the President of the Corporation shall be
appointed, and the same is hereby irrevocably appointed, the
Employee's attorney-in-fact with full authority to execute
Supporting Documents and perform all other acts necessary to
further evidence such assignment.
5.3(c)
The Employee further agrees, without further charge during
the Term of Employment, and after the termination or expiration
of the Term of Employment at the same base salary rate (excluding
any bonuses, deferred compensation or other benefits) as during
the last year of the Employee's employment (determined on an
hourly basis for this purpose), to assist the Corporation or the
Subsidiary, and to perform such further acts, including giving
testimony or furnishing evidence in the prosecution or defense of
appeals, interferences, suits and controversies relating to any
aforesaid inventions, discoveries, works, ideas, information,
knowledge or data as may be deemed necessary by the Corporation,
the Subsidiary or either of their nominees to effectuate the
vesting or perfecting in the Corporation or the Subsidiary or the
nominees of the Subsidiary or the Corporation of all right, title
and interest in and to the said inventions, discoveries, works,
ideas, information, knowledge or data described in Section
5.3(a).
5.3(d)
The Employee shall keep complete, accurate and authentic
accounts, notes, data and records of all inventions, made,
developed, prepared, created, discovered or conceived by the
Employee as described in this Section 5.3, in the manner and form
requested by the Corporation or the Subsidiary. Upon termination
or expiration of the Term of Employment, the Employee agrees to
return to the Corporation or the Subsidiary all records created
and maintained pursuant to this section and any and all documents
or materials constituting or, directly or indirectly, relating to
any Confidential Information.
6. REPRESENTATIONS AND WARRANTIES.
The Employee represents and warrants to the Corporation and
the Subsidiary that (i) he has been advised by the Corporation
that the execution and delivery by him of this Agreement at the
closing of the acquisition of the Subsidiary by the Corporation
is a material inducement to the Corporation to consummate the
acquisition as contemplated to preserve the importance of
Employee to the future operating and financial performance and
future prospects of the Corporation and the Subsidiary; (ii)
neither the execution and delivery of this Agreement, nor the
carrying out of any of the transactions contemplated hereby will
in any respect result in any violation of, or be in conflict
with, any term or provision of any agreement, document or
instrument to which the Employee is a party, or by which he is
bound; and (iii) he has furnished the Corporation and the
Subsidiary with copies of any such agreements, documents or
instruments to which the Employee is a party or by which he is
bound. The Employee agrees not to divulge to the Corporation or
the Subsidiary any information which would violate any such
agreement, document or instrument, nor to divulge to the
Corporation or the Subsidiary any trade secrets of prior
employers.
7. MISCELLANEOUS.
7.1 Additional Actions and Documents.
Each of the parties hereto hereby agrees to take or cause to
be taken such further actions, to execute, deliver and file or
cause to be executed, delivered and filed, such further
documents, and will obtain such consents, as may be necessary or
as may be reasonably requested in order to fully effectuate the
purposes, terms and conditions of this Agreement.
7.2 Assignment.
The Employee shall not assign his rights or obligations
under this Agreement, in whole or in part, whether by operation
of law or otherwise, without the prior written consent of the
Corporation and the Subsidiary, and any such assignment contrary
to the terms hereof shall be null and void and of no force and
effect.
7.3 Sale of Business
In the event that the Corporation sells or transfers to any
other party or entity which is not a subsidiary or affiliate of
the Corporation, all or a majority of the shares of common stock
of the Subsidiary, or sells or transfers to any other party or
entity which is not a subsidiary or affiliate of the Corporation,
all or substantially all of the assets of the Subsidiary,
Employee may terminate this Agreement.
7.4 Entire Agreement; Amendment.
This Agreement constitutes the entire agreement between the
parties hereto with respect to the transactions contemplated
herein, and supersedes all prior oral or written agreements,
commitments or understandings with respect to the matters
provided for herein. No amendment, modification or discharge of
this Agreement shall be valid or binding unless set forth in
writing and duly executed and delivered by the party against whom
enforcement of the amendment, modification, or discharge is
sought.
7.5 Waiver.
No delay or failure on the part of any party hereto in
exercising any right, power or privilege under this Agreement or
under any other documents furnished in connection with or
pursuant to this Agreement shall impair any such right, power or
privilege or be construed as a waiver of any default or any
acquiescence therein. No single or partial exercise of any such
right, power or privilege shall preclude the further exercise of
such right, power or privilege, or the exercise of any other
right, power or privilege. No waiver shall be valid against any
party hereto unless made in writing and signed by the party
against whom enforcement of such waiver is sought and then only
to the extent expressly specified therein.
7.6 Forum.
The Corporation, the Subsidiary and the Employee hereby
irrevocably submit to the exclusive jurisdiction of any Florida
State Court or Federal Court, in either case sitting in Dade
County, Florida, in any action or proceeding arising out of or
relating to this Agreement or the transactions contemplated
hereby, and each such party hereby irrevocably agrees that all
claims in respect of any such action or proceeding may be heard
and determined in such Florida State Court or Federal Court. The
Employee, the Corporation and the Subsidiary irrevocably consent
to the service of any and all process in any such actions or
proceeding by the mailing of copies of such process to such party
at the address specified pursuant to Section 9.7. The Employee,
the Corporation and the Subsidiary irrevocably confirm that
service of process out of such courts, in such manner, shall be
deemed due service upon each of them for the purposes of any such
action or proceeding. The Employee, the Corporation and the
Subsidiary hereby irrevocably waive (i) any objection each of
them may have to the laying of venue of any such action or
proceeding in any of such courts, or (ii) any claim that each of
them may have that any such action or proceeding has been brought
in an inconvenient forum. The Employee, the Corporation and the
Subsidiary irrevocably agree that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other
manner provided by law. Nothing in this Section shall affect the
right of any party hereto to serve legal process in any other
manner permitted by law. The Corporation, the Subsidiary and
the Employee further agree that any party hereto instituting
legal proceedings arising out of or relating to this Agreement
and, thereafter, not prevailing in such proceedings, shall pay
the costs and expenses of the party or parties against whom such
proceedings were brought, including reasonable attorney's fees.
7.7 Governing Law.
This Agreement, the rights and obligations of the parties
hereto, and any claims or disputes relating thereto, shall be
governed by and construed in accordance with the laws of the
State of Florida (excluding the choice of law rules thereof).
7.8 Notices.
All notices, demands, requests, or other communications that
may be or are required to be given, served, or sent by any party
to any other party pursuant to this Agreement shall be in writing
and shall be hand delivered, sent by overnight courier or mailed
by first-class, registered or certified mail, return receipt
requested, postage prepaid, or transmitted by telegram, telecopy
or telex, addressed as follows:
(i) If to the Corporation:
Cordis Corporation
14201 N.W. 60th Avenue
Miami Lakes, FL 33014
Attn: President
(ii) If to the Subsidiary:
Daniel G. Hall
14201 N.W. 60th Avenue
Miami Lakes, FL 33014
(iii) If to the Employee:
Wilton W. Webster, Jr.
7388 Crest Drive
Altadena, CA 91001
Each party may designate by notice in writing a new address to
which any notice, demand, request or communication may thereafter
be so given, served or sent. Each notice, demand, request, or
communication that shall be hand delivered, sent, mailed,
telecopied or telexed in the manner described above, or that
shall be delivered to a telegraph corporation, shall be deemed
sufficiently given, served, sent, received or delivered, for all
purposes, at such time as it is delivered to the addressee (with
the return receipt, the delivery receipt, or (with respect to a
telecopy or telex) the answerback being deemed conclusive, but
not exclusive, evidence of such delivery) or at such time as
delivery is refused by the addressee upon presentation.
7.9 Headings.
Article and Section headings contained in this Agreement are
inserted for convenience of reference only, shall not be deemed
to be a part of this Agreement for any purpose, and shall not in
any way define or affect the meaning, construction or scope of
any of the provisions hereof.
7.10 Execution of Counterparts.
To facilitate execution, this Agreement may be executed in
as many counterparts as may be required. It shall not be
necessary that the signatures of, or on behalf of, each party, or
that the signatures of all persons required to bind any party,
appear on each counterpart; but it shall be sufficient that the
signature of, or on behalf of, each party, or that the signatures
of the persons required to bind any party, appear on one or more
of the counterparts. All counterparts shall collectively
constitute a single agreement. It shall not be necessary in
making proof of this Agreement to produce or account for more
than a number of counterparts containing the respective
signatures of, or on behalf of, all of the parties hereto.
7.11 Limitation on Benefits.
The covenants, undertakings and agreements set forth in this
Agreement shall be solely for the benefit of, and shall be
enforceable only by, the parties hereto and their respective
successors, heirs, executors, administrators, legal
representatives and permitted assigns.
7.12 Binding Effect.
Subject to any provisions hereof restricting assignment,
this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors,
heirs, executors, administrators, legal representatives and
permitted assigns.
IN WITNESS WHEREOF, the Corporation and the Subsidiary have
caused this Agreement to be executed by their duly authorized
officers and the Employee has hereunto set his hand as of the
date first above written.
CORDIS CORPORATION
By:________________________________
Name:
Title:
CORDIS-WEBSTER, INC.
By:________________________________
Name:
Title:
_______________________________
Wilton W. Webster, Jr.
<PAGE>
EXHIBIT E-2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is entered
into as of this _______ day of ____________, 1994, by and among
Tony R. Brown, residing at 6605 Canyon Hill Road, Anaheim Hills,
California, 92807 ( the "Employee"), and Cordis Corporation, a
Florida corporation, having its principal place of business
located at 14201 N.W. 60th Avenue, Miami Lakes, Florida 33014
(the "Corporation"), and Cordis Webster, Inc., a California
corporation, having its principal place of business located at
5114 Commerce Drive, Baldwin Park, CA 91706 (the "Subsidiary").
W I T N E S S E T H:
WHEREAS, the Corporation is the sole owner of all of the
stock of the Subsidiary, and
WHEREAS, the Corporation and the Subsidiary desire to obtain
the services of the Employee as Vice President of the
Corporation and as President and Chief Executive Officer of the
Subsidiary, and the Employee is willing to render such services
to the Corporation and the Subsidiary upon the terms and
conditions herein set forth.
NOW, THEREFORE, in consideration of the mutual promises set
forth herein and other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto agree
as follows:
1. SALARY, DUTIES AND BENEFITS.
1.1 Salary and Benefits.
The Corporation and the Subsidiary agree to employ the
Employee and the Employee agrees to accept employment by the
Corporation on a full-time basis as Vice President of the
Corporation and President and Chief Executive Officer of the
Subsidiary at an annual salary of $160,000, payable during the
Term of Employment (as defined in Section 2 hereof). Such
salary shall be payable in equal installments during each year of
employment pursuant to this Agreement in accordance with the
payment schedule of employees of the Subsidiary or such other pay
period established from time to time by the Corporation, pursuant
to the standard employment practices of the Corporation or the
Subsidiary, as the case may be, and shall be subject to deduction
for withholding, other applicable taxes and benefit
contributions. During the Term of Employment, the Employee shall
be governed by the Corporation and the Subsidiary's policies
applicable to other Employees of the Corporation and the
Subsidiary, as applicable, with respect to periodic reviews and
increases in salary and fringe benefits as hereinafter described,
provided for such employees. The Employee shall be entitled to
participate in all fringe benefit programs established for or on
behalf of employees of the Subsidiary and all fringe benefit
programs established by the Board of Directors for employees of
the Corporation similarly situated to the Employee, including any
pension, retirement, hospitalization, vacation, and sick leave,
medical or insurance plan or any other benefit policy, plan or
other practice that under applicable law constitutes a benefit of
employment to which employees of the Corporation, similarly
situated to Employee are generally entitled. The Employee's
participation in other benefits or incentive payments shall be at
the discretion of the Board of Directors of the Corporation or
Subsidiary, as applicable.
1.2 Duties.
The Employee shall perform duties which shall include, but
not be limited to, the following:
(i) Management and direction of the operations of the
Subsidiary including management and direction of vice presidents
and other Corporate officers of the Subsidiary in the day-to-day
administration and operation of the Subsidiary business; and
(ii) Service in such additional capacities appropriate
to Employee's responsibilities and skills as shall be designated
by the Corporation. The Employee shall conduct business in a
manner that will reflect favorably on the Corporation and the
Subsidiary, their products and good names, and avoid any
deceptive, misleading or unethical practice or practices that is,
or might be, detrimental to the Corporation, the Subsidiary or
any of the products of the Corporation or Subsidiary and he shall
carry out the other terms and conditions of this Agreement
diligently and in good faith.
1.3 Extent of Service.
The Employee shall carry out his duties under the general
supervision of the President of the Corporation or his designee
and the Board of Directors of the Subsidiary. The Employee
shall devote his entire business time, attention and energies to
the business of the Corporation and the Subsidiary during the
Term of Employment (as defined in Section 2.1 below). The
foregoing, however, shall not preclude the Employee from engaging
in appropriate civic, charitable or religious activities or from
devoting a reasonable amount of time to private investments or
from serving on the boards of directors of other entities, as
long as such activities and service do not interfere or conflict
with his responsiblities to the Corporation or the Subsidiary.
The Corporation and the Subsidiary reserve the right to change,
from time to time, the nature and scope of the Employee's duties
and the place where such duties shall be performed, but the
Employee shall not be required to be based outside of the United
States.
1.4 Expenses.
The Employee shall be reimbursed periodically for
reasonable travel and other expenses, as approved from time to
time by the President of the Corporation or his designee, or the
Board of Directors of the Subsidiary which are incurred and
accounted for in accordance with the normal practices for
reimbursement of such expenses established by the Corporation or
the Subsidiary.
1.5 Vacation.
The Employee shall be entitled to vacation of 3 weeks or
the amount of vacation time allowable under his contract in
effect just prior to the execution of this Agreement, whichever
is greater) during each year of his employment pursuant to this
Agreement, which vacation shall be in accordance with the
standard vacation policies of the Subsidiary and which shall be
taken at such time or times and for such periods as shall be
mutually agreed upon by the Employee, the Corporation and the
Subsidiary. Carryover of vacation shall be limited to one week
each year that may be taken the following year. The Employee
shall also be entitled to all public holidays observed by the
Subsidiary.
1.6 Travel.
The Employee shall undertake such travel as may be required
in the performance of his duties.
2. TERM OF EMPLOYMENT.
2.1 Term of Employment.
The "Term of Employment" as used herein during which the
Corporation and the Subsidiary will employ or continue to
employ the Employee in their businesses, and the Employee will
work or continue to work for the Corporation and the Subsidiary,
shall initially be a period of two years from the effective date
of this Agreement or any period shorter than two years marked by
the termination of the Employee pursuant to the terms hereof or
by mutual agreement. Subsequent to the initial two-year term,
the Term of Employment shall then continue from year-to-year
thereafter, unless and until such employment hereunder shall have
been terminated at the end of any such period or any such year,
upon one-month advance notice from one party to the others, or
unless and until such employment hereunder shall have been
otherwise terminated as hereinafter provided.
2.2 Termination.
2.2(a)
Notwithstanding any other provisions of this Agreement, the
employment of the Employee pursuant to this Agreement shall be
terminated immediately upon (i) the death of the Employee; (ii)
a determination by the Board of Directors or the President of the
Corporation or the Board of Directors of the Subsidiary as the
case may be, acting in good faith, but made in the sole
discretion of such Board or President, that the Employee (A) has
become physically or mentally incapacitated or unable to perform
his duties under this Agreement and that such incapacity or
inability has continued for three consecutive calendar months,
(B) has materially breached any of the terms of this Agreement,
(C) has willfully failed to perform his duties, (D) has committed
a willful act which constitutes gross misconduct, or (E) has
committed a violation of a federal or a state law or regulation
applicable to the business of the Company.
2.2(b)
The Employee, the Corporation or the Subsidiary may
terminate this Agreement at any time, without cause, by giving
not less than 30 days advance written notice to the other
parties.
2.2(c)
(A). If the Corporation or the Subsidiary terminates the
Employee's Term of Employment without cause, pursuant to
paragraph 2.2(b) above, the Employee shall be entitled to
receive severance pay in an amount equal to twelve months annual
salary at his annual salary level in effect at the time of such
termination; provided, however, that such payment shall be
reduced to the extent of any other compensation that the Employee
receives from a subsequent employer and the Corporation's or
Subsidiary's obligation to pay severance shall cease in the event
the Employee obtains comparable new employment prior to the end
of the twelve months. Such payment shall be in lieu of any
other severance or severance-type benefits to which the Employee
may be entitled under Company or Subsidiary benefit plans and
programs. Any severance payments to which the Employee is
entitled pursuant to this section 2.2(c) shall be paid
periodically, in accordance with the Subsidiary's normal payroll
schedule.
(B). In the event, however, that the Employee resigns his
employment with the Corporation or the Subsidiary or the
Employee's Term of Employment is terminated pursuant to any of
the provisions of Section 2.2(a) above, the Employee shall not be
entitled to any severance or other benefits except as may be
payable to the Employee under the Company's or Subsidiary's then
existing benefit plans or programs.
3. OTHER COMPENSATION.
The Employee shall be entitled to participate in, and
receive compensation from, any bonus compensation, incentive
compensation, stock option plans or any and all other executive
bonus compensation plans available to officers of the Corporation
or the Subsidiary. Participation in the plans, payment of any
bonus compensation or the grant of any stock options thereunder
to be in the sole discretion of the Board of Directors of the
Corporation or the Subsidiary, as applicable.
4. EMPLOYEE ACKNOWLEDGEMENTS
4.1 Confidential Information.
The Employee acknowledges (i) that the use, misappropriation
or disclosure of the Confidential Information (as defined in
Section 5.2(c)) would constitute a breach of trust and cause
irreparable injury to the Corporation and the Subsidiary, (ii)
that all such Confidential Information is the property of the
Corporation or the Subsidiary , as applicable, and (iii) that it
is essential to the protection of the business and goodwill of
the Corporation and the Subsidiary and to the maintenance of the
competitive position of the Corporation and the Subsidiary that
the Confidential Information be kept secret and that the
Confidential Information not be disclosed by the Employee to
others or used by the Employee for his own advantage or the
advantage of others. The Employee further acknowledges that the
Employee's agreement to the provisions of Article 5 and the
enforceability of such provisions against the Employee are an
essential element of this Agreement and that, absent
enforceability thereof, the Corporation and the Subsidiary would
not (i) employ or continue the employment of the Employee, or
(ii) permit the Employee access to or the use of Confidential
Information.
4.2 Competition.
The Employee further recognizes and acknowledges that it is
essential for the proper protection of the business of the
Corporation and the Subsidiary that the Employee be restrained
from competing against the Corporation or the Subsidiary during
the Term of Employment.
5. RESTRICTIVE COVENANTS.
5.1 Exclusive Arrangements.
5.1(a)
The Employee shall not at any time during the Term of
Employment engage in any business on behalf of any other
corporation or other business organizations or himself and shall
not directly or indirectly own, or own an interest in (except for
a less than 5% stock ownership in a publicly traded corporation),
manage, operate, join, control, be employed by, act as an agent
for or participate, either directly or indirectly, in the
ownership, management, operation or control of, or be connected
in any manner with, any business selling to or doing business
with the Corporation or the Subsidiary or any business which is
competitive with the business of the Corporation or the
Subsidiary.
5.1(b)
During the Term of Employment, the Employee shall not,
directly or indirectly, on his own behalf or on behalf of, or as
an employee or agent of, any other person or business, contact or
approach any person or business, wherever located, with a view to
selling or assisting others to sell products or services
competing with any products or services of the Corporation or the
Subsidiary, or sell or solicit orders for the sale of such
products or services.
5.2 Confidential Information.
5.2(a)
Unless authorized or instructed in writing by the
Corporation or the Subsidiary, the Employee shall not, during or
at any time after the Term of Employment, except as required in
the conduct of the Corporation or Subsidiary's business, disclose
to others, or use, or permit to be disclosed to others or use,
any of the Corporation or the Subsidiary's inventions,
discoveries, works, ideas, information, knowledge or data
(whether in oral, written, or machine-readable form) which the
Employee may develop or obtain during the course of, or in
connection with, the Employee's employment, including such
inventions, discoveries, works, ideas, information, knowledge, or
data relating to machines, equipment, products, systems,
software, research and/or development, designs, compositions,
formulae, processes, manufacturing procedures or business
methods, whether or not developed by the Employee, by others in
the Corporation or the Subsidiary, or obtained by the Corporation
or the Subsidiary from third parties, and irrespective of
whether or not such inventions, discoveries, works, ideas,
information, knowledge or data have been identified by the
Corporation or Subsidiary as secret or confidential, unless and
until, and then to the extent and only to the extent that, such
inventions, discoveries, works, ideas, information, knowledge or
data become available to the public other than by the Employee's
wrongful act or omission.
5.2(b)
During the Term of Employment and thereafter the Employee
shall not, except as required in the conduct of the Corporation's
or Subsidiary's business, disclose to others, or use, any of the
information relating to present and prospective customers of the
Corporation or Subsidiary, business dealings with such customers,
prospective marketing, promotion, sales and advertising programs
and strategies, and agreements with representatives or
prospective representatives of the Corporation or the Subsidiary,
including but not limited to customers, customer lists, costs,
prices and earnings, whether or not such information is developed
by the Employee, by others in the Corporation or Subsidiary, or
obtained by the Corporation or Subsidiary from third parties, and
irrespective of whether or not such information has been
identified by the Corporation as secret or confidential, unless
and until, and then only to the extent that, such information
becomes available to the public or other than by the Employee's
wrongful act or omission.
5.2(c)
All inventions, discoveries, works, ideas, information,
knowledge, and data described or referred to in Section 5.2(a)
and 5.2(b) are referred to herein collectively as "Confidential
Information").
5.3 Assignment Of Proprietary Rights.
5.3(a)
The Employee agrees to disclose immediately to the
Corporation and the Subsidiary and hereby assigns to the
Corporation or the Subsidiary, at the discretion of the
Corporation, all proprietary rights including, but not limited
to, all patents, copyrights, trade secrets and trademarks, the
Employee might otherwise have, by operation of law or otherwise,
in all inventions, discoveries, works, ideas, information,
knowledge and data (i) related to the Employee's access to
Confidential Information; or (ii) made, developed, prepared,
created, discovered, conceived or first reduced to practice by
the Employee, solely or jointly with others, during the Term of
Employment (either during or outside of the Employee's working
hours and either on or off the Corporation or the Subsidiary's
premises), which inventions, discoveries, works, ideas,
information, knowledge or data are or were made, developed,
prepared, created, discovered or conceived either in the course
of such employment, or with the use of the Corporation's or the
Subsidiary's time, material, facilities or funds, or which relate
to, or are suggested by, any subject matter with which the
Employee's employment by the Corporation or the Subsidiary may
bring the Employee into contact, or which relate to any
investigations or obligations undertaken by the Corporation or
the Subsidiary.
5.3(b)
The Employee further agrees to execute and deliver any
additional documents, instruments, applications, oaths or other
writings necessary or desirable to further evidence the
assignment described in Section 5.3(a) ("Supporting Documents").
If the Employee fails or refuses to execute or deliver any
Supporting Documents, Employee hereby agrees, for himself and his
successors, assigns, donees, executors, administrators,
transferees and personal representatives, to the fullest extent
permitted by law, that the President of the Corporation shall be
appointed, and the same is hereby irrevocably appointed, the
Employee's attorney-in-fact with full authority to execute
Supporting Documents and perform all other acts necessary to
further evidence such assignment.
5.3(c)
The Employee further agrees, without further charge during
the Term of Employment, and after the termination or expiration
of the Term of Employment at the same base salary rate (excluding
any bonuses, deferred compensation or other benefits) as during
the last year of the Employee's employment (determined on an
hourly basis for this purpose), to assist the Corporation or the
Subsidiary, and to perform such further acts, including giving
testimony or furnishing evidence in the prosecution or defense of
appeals, interferences, suits and controversies relating to any
aforesaid inventions, discoveries, works, ideas, information,
knowledge or data as may be deemed necessary by the Corporation,
the Subsidiary or either of their nominees to effectuate the
vesting or perfecting in the Corporation or the Subsidiary or the
nominees of the Subsidiary or the Corporation of all right, title
and interest in and to the said inventions, discoveries, works,
ideas, information, knowledge or data described in Section
5.3(a).
5.3(d)
The Employee shall keep complete, accurate and authentic
accounts, notes, data and records of all inventions, made,
developed, prepared, created, discovered or conceived by the
Employee as described in this Section 5.3, in the manner and form
requested by the Corporation or the Subsidiary. Upon termination
or expiration of the Term of Employment, the Employee agrees to
return to the Corporation or the Subsidiary all records created
and maintained pursuant to this section and any and all documents
or materials constituting or, directly or indirectly, relating to
any Confidential Information.
6. REPRESENTATIONS AND WARRANTIES.
The Employee represents and warrants to the Corporation and
the Subsidiary that (i) he has been advised by the Corporation
that the execution and delivery by him of this Agreement at the
closing of the acquisition of the Subsidiary by the Corporation
is a material inducement to the Corporation to consummate the
acquisition as contemplated to preserve the importance of
Employee to the future operating and financial performance and
future prospects of the Corporation and the Subsidiary; (ii)
neither the execution and delivery of this Agreement, nor the
carrying out of any of the transactions contemplated hereby will
in any respect result in any violation of, or be in conflict
with, any term or provision of any agreement, document or
instrument to which the Employee is a party, or by which he is
bound; and (iii) he has furnished the Corporation and the
Subsidiary with copies of any such agreements, documents or
instruments to which the Employee is a party or by which he is
bound. The Employee agrees not to divulge to the Corporation or
the Subsidiary any information which would violate any such
agreement, document or instrument, nor to divulge to the
Corporation or the Subsidiary any trade secrets of prior
employers.
7. MISCELLANEOUS.
7.1 Additional Actions and Documents.
Each of the parties hereto hereby agrees to take or cause to
be taken such further actions, to execute, deliver and file or
cause to be executed, delivered and filed, such further
documents, and will obtain such consents, as may be necessary or
as may be reasonably requested in order to fully effectuate the
purposes, terms and conditions of this Agreement.
7.2 Assignment.
The Employee shall not assign his rights or obligations
under this Agreement, in whole or in part, whether by operation
of law or otherwise, without the prior written consent of the
Corporation and the Subsidiary, and any such assignment contrary
to the terms hereof shall be null and void and of no force and
effect.
7.3 Sale of Business
In the event that the Corporation sells or transfers to
any other party or entity which is not a subsidiary or affiliate
of the Corporation, all or a majority of the shares of common
stock of the Subsidiary, or sells or transfers to any other party
or entity which is not a subsidiary or affiliate of the
Corporation, all or substantially all of the assets of the
Subsidiary, Employee may terminate this Agreement.
7.4 Entire Agreement; Amendment.
This Agreement constitutes the entire agreement between the
parties hereto with respect to the transactions contemplated
herein, and supersedes all prior oral or written
agreements, commitments or understandings with respect to the
matters provided for herein. No amendment, modification or
discharge of this Agreement shall be valid or binding unless set
forth in writing and duly executed and delivered by the party
against whom enforcement of the amendment, modification, or
discharge is sought.
7.5 Waiver.
No delay or failure on the part of any party hereto in
exercising any right, power or privilege under this Agreement or
under any other documents furnished in connection with or
pursuant to this Agreement shall impair any such right, power or
privilege or be construed as a waiver of any default or any
acquiescence therein. No single or partial exercise of any such
right, power or privilege shall preclude the further exercise of
such right, power or privilege, or the exercise of any other
right, power or privilege. No waiver shall be valid against any
party hereto unless made in writing and signed by the party
against whom enforcement of such waiver is sought and then only
to the extent expressly specified therein.
7.6 Forum.
The Corporation, the Subsidiary and the Employee hereby
irrevocably submit to the exclusive jurisdiction of any Florida
State Court or Federal Court, in either case sitting in Dade
County, Florida, in any action or proceeding arising out of or
relating to this Agreement or the transactions contemplated
hereby, and each such party hereby irrevocably agrees that all
claims in respect of any such action or proceeding may be heard
and determined in such Florida State Court or Federal Court. The
Employee, the Corporation and the Subsidiary irrevocably consent
to the service of any and all process in any such actions or
proceeding by the mailing of copies of such process to such party
at the address specified pursuant to Section 9.7. The Employee,
the Corporation and the Subsidiary irrevocably confirm that
service of process out of such courts, in such manner, shall be
deemed due service upon each of them for the purposes of any such
action or proceeding. The Employee, the Corporation and the
Subsidiary hereby irrevocably waive (i) any objection each of
them may have to the laying of venue of any such action or
proceeding in any of such courts, or (ii) any claim that each of
them may have that any such action or proceeding has been brought
in an inconvenient forum. The Employee, the Corporation and the
Subsidiary irrevocably agree that a final judgment in any such
action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other
manner provided by law. Nothing in this Section shall affect the
right of any party hereto to serve legal process in any other
manner permitted by law. The Corporation, the Subsidiary and
the Employee further agree that any party hereto instituting
legal proceedings arising out of or relating to this Agreement
and, thereafter, not prevailing in such proceedings, shall pay
the costs and expenses of the party or parties against whom such
proceedings were brought, including reasonable attorney's fees.
7.7 Governing Law.
This Agreement, the rights and obligations of the parties
hereto, and any claims or disputes relating thereto, shall be
governed by and construed in accordance with the laws of the
State of Florida (excluding the choice of law rules thereof).
7.8 Notices.
All notices, demands, requests, or other communications that
may be or are required to be given, served, or sent by any party
to any other party pursuant to this Agreement shall be in writing
and shall be hand delivered, sent by overnight courier or mailed
by first-class, registered or certified mail, return receipt
requested, postage prepaid, or transmitted by telegram, telecopy
or telex, addressed as follows:
(i) If to the Corporation:
Cordis Corporation
14201 N.W. 60th Avenue
Miami Lakes, FL 33014
Attn: President
(ii) If to the Subsidiary:
Daniel G. Hall
14201 N.W. 60th Avenue
Miami Lakes, FL 33014
(iii) If to the Employee:
Tony R. Brown, Ph.D.
6605 Canyon Hills Road
Anaheim Hills, CA 92807
Each party may designate by notice in writing a new address to
which any notice, demand, request or communication may thereafter
be so given, served or sent. Each notice, demand, request, or
communication that shall be hand delivered, sent, mailed,
telecopied or telexed in the manner described above, or that
shall be delivered to a telegraph corporation, shall be deemed
sufficiently given, served, sent, received or delivered, for all
purposes, at such time as it is delivered to the addressee (with
the return receipt, the delivery receipt, or (with respect to a
telecopy or telex) the answerback being deemed conclusive, but
not exclusive, evidence of such delivery) or at such time as
delivery is refused by the addressee upon presentation.
7.9 Headings.
Article and Section headings contained in this Agreement are
inserted for convenience of reference only, shall not be deemed
to be a part of this Agreement for any purpose, and shall not in
any way define or affect the meaning, construction or scope of
any of the provisions hereof.
7.10 Execution of Counterparts.
To facilitate execution, this Agreement may be executed in
as many counterparts as may be required. It shall not be
necessary that the signatures of, or on behalf of, each party, or
that the signatures of all persons required to bind any party,
appear on each counterpart; but it shall be sufficient that the
signature of, or on behalf of, each party, or that the signatures
of the persons required to bind any party, appear on one or more
of the counterparts. All counterparts shall collectively
constitute a single agreement. It shall not be necessary in
making proof of this Agreement to produce or account for more
than a number of counterparts containing the respective
signatures of, or on behalf of, all of the parties hereto.
7.11 Limitation on Benefits.
The covenants, undertakings and agreements set forth in this
Agreement shall be solely for the benefit of, and shall be
enforceable only by, the parties hereto and their respective
successors, heirs, executors, administrators, legal
representatives and permitted assigns.
7.12 Binding Effect.
Subject to any provisions hereof restricting assignment,
this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors,
heirs, executors, administrators, legal representatives and
permitted assigns.
IN WITNESS WHEREOF, the Corporation and the Subsidiary have
caused this Agreement to be executed by their duly authorized
officers and the Employee has hereunto set his hand as of the
date first above written.
CORDIS CORPORATION
By:______________________________________
Name:
Title:
CORDIS-WEBSTER, INC.
By:______________________________________
Name:
Title:
____________________________________
Tony R. Brown, Ph.D.
<PAGE>
Appendix B
CHAPTER 13. DISSENTERS' RIGHTS
(Sec.) 1300 Shareholder in short-form merger; Purchase at fair market
value; "Dissenting Shares"; "Dissenting shareholder". (a) If the approval
of the outstanding shares (Section 152) of a corporation is required for a
reorganization under subdivisions (a) and (b) or subdivision (e) of Section
1201, each shareholder of the corporation entitled to vote on the transaction
and each shareholder of a subsidiary corporation in a short-form merger may,
by complying with this chapter, require the corporation in which the shareholder
holds shares to purchase for cash at their fair market value the shares owned by
the shareholder which are dissenting shares as defined in subdivision (b). The
fair market value shall be determined as of the day before the first
announcement of the terms of the proposed reorganization or short-form merger,
excluding any appreciation or depreciation in consequence of the proposed
action, but adjusted for any stock split, reverse stock split, or share
dividend which becomes effective thereafter.
(b) As used in this chapter, "dissenting shares" means shares which come
within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or
short-form merger either (i) listed on any national securities exchange
certified by the Commissioner of Corporations under subdivision (o) of Section
25100 or (ii) listed on the list of OTC margin stocks issued by the Board of
Governors of the Federal Reserve System, and the notice of meeting of
shareholders to act upon the reorganization summarizes this section and
Sections 1301, 1302, 1303 and 1304; provided, however, that this provision
does not apply to any shares with respect to which there exists any restriction
on transfer imposed by the corporation or by any law or regulation;
and provided, further, that this provision does not apply to any class
of shares described in clause (i) or (ii) if demands for payment are filed
with respect to 5 percent or more of the outstanding shares of that class.
(2) Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (i) were not voted in
favor of the reorganization or, (ii) if described in clause (i) or (ii)
paragraph (1) (without regard to the provisos in that paragraph), were voted
against the reorganization, or which were held of record on the effective
date of a short-forms merger; provided, however, that clause (i) rather than
clause (ii) of this paragraph applies in any case where the approval required
by Section 1201 is sought by written consent rather than at a meeting.
(3) Which the dissenting shareholder has demanded that the
corporation purchase at their fair market value, in accordance with
Section 1301.
(4) Which the dissenting shareholder has submitted for endorsement,
in accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the
recordholder of dissenting shares and includes a transferee of record.
(Sec.) 1301 Notice to holder of dissenting shares of reorganization
approval; Demand for purchase of shares; Contents of demand. (a) If, in the
case of a reorganization, any shareholders of a corporation have a right under
Section 1300, subject to compliance with paragraphs (3) and (4) of
subdivision (b) thereof, to require the corporation to purchase their shares
for cash, such corporation shall mail to each such shareholder a notice of the
approval of the reorganization by its outstanding shares (Section 152) within 10
days after the date of such approval, accompanied by a copy of Sections 1300,
1302, 1303, 1304 and this section, a statement of the price determined by
the corporation to represent the fair market value of the dissenting shares,
and a brief description of the procedure to be followed if the shareholder
desires to exercise the shareholder's right under such sections. The statement
of price constitutes an offer by the corporation to purchase at the price stated
any dissenting shares as defined in subdivision (b) of Section 1300, unless
they lose their status as dissenting shares under Section 1309.
(b) Any shareholder who has a right to require the corporation to purchase
the shareholder's shares for cash under Section 1300, subject to compliance with
paragraphs (3) and (4) of subdivision (b) thereof, and who desires the
corporation to purchase such shares shall make written demand upon the
corporation for the purchase of such shares and payment to the shareholder in
cash of their fair market value. The demand is not effective for any purpose
unless it is received by the corporation or any transfer agent thereof(1) in the
case of shares described in clause (i) or (ii) or paragraph (1) of subdivision
(b) of Section 1300 (without regard to the provisos in that paragraph), not
later than the date of the shareholders' meeting to vote upon the
reorganization, or (2) in any other case within 30 days after the date on which
the notice of the approval by the outstanding shares pursuant to subdivision
(a) or the notice pursuant to subdivision (i) of Section 1110 was mailed to
the shareholder.
(c) The demand shall state the number and class of the shares held of
record by the shareholder which the shareholder demands that the corporation
purchase and shall contain a statement of what such shareholder claims to be the
fair market value of those shares as of the day before the announcement of the
proposed reorganization or short-form merger. The statement of fair market
value constitutes an offer by the shareholder to sell the shares at such price.
(Sec.) 1302 Stamping or endorsing dissenting shares. Within 30 days
after the date on which notice of the approval by the outstanding shares or the
notice pursuant to subdivision (i) of Section 1110 was mailed to the
shareholder, the shareholder shall submit to the corporation at its principal
office or at the office of any transfer agent thereof, (a) if the shares
are certificate securities, the shareholder's certificates representing any
shares which the shareholders demands that the corporation purchase, to be
stamped or endorsed with a statement that the shares are dissenting shares or
to be exchanged for certificates of appropriate denomination so stamped or
endorsed or (b) if the shares are uncertificated securities, written notice
of the number of shares which the shareholder demands that the corporation
purchase. Upon subsequent transfers of the dissenting shares on the
books of the corporation, the new certificates, initial transaction statement,
and other written statements issued therefor shall bear a like statement,
together with the name of the original dissenting holder of the shares.
(Sec.) 1303 Dissenting shareholder entitled to agreed price with interest
thereon; When price to be paid. (a) If the corporation and the shareholder
agree that the shares are dissenting shares and agree upon the price of the
shares, the dissenting shareholder is entitled to the agreed price with interest
thereon at the legal rate on judgments from the date of the agreement. Any
agreements fixing the fair market value of any dissenting shares as between the
corporation and the holders thereof shall be filed with the secretary of the
corporation.
(b) Subject to the provisions of Section 1306, payment of the fair market
value of dissenting shares shall be made within 30 days after the amount thereof
has been agreed or within 30 days after any statutory or contractual conditions
to the reorganization are satisfied, whichever is later, and in the case of
certificated securities, subject to surrender of the certificates thereof,
unless provided otherwise by agreement.
(Sec.) 1304 Action by dissenters to determine whether shares are
dissenting shares or fair market value of dissenting shares or both; Joinder of
shareholders; Consolidation of actions; Determination of issues; Appointment of
appraisers. (a) If the corporation denies that the shares are dissenting
shares, or the corporation and the shareholder fail to agree upon the fair
market value of the shares, then the shareholder demanding purchase of such
shares as dissenting shares or any interested corporation, within six months
after the date on which notice of the approval by the outstanding shares
(Section 152) or notice pursuant to subdivision (i) of Section 1110 was mailed
to the shareholder, but not thereafter, may file a complaint in the superior
court of the proper county praying to the court to determine whether the shares
are dissenting shares or the fair market value of the dissenting shares or
both or may intervene in any action pending on such a complaint.
(b) Two or more dissenting shareholders may join as plaintiffs or be
joined as defendants in any such action and two or more such actions may be
consolidated.
(c) On the trial of the action, the court shall determine the issues. If
the status of the shares as dissenting shares is in issue, the court shall first
determine that issue. If the fair market value of the dissenting shares is in
issue, the court shall determine, or shall appoint one or more impartial
appraisers to determine, the fair market value of the shares.
(Sec.) 1305 Duty and report of appraisers; Court's confirmation of
report; Determination of fair market value by court; Judgment, and Payment;
Appeal; Costs of action. (a) If the court appoints an appraiser or appraisers,
they shall proceed forthwith to determine the fair market value per share. With
in the time fixed by the court, the appraisers, or a majority of them, shall
make and rule a report in the office of the clerk of the court. Thereupon, on
the motion of any party, the report shall be submitted to the court and
considered on such evidence as the court considers relevant. If the court
finds the report reasonable, the court may confirm it.
(b) If a majority of the appraisers appointed fail to make and file a
report within 10 days from the date of their appointment or within such further
time as may be allowed by the court or the report is not confirmed by the court,
the court shall determine the fair market value of the dissenting shares.
(c) Subject to the provisions of Section 1306, judgment shall be rendered
against the corporation for payment of an amount equal to the fair market value
of each dissenting share multiplied by the number of dissenting shares which any
dissenting shareholder who is a party, or who has intervened, is entitled to
require the corporation to purchase, with interest thereon at the legal rate
from the date on which judgment was entered.
(d) Any such judgment shall be payable forthwith with respect to
uncertificated securities and, with respect to certificated securities, only
upon the endorsement and delivery to the corporation of the certificates for the
shares described in the judgment. Any party may appeal from the judgment.
(e) The costs of the action, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable, but, if the appraisal exceeds the price offered by
the corporation, the corporation shall pay the costs (including in the
discretion of the court attorneys' fees, fees of expert witnesses and
interest at the legal rate on judgments from the date of compliance with
Section 1300, 1301 and 1302 if the value awarded by the court for the shares
is more than 125 percent of the price offered by the corporation
under subdivision (a) of Section 1301).
(Sec.) 1306 Prevention of payment to holders of dissenting shares of fair
market value; Effect. To the extent that the provisions of Chapter 5 prevent the
payment to any holders of dissenting shares of their fair market value, they
shall become creditors of the corporation for the amount thereof together with
interest at the legal rate on judgments until the date of payment, but
subordinate to all other creditors in any liquidation proceeding, such debt to
be payable when permissible under the provisions of Chapter 5.
(Sec.) 1307 Disposition of dividends upon dissenting shares. Cash
dividends declared and paid by the corporation upon the dissenting shares after
the date of approval of the reorganization by the outstanding shares (Section
152) and prior to payment for the shares by the corporation shall be credited
against the total amount to be paid by the corporation therefor.
(Sec.) 1308 Rights and privileges of dissenting shares; Withdrawal of
demand for payment. Except as expressly limited in this chapter, holders of
dissenting shares continue to have all the rights and privileges incident to
their shares, until the fair market value of their shares is agreed upon or
determined. A dissenting shareholder may not withdraw a demand for payment
unless the corporation consents thereto.
(Sec.) 1309 When dissenting shares lose their status. Dissenting shares
lose their status as dissenting shares and the holders thereof cease to be
dissenting shareholders and cease to be entitled to require the corporation to
purchase their shares upon the happening of any of the following:
(a) The corporation abandons the reorganization. Upon the abandonment of
the reorganization, the corporation shall pay on demand to any dissenting
shareholder who has initiated proceedings in good faith under this chapter all
necessary expenses incurred in such proceedings and reasonable attorneys' fees.
(b) The shares are transferred prior to their submission for endorsement
in accordance with Section 1302 or are surrendered for conversion into shares of
another class in accordance with the articles.
(c) The dissenting shareholder and the corporation do not agree upon the
status of the shares as dissenting shares or upon the purchase price of the
shares, and neither files a complaint or intervenes in a pending action as
provided in Section 1304, within six months after the date on which notice of
the approval by the outstanding shares or notice pursuant to subdivision (i) of
Section 1110 was mailed to the shareholder.
(d) The dissenting shareholder, with the consent of the corporation,
withdraws the shareholder's demand for purchase of the dissenting shares.
(Sec.) 1310 Suspension of proceedings for compensation or valuation
pending litigation. If litigation is instituted to test the sufficiency or
regularity of the votes of the shareholders in authorizing a reorganization, any
proceedings under Section 1304 and 1305 shall be suspended until final
determination of such litigation.
(Sec.) 1311 Shares to which chapter inapplicable. This chapter, except
Section 1312, does not apply to classes shares whose terms and provisions
specifically set forth the amount to be paid in respect to such shares in the
event of a reorganization or merger.
(Sec.) 1312 Attack on validity of reorganization or short-form merger;
Rights of shareholders; Burden of proof. (a) No shareholder of a corporation
who has a right under this chapter to demand payment of cash for the shares held
by the shareholder shall have any right at law or in equity to attack the
validity of the reorganization or short-form merger, or to have the
reorganization or short-form merger set aside or rescinded, except in an action
to test whether the number of shares required to authorize or approve the
reorganization have been legally voted in favor thereof; but any holder of
shares of a class whose terms and provisions specifically set forth the amount
to be paid in respect to them in the event of a reorganization or short-form
merger is entitled to payment in accordance with those terms and provisions or,
if the principal terms of the reorganization are approved pursuant to
subdivision (b) of Section 1202, is entitled to payment in accordance with the
terms and provisions of the approved reorganization.
(b) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization of short-form merger, subdivision (a) shall not
apply to any shareholder of such party who has not demanded payment of cash for
such shareholder's shares pursuant to this chapter; but if the shareholder
institutes any action to attack the validity of the reorganization or short-form
merger or to have the reorganization or short-form merger set aside or
rescinded, the shareholder shall not thereafter have any right to demand payment
of cash for the shareholder's shares pursuant to this chapter. The court in any
action attacking the validity of the reorganization or short-form merger or to
have the reorganization or short-form merger set aside or rescinded shall not
restrain or enjoin the consummation of the transaction except upon 10 days'
prior notice to the corporation and upon a determination by the court that
clearly no other remedy will adequately protect the complaining shareholder or
the class of shareholders of which such shareholder is a member.
(c) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, in any action to attack the
validity of the reorganization or short-form merger or to have the
reorganization or short-form merger set aside or rescinded, (1) a party to a
reorganization or short-form merger which controls another party to the
reorganization or short-form merger shall have the burden of proving that the
transaction is just and reasonable as to the shareholders of the controlled
party, and (2) a person who controls two or more parties to a reorganization
shall have the burden of proving that the transaction is just and reasonable
as to the shareholders of any party so controlled.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Under the Florida Business Corporation Act ("FBCA"), a corporation
has the power to indemnify its officers, directors, employees and agents against
liability incurred in connection with a proceeding (other than derivative
actions), if they acted in good faith and in a manner they reasonably believed
to be in or not opposed to the best interests of the corporation and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
their conduct was unlawful. A similar standard is applicable in derivative
actions, except that indemnification may be made only for (i)expenses (including
attorneys' fees) and certain amounts paid in settlement, and (ii) in the event
the person seeking indemnification has been adjudicated liable, amounts deemed
proper, fair and reasonable by the appropriate court upon application thereto.
The FBCA provides that to the extent that such persons have been successful in
defense of any proceeding, they must be indemnified by the corporation against
expenses actually and reasonably incurred in connection therewith. The FBCA also
provides that, unless a corporation's articles of incorporation provide
otherwise, if a corporation does not so indemnify such persons, they may select,
and a court may order, indemnification under certain circumstances even if the
board of directors or stockholders of the corporation have determined that the
persons are not entitled to indemnification. The indemnification authorized by
the FBCA is not exclusive and the corporation may grant its officers, directors,
employees and agents additional indemnification.
Article VIII of Cordis' Bylaws contains a provision authorizing the
indemnification of Cordis' directors, officers, employees and agents against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by them in connection with any
action, suit or proceeding. This provision also states that such indemnification
shall in no way be exclusive of any other rights of indemnification to which any
of such persons would otherwise be entitled under any other bylaw, agreement,
vote of stockholders or disinterested directors or otherwise.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits:
The following exhibits are filed herewith or are incorporated by reference
to previously filed registration statements or reports of Cordis as indicated in
the "Incorporated by Reference to" column.
<TABLE>
<CAPTION>
Incorporated
by Reference to
Ex- Ex-
hibit Registration hibit
No. No. or Report No. Description
<S> <C> <C> <C>
2 -- -- Agreement and Plan of Reorganization by and among
Cordis Corporation ("Cordis"), Cordis Acquisition,
Inc., Webster Laboratories, Inc. ("Webster") and
Certain Shareholders of Webster dated as of
January 20, 1994.*
3(a)(i) Form 10-K for 3 Restated Articles of Incorporation of Cordis
year ended filed with the Florida Secretary of State on
June 30, 1983 February 14, 1978 and Articles of Amendment
thereto filed with the Florida Secretary of State
on November 1, 1978.
3(a)(ii) -- -- Articles of Amendment to Cordis' Restated Articles
of Incorporation filed with the Florida Secretary
of State on November 3, 1983.
3(b) Form 10-K for 3(a) By-Laws of Cordis.
year ended
June 30, 1983
4 -- -- **
5 -- -- Opinion of Daniel G. Hall, General Counsel
to Cordis.
8 -- -- Tax opinion of Venture Law Group, special counsel
to Webster.***
10(a) Form 10-K for 10(a) Revolving Credit and Reimbursement Agreement,
year ended dated as of December 30, 1991, between Cordis
June 30, 1992 as Borrower and NCNB National Bank of Florida
as Lender.
10(b) Form 10-K for 10(b) Lease Agreement dated as of March 1, 1979,
year ended between Cordis and Olympia & York Florida
June 30, 1985 Equity Corp.
10(b) Form 10-K for 10(b) Lease Agreement dated as of September 20, 1991
year ended between Cordis and Baxter Diagnostics, Inc.
June 30, 1991
10(d) Form 10-K for 10(d) Cordis Corporation Incentive Stock Option Plan
year ended of 1982.
June 30, 1983
10(d) Form 10-Q for 10(d) Amendment, dated April 13, 1987, to Cordis
quarter ended Corporation Incentive Stock Option Plan of 1982.
March 31, 1987
10(d) Form S-8 No. 10(d) Cordis Corporation Non-qualified Stock Option
33-23668 dated Plan.
August 30, 1988
10(d) Form S-8 No. 10(d) Cordis Corporation Non-qualified Stock Option
33-35304 dated Plan.
June 28, 1990
10(d) Form S-8 No. 10(d) Cordis Corporation Non-qualified Stock Option
33-63634 dated Plan.
June 1, 1993
10(d) Form 10-K for 10(d) Cordis Corporation Director Non-qualified Stock
year ended Option Plan.
June 30, 1992
10(d) Form S-8 No. 10(d) Cordis Corporation Director Non-qualified Stock
33-44953 dated Plan.
January 6, 1992
10(d) Form 10-K for 10(d) Cordis Corporation Supplemental Executive
year ended Retirement Plan
June 30, 1992
10(d) Form 10-K for 10(d) Cordis Corporation Salary Deferral Plan
year ended
June 30, 1992
10(d) Form 10-K for 10(d) Amended Cordis Corporation Director Retirement
year ended Policy
June 30, 1992
10(f) Form 10-K for 10(f) Cordis Corporation 1991 Performance Unit Award
year ended Plan
June 30, 1992
10(i) Form 10-Q for 10(i) Acquisition Agreement by and between TNC Medical
quarter ended Device and Cordis, dated as of April 14, 1987,
March 31, 1987 including amendments thereto dated April 14,
1987 and April 30, 1987, with respect to the sale
of Cordis' worldwide cardiac pacing operations.
10(j) Form 8-K dated 4 Rights Agreement, dated September 12, 1986
September 12, between Cordis and Manufacturers Hanover
1986 Trust Company.
10(j) Form 10-K for 10(j) Amendment No. 1, dated as of September 15, 1989
year ended to the Rights Agreement, dated September 12, 1986
June 30, 1989 between Cordis and Manufacturers Hanover
Trust Company.
10(j) Form 10-K for 10(j) Amendment No. 2, dated as of October 12, 1989 to
year ended the Rights Agreement, dated September 12, 1986
June 30, 1991 between Cordis and Manufacturers Hanover
Trust Company.
10(j) Form 10-K for 10(j) Amendment No. 3, dated as of November 15, 1989
year ended to the Rights Agreement, dated September 12, 1986
June 30, 1991 between Cordis and Manufacturers Hanover
Trust Company.
11 -- -- Computation of earnings per share of Cordis.
21 -- -- Subsidiaries of Cordis.
23(a) -- -- Consents of Deloitte & Touche, Independent
Auditors.
23(b) -- -- Consent of Daniel G. Hall (included in Exhibit
5 to the Registration Statement).
23(c) -- -- Consent of Venture Law Group.***
24 -- -- Power of Attorney (included immediately following
the signature page of this Registration Statement).
99 -- -- Webster form of shareholders' consent.
__________________________
</TABLE>
* Included as Appendix A to the Consent Statement/Prospectus.
** Included as Exhibits 3(a)(i), 3(a)(ii) and 3(b) to this Registration
Statement.
*** To be filed by Amendment.
(b) Financial Statement Schedules.
The following financial statement schedules are filed herewith:
Cordis' Schedules:
V - Property, Plant and Equipment
VI - Accumulated Depreciation and Amortization of
Property, Plant and Equipment
VIII - Valuation and Qualifying Accounts
IX - Short-Term Borrowings
X - Supplementary Income Statement Information
Webster's Schedules:
None.
Schedules other than those listed above are omitted because they are not
applicable or the required information is shown in the financial statements or
notes thereto.
Item 22. Undertakings.
(a) (1) The undersigned registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder through
the use of a prospectus which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning of Rule
145(c), the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
(2) The registrant undertakes that every prospectus (i) that is
filed pursuant to paragraph (a)(1) immediately preceding, or (ii) that purports
to meet the requirements of section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
a part of an amendment to the registration statement and will not be
used until such amendment is effective, and that, for purposes of determining
any liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(3) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(b) The undersigned registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Miami Lakes, Florida, on the 24th day
of February, 1994.
CORDIS CORPORATION
By: /s/ Robert C. Strauss
Robert C. Strauss, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
Date: February 24, 1994 /s/ Robert C. Strauss
Robert C. Strauss, Director,
President and Chief Executive Officer
(Principal Executive Officer)
Date: February 24, 1994 /s/ Alfred J. Novak
Alfred J. Novak, Vice President,
Treasurer and Chief Financial Officer
(Principal Financial Officer and Principal)
Accounting Officer)
Date: February 24, 1994 /s/ Robert Q. Marston
Robert Q. Marston, Chairman of the Board
Date: February 24, 1994 /s/ David R. Challoner, M.D.
David R. Challoner, M.D., Director
Date: February 24, 1994 /s/ Richard W. Foxen
Richard W. Foxen, Director
Date: February 24, 1994 /s/ Donald F. Malin, Jr.
Donald F. Malin, Jr., Director
Date: February 24, 1994 /s/ Jan L. de Ruyter van Steveninck
Jan L. de Ruyter van Steveninck, Director
Date: February 24, 1994 /s/ Patricia K. Woolf, Ph.D.
Patricia K. Woolf, Ph.D., Director
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Daniel
G. Hall and Alfred J. Novak and each of them, with full power of substitution
and resubstitution and each with full power to act without the other, his true
and lawful attorney-in-fact and agent, for him and in his name, place, and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the
same, with all exhibits thereto, and all other documents in connection
therewith, with the Securities and Exchange Commission or any state, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their, his or her substitutes
or substitute, may lawfully do or cause to be done by virtue hereof.
Date:
Robert C. Strauss, Director,
President and Chief Executive Officer
Date: February 24, 1994 /s/ Robert Q. Marston
Robert Q. Marston, Chairman of the Board
Date: February 24, 1994 /s/ David R. Challoner, M.D.
David R. Challoner, M.D., Director
Date: February 24, 1994 /s/ Richard W. Foxen
Richard W. Foxen, Director
Date: February 24, 1994 /s/ Donald F. Malin, Jr.
Donald F. Malin, Jr., Director
Date: February 24, 1994 /s/ Jan L. de Ruyter van Steveninck
Jan L. de Ruyter van Steveninck, Director
Date: February 24, 1994 /s/ Patricia K. Woolf, Ph.D.
Patricia K. Woolf, Ph.D., Director
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board Of Directors And Shareholders
Cordis Corporation
We have audited the consolidated financial statements of Cordis Corporation and
its subsidiaries as of June 30, 1993 and 1992, and for each of the three years
in the period ended June 30, 1993, and have issued our report thereon dated
August 10, 1993 (included elsewhere in this Registration Statement). Our audits
also included the financial statement schedules listed in the Index at Item
21(b) of this Registration Statement. These financial statement schedules
are the responsibility of the Company's management. Our responsibility is to
express an opinion based on our audits. In our opinion, such financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
DELOITTE & TOUCHE
Miami, Florida
August 10, 1993
<PAGE>
CORDIS CORPORATION
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
(In thousands)
<TABLE>
<CAPTION>
Balance at Balance
beginning Addi- Retirements Other at end
of tions or sales changes of
period at cost (a) (b) period
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1993:
Land $ 4,761 $ 237 $ -- $ (169) $ 4,829
Building and improvements 50,413 2,541 (892) (2,122) 49,940
Leasehold improvements 1,088 237 (85) (167) 1,073
Machinery and equipment 48,576 10,508 (5,303) (3,128) 50,653
Construction in progress 4,435 562 -- (594) 4,403
$109,273 $ 14,085 $ (6,280) $(6,180) $110,898
Year ended June 30, 1992:
Land $ 4,487 $ -- $ -- $ 274 $ 4,761
Buildings and improvements 46,153 976 (170) 3,454 50,413
Leasehold improvements 691 306 (59) 150 1,088
Machinery and equipment 37,833 8,156 (1,130) 3,717 48,576
Construction in progress 3,098 1,313 -- 24 4,435
$ 92,262 $ 10,751 $ (1,359) $ 7,619 $109,273
Year ended June 30, 1991:
Land $ 4,513 $ 101 $ -- $ (127) $ 4,487
Building and improvements 46,371 1,435 (96) (1,557) 46,153
Leasehold improvements 799 230 (275) (63) 691
Machinery and equipment 35,743 6,137 (2,515) (1,532) 37,833
Construction in progress 2,008 1,238 -- (148) 3,098
$ 89,434 $ 9,141 $ (2,886) $(3,427) $ 92,262
</TABLE>
(a) Includes normal retirements of assets.
(b) Includes reclassifications between categories, and the translation effect
of Statement of Financial Accounting Standards No. 52.
<PAGE>
CORDIS CORPORATION
SCHEDULE VI - ACCUMULATED DEPRECIATION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
(In thousands)
<TABLE>
<CAPTION>
Balance at Balance
beginning Addi- Retirements Other at end
of tions or sales changes of
period at cost (a) (b) period
<S> <C> <C> <C> <C> <C>
Year ended June 30, 1993:
Buildings and improvements $ 21,296 $ 2,721 $ (860) $(1,094) $ 22,063
Leasehold improvements 558 156 (63) (92) 559
Machinery and equipment 31,259 6,642 (5,083) (1,639) 31,179
$ 53,113 $ 9,519 $(6,006) $(2,825) $ 53,801
Year ended June 30, 1992:
Buildings and improvements $ 16,964 $ 2,628 $ (73) $ 1,777 $ 21,296
Leasehold improvements 405 133 (59) 79 558
Machinery and equipment 24,329 5,904 (945) 1,971 31,259
$ 41,698 $ 8,665 $(1,077) $ 3,827 $ 53,113
Year ended June 30, 1991:
Buildings and improvements $ 14,928 $ 2,809 $ (37) $ (736) $ 16,964
Leasehold improvements 624 88 (264) (43) 405
Machinery and equipment 22,100 5,194 (2,177) (788) 24,329
$ 37,652 $ 8,091 $(2,478) $(1,567) $ 41,698
</TABLE>
(a) Includes normal retirements of assets.
(b) Includes reclassifications between categories, and the translation effect
of Statement of Financial Accounting Standards No. 52.
<PAGE>
CORDIS CORPORATION
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
<TABLE>
<CAPTION>
Addi-
Balance tions Deduc-
at be- charged tions/ Balance
ginning to Other at end
of costs & Changes of
period expenses (a) period
<S> <C> <C> <C> <C>
Allowance for doubtful accounts -
deducted from accounts receivable
in the balance sheet:
Year ended June 30, 1993 $1,535 $ 545 $ (463) $1,617
Year ended June 30, 1992 $1,163 $ 216 $ 156 $1,535
Year ended June 30, 1991 $1,006 $ 109 $ 48 $1,163
Allowance for inventory obsolescence
- - deducted from inventory in the
balance sheet:
Year ended June 30, 1993 $2,826 $1,061 $(1,415) $2,472
Year ended June 30, 1992 $2,526 $ 994 $ (694) $2,826
Year ended June 30, 1991 $3,475 $ 669 $(1,618) $2,526
Allowance for uncollectible
notes receivable - deducted
from other assets in the
balance sheet:
Year ended June 30, 1993 $4,943 $ 524 $ (45) $5,422
Year ended June 30, 1992 $4,191 $ 752 $ -- $4,943
Year ended June 30, 1991 $3,291 $1,856 $ (956) $4,191
Allowance for uncollectible
investment - deducted from
other assets in the balance
sheet:
Year ended June 30, 1993 $ -- $2,014 $ -- $2,014
</TABLE>
(a) Includes the translation effect of Statement of Financial Accounting
Standards No. 52.
<PAGE>
CORDIS CORPORATION
SCHEDULE IX - SHORT-TERM BORROWINGS
(In thousands)
Maximum Weighted
amount average
out- Average of
standing amount interest
at any out- rates
Balance Weighted month standing during
at end average end during the
of interest during period period
period rate period (1) (2)
Years ended
June 30,
1993 $9,092 9.3% $9,092 $4,217 11.9%
1992 $2,638 13.4% $2,864 $2,120 14.6%
1991 $1,691 12.8% $4,791 $2,850 10.4%
(1) Average amount outstanding during the period is computed by
dividing the total of month-end outstanding principal balances
by the number of periods.
(2) Weighted average interest rate for the year is computed by dividing
the actual short-term interest expense by the average short-term debt
outstanding.
CORDIS CORPORATION
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
(In thousands)
Maintenance
and
repairs Advertising
Year ended June 30, 1993 $ 3,292 $ 2,647
Year ended June 30, 1992 $ 2,617 $ 1,856
Year ended June 30, 1991 $ 2,380 $ 1,797
Exhibit 3(a)(ii)
ARTICLES OF AMENDMENT
TO
RESTATED ARTICLES OF INCORPORATION
OF
CORDIS CORPORATION
Pursuant to the terms, provisions and mandates of the Florida Statutes,
Section 607.001 et seq., the Florida General Corporation Act, Cordis
Corporation, a Florida corporation, by its undersigned officers, states
the following:
1. The name of the corporation is CORDIS CORPORATION.
2. That the Restated Articles of Incorporation of Cordis Corporation,
heretofore filed with the Florida Department of State, with respect
to Article III thereof, the said Article III being titled "Capital Stock,"
have been amended as follows:
That the maximum shares of common stock that the Corporation is
authorized to issue and have outstanding is Fifty Million
(50,000,000) Shares at par value of $1.00 per share.
3. That the increase in authorized common stock of the Corporation as
herein set forth is the only amendment to the Restated Articles of Incorporation
and no other or further provision thereof is intended to be changed by these
Articles of Incorporation.
4. That the aforesaid Amendment was duly adopted by the affirmative
vote of the holders of a majority of the shares of the Corporation's Common
Stock entitled to vote thereon at the Annual Meeting of the Corporation, on
October 21, 1983, subsequent to notice of the meeting, duly given to each
Shareholder of record entitled to vote at such meeting and at which meeting
there was a quorum of the Shareholders entitled to vote present, in person or
by proxy.
IN WITNESS WHEREOF, the undersigned, on behalf of CORDIS CORPORATION,
have executed these Articles of Amendment this 24th day of October, 1983.
/s/ Harold Hershenson
HAROLD HERSHENSON
Executive Vice President
/s/ Daniel G. Hall
DANIEL G. HALL
Secretary
<PAGE>
STATE OF FLORIDA )
:ss
COUNTY OF DADE )
ON THIS DAY, personally appeared before me, the undersigned officer, a
Notary Public, in and for the State and County aforesaid, HAROLD HERSHENSON,
known to me to be the Executive Vice President of Cordis Corporation, a Florida
corporation, and after making oath in due form of law, acknowledged that he
executed the foregoing Articles of Amendment as such Officer of the Corporation,
for and on behalf of the said Corporation, after having been duly authorized to
do so.
WITNESS my hand and official seal this 24th day of October, 1983, at
Miami, Dade County, Florida.
/s/ Marion E. DeBellis
NOTARY PUBLIC
NOTARY PUBLIC STATE OF FLORIDA
MY COMMISSION EXPIRES APR 18 1986
BONDED THRU GENERAL INS. UND.
Exhibit 5
February 23, 1994
Board of Directors
Cordis Corporation
14201 N.W. 60th Avenue
Miami Lakes, Florida 33014
Dear Sirs and Madam:
I am General Counsel to Cordis Corporation, a Florida corporation (the
"Company"), which is planning to file a Registration Statement (the
"Registration Statement") on Form S-4 with the Securities and Exchange
Commission relating to the proposed offering of up to 1,997,203 shares of the
Company's Common Stock, par value $1.00 per share (the "Shares"). The Shares
are being offered in connection with that certain merger (the "Merger") of
Cordis Acquisition, Inc., a newly formed California corporation ("Acquisition")
that is a wholly owned subsidiary of the Company, with and into Webster
Laboratories, Inc., a California corporation ("Webster"), as contemplated by the
terms of that certain Agreement and Plan of Reorganization among the Company,
Acquisition, Webster and certain of the shareholders of Webster dated as
of January 20, 1994 (the "Reorganization Agreement"). Certain of such Shares
also may be issued upon the exercise of outstanding Webster stock options to be
assumed by the Company. This letter is furnished to you pursuant to the
requirements of Item 601(b)(5) of Regulation S-K, 17 C.F.R. (Sec.) 229.601(b)(5)
in connection with the Registration Statement.
For purposes of this opinion letter, I have examined copies of the
following documents:
1. An executed copy of the Registration Statement.
2. An executed copy of the Reorganization Agreement.
3. The Restated Articles of Incorporation, as amended, and Bylaws of the
Company as in effect on the date hereof.
4. Resolutions of the Board of Directors of the Company adopted at (i)
a Special Meeting of the Board of Directors held on January 13,1994
and (ii) a Special Meeting of the Board of Directors held
on February 8, 1994.
I have not, except as specifically mentioned above, made any independent
review or investigation of the organization, existence, good standing,
assets, business or affairs of the Company, or of any other matters, for
the purposes of this opinion letter. In my examination of the aforesaid
documents, I have assumed the genuineness of all signatures, the legal
capacity of natural persons, the authenticity of all documents submitted to
me as originals, and the authenticity and conformity with the original
documents of all documents submitted to me as certified, telecopied,
photostatic, or reproduced copies. For the purposes of this opinion letter,
I have not performed any independent review or investigation of any
statutes, ordinances, laws, regulations, agreements, contracts, instruments,
or corporate records to which the Company, or any subsidiary of the
Company, may be a party or may be subject. This opinion letter is given
in the context of the foregoing.
This opinion letter is based, as to matters of law, solely on the
Florida Business Corporation Act (the "FBCA"). I express no opinion herein as
to any other laws, statutes, regulations, or ordinances, including, without
limitation, any federal or state tax or securities laws or regulations.
Nothing herein shall be construed to cause me to be considered an "expert"
within the meaning of Section 11 of the Securities Act of 1933, as
amended.
Based upon, subject to, and limited by the foregoing, I am of the opinion
that the Shares, when issued and delivered in the manner and on the terms
described in the Reorganization Agreement, will be legally issued, fully paid
and nonassessable under the FBCA.
I assume no obligation to advise you of any changes in the foregoing
subsequent to the delivery of this opinion letter. This opinion letter has
been prepared solely for your use in connection with the filing of the
Registration Statement on the date of this opinion letter, and should not
be quoted in whole or in part or otherwise be referred to, nor be filed with or
furnished to any governmental agency or other person or entity,
without my prior written consent.
<PAGE>
I hereby consent to the filing of this opinion letter as Exhibit 5 to the
Registration Statement, and to the reference made to me in the Registration
Statement under the caption "Legal Matters."
Very truly yours,
/s/ Daniel G. Hall
Daniel G. Hall
Exhibit 11
CORDIS CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(In thousands except per share amounts)
Years ended June 30,
1993 1992 1991
Income:
Income from continuing operations $29,060 $24,014 $19,332
Loss from discontinued operations -- -- (9,800)
Net income $29,060 $24,014 $ 9,532
Common shares:
PRIMARY
Weighted average shares outstanding 14,281 13,969 13,702
Potential dilution on exercise
of stock options (1) 250 371 304
Shares included in the computation
of primary earnings per share 14,531 14,340 14,006
FULLY DILUTED
Weighted average shares outstanding 14,281 13,969 13,702
Potential dilution on exercise
of stock options (1) 292 381 363
Shares included in the computation
of fully diluted earnings per share 14,573 14,350 14,065
Earnings per share:
PRIMARY
Income from continuing operations $ 2.00 $ 1.67 $ 1.38
Loss from discontinued operations -- -- (.70)
Net income $ 2.00 $ 1.67 $ .68
FULLY DILUTED
Income from continuing operations $ 1.99 $ 1.67 $ 1.38
Loss from discontinued operations -- -- (.70)
Net income $ 1.99 $ 1.67 $ .68
(1) Computed under the treasury stock method based on the average price
during the periods for primary earnings per share, and the higher of the
average price during the periods or the end of period closing price for
fully diluted earnings per share.
NOTE: The fully diluted calculation is submitted in accordance with Regulation
S-K item 601(b)(11) although not required by Accounting Principles
Board Opinion No. 15 because it results in a dilution of less than 3%.
<PAGE>
Exhibit 11
(Continued)
CORDIS CORPORATION
COMPUTATION OF PRIMARY EARNINGS PER SHARE
Six Months Ended December 31, 1993 and 1992
(Unaudited)
(In thousands except per share amounts)
1993 1992
Income before cumulative effect of accounting change $16,499 $12,971
Cumulative effect of accounting change 10,115 --
Net income $26,614 $12,971
Common shares (000):
Weighted average shares outstanding 14,292 14,199
Potential dilution on exercise of stock options (1) 331 309
Total 14,623 14,508
Earnings per share:
Income before cumulative effect of accounting change $ 1.13 $ .89
Cumulative effect of accounting change .69 --
Net income $ 1.82 $ .89
(1) Computed using the treasury stock method based on the average price
during the periods.
NOTE: The computation of earnings per share on the fully diluted basis is the
same as that set forth above.
Exhibit 21
SUBSIDIARIES OF CORDIS CORPORATION
The significant subsidiaries of Cordis Corporation, all of which are
included in the Consolidated Financial Statements of Cordis Corporation, are as
follows:
Name Jurisdiction of Incorporation
Cordis International Corporation Delaware
Cordis Holding B.V. The Netherlands
Cordis Europa N.V. The Netherlands
Exhibit 23(a)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Cordis Corporation on
Form S-4 of our report relating to Cordis Corporation dated August 10, 1993,
appearing in the Consent Statement/Prospectus, which is part of this
Registration Statement, and to the reference to us under the heading "Experts"
in such Consent Statement/Prospectus.
DELOITTE & TOUCHE
Miami, Florida
February 23, 1994
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Cordis Corporation
on Form S-4 of our report relating to Webster Laboratories, Inc. dated December
21, 1993, appearing in the Consent Statement/Prospectus, which is part of this
Registration Statement, and to the reference to us under the heading "Experts"
in such Consent Statement/Prospectus.
DELOITTE & TOUCHE
Costa Mesa, California
February 23, 1994
Exhibit 99
WEBSTER LABORATORIES, INC.
CONSENT TO ACTION WITHOUT A MEETING
THIS CONSENT IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of record of Webster Laboratories, Inc. (the
"Company"), as of _______ ___, 199_, hereby consents, pursuant to
Section ___ of the Corporations Code of the State of California, with respect
to all shares of Common Stock, no par value per share of the Company
("Company Common Stock"), or Preferred Stock, no par value per share, of the
Company ("Company Preferred Stock"), to the following actions without
a meeting, without prior notice and without a vote; such actions to be effective
when unrevoked consents signed by the shareholders of the Company
holding a majority of the outstanding shares of Company Common Stock and the
shareholders of the Company holding a majority of the outstanding shares
of Company Preferred Stock are delivered to the Company:
1. Resolved, that the Agreement and Plan of Reorganization dated
as of January 20, 1994 among Cordis Corporation ("Cordis"), Cordis
Acquisition, Inc., a newly formed wholly owned subsidiary of Cordis
("Acquisition"), the Company and certain of the shareholders of the Company,
and the related form of Agreement of Merger, providing for the merger of
Acquisition with and into the Company as described in the accompanying
Consent Statement/Prospectus and as set forth in Appendix A thereto, are hereby
approved and adopted.
[] FOR [] AGAINST [] ABSTAIN
IF THE SHAREHOLDER HAS EXECUTED THIS CONSENT BUT FAILED TO CHECK A BOX MARKED
"FOR", "AGAINST" OR "ABSTAIN" FOR THE PROPOSAL, SUCH SHAREHOLDER SHALL
BE DEEMED TO HAVE VOTED FOR APPROVAL AND ADOPTION OF THE AGREEMENT AND PLAN OF
REORGANIZATION AND THE RELATED AGREEMENT OF MERGER.
Subject to certain voting agreements as described in the accompanying Consent
Statement/Prospectus and as set forth in the Agreement and Plan of
Reorganization attached as Appendix A thereto, any consent may be revoked
by any shareholder prior to such shareholder approval by executing and
delivering a subsequent consent or by delivering a written notice to the
Secretary of the Company, as applicable, stating that the consent is
revoked.
Dated ___________________ , 1994
__________________________________
__________________________________
Signature of Shareholder
or Authorized Representative
Please sign exactly as your name or
names appear on this Consent. Each
executor, administrator, trustee,
guardian, attorney-in-fact and other
fiduciary should sign and indicate
his or her full title. In the case
of stock ownership in the name of
two or more persons, all owners
should sign.
PLEASE SIGN AND DATE ABOVE, AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE
<PAGE>
EXHIBIT INDEX
The following exhibits are filed herewith or are incorporated by reference
to previously filed registration statements or reports of Cordis
as indicated in the "Incorporated by Reference to" column.
<TABLE>
<CAPTION>
Incorporated
by Reference to
Ex- Ex-
hibit Registration hibit Sequential
No. No. or Report No. Description Page No.
<C> <C> <C> <C> <C>
2 -- -- Agreement and Plan of Reorganization by and among
Cordis Corporation ("Cordis"), Cordis Acquisition,
Inc., Webster Laboratories, Inc. ("Webster") and
Certain Shareholders of Webster dated as of
January 20, 1994.*
3(a)(i) Form 10-K for 3 Restated Articles of Incorporation of Cordis
year ended filed with the Florida Secretary of State on
June 30, 1983 February 14, 1978 and Articles of Amendment
thereto filed with the Florida Secretary of State on
November 1, 1978.
3(a)(ii) -- -- Articles of Amendment to Cordis' Restated Articles
of Incorporation filed with the Florida Secretary of
State on November 3, 1983.
3(b) Form 10-K for 3(a) By-Laws of Cordis.
year ended
June 30, 1983
4 -- -- **
5 -- -- Opinion of Daniel G. Hall, General Counsel
to Cordis.
8 -- -- Tax opinion of Venture Law Group, special counsel
to Webster.***
10(a) Form 10-K for 10(a) Revolving Credit and Reimbursement Agreement,
year ended dated as of December 30, 1991, between Cordis
June 30, 1992 as Borrower and NCNB National Bank of Florida
as Lender.
10(b) Form 10-K for 10(b) Lease Agreement dated as of March 1, 1979,
year ended between Cordis and Olympia & York Florida
June 30, 1985 Equity Corp.
10(b) Form 10-K for 10(b) Lease Agreement dated as of September 20, 1991
year ended between Cordis and Baxter Diagnostics, Inc.
June 30, 1991
10(d) Form 10-K for 10(d) Cordis Corporation Incentive Stock Option Plan
year ended of 1982.
June 30, 1983
10(d) Form 10-Q for 10(d) Amendment, dated April 13, 1987, to Cordis
quarter ended Corporation Incentive Stock Option Plan of 1982.
March 31, 1987
10(d) Form S-8 No. 10(d) Cordis Corporation Non-qualified Stock Option
33-23668 dated Plan.
August 30, 1988
10(d) Form S-8 No. 10(d) Cordis Corporation Non-qualified Stock Option
33-35304 dated Plan.
June 28, 1990
10(d) Form S-8 No. 10(d) Cordis Corporation Non-qualified Stock Option
33-63634 dated Plan.
June 1, 1993
10(d) Form 10-K for 10(d) Cordis Corporation Director Non-qualified Stock
year ended Option Plan.
June 30, 1992
10(d) Form S-8 No. 10(d) Cordis Corporation Director Non-qualified Stock
33-44953 dated Plan.
January 6, 1992
<PAGE>
10(d) Form 10-K for 10(d) Cordis Corporation Supplemental Executive
year ended Retirement Plan
June 30, 1992
10(d) Form 10-K for 10(d) Cordis Corporation Salary Deferral Plan
year ended
June 30, 1992
10(d) Form 10-K for 10(d) Amended Cordis Corporation Director Retirement
year ended Policy
June 30, 1992
10(f) Form 10-K for 10(f) Cordis Corporation 1991 Performance Unit Award
year ended Plan
June 30, 1992
10(i) Form 10-Q for 10(i) Acquisition Agreement by and between TNC Medical
quarter ended Device and Cordis, dated as of April 14, 1987,
March 31, 1987 including amendments thereto dated April 14,
1987 and April 30, 1987, with respect to the sale
of Cordis' worldwide cardiac pacing operations.
10(j) Form 8-K dated 4 Rights Agreement, dated September 12, 1986
September 12, between Cordis and Manufacturers Hanover
1986 Trust Company.
10(j) Form 10-K for 10(j) Amendment No. 1, dated as of September 15, 1989
year ended to the Rights Agreement, dated September 12, 1986
June 30, 1989 between Cordis and Manufacturers Hanover
Trust Company.
10(j) Form 10-K for 10(j) Amendment No. 2, dated as of October 12, 1989 to
year ended the Rights Agreement, dated September 12, 1986
June 30, 1991 between Cordis and Manufacturers Hanover
Trust Company.
10(j) Form 10-K for 10(j) Amendment No. 3, dated as of November 15, 1989
year ended to the Rights Agreement, dated September 12, 1986
June 30, 1991 between Cordis and Manufacturers Hanover
Trust Company.
11 -- -- Computation of earnings per share of Cordis.
21 -- -- Subsidiaries of Cordis.
23(a) -- -- Consents of Deloitte & Touche, Independent Auditors.
23(b) -- -- Consent of Daniel G. Hall (included in Exhibit 5 to the
Registration Statement).
23(c) -- -- Consent of Venture Law Group.***
24 -- -- Power of Attorney (included immediately following the
signature page of this Registration Statement).
99 -- -- Webster form of shareholders' consent.
</TABLE>
__________________________
* Included as Appendix A to the Consent Statement/Prospectus.
** Included as Exhibits 3(a)(i), 3(a)(ii) and 3(b) to this Registration
Statement.
*** To be filed by Amendment.
