<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 1, 2000
REGISTRATION NO. 333-
--------------------------------------------------
--------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
THORATEC LABORATORIES CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
CALIFORNIA 3845 94-2340464
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
6035 STONERIDGE DRIVE
PLEASANTON, CALIFORNIA 94588
(925) 847-8600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
MR. D. KEITH GROSSMAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
THORATEC LABORATORIES CORPORATION
6035 STONERIDGE DRIVE
PLEASANTON, CALIFORNIA 94588
(925) 847-8600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
JAY E. BOTHWICK AUGUST J. MORETTI
HALE AND DORR LLP DANIEL E. TITLEBAUM
60 STATE STREET HELLER EHRMAN WHITE & MCAULIFFE LLP
BOSTON, MA 02109 2500 SAND HILL ROAD
TEL: (617) 526-6000 MENLO PARK, CA 94025
FAX: (617) 526-5000 TEL: (650) 234-4200
FAX: (650) 234-4299
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO
THE PUBLIC: Upon consummation of the merger described herein.
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 this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
---------------
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
---------------
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE REGISTRATION FEE
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, no par value.......... 32,199,688 $11.875 $382,371,295 $100,946.02
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Computed based on the number of shares of common stock of Thermo
Cardiosystems Inc. outstanding as of October 3, 2000 and a fixed exchange
ratio of 0.835 of a share of Thoratec common stock for each share of Thermo
Cardiosystems Inc. common stock.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f)(1) and 457(c) of the Securities Act of 1933 (based upon the
average of the high and low sales prices of Thoratec common stock on the
Nasdaq National Market on October 27, 2000 of $11.6875 per share).
------------------------
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> 2
[THORATEC LETTERHEAD]
, 2000
To Our Shareholders:
MERGER PROPOSAL -- YOUR VOTE IS IMPORTANT
We are pleased to invite you to attend a special meeting of the
shareholders of Thoratec Laboratories Corporation to be held on ,
200 at [1:00] p.m. Pacific Standard Time. The meeting will be held at our
corporate offices, 6035 Stoneridge Drive, Pleasanton, California.
At the meeting, we will ask you to vote on four separate proposals.
- The first and most important proposal is to approve the merger of a
subsidiary of Thoratec into Thermo Cardiosystems Inc. Cardiosystems, like
Thoratec, is a public company. If the merger is approved and completed,
the holders of Cardiosystems' common stock will receive .835 of a share
of Thoratec's common stock for each share of Cardiosystems' common stock.
Cardiosystems will then be a subsidiary of Thoratec.
- The second and third proposals relate to increases in the number of
shares we are authorized to issue under our 1997 stock option plan.
- The fourth and final proposal is to approve a change in our corporate
name to Thoratec Corporation.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" ALL FOUR
PROPOSALS.
The accompanying proxy statement describes the proposals, including:
- the background of this important merger
- our board's reasons for recommending the merger
- the conditions to completing the merger
- some risks you should consider in connection with the merger and
- other important information about the merger and proposals two, three and
four.
The proxy statement also includes the opinion of our financial advisor,
Lehman Brothers, about the merger.
YOUR VOTE IS IMPORTANT. BY USING THE ENCLOSED PROXY CARD TO VOTE YOUR
SHARES, YOU WILL ENSURE YOUR REPRESENTATION AT THE SPECIAL MEETING EVEN IF YOU
DO NOT ATTEND IN PERSON. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE
VOTE AS SOON AS POSSIBLE BY SIGNING AND RETURNING THE ENCLOSED PROXY CARD IN THE
ENVELOPE
<PAGE> 3
PROVIDED. YOUR FAILURE TO RETURN THE PROXY CARD WILL HAVE THE SAME EFFECT AS A
VOTE AGAINST THE PROPOSALS, UNLESS YOU ATTEND THE MEETING AND VOTE IN PERSON.
Sincerely yours,
D. Keith Grossman
Chief Executive Officer and President
This proxy statement is dated , 2000. It is first being mailed
to Thoratec's shareholders on , 2000.
IF YOU HAVE ANY QUESTIONS
OR NEED ASSISTANCE
COMPLETING YOUR PROXY CARD,
PLEASE CONTACT:
[PROXY SOLICITORS]
[ADDRESS]
OR
CALL TOLL-FREE ( ) -
<PAGE> 4
[CARDIOSYSTEMS LETTERHEAD]
, 2000
Dear Stockholder:
MERGER PROPOSAL -- YOUR VOTE IS IMPORTANT
The board of directors of Thermo Cardiosystems, Inc. has approved a merger
agreement with Thoratec Laboratories Corporation.
We will hold a special stockholders meeting on , 200 at
[4:00] p.m. Eastern Time at the offices of Thermo Electron Corporation, 81 Wyman
Street, Waltham, Massachusetts at which we will ask you to approve the merger
and merger agreement. If we receive that approval:
- a wholly-owned subsidiary of Thoratec will merge into Cardiosystems
- Cardiosystems will become a wholly-owned subsidiary of Thoratec and
- you will receive .835 of a share of Thoratec common stock for each of
your Cardiosystems shares.
Thoratec's common stock is listed on the Nasdaq National Market under the
symbol "THOR." On October 3, 2000, the last trading day before we announced the
terms of the merger, the last reported sales price of Thoratec's stock was
$17.75. On , 2000 the last reported sales price was $ .
The attached proxy statement/prospectus provides detailed information
concerning the special meeting and the proposed merger. PLEASE CAREFULLY
CONSIDER ALL THE INFORMATION IN THIS PROXY STATEMENT/PROSPECTUS REGARDING
CARDIOSYSTEMS, THORATEC AND THE MERGER, INCLUDING IN PARTICULAR THE "RISK
FACTORS" SECTION STARTING ON PAGE 7.
The proposed merger will not be completed unless it is approved by the
affirmative vote of Cardiosystems stockholders holding a majority of the
outstanding shares of Cardiosystems common stock. Thermo Electron Corporation
owns a sufficient number of shares of our common stock to assure approval of the
merger and merger agreement at the special meeting. Thermo Electron intends, and
under most circumstances is contractually required, to vote all its shares in
favor of the merger and merger agreement. As a result, the affirmative vote of
other stockholders will not be required to approve the merger and merger
agreement.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATOR HAS APPROVED OR DISAPPROVED THE THORATEC COMMON STOCK TO BE ISSUED IN
THE MERGER OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
On behalf of our board of directors, I thank you for your support and urge
you to vote FOR approval of the merger and merger agreement.
Sincerely,
R. Michael Kleine
Chief Executive Officer
This proxy statement/prospectus is dated , 2000. It is first
being mailed to Cardiosystems' stockholders on , 2000.
<PAGE> 5
THORATEC LABORATORIES CORPORATION
6035 STONERIDGE DRIVE
PLEASANTON, CALIFORNIA 94588
(925) 847-8600
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON , 200
TO THE SHAREHOLDERS OF THORATEC LABORATORIES CORPORATION
A special meeting of the shareholders of Thoratec Laboratories Corporation,
a California corporation, will be held on , 200 , at [1:00
P.M.], Pacific Time, at Thoratec's headquarters at 6035 Stoneridge Drive,
Pleasanton, California, for these purposes:
1. To consider and vote on a proposed merger of Thoratec's
wholly-owned subsidiary, Lightning Acquisition Corp., into Thermo
Cardiosystems Inc., as contemplated by an Agreement and Plan of Merger
dated as of October 3, 2000 among Thoratec, Lightning Acquisition Corp.,
Cardiosystems and Thermo Electron Corporation. In the merger, Thoratec will
issue .835 of a share of its common stock for each outstanding share of
common stock of Cardiosystems, and Cardiosystems will become a wholly-
owned subsidiary of Thoratec.
2. To consider and vote on an amendment to Thoratec's 1997 Stock
Option Plan, which we call the Thoratec option plan, to increase the
authorized number of shares of Thoratec common stock reserved for issuance
under options granted under the Thoratec option plan by 3,600,000 shares,
which is in addition to any increase authorized under proposal 3. This
additional increase will enable Thoratec to assume the options to purchase
shares of Cardiosystems common stock that are outstanding when the merger
closes and also grant additional options, over time after the merger, to
Cardiosystems personnel.
3. To consider and vote on an amendment to the Thoratec option plan to
increase the number of shares of Thoratec common stock reserved for
issuance under options granted under the Thoratec option plan by 2,800,000
shares, which is in addition to any increase authorized by proposal 2.
Since only shares are available for grant under the Thoratec option
plan, this additional increase will allow us to continue to attract and
retain qualified Thoratec personnel.
4. To consider and vote on an amendment to Thoratec's Articles of
Incorporation to change the name of Thoratec from "Thoratec Laboratories
Corporation" to "Thoratec Corporation."
The approval of each of the first two proposals is conditioned upon
approval of the other. Accordingly, a vote against either of the first two
proposals will have the same effect as a vote against the other.
The accompanying proxy statement describes the merger and the other
proposals in more detail. We encourage you to read the entire document
carefully. Thoratec's board of directors has fixed the close of business on
, 2000 as the record date for the determination of shareholders
entitled to notice of, and to vote at, the meeting and any adjournments or
postponements of the meeting.
All shareholders are cordially invited to attend the meeting in person. Any
shareholder attending the meeting may vote in person even if the shareholder
previously signed and returned a proxy.
FOR THE BOARD OF DIRECTORS,
--------------------------------------
D. Keith Grossman
Chief Executive Officer and President
Pleasanton, California
, 2000
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER TO
ASSURE REPRESENTATION OF YOUR SHARES.
<PAGE> 6
THERMO CARDIOSYSTEMS INC.
470 WILDWOOD STREET
WOBURN, MASSACHUSETTS 01888
(781) 932-8668
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 200
TO THE STOCKHOLDERS OF THERMO CARDIOSYSTEMS INC.
A special meeting of the stockholders of Thermo Cardiosystems Inc., a
Massachusetts corporation will be held on , 200 , at [4:00 P.M.]
Eastern Time, at Thermo Electron Corporation, 81 Wyman Street, Waltham,
Massachusetts for these purposes:
1. To consider and vote on a proposed merger of a wholly-owned
subsidiary of Thoratec Laboratories Corporation named Lightning Acquisition
Corp. into Cardiosystems, as contemplated by an Agreement and Plan of
Merger dated as of October 3, 2000 among Thoratec, Lightning Acquisition
Corp., Cardiosystems and Thermo Electron Corporation. In the merger,
Thoratec will issue .835 of a share of its common stock for each
outstanding share of common stock of Cardiosystems, and Cardiosystems will
become a wholly-owned subsidiary of Thoratec.
2. To transact such other business as may properly come before the
special meeting or any adjournment or postponement of the meeting.
The accompanying proxy statement/prospectus describes the merger in more
detail. We encourage you to read the entire document carefully. Cardiosystems'
board of directors has fixed the close of business on , 2000 as
the record date for the determination of stockholders entitled to notice of, and
to vote at, the meeting and any adjournments or postponements of the meeting.
All stockholders are cordially invited to attend the meeting in person. Any
stockholder attending the meeting may vote in person even if the stockholder
previously signed and returned a proxy.
FOR THE BOARD OF DIRECTORS,
--------------------------------------
R. Michael Kleine
Chief Executive Officer
Woburn, Massachusetts
, 2000
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER TO
ASSURE REPRESENTATION OF YOUR SHARES.
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Questions and Answers for Thoratec Shareholders and
Cardiosystems Stockholders................................ iv
Summary..................................................... 1
Thoratec's Business....................................... 1
Cardiosystems' Business................................... 1
Summary of The Merger..................................... 2
Conditions to Completion of The Merger.................... 2
Vote Required for Approval................................ 2
Termination of The Merger Agreement....................... 2
Directors and Executive Officers of Thoratec after The
Merger................................................. 2
Opinions of Thoratec's and Cardiosystems' Financial
Advisors............................................... 3
Material United States Federal Income Tax Consequences of
The Merger............................................. 3
Accounting Treatment of The Merger........................ 3
Interests of Certain Persons in The Merger................ 3
Dissenters' Rights........................................ 4
Restrictions on the Sale of Certain Thoratec Shares
Received in The Merger................................. 4
Forward Looking Statements.................................. 5
Where You Can Find More Information......................... 5
Risk Factors................................................ 7
General Risks Related to The Merger and The Combined
Company................................................ 7
Risks Related to Thoratec or Cardiosystems or Both
Companies Even if The Merger Does Not Occur............ 10
Thoratec Selected Consolidated Financial Data............... 16
Cardiosystems Selected Consolidated Financial Data.......... 17
Unaudited Pro Forma Combined Condensed Financial Statement
Overview.................................................. 18
Notes to Unaudited Pro Forma Combined Condensed Financial
Statements................................................ 22
In-Process Research and Development....................... 22
Adjustments to Unaudited Pro Forma Combined Condensed
Financial Statements................................... 24
The Thoratec Meeting........................................ 30
Purpose of the Thoratec Special Meeting................... 30
Record Date and Outstanding Shares........................ 30
Vote and Quorum Required.................................. 31
Voting of Proxies, Abstentions and Broker Non-Votes....... 31
California Dissenters' Rights............................. 31
Expenses of Proxy Solicitation............................ 33
Proposal One: The Merger.................................. 34
Proposal Two: Approval of Amendment to the Thoratec Option
Plan................................................... 34
Board Recommendation...................................... 34
Proposal Three: Approval of Amendment to the Thoratec
Option Plan............................................ 34
Description Of The Plan................................... 34
Federal Income Tax Consequences of The Plan............... 35
Board Recommendation...................................... 34
Proposal Four: Approval of Amendment to Thoratec's
Articles of Incorporation to Change Thoratec's
Corporate Name......................................... 37
Board Recommendation...................................... 37
Thoratec Proxies.......................................... 37
The Cardiosystems Meeting................................... 38
</TABLE>
i
<PAGE> 8
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Purpose of The Special Cardiosystems Meeting.............. 38
Record Date And Outstanding Shares........................ 38
Vote and Quorum Required.................................. 39
Voting of Proxies, Abstentions and Broker Non-Votes....... 39
Massachusetts Dissenters' Rights.......................... 39
Expenses of Proxy Solicitation............................ 40
Cardiosystems Proxies..................................... 41
Recommendation of The Cardiosystems Board of Directors.... 41
The Merger.................................................. 42
Background of The Merger.................................. 42
Thoratec's Reasons for The Merger......................... 44
Recommendation of Thoratec's Board of Directors........... 45
Cardiosystems' Reasons for The Merger..................... 46
Recommendation of the Cardiosystems Board of Directors.... 47
Opinion of Thoratec's Financial Advisor................... 47
Interests of Thoratec Directors and Officers in the
Merger................................................. 54
Opinion of Cardiosystems' Financial Advisor............... 54
Interests of Thermo Electron and Cardiosystems' Directors,
Officers and Significant Stockholders in the Merger.... 58
Completion and Effectiveness of the Merger................ 59
Structure of the Merger and Conversion of Cardiosystems
Common Stock........................................... 59
Exchange of Cardiosystems Stock Certificates for Thoratec
Stock Certificates..................................... 59
Accounting Treatment of the Merger........................ 59
Regulatory Filings and Approvals Required to Complete the
Merger................................................. 60
Certain Securities Laws Considerations.................... 60
Listing on The Nasdaq National Market of Thoratec Common
Stock to be Issued in The Merger....................... 60
Delisting and Deregistration of Cardiosystems Common Stock
After The Merger....................................... 61
Material United States Federal Income Tax Considerations.... 61
The Merger Agreement........................................ 62
General................................................... 62
The Exchange Ratio and Treatment of Cardiosystems Common
Stock.................................................. 62
Treatment of Cardiosystems Stock Options.................. 63
Cardiosystems' Employee Stock Purchase Plan............... 63
Employee Benefits Matters................................. 63
Representations and Warranties............................ 63
Conduct of Business Before Completion of The Merger....... 64
No Solicitation of Other Transactions by Thermo Electron,
Cardiosystems and Subsidiaries......................... 65
No Solicitation of Other Transactions by Thoratec and its
Subsidiaries........................................... 67
Conditions to Completion of The Merger.................... 68
Termination of The Merger Agreement....................... 70
Payment of Termination Fees............................... 71
Cardiosystems Convertible Debentures...................... 71
Operations After the Merger............................... 72
Extension, Waiver and Amendment of the Merger Agreement... 72
Agreements Related to The Merger............................ 72
The Shareholder Agreement................................. 72
The Registration Rights Agreement......................... 73
</TABLE>
ii
<PAGE> 9
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Comparison of Shareholder Rights and Corporate Governance
Matters................................................... 73
Capitalization............................................ 74
Voting Rights............................................. 74
Number, Election, Vacancy and Removal of Directors........ 74
Charter Amendments........................................ 75
Bylaw Amendments.......................................... 75
Shareholder and Stockholder Action........................ 76
Notice of Specific Actions by Holders of Shares........... 76
Special Shareholder and Stockholder Meetings.............. 76
Limitation of Personal Liability of Directors and
Indemnification........................................ 76
Dividends................................................. 77
Special Provisions Relating to Certain Acquisitions and
Business Combinations.................................. 78
Mergers, Acquisitions and Other Transactions.............. 79
Dissenters' Appraisal Rights.............................. 79
Preemptive Rights......................................... 80
Legal Matters............................................... 80
Experts..................................................... 80
Shareholder Proposals....................................... 80
ANNEXES
A: Merger Agreement...................................... A-1
B: Lehman Brothers Opinion............................... B-1
C: J.P. Morgan Opinion................................... C-1
D: Registration Rights Agreement......................... D-1
E: Shareholder Agreement................................. E-1
F: California Dissenters' Statute........................ F-1
G: Massachusetts Dissenters' Statute..................... G-1
</TABLE>
iii
<PAGE> 10
QUESTIONS AND ANSWERS FOR
THORATEC SHAREHOLDERS AND CARDIOSYSTEMS STOCKHOLDERS
Q: WHO IS MERGING WITH WHOM?
A: A wholly-owned subsidiary of Thoratec will merge into Cardiosystems. That
will make Cardiosystems a wholly-owned subsidiary of Thoratec.
Q: WHY ARE THE COMPANIES PROPOSING TO MERGE?
A: Thoratec and Cardiosystems are proposing to merge because we believe the
resulting combination will create a stronger, more competitive company with
greater financial strength and capable of achieving greater operational
efficiencies, earnings power and growth potential than either company would
have on its own.
Q: WHAT WILL THE EFFECT OF THE MERGER BE ON THE THORATEC SHAREHOLDERS AND THE
CARDIOSYSTEMS STOCKHOLDERS? (SEE PAGE )
A: In the merger, Cardiosystems will become a wholly-owned subsidiary of
Thoratec. After the merger, the current owners of Thoratec will own
approximately 43% of Thoratec and the former owners of Cardiosystems will
own approximately 57% of Thoratec. These percentages are based on the
diluted capitalization of both companies.
Q: HOW MUCH OF THORATEC WILL THERMO ELECTRON OWN AFTER THE MERGER?
A: Upon completion of the merger, Thermo Electron will own approximately 34% of
the common stock of Thoratec.
Q: WILL THERE BE ANY RESTRICTIONS ON THERMO ELECTRON'S ABILITY TO SELL THORATEC
SHARES?
A: Yes. Thermo Electron and Thoratec have signed a shareholder agreement and a
registration rights agreement. Under the shareholder agreement, Thermo
Electron has agreed not to sell any Thoratec shares until four months after
the merger. Thereafter, Thermo Electron may sell up to 25% of such shares
until the first anniversary of the closing, an additional 25% (for a total
of 50%) between that anniversary and 18 months after the merger, and all
such shares (for a total of 100%) beginning 18 months after the merger.
Under the registration rights agreement, Thoratec has agreed to register the
Thoratec shares for resale consistent with this schedule.
Q: WHAT WILL THE CARDIOSYSTEMS STOCKHOLDERS RECEIVE IN THE MERGER?
A: When the merger is completed, holders of Cardiosystems stock will receive
.835 of a share of Thoratec stock for each of their outstanding shares of
Cardiosystems stock. In this statement we refer to the rate at which the
Cardiosystem shares will be exchanged for the Thoratec shares as the
exchange ratio. Thoratec will not issue fractional shares. Rather,
fractional shares otherwise issuable to a Cardiosystems stockholder will be
combined and the stockholder will receive cash for any resulting fractional
share in an amount reflecting the closing price, as reported on the Nasdaq
National Market, of Thoratec's stock on the trading day before the merger
closes.
Q: WHAT WILL HAPPEN TO OUTSTANDING CARDIOSYSTEMS STOCK OPTIONS?
A: Upon completion of the merger, Thoratec will assume the then-outstanding
options to purchase shares of Cardiosystems stock. The number of shares of
Thoratec stock purchasable under each assumed option will be calculated
using the merger exchange ratio of .835 of a Thoratec share for each share
of Cardiosystems. The exercise price for each Thoratec share will be
increased accordingly.
Q: DOES THE BOARD OF DIRECTORS OF THORATEC RECOMMEND VOTING IN FAVOR OF THE
ISSUANCE OF THORATEC SHARES IN THE MERGER?
A: Yes. After careful consideration, Thoratec's board of directors unanimously
recommends that Thoratec's shareholders vote in favor of the merger
agreement, the merger and the issuance of Thoratec common stock to the
stockholders of Cardiosystems in the merger.
iv
<PAGE> 11
Q: DOES THE BOARD OF DIRECTORS OF CARDIOSYSTEMS RECOMMEND VOTING IN FAVOR OF
THE MERGER?
A: Yes. After careful consideration, Cardiosystems' board of directors
unanimously recommends that Cardiosystems' stockholders vote in favor of the
merger agreement and the merger. In addition, Thermo Electron has agreed to
vote its Cardiosystems shares (totaling approximately 60% of the outstanding
Cardiosystems shares) in favor of the merger agreement and merger.
Q: ARE THERE RISKS I SHOULD CONSIDER IN DECIDING WHETHER TO VOTE FOR THE
MERGER?
A: Yes. In evaluating the merger, you should carefully consider the factors
discussed in the section entitled "Risk Factors" beginning on page .
Q: WHAT DO I NEED TO DO NOW? (SEE PAGES AND )
A: Mail your signed proxy card in the enclosed return envelope as soon as
possible so that your shares are represented at your meeting. If you do not
include instructions on how to vote your signed proxy card, your common
stock will be voted "FOR" the proposals set forth in this proxy
statement/prospectus.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME? (SEE PAGES , )
A: Normally, brokers cannot vote your shares without instructions from you on
how to vote. Therefore, it is important that you follow the directions
provided by your broker about how to instruct your broker to vote your
shares. If you fail to provide your broker with instructions, that will have
the same effect as your voting against the merger agreement and the merger.
Q: WHAT DO I DO IF I WANT TO CHANGE MY VOTE? (SEE PAGES , )
A: If you want to change your vote, send the secretary of Thoratec or the clerk
of Cardiosystems, as applicable, a later-dated, signed proxy card before
your meeting or attend the meeting in person and revoke your proxy there.
You may also revoke your proxy by sending written notice to the applicable
secretary before the meeting.
Q: AS A CARDIOSYSTEMS STOCKHOLDER, SHOULD I SEND IN MY CARDIOSYSTEMS STOCK
CERTIFICATES NOW? (SEE PAGE )
A: No. After the merger is completed, Thoratec will send you written
instructions for exchanging your Cardiosystems stock certificates for
Thoratec stock certificates.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED? (SEE PAGE )
A: Thoratec and Cardiosystems are working toward completing the merger as
quickly as possible. We expect to complete the merger during the first
calendar quarter of 2001. However, even if both shareholder groups vote in
favor of the merger, there is no assurance that the merger will close
promptly after the shareholder meetings or, indeed, that the merger will
close at all.
Q: WILL I BE TAXED ON THE MERGER? (SEE PAGE )
A: Generally, Thoratec's shareholders and Cardiosystems' stockholders should not
have taxable gain or deductible loss for United States federal income tax
purposes as a result of the merger, except to the extent that they receive
cash for fractional shares or receive cash because they exercise statutory
dissenters' rights. All Thoratec shareholders and Cardiosystems stockholders
are urged to consult their own tax advisors to determine their particular tax
consequences.
Q: ARE THE CARDIOSYSTEMS STOCKHOLDERS ENTITLED TO DISSENTERS' OR APPRAISAL
RIGHTS?
A: Yes. Cardiosystems stockholders have the opportunity to assert dissenters'
rights relating to the merger. To claim these rights, Cardiosystems
stockholders must comply with the special requirements of Massachusetts law.
They should read the section of this statement called "The Cardiosystems
Meeting -- Massachusetts Dissenters Rights" beginning on page .
v
<PAGE> 12
Q: ARE THE THORATEC SHAREHOLDERS ENTITLED TO DISSENTERS' OR APPRAISAL RIGHTS?
A: Thoratec shareholders also have the opportunity to assert dissenters' rights
relating to the merger. To claim these rights, Thoratec shareholders must
comply with the special requirements of California law. They should read the
section of this statement called "The Thoratec Meeting -- California
Dissenters' Rights" beginning on page . However, under California law, no
Thoratec shareholders will be entitled to exercise such rights unless
holders of at least 5% of the outstanding Thoratec shares exercise those
rights.
Q: WHOM SHOULD I CALL WITH QUESTIONS?
A: Thoratec shareholders should call the Thoratec Investor Relations Department
at (925) 847-8600 with any questions about the merger. Cardiosystems
stockholders should call the Cardiosystems Investor Relations Department at
(781) 622-1111 with any questions about the merger.
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SUMMARY
This proxy statement (and, for Cardiosystems' stockholders, prospectus) is
referred to in the balance of this document as the "statement." It pertains
principally to the merger of a wholly-owned subsidiary of Thoratec, which we
call the merger subsidiary, into Cardiosystems. That merger will make
Cardiosystems a wholly-owned subsidiary of Thoratec. We are sending this
statement to the holders of Thoratec common stock and to the holders of
Cardiosystems common stock. Neither Thoratec nor Cardiosystems has any other
type of stock outstanding.
This summary may not contain all of the information that is important to
you. You should carefully read this entire document, including all agreements
and other documents attached to this statement, and all other documents
referenced here for a more complete understanding of the merger. In particular,
you should read the merger agreement and the other Annexes to this statement
which are attached as follows:
<TABLE>
<CAPTION>
ANNEX DOCUMENT
----- --------
<S> <C>
A................ merger agreement
B................ opinion of Lehman Brothers Inc.
C................ opinion of J.P. Morgan Inc.
D................ registration rights agreement dated October 3, 2000 between
Thoratec and Thermo Electron
E................ shareholder agreement dated October 3, 2000 between Thoratec
and Thermo Electron
F................ Chapter 13 of the California Corporations Code relating to
dissenters' rights in connection with a California
corporation like Thoratec; and
G................ Chapter 156B, Sections 85 through 98, of the Massachusetts
Business Corporation Law relating to dissenters' rights in
connection with a Massachusetts corporation like
Cardiosystems
</TABLE>
THORATEC'S BUSINESS
Thoratec develops, manufactures and markets proprietary medical devices
used for circulatory support and for vascular graft applications. Thoratec
currently markets the Thoratec Ventricular Assist Device System, which we refer
to as the VAD System, in the United States and internationally for use as a
bridge to heart transplant and for use in the recovery of the heart after
open-heart surgery. The VAD System is currently the only device approved by the
FDA that can provide left, right or biventricular support for both of these
indications.
Thoratec has developed small diameter vascular grafts for use in
hemodialysis access and coronary artery bypass surgery. The Thoratec
hemodialysis access graft, which we call the Vectra, is undergoing clinical
trials in the United States and is currently marketed in Europe.
Thoratec is applying the same technological expertise used in the Vectra
for use in coronary artery bypass surgery through development of its Aria graft.
This small diameter graft is designed for use by patients who have too few
suitable blood vessels of their own. Thoratec commenced clinical trials in the
United States of its Aria coronary graft in the third quarter of 2000.
Thoratec, the Thoratec logo and Thoralon are registered trademarks, and
TLC-II, Vectra and Aria are trademarks, of Thoratec.
CARDIOSYSTEMS' BUSINESS
Cardiosystems develops, manufactures and markets left ventricular-assist
systems, which we call LVAS, and other medical equipment. The LVAS is an
implantable heart-assist device designed to perform substantially all or part of
the pumping function of the left ventricle of the natural heart for patients
suffering from cardiovascular disease.
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Cardiosystems has developed two systems for patients requiring cardiac
support, an implantable pneumatic LVAS powered by an external electrically
driven air-pump and an electric LVAS that is driven by an implanted electric
motor and powered by a lightweight battery pack worn by the patient.
Cardiosystems also manufactures, through its wholly-owned subsidiary
International Technidyne Corporation, near-patient, whole-blood coagulation
testing equipment and related disposables, as well as premium-quality,
single-use, skin-incision devices.
The Cardiosystems logo and the Heartmate trademark are registered
trademarks of Cardiosystems.
SUMMARY OF THE MERGER
In the merger, Thoratec's merger subsidiary will merge into Cardiosystems.
Cardiosystems will become a wholly-owned subsidiary of Thoratec. Thoratec and
Cardiosystems each have a single class of common stock. In the merger, the
holders of the Cardiosystems common stock will receive, in exchange for each of
their Cardiosystems shares, .835 of a share of Thoratec common stock. The merger
agreement is attached to this statement as Annex A. We encourage you to read it
carefully. See "The Merger" beginning on page .
CONDITIONS TO COMPLETION OF THE MERGER
The parties' respective obligations to complete the merger are subject to
the satisfaction or waiver of closing conditions. If either Thoratec or
Cardiosystems waives any conditions, we will each consider the facts and
circumstances at that time and make a determination whether a resolicitation of
proxies from either the Thoratec shareholders or the Cardiosystems stockholders
is appropriate. See "The Merger Agreement -- Conditions to Completion of the
Merger" beginning on page .
VOTE REQUIRED FOR APPROVAL
The holders of a majority of the shares of Thoratec common stock
outstanding on the record date for the special meeting of Thoratec's
shareholders must approve the merger agreement and merger, including the
issuance of Thoratec stock in the merger. Thoratec's shareholders are entitled
to cast one vote per share of Thoratec stock owned as of that record date. See
"The Thoratec Meeting -- Vote and Quorum Required" on page .
The holders of a majority of the shares of Cardiosystems stock outstanding
on the record date for the special meeting of Cardiosystems' stockholders must
approve the merger agreement and the merger. Cardiosystems' stockholders are
entitled to cast one vote per share of Cardiosystems stock owned as of that
record date. Thermo Electron owns 23,129,293 Cardiosystems shares, or
approximately 60% of the outstanding Cardiosystems shares, as of the record date
and has agreed to vote that stock in favor of the merger agreement and merger
with exceptions explained later in this statement. See "The Cardiosystems
Meeting -- Vote and Quorum Required" on page .
TERMINATION OF THE MERGER AGREEMENT
Thoratec and Cardiosystems each has the right to terminate the merger
agreement under certain circumstances. Those circumstances include, for example,
if a required governmental consent is not obtained or if either party materially
breaches the merger agreement and does not timely cure any such breach. In
certain cases, termination of the merger agreement will require payment of a
termination fee by the terminating party. See "The Merger
Agreement -- Termination of the Merger Agreement" beginning on page .
DIRECTORS AND EXECUTIVE OFFICERS OF THORATEC AFTER THE MERGER
Thoratec's seven present directors are expected to continue as directors of
Thoratec after the merger. In addition, after the merger , a
designee of Thermo Electron, will join the Thoratec board. Thoratec also intends
to add an additional member to its board to fill the current vacancy.
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<PAGE> 15
D. Keith Grossman will continue as Chief Executive Officer, President and a
director of Thoratec after the merger.
OPINIONS OF THORATEC'S AND CARDIOSYSTEMS' FINANCIAL ADVISORS
In connection with the merger, Thoratec's board of directors considered the
opinion it received from its financial advisor, Lehman Brothers Inc. as to the
fairness, from a financial point of view, to Thoratec and the holders of
Thoratec stock, of the merger exchange ratio. Cardiosystems' board of directors
considered the opinion it received from its financial advisor, J.P. Morgan
Securities Inc., as to the fairness, from a financial point of view, to
Cardiosystems and the holders of Cardiosystems stock, of the merger exchange
ratio. The full text of the written opinions of the financial advisors are
attached to this statement as Annex B and C. Read them carefully to understand
the procedures followed, the assumptions made, matters considered and
limitations on the review undertaken in providing the opinions.
The opinion of Lehman Brothers is directed to the Thoratec board of
directors. The opinion of J.P. Morgan is directed to the Cardiosystems board of
directors. These opinions do not address the prices at which Thoratec's stock
will trade after the proposed merger and do not constitute a recommendation to
any Thoratec shareholder or Cardiosystems stockholder as to how to vote on the
merger. See "The Merger -- Opinion of Cardiosystems' Financial Advisor"
beginning on page and "The Merger -- Opinion of Thoratec's Financial Advisor"
beginning on page .
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
In general, Thoratec, Thoratec's shareholders, Cardiosystems and
Cardiosystems' stockholders will not have taxable gain or deductible loss for
United States federal income tax purposes in the merger, except to the extent
Cardiosystems stockholders will receive cash for fractional shares of Thoratec
stock or to the extent Cardiosystems stockholders or Thoratec shareholders
receive cash for their shares because they exercise statutory appraisal rights.
See "Material United States Federal Income Tax Considerations" beginning on page
.
ACCOUNTING TREATMENT OF THE MERGER
The parties intend to account for the transaction as a purchase for
accounting and financial reporting purposes under generally accepted accounting
principles. Because Cardiosystems' stockholders will own approximately 57% of
the common stock of Thoratec after the merger, the merger will be accounted for
as a reverse acquisition and the financial statements of Cardiosystems will be
the financial statements of the surviving corporation. Under the purchase
method, Thoratec's results of operations will be included in Cardiosystems'
results of operations from and after the closing of the transaction. For
purposes of preparing Cardiosystems' results of operations, Cardiosystems will
establish a new accounting basis for Thoratec's identifiable tangible and
intangible assets and liabilities based upon the fair values thereof, and record
goodwill for the difference between the purchase price, including the direct
costs of the transaction, and the fair value of such net assets. A final
determination of required purchase accounting adjustments and of the fair value
of the assets and liabilities of Thoratec has not yet been made. Accordingly,
the purchase accounting adjustments made in connection with the development of
the comparative pro forma per share financial information appearing elsewhere in
this statement are preliminary and subject to change. See "The
Merger -- Accounting Treatment for the Merger" on page .
INTERESTS OF CERTAIN PERSONS IN THE MERGER
When considering the recommendations of Cardiosystems' and Thoratec's
boards of directors, you should be aware that certain Cardiosystems directors
and officers, Thermo Electron and certain Thoratec directors and officers have
interests in the merger that are different from, or are in addition to, yours.
These interests include, for officers and directors of both Thoratec and
Cardiosystems, the acceleration of options, payment of bonuses if the merger is
completed or as an inducement to remain with the company after the merger, and
the continuing indemnification of directors and officers of Cardiosystems
against certain liabilities both before and
3
<PAGE> 16
after the merger. See "The Merger -- Interests of Thoratec Directors and
Officers in the Merger" on page and "The Merger -- Interests of Thermo
Electron and Cardiosystems' Directors and Officers and Significant Stockholders
in the Merger" on page .
DISSENTERS' RIGHTS
Under Massachusetts law, stockholders of Cardiosystems are entitled to
exercise dissenters' rights in connection with the merger, if they follow the
proper procedures to perfect their dissenters' rights. See "The Cardiosystems
Meeting -- Massachusetts Dissenters' Rights" beginning on page .
Under California law, shareholders of Thoratec are entitled to exercise
dissenters' rights in connection with the merger, if they follow the proper
procedures to perfect their dissenters' rights, and holders of at least 5% of
Thoratec's outstanding shares perfect such rights. See "The Thoratec
Meeting -- California Dissenters' Rights" beginning on page .
RESTRICTIONS ON THE SALE OF CERTAIN THORATEC SHARES RECEIVED IN THE MERGER
Most of the Cardiosystems stockholders receiving Thoratec shares in the
merger will be free to sell their Thoratec shares after the merger. However,
persons and entities considered to be affiliates, including Thermo Electron, of
either Cardiosystems or Thoratec under the Securities Act will not be able to
sell their shares freely. Their shares may only be sold under a registration
statement or an exemption from the registration requirements of the Securities
Act.
Certain Thoratec officers have agreed not to sell or transfer a portion of
their shares issuable upon exercise of existing options during the period ending
18 months after the merger. See "The Merger -- Interests of Thoratec Directors
and Officers in the Merger." Thermo Electron, the majority stockholder of
Cardiosystems, will receive approximately 19,313,000 shares of Thoratec common
stock in the merger. Thermo Electron has agreed not to sell or transfer any of
those shares for a period of four months after the merger. Thereafter, Thermo
Electron may sell or transfer 25% of those shares during the period ending one
year after the merger, an additional 25% (for a total of 50%) of those shares
during the period ending 18 months after the merger and all of the shares (for a
total of 100%) beginning 18 months after the merger. Thermo Electron's ability
to transfer the shares will be further limited by the shareholder agreement
attached as Annex E. In connection with the merger, Thoratec is also granting
Thermo Electron certain registration rights under which Thermo Electron will
have its shares of Thoratec stock registered for resale under the Securities Act
of 1933. These rights are set out in detail in the registration rights agreement
attached as Annex D.
4
<PAGE> 17
FORWARD LOOKING STATEMENTS
This statement, including the documents incorporated by reference, contains
certain forward looking statements (as that term is defined in Section 27A of
the Securities Act and Section 21E of the Securities Exchange Act of 1934) and
information relating to Thoratec and Cardiosystems and their current
expectations about future events. Actual results could differ materially from
those discussed in, or implied by, these forward looking statements. The forward
looking statements are based on the beliefs of, as well as assumptions made by
and information currently available to, the management of Thoratec and the
management of Cardiosystems. Forward looking statements include, but are not
necessarily limited to, those relating to:
- the ability to obtain and maintain regulatory approval of Thoratec's and
Cardiosystems' products in the United States and internationally
- plans to develop and market new products
- other competing therapies that may in the future be available to heart
failure patients or patients in new markets, which Thoratec and
Cardiosystems enter and
- the ability to improve Thoratec's and Cardiosystems' financial
performance.
Factors that could cause actual results or conditions to differ from those
anticipated by these and other forward looking statements include those more
fully described in the "Risk Factors" section and elsewhere in this statement.
Thoratec and Cardiosystems are not obligated to update or revise these
forward-looking statements to reflect new events or circumstances.
When used in this statement, the words "likely," "will," "suggests," "may,"
"would," "could," "anticipate," "believe," "estimate," "expect," "intend,"
"plan," "predict" and similar expressions and their variants, as they relate to
Thoratec or Cardiosystems or the management of either company, may identify
forward looking statements. In addition, statements that refer to expectations,
projections or other characterizations of future events or circumstances are
forward looking statements. Such statements reflect the judgment of Thoratec or
Cardiosystems management as of the date of this statement with respect to future
events, the outcome of which is subject to certain risks, including the risk
factors set forth in this statement, which may have a significant impact on the
business, operating results or financial conditions of Thoratec, Cardiosystems
or the combined company if and after the merger is completed. Thoratec
shareholders and Cardiosystems stockholders are cautioned that these forward
looking statements are inherently uncertain. Should one or more of these risks
or uncertainties materialize, or should underlying assumptions prove incorrect,
actual results or outcomes may vary materially from those described in this
statement. Neither Thoratec nor Cardiosystems undertakes any obligation to
update any forward looking statements.
You should rely only on the information contained or incorporated into this
statement. Neither Thoratec nor Cardiosystems has authorized anyone to provide
you with different information. We are not making an offer to sell any Thoratec
shares issuable in the merger in any jurisdiction where the offer or sale is not
permitted. You should assume that the information appearing in this statement is
accurate as of the date of this statement only. The business, financial
condition, results of operations and prospects of Thoratec or Cardiosystems may
have changed since that date.
WHERE YOU CAN FIND MORE INFORMATION
Thoratec and Cardiosystems file annual, quarterly and current reports,
statements and other information with the Securities and Exchange Commission.
You may read and copy any document we file at the SEC's public reference room at
450 Fifth Street, NW, Washington, D.C., 20549, and at the SEC's public reference
rooms in Chicago, Illinois and New York, New York. Please call the SEC at
1-800-SEC-0330 for further information concerning the public reference rooms.
SEC filings are also available to the public on the SEC's Website at
http://www.sec.gov. Reports, statements and other information concerning
Thoratec can be inspected at the NASDAQ National Market, Operations, 1735 K
Street N.W., Washington, D.C. 20006. Reports, statements and other information
concerning Cardiosystems can be inspected at the offices of the American Stock
Exchange, 33 Whitehall Street, New York, New York 10004.
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<PAGE> 18
Thoratec has filed with the SEC a registration statement on Form S-4 under
the Securities Act for the common stock offered in connection with the merger.
This statement does not contain all the information set forth in that
registration statement. We have omitted certain parts of the registration
statement in accordance with the rules and regulations of the SEC. For further
information about Thoratec and the common stock, you should refer to the
registration statement. Statements contained in this statement as to the
contents of any contract or other document are not necessarily complete. In each
instance, you should refer to the copy of the contract or document filed as an
exhibit to or incorporated by reference in the registration statement. Each
statement as to the contents of a contract or document is qualified in all
respects by that reference. You may obtain copies of the registration statement
from the SEC's principal office in Washington, D.C. upon payment of the fees
prescribed by the SEC, or examine the registration statement without charge at
the offices of the SEC described above.
The SEC allows us to "incorporate by reference" the information we file
with the SEC, which means we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this statement, and information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below and future filings we will make with the
SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act.
The Thoratec documents we incorporate by reference are Thoratec's:
- Annual Report on Form 10-K and all amendments for the fiscal year ended
January 1, 2000
- Quarterly Report on Form 10-Q for the period ended April 1, 2000
- Quarterly Report on Form 10-Q for the period ended July 1, 2000 and
- the description of Thoratec's common stock contained in Thoratec's
registration statement on Form 8-A filed with the SEC on May 18, 1981.
The Cardiosystems documents we incorporate by reference are Cardiosystems':
- Annual Report on form 10-K and all amendments for the fiscal year ended
January 1, 2000
- Quarterly Report on Form 10-Q for the period ended April 1, 2000
- Quarterly Report on Form 10-Q for the period ended July 1, 2000 and
- the description of Cardiosystems' common stock contained in
Cardiosystems' registration statement on Form 8-A filed with the SEC on
May 17, 1990.
You may request a copy of Thoratec's filings at no cost by writing or
telephoning:
THORATEC LABORATORIES CORPORATION
INVESTOR RELATIONS
6035 Stoneridge Drive
Pleasanton, California 94588
(925) 847-8600
e-mail address: [email protected]
You may request a copy of Cardiosystems' filings at no cost by writing or
telephoning:
THERMO CARDIOSYSTEMS INC.
c/o Thermo Electron Corporation
81 Wyman Street
Waltham, Massachusetts 02454
(781) 622-1111
e-mail address: [email protected]
To ensure timely delivery of the documents, any requests should be made by
, 200 .
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<PAGE> 19
RISK FACTORS
The merger involves a high degree of risk. By voting for the merger, the
Cardiosystems stockholders will be choosing to invest in Thoratec common stock,
and the Thoratec shareholders will face dilution of their ownership interest in
Thoratec. An investment in Thoratec stock involves a high degree of risk. In
addition to the other information contained in this statement, you should
carefully consider all the following risk factors relating to the proposed
merger, the combined company, Thoratec and Cardiosystems, in deciding whether to
vote for the merger and the related issuance of Thoratec shares.
GENERAL RISKS RELATED TO THE MERGER
AND THE COMBINED COMPANY
THE NUMBER OF THORATEC SHARES TO BE RECEIVED BY THE CARDIOSYSTEMS STOCKHOLDERS
IN THE MERGER IS FIXED AND WILL NOT BE ADJUSTED FOR CHANGES IN THE PRICE OF
THORATEC OR CARDIOSYSTEMS SHARES.
Thoratec's stock price is volatile. The value of Thoratec stock issued in
the merger will depend on its market price at the time the merger closes and
afterwards. No adjustment will be made as a result of changes in the market
price of Thoratec's stock. When the merger closes, each share of Cardiosystems
stock will be exchanged for .835 of a share of Thoratec stock. This exchange
ratio will not be adjusted for changes in the market price of Thoratec stock or
Cardiosystems stock. Any reduction in Thoratec's stock price will result in
Cardiosystems' stockholders receiving less value in the merger at the closing.
Any increase in Thoratec's stock price will result in Cardiosystems'
stockholders receiving more value in the merger at the closing. Cardiosystems'
and Thoratec's stockholders will not know the exact value of Thoratec's stock to
be issued to Cardiosystems' stockholders in the merger at the time of the
special meeting of Cardiosystems' stockholders. Cardiosystems has the right to
terminate the merger agreement if the average closing price of Thoratec stock
during the 20-trading-day period ending with the fifth full trading day
immediately before the date of the Thoratec special meeting is less then $14.
Thoratec has the right to terminate the merger agreement if that average price
is less then $11. However, the parties may choose to complete the merger even if
that average price is below these amounts.
THORATEC WILL FACE SIGNIFICANT CHALLENGES IN INTEGRATING CARDIOSYSTEMS AND, AS A
RESULT, MAY NOT REALIZE THE EXPECTED BENEFITS OF THE MERGER.
Thoratec and Cardiosystems have different technologies, products and
business operations that have operated independently. The combination of these
businesses after the merger will be complex and difficult. Thoratec is uncertain
that the integration will be completed in a timely manner. If Thoratec fails to
integrate the businesses successfully, the operating results of the combined
company could be adversely affected and the combined company may not achieve the
benefits or operating efficiencies that we hope to obtain from the merger. The
uncertainty of whether Thoratec and Cardiosystems employees will remain with the
combined company after announcement of the merger and during the integration
process may also affect business operations of each company. Thoratec may not be
able to retain enough key employees for the combined company to operate its
business effectively during the period before or after the merger. We do not yet
know that the products, systems and personnel of the two companies will be fully
compatible.
THE COSTS OF COMPLETING THE MERGER ARE SUBSTANTIAL, AND WILL AFFECT THORATEC'S
RESULTS OF OPERATIONS.
Completion of the merger will result in substantial costs. These,
primarily, are costs associated with combining the businesses of the two
companies and the fees of financial advisors, attorneys, consultants and
accountants. Unanticipated events could increase the costs of combining the two
companies. In any event, costs associated with the merger will negatively affect
Thoratec's results of operations for at least a year after the merger is
completed.
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<PAGE> 20
IF THORATEC DOES NOT SUCCESSFULLY INTEGRATE CARDIOSYSTEMS OR THE MERGER'S
BENEFITS DO NOT MEET THE EXPECTATIONS OF INVESTORS OR FINANCIAL OR INDUSTRY
ANALYSTS, THE MARKET PRICE OF THORATEC STOCK MAY DECLINE.
The market price of Thoratec stock may decline as a result of the merger
for any of the following reasons, among others:
- the integration of Thoratec and Cardiosystems is not completed in a
timely and efficient manner
- Thoratec does not achieve the benefits of the merger as rapidly as, or to
the extent, anticipated by financial or industry analysts
- significant numbers of shareholders of Thoratec after the merger dispose
of their shares.
DURING THE PENDENCY OF THE MERGER, CARDIOSYSTEMS AND THORATEC MAY NOT BE ABLE TO
ENTER INTO A MERGER OR BUSINESS COMBINATION WITH ANOTHER PARTY AT A FAVORABLE
PRICE BECAUSE OF RESTRICTIONS IN THE MERGER AGREEMENT.
In general, until the merger is completed or the merger agreement is
terminated, Cardiosystems is prohibited from soliciting, initiating or
encouraging any inquiries or proposals that may lead to a proposal or offer for
a merger, consolidation, business combination, sale of substantial assets,
tender offer, sale of shares of stock or other similar transactions with any
other party. Thoratec is similarly prohibited with respect to similar
transactions. As a result of these prohibitions, Cardiosystems and Thoratec may
not be able to enter into an alternative transaction at a favorable price.
CARDIOSYSTEMS' AND THORATEC'S OFFICERS AND DIRECTORS AND THERMO ELECTRON HAVE
CONFLICTS OF INTEREST THAT MAY INFLUENCE THEM TO SUPPORT OR APPROVE THE MERGER.
Thermo Electron and the directors and officers of Cardiosystems and
Thoratec participate in arrangements and are entitled to continuing
indemnification against liabilities that provide them with interests in the
merger that are different from, or in addition to, those of other Cardiosystems
stockholders and Thoratec shareholders, including:
- As of December , 2000, the executive officers and directors of Cardiosystems
owned, or held options to purchase, a total of approximately
shares of Cardiosystems stock. Approximately of these shares
are subject to a right of repurchase by Cardiosystems under the terms of its
stock option plans. If the merger is completed, Cardiosystems' right to
repurchase with respect to all of the shares immediately lapses.
- As of December , 2000, the officers of Thoratec owned options to purchase a
total of approximately shares of Thoratec stock, of which
approximately shares are unvested. All of these unvested
options will vest upon the closing of the merger.
- Two officers who are also directors of Cardiosystems are entitled to payments
based on the value of the Thoratec stock received by the Cardiosystems
stockholders.
- The officers of Thoratec are entitled to certain benefits, including severance
packages, if their employment is terminated after a change of control of
Thoratec, such as in the merger.
- Certain officers of Cardiosystems are entitled to certain benefits, including
severance packages, if their employment is terminated after a change of
control of Cardiosystems, such as in the merger.
- Thermo Electron and Thoratec have entered into a shareholder agreement
providing Thermo Electron the right to appoint one director to Thoratec's
board of directors and limiting the ability of Thermo Electron to transfer or
acquire additional shares of Thoratec common stock.
- Thermo Electron and Thoratec have entered into a registration rights agreement
that requires Thoratec to register, with the SEC under the Securities Act, the
shares of Thoratec stock received by Thermo Electron in the merger for resale
by Thermo Electron.
- Thoratec has agreed to indemnify each present and former Cardiosystems officer
and director against liabilities arising out of that person's services as an
officer or director.
- Thoratec will pay for officers' and directors' liability insurance to cover
such liabilities for the next six years.
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<PAGE> 21
As a result, Thermo Electron and the directors and officers of
Cardiosystems and Thoratec may have been and be more likely to vote to approve
(and recommend that shareholders vote to approve) the merger agreement and the
merger than if they did not have these interests. Cardiosystems stockholders and
Thoratec shareholders should consider whether these interests may have
influenced Thermo Electron and these directors and officers to support or
recommend the merger. You may read more about these interests beginning on pages
and .
UNCERTAINTIES ASSOCIATED WITH THE MERGER MAY CAUSE THORATEC AND CARDIOSYSTEMS TO
LOSE KEY PERSONNEL.
Current and prospective Thoratec employees and Cardiosystems employees may
experience uncertainty about their future roles with Thoratec and Cardiosystems
after the merger. This uncertainty may adversely affect Thoratec's and
Cardiosystems' ability to attract and retain key management, sales, marketing
and technical personnel. In addition, Thoratec's ability successfully to
integrate the two companies may be adversely affected if a significant number of
key personnel depart before or after the merger.
THE MERGER WILL HAVE A NEGATIVE IMPACT ON PROFITABILITY.
As a result of the merger, Thoratec expects to incur a noncash "in process
research and development" expense of approximately $75 million in the period
that the merger closes and will incur transaction related expenses. In addition,
as a result of the merger, Thoratec will recognize goodwill (currently estimated
to be approximately $103 million) that Thoratec expects to amortize over 20
years and additional noncash intangible assets (currently estimated to be
approximately $203 million) that Thoratec expects to amortize over periods
ranging from 8 to 20 years. This amortization will result in a non-cash expense
that will reduce any reported operating profit during the amortization period.
THORATEC'S STOCK PRICE HAS BEEN VOLATILE, IS LIKELY TO CONTINUE TO BE VOLATILE
AND COULD DECLINE SUBSTANTIALLY.
The price of Thoratec's stock has been, and is likely to continue to be,
highly volatile, including after the merger. That price could fluctuate
significantly for the following reasons:
- future announcements concerning the combined company and its competitors
- quarterly variations in operating results
- introduction of new products or changes in product pricing policies by
the combined company or its competitors
- acquisition or loss of significant customers, distributors and suppliers
- changes in earnings estimates by analysts
- changes in third party reimbursement practices
- regulatory developments or
- fluctuations in the economy or general market conditions.
In addition, stock markets in general, and the market for shares of medical
device and life science stocks in particular, have experienced extreme price and
volume fluctuations in recent years that have frequently been unrelated to the
operating performance of the affected companies. These broad market fluctuations
may adversely affect the market price for Thoratec's stock, including after the
merger. The market price of Thoratec's stock could decline below its current
price and may fluctuate significantly in the future. These fluctuations may or
may not be related to the combined company's performance or prospects.
In the past, shareholders have often instituted securities class action
litigation after periods of volatility in the market price of a company's
securities. If a shareholder files a securities class action suit, Thoratec,
Cardiosystems or the combined company would incur substantial legal fees and its
management's attention and resources could be diverted from operating the
business of the combined company in order to respond to the litigation.
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<PAGE> 22
FUTURE SALES OF THORATEC'S STOCK COULD ADVERSELY AFFECT ITS STOCK PRICE.
Future sales of substantial amounts of Thoratec's stock in the public
market, or the perception that such sales could occur, could adversely affect
the market price of Thoratec's stock. For example, Thermo Electron will own
approximately 19 million shares and those shares will be eligible for sale
starting four months following the merger.
THORATEC DOES NOT ANTICIPATE PAYING DIVIDENDS.
Neither Thoratec nor Cardiosystems has ever paid any dividends. Thoratec
intends that, after the merger, it will retain its earnings, if any, for the
future operation and expansion of the combined company's business.
RISKS RELATED TO THORATEC OR CARDIOSYSTEMS OR BOTH COMPANIES
EVEN IF THE MERGER DOES NOT OCCUR
THORATEC HAS A HISTORY OF NET LOSSES AND MAY NOT ACHIEVE OR MAINTAIN
PROFITABILITY.
Thoratec was founded in 1976. It has incurred a loss from operations in all
but one of the years of its existence. At the end of fiscal year 1999,
Thoratec's accumulated deficit was approximately $55.2 million. Although
Thoratec achieved profitability in the first two quarters of 2000, it may not be
able to sustain or increase profitability on a quarterly or annual basis. In
addition, Thoratec anticipates that its expenses will increase as a result of
increased preclinical and clinical testing, research and development and
selling, general and administrative expenses. Additionally, Thoratec will incur
significant costs in connection with the merger even if the merger does not
close.
PHYSICIANS MAY NOT ACCEPT OR CONTINUE TO ACCEPT THORATEC'S OR CARDIOSYSTEMS'
PRODUCTS AND PRODUCTS UNDER DEVELOPMENT.
A limited number of cardiovascular and vascular surgeons and interventional
cardiologists influence medical device selection and purchase decisions for a
large portion of the target cardiac patient population. In addition, physicians'
acceptance of Cardiosystems' whole-blood coagulation monitoring systems and
Coumadin monitors is important to the success of those products. Accordingly,
the success of Thoratec's and Cardiosystems' current and future products will
require acceptance or continued acceptance by cardiovascular and vascular
surgeons and interventional cardiologists and other physicians. That acceptance
will depend on clinical results and the conclusion by these physicians that
Thoratec's and Cardiosystems' products are safe, cost-effective and acceptable
alternative methods of treatment. Thoratec's and Cardiosystems' products may not
provide benefits considered adequate by providers of cardiovascular and vascular
treatments or a sufficient number of such providers may not use their products.
Even if the safety and efficacy of Thoratec's and Cardiosystems' products are
established, physicians may elect not to use them for a number of reasons. These
reasons could include the high cost of equipment and training associated with
their use or unfavorable reimbursement from health care payors.
Thoratec and Cardiosystems have each developed working relationships with
cardiac surgeons and cardiologists at a number of leading medical centers in
connection with developing their respective products. In addition, surgical
teams at these medical institutions have performed clinical trials to support
applications to be filed with the FDA by Thoratec and Cardiosystems. A
continuing working relationship with these and other physicians and medical
centers will be important to the commercial acceptance of the present and any
future products. Thoratec and Cardiosystems may fail to maintain existing
relationships and arrangements and fail to establish new relationships in
support of their products and technologies. Also, economic, psychological,
ethical and other concerns may limit the general acceptance of ventricular
assist and graft devices.
THORATEC AND CARDIOSYSTEMS RELY ON SPECIALIZED SUPPLIERS.
Thoratec and Cardiosystems each depend on a number of custom-designed
components and materials supplied by other companies including, in some cases,
single source suppliers. If either company needs
10
<PAGE> 23
alternative sources for key components or materials for any reason, those
component or material parts may not be available. For example, Arrow
International, Inc. is currently the single source of supply for valves used in
Thoratec's VAD System. Sales of the VAD System accounted for substantially all
of Thoratec's revenue in 1998, 1999 and the first nine months of 2000. Cessation
or interruption of VAD System sales would have a material adverse effect on
Thoratec's business, financial condition and results of operations.
Alternative suppliers may not agree to supply Thoratec or Cardiosystems. In
addition, new suppliers must be approved by the FDA. The cost to Thoratec and
Cardiosystems to evaluate and test alternative materials and components and the
time necessary to obtain FDA approval for these materials and components are
inherently difficult to determine because both time and cost are dependent on at
least two factors, the similarity of the alternative material or component to
the original material or component, and the amount of third-party testing that
may have already been completed on alternative materials or components. If
alternative suppliers are not available, Thoratec or Cardiosystems may not have
the expertise or resources necessary to produce such materials or component
parts internally. For example, in 1999 Thoratec decided to change manufacturers
for a valve in its portable driver, which Thoratec calls its TLC-II. Thoratec
experienced delays in shipping the TLC-II while Thoratec qualified a new
component manufacturer for these valves. As a result of this delay, Thoratec put
a voluntary hold on further enrollment in U.S. clinical trials for the TLC-II
portable driver and on shipments of this device to new centers in Europe. Any
interruption in the supply of raw materials or component parts could have a
material adverse effect on Thoratec's ability to manufacture products until a
satisfactory new source of supply is located.
THORATEC AND CARDIOSYSTEMS MAY ENCOUNTER PROBLEMS MANUFACTURING THEIR PRODUCTS.
Thoratec and Cardiosystems may encounter difficulties manufacturing their
products for a number of reasons. For example:
- Thoratec and Cardiosystems do not have experience in manufacturing their
products in the commercial quantities that might be required if they
receive FDA approval of several or all of the products currently under
development
- the manufacture of Thoratec's and Cardiosystems' products is complex and
costly, involving a number of separate processes and components and
- certain manufacturing processes are labor intensive, with the result that
Thoratec's or Cardiosystems' achieving significant cost reductions will
depend in part upon reducing the time required to complete these
processes.
In addition, manufacturers often encounter difficulties in scaling up the
manufacture of new products. These difficulties include, for example:
- problems involving product yields, quality control and assurance
- component and service availability
- adequacy of control policies and procedures and
- lack of qualified personnel.
Thoratec and Cardiosystems will consider whether they should internally
manufacture components that are currently provided by third parties. They may
not be able to obtain or manufacture such products in a timely fashion at
acceptable quality and prices. In addition, Thoratec and Cardiosystems may not
be able to comply with the FDA's current good manufacturing practices, which is
called cGMP. Thoratec and Cardiosystems and their suppliers may not be able to
manufacture an adequate supply of products.
THORATEC AND CARDIOSYSTEMS FACE INTENSE COMPETITION.
Competition from medical device companies and medical device subsidiaries
of health care and pharmaceutical companies is intense and expected to increase.
Many competitors have substantially greater financial, technical, distribution
and marketing resources than Thoratec and Cardiosystems have. In addition,
11
<PAGE> 24
many of these competitors have significantly greater experience than Thoratec
and Cardiosystems have in obtaining regulatory approvals for medical devices.
Accordingly, competitors may succeed in obtaining regulatory approval more
rapidly than Thoratec or Cardiosystems does. Furthermore, many of these
competitors have superior manufacturing capabilities and may be able to
manufacture products more efficiently and at lower costs than Thoratec and
Cardiosystems. Competitors may therefore offer competitive products at lower
prices than the prices at which Thoratec or Cardiosystems offers products. Any
product they develop that gains regulatory approval will have to compete for
market acceptance and market share. An important factor in that competition may
be the timing of market introduction of competitive products. Accordingly,
Thoratec and Cardiosystems expect that competitive factors will include the
relative speeds with which they can:
- develop products
- complete clinical testing
- receive regulatory approval and
- manufacture and sell commercial quantities of products.
COMPETITORS MAY DEVELOP MORE EFFECTIVE PRODUCTS AND RENDER THORATEC'S OR
CARDIOSYSTEMS PRODUCTS OBSOLETE.
Competitors may succeed in developing and marketing technologies and
products that are more effective than Thoratec's or Cardiosystems' technologies
and products. Any such technologies or products may render Thoratec's or
Cardiosystems' technologies and products obsolete or uncompetitive. In addition,
new surgical procedures and medications could be developed that replace or
reduce the importance of current procedures that use Thoratec's or
Cardiosystems' products. Accordingly, Thoratec's and Cardiosystems' success will
depend in part on their ability to respond quickly to medical and technological
changes by developing and introducing new products or modifying existing
products.
IF THORATEC OR CARDIOSYSTEMS FAIL TO OBTAIN APPROVAL FROM THE FDA AND FOREIGN
REGULATORY AUTHORITIES, THEY CANNOT MARKET AND SELL PRODUCTS UNDER DEVELOPMENT
IN THE UNITED STATES AND OTHER COUNTRIES.
Before Thoratec and Cardiosystems can market new products in the United
States, they must obtain clearance from the FDA. This process can be lengthy and
uncertain. In the United States, one must obtain clearance from the FDA of a
so-called 510(k) premarket notification or approval of a more extensive
submission known as a premarket approval, also known as a PMA, application. If
the FDA concludes that any of Thoratec's or Cardiosystems' products do not meet
the requirements to obtain clearance under Section 510(k) of the Federal Food,
Drug and Cosmetic Act, Thoratec or Cardiosystems would be required to file a PMA
application. The process for a PMA application can be lengthy, expensive and
typically requires extensive preclinical and clinical trial data.
Thoratec and Cardiosystems may not obtain clearance of a 510(k)
notification or approval of a PMA application for any of their products on a
timely basis, if at all. If they fail to obtain timely clearance or approval for
products, they will not be able to market and sell those products. That will
limit their ability to generate revenue. Thoratec and Cardiosystems may also be
required to obtain clearance of a 510(k) notification or PMA application from
the FDA before they can market certain previously marketed products that they
modify after the products have been cleared.
The FDA also requires Thoratec and Cardiosystems to adhere to cGMP
regulations, which include production design controls, testing, quality control,
storage and documentation procedures. The FDA may at any time inspect Thoratec's
or Cardiosystems' facilities to determine whether they adequately comply.
Compliance with cGMP regulations for medical devices is difficult and costly. In
addition, facilities may not be found to comply as a result of future changes
in, or new interpretations of, regulations by the FDA or other regulatory
agencies. If Thoratec or Cardiosystems does not achieve compliance, the FDA may
withdraw marketing clearance, require product recalls or take other enforcement
action. Any change or modification in a device is required to be made in
compliance with cGMP regulations, which may cause interruptions or delays in the
marketing and sale of products.
12
<PAGE> 25
Sales of Thoratec's and Cardiosystems' products outside the United States
are subject to foreign regulatory requirements that vary from country to
country. The time required to obtain approvals from foreign countries may be
longer or shorter than that required for FDA approval, and requirements for
foreign licensing may differ from FDA requirements.
The federal, state and foreign laws and regulations regarding the
manufacture and sale of Thoratec's and Cardiosystems' products are subject to
future changes, as are administrative interpretations and policies of regulatory
agencies. If they fail to comply with applicable federal, state or foreign laws
or regulations, Thoratec or Cardiosystems could be subject to enforcement
actions. Enforcement actions could include product seizures, recalls, withdrawal
of clearances or approvals, and civil and criminal penalties.
THORATEC'S OR CARDIOSYSTEMS' INABILITY TO PROTECT PROPRIETARY TECHNOLOGIES COULD
HARM THEIR COMPETITIVE POSITIONS.
Thoratec's and Cardiosystems' success depend, in part, on their ability to
maintain the proprietary nature of their technology, products and manufacturing
processes. Thoratec and Cardiosystems rely on trade secrets, know-how and
patents to maintain their competitive positions. Thoratec has been issued or has
licensed a number of U.S. and foreign patents covering its core biomaterials
technology and its graft technologies. In addition, Thoratec and Cardiosystems
have each filed other U.S. and non-U.S. patent applications. Aside from the
biomaterials patents mentioned above, which are used in Thoratec's VAD System
blood pump and cannulae, and one TLC-II patent, Thoratec's VAD System is not
protected by any patents. Cardiosystems relies principally on trade secret
protection and, to a lesser extent, patents to protect its rights with respect
to LVAS and its reagents. It does, however, rely principally on patents to
protect its coagulation equipment and skin-incision products.
Any existing or future patent applications may not result in issued
patents. In addition, current or future trade secrets, know-how or issued or
licensed patents may not sufficiently protect Thoratec or Cardiosystems from
competitors with similar technologies or processes. Others may independently
develop proprietary technologies and processes that are the same as or
substantially equivalent to those of Thoratec or Cardiosystems. Any patents
issued may be infringed or designed around by others.
Thoratec's or Cardiosystems' products may be found to infringe prior or
future patents owned by others. Accordingly, they may need to acquire licenses
under patents belonging to others for technology potentially useful or
necessary, and such licenses may not be available to Thoratec or Cardiosystems.
They could incur substantial costs in defending suits based on such patents or
in bringing suits to protect their patents or patents licensed by them against
infringement.
Cardiosystems has received correspondence from another company alleging
that Cardiosystems' LVAS infringes certain patent rights of that company.
Cardiosystems believes it has meritorious defenses to that claim but cannot
assure that it would be successful were the matter litigated.
THORATEC AND CARDIOSYSTEMS DEPEND ON DISTRIBUTORS. IF THEY LOSE A DISTRIBUTOR OR
A DISTRIBUTOR FAILS TO PERFORM, THEIR OPERATIONS WOULD BE HARMED.
With the exception of Canada and Europe, Thoratec sells its VAD System in
foreign markets through distributors. In addition, Thoratec sells its vascular
access graft products through Goodman Co. Ltd., its distributor in Japan, and
through Guidant Corporation in the rest of the world. Thoratec will rely on
Guidant for sales of the Vectra in the United States, if Thoratec receives
regulatory approval for that product. Cardiosystems sells it Heartmate System in
foreign markets through distributors, and Cardiosystems' ITC subsidiary relies
on distributors in all markets. Allied Healthcare is ITC's United States
distributor. Allied Healthcare's sales represented approximately 20% of
Cardiosystems' consolidated revenues during the first nine months of 2000. To
the extent Thoratec and Cardiosystems rely on distributors, their success will
depend on the efforts of others, over which they may have little control. If
Thoratec or Cardiosystems loses a distributor or a distributor fails to perform,
Thoratec's or Cardiosystems' revenues will be adversely affected.
13
<PAGE> 26
SINCE THORATEC AND CARDIOSYSTEMS EACH DEPEND ON THIRD PARTY REIMBURSEMENT TO
CUSTOMERS, IF THIRD PARTY PAYORS FAIL TO PROVIDE APPROPRIATE LEVELS OF
REIMBURSEMENT FOR PRODUCTS, THE OPERATIONS OF THORATEC OR CARDIOSYSTEMS WOULD BE
HARMED.
The cost of implanting a cardiac support system is substantial. In
addition, Cardiosystems' coagulation testing equipment can cost several thousand
dollars per instrument. Without the financial support of government or
third-party insurers, the markets for Thoratec's and Cardiosystems' equipment
and devices are limited.
Significant uncertainty exists as to the reimbursement status of
newly-approved health care products such as Thoratec's VAD System and its
vascular grafts and Cardiosystems' Heartmate System. Government and other third
party payors are increasingly attempting to contain health care costs. Payors
are attempting to contain costs by, for example, limiting coverage and the level
of reimbursement of new therapeutic products. Payors are also attempting to
contain costs by refusing in some cases to provide any coverage of uses of
approved products for disease indications other than those for which the FDA has
granted marketing approval.
To date, some private insurers, Medicare and Medicaid have determined to
reimburse the costs of Thoratec's VAD System and Cardiosystems' Heartmate
System. These systems may not continue to be approved for reimbursement. In
addition, changes in the health care system may affect the reimbursability of
future products. If Thoratec or Cardiosystems fail to obtain such reimbursement
or if the reimbursement levels are reduced, their revenues would be reduced.
PRODUCT LIABILITY CLAIMS COULD DAMAGE THORATEC'S OR CARDIOSYSTEMS' REPUTATION
AND HURT THEIR FINANCIAL RESULTS.
Thoratec's and Cardiosystems' businesses expose them to an inherent risk of
potential product liability claims related to medical devices for human use.
Thoratec and Cardiosystems carry only a limited amount of product liability
insurance. Thoratec and Cardiosystems also have general commercial and property
insurance. Thoratec's and Cardiosystems' insurance policies generally must be
renewed on an annual basis. They may not be able to maintain or increase such
insurance on acceptable terms or at reasonable costs, and such insurance may not
provide adequate coverage against potential liabilities. A successful claim
brought against Thoratec or Cardiosystems in excess of, or outside, their
insurance coverages could have a material adverse effect on their financial
condition and results of operations. Claims against Thoratec or Cardiosystems,
regardless of their merit or potential outcome, may also reduce their ability to
obtain physician endorsement of products or expand their businesses.
THORATEC'S AND CARDIOSYSTEMS' NON-U.S. SALES PRESENTS SPECIAL RISKS.
During 1999, sales originating outside the U.S. and U.S. export sales
accounted for approximately 23% of Thoratec's total revenues and 17% of
Cardiosystems' total revenues. Cardiosystems and Thoratec anticipate that sales
outside the U.S. and U.S. export sales will continue to account for a
significant percentage of their revenues. Both companies hope to continue to
expand their presence in international markets. Non-U.S. sales are subject to a
number of special risks. For example, agreements may be difficult to enforce and
receivables difficult to collect through a foreign country's legal system,
foreign customers may have longer payment cycles, foreign countries may impose
additional withholding taxes or otherwise tax Thoratec's or Cardiosystems'
foreign income, impose tariffs or adopt other restrictions on foreign trade,
U.S. export licenses may be difficult to obtain, intellectual property may be
more difficult to enforce in foreign countries, and fluctuations in exchange
rates may affect product demand and adversely affect the profitability, in U.S.
dollars, of products sold in foreign markets where payments are made in local
currencies.
ANY CLAIMS RELATING TO IMPROPER HANDLING, STORAGE OR DISPOSAL OF HAZARDOUS
CHEMICALS AND BIOMATERIALS COULD BE TIME CONSUMING AND COSTLY.
Production of Thoratec's proprietary biomaterial, Thoralon, requires the
use of hazardous materials, including chemicals and biomaterials. Thoratec
cannot necessarily eliminate the risk of accidental contamina-
14
<PAGE> 27
tion or discharge or any resultant injury from these materials. Federal, state
and local laws and regulations govern the use, manufacture, storage, handling
and disposal of these materials.
Thoratec or Cardiosystems could be subject to civil damages in the event of
an improper or unauthorized release of, or exposure of individuals to, hazardous
materials. In addition, claimants may sue us for injury or contamination that
results from their use or the use by third parties of these materials.
Compliance with environmental laws and regulations may be expensive, and current
or future environmental regulations may impair our research, development or
production efforts.
15
<PAGE> 28
THORATEC SELECTED CONSOLIDATED FINANCIAL DATA
These selected financial data of Thoratec have been derived from the
audited historical consolidated financial statements and related notes of
Thoratec for each of the years in the five-year period ended January 1, 2000 and
the unaudited consolidated financial statements for the six months ended July 1,
2000 and July 3, 1999. These historical data are only a summary. You should read
them in conjunction with the historical financial statements and related notes
contained in the annual and quarterly reports of Thoratec that have been
incorporated by reference into this statement.
<TABLE>
<CAPTION>
SIX MONTHS ENDED FISCAL YEARS ENDED(A)
----------------- -----------------------------------------------
JULY 1, JULY 3,
2000 1999 1999 1998 1997 1996 1995
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Product Sales....................... $14,867 $10,267 $22,508 $16,320 $ 9,441 $ 7,503 $ 3,489
Net Income (Loss)................... 1,002 (389) (1,789) (2,321) (4,402) (3,263) (1,894)
Earnings (Loss) per Share:
Basic............................. 0.05 (0.02) (0.09) (0.11) (0.24) (0.20) (0.13)
Diluted........................... 0.04 (0.02) (0.09) (0.11) (0.24) (0.20) (0.13)
BALANCE SHEET DATA (AT END OF
PERIOD):
Cash and Cash Equivalents........... $18,192 $ 1,697 $ 2,713 $ 9,469 $ 5,438 $ 1,646
Working Capital..................... 28,239 10,533 11,251 15,885 17,266 2,808
Total Assets........................ 42,036 25,060 25,208 28,477 21,847 4,380
Long-term Obligations............... -- -- -- -- -- 1,675
Shareholders' Equity................ 37,784 20,276 21,877 24,027 19,330 1,663
OTHER DATA:
Book Value per Share(b)............. $ 1.69 $ 0.99 $ 1.07 $ 1.19 $ 1.08 $ 0.11
Cash Dividends Declared per Share... -- -- -- -- -- --
</TABLE>
---------------
(a) Thoratec's 1999, 1998, 1997, 1996 and 1995 figures are for fiscal years
ended January 1, 2000, January 2, 1999, January 3, 1998, December 28, 1996
and December 30, 1995, respectively.
(b) The historical book value per share is computed by dividing shareholders'
equity as of the end of each fiscal period presented by the number of common
shares outstanding as of the end of the same relevant period.
16
<PAGE> 29
CARDIOSYSTEMS SELECTED CONSOLIDATED FINANCIAL DATA
These selected financial data of Cardiosystems are derived from the audited
historical consolidated financial statements and related notes of Cardiosystems
for each of the years in the five-year period ended January 1, 2000 and the
unaudited consolidated financial statements for the six months ended July 1,
2000 and July 3, 1999. These historical data are only a summary. You should read
them in conjunction with the historical financial statements and related notes
contained in the annual and quarterly reports of Cardiosystems that have been
incorporated by reference into this statement.
<TABLE>
<CAPTION>
SIX MONTHS ENDED FISCAL YEARS ENDED(B)
------------------ ----------------------------------------------------------
JULY 1, JULY 3,
2000(A) 1999 1999(C) 1998() 1997(D) 1996(E) 1995()
-------- ------- ---------- -------- ---------- ---------- --------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues.................. $ 42,844 $39,676 $ 79,090 $ 66,848 $ 62,834 $ 63,962 $ 52,880
Income Before
Extraordinary Item...... 4,218 3,783 8,372 7,820 9,019 10,030 11,135
Net Income................ 4,409 3,783 9,584 7,820 9,019 10,030 11,135
Earnings per Share:
Basic................... 0.11 0.10 0.25 0.20 0.23 0.25 0.29
Diluted................. 0.11 0.10 0.25 0.20 0.23 0.25 0.27
BALANCE SHEET DATA (AT END
OF PERIOD):
Cash and Cash
Equivalents............. $112,409 $ 96,938 $ 85,336 $116,747 $ 47,612 $ 50,521
Working Capital........... 145,575 115,471 98,904 136,702 65,328 64,610
Total Assets.............. 171,453 169,928 172,363 173,208 124,978 124,285
Long-term Obligations..... 54,838 58,011 70,000 70,000 -- 11,642
Stockholders'
Investment.............. 101,877 96,940 88,714 92,963 111,089 103,416
OTHER DATA:
Book Value per Share(f)... $ 2.64 $ 2.52 $ 2.31 $ 2.38 $ 2.78 $ 2.62
Cash Dividends Declared
per Share............... -- -- -- -- -- --
</TABLE>
---------------
(a) Reflects the repurchase of $3,173,000 principal amount of 4 3/4%
subordinated convertible debentures resulting in an extraordinary gain of
$191,000, net of taxes of $117,000.
(b) Cardiosystems' 1999, 1998, 1997, 1996 and 1995 figures are for fiscal years
ended January 1, 2000, January 2, 1999, January 3, 1998, December 28, 1996,
and December 30, 1995, respectively.
(c) Reflects the repurchase of $11,989,000 principal amount of 4 3/4%
subordinated convertible debentures resulting in an extraordinary gain of
$1,212,000, net of taxes of $743,000.
(d) Reflects the May 1997 issuance of $70,000,000 principal amount of 4 3/4%
subordinated convertible debentures due 2004 and conversion of $3,755,000
principal amount of noninterest-bearing subordinated convertible debentures.
(e) Reflects conversion of $7,887,000 principal amount of noninterest-bearing
subordinated convertible debentures.
(f) The historical book value per share is computed by dividing shareholders'
equity as of the end of each fiscal period presented by the number of common
shares outstanding as of the end of the same relevant period.
17
<PAGE> 30
UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENT OVERVIEW
The merger agreement requires Thoratec to issue 0.835 of a share of
Thoratec common stock for each share of Cardiosystems common stock outstanding
when the merger closes. The following tables set forth certain historical
financial information of Thoratec and Cardiosystems on an unaudited pro forma
basis after giving effect to the merger as a "reverse acquisition" (i.e., as if
Cardiosystems had acquired Thoratec). The accompanying unaudited pro forma
combined condensed balance sheet assumes the merger took place on July 1, 2000.
The unaudited pro forma combined condensed balance sheet combines the unaudited
consolidated balance sheet of Thoratec as of July 1, 2000 and the unaudited
consolidated balance sheet of Cardiosystems as of July 1, 2000. The accompanying
unaudited pro forma combined condensed statements of operations present (i) the
consolidated results of operations of Thoratec for the fiscal year ended January
1, 2000 combined with the consolidated results of operations of Cardiosystems
for the fiscal year ended January 1, 2000 and (ii) the unaudited consolidated
results of operations for Thoratec for the six months ended July 1, 2000,
combined with the unaudited consolidated results of operations for Cardiosystems
for the six months ended July 1, 2000. The unaudited pro forma combined
condensed statements of operations give effect to the merger as if it had
occurred on January 3, 1999.
The unaudited pro forma condensed combined financial information is
presented for illustrative purposes only and is not necessarily indicative of
the future financial position or future results of operations of Thoratec after
the merger or of the financial position or results of operations of Thoratec
that would have actually occurred had the merger been effected as of the dates
described above.
The allocation of the aggregate purchase price reflected in the unaudited
pro forma condensed combined financial information is preliminary. The actual
purchase price allocation to reflect the fair values of assets acquired and
liabilities assumed will be based upon management's evaluation of such assets
and liabilities following the effective time of the merger and, accordingly, the
adjustments that have been included will change based upon the final allocation
of the total purchase price (including any purchase price adjustment). Such
allocation may differ significantly from the preliminary allocation included in
this statement.
The unaudited pro forma combined condensed financial information should be
read in conjunction with the audited consolidated financial statements and
related notes of Thoratec and Cardiosystems that have been incorporated by
reference into this statement.
18
<PAGE> 31
UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JANUARY 1, 2000
<TABLE>
<CAPTION>
PRO FORMA COMBINED
CARDIOSYSTEMS THORATEC ADJUSTMENTS PRO FORMA
------------- -------- ----------- ---------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues..................................... $79,090 $22,508 $101,598
Cost of revenues............................. 33,739 9,739 $ 140(1) 43,618
------- ------- -------- --------
Gross Profit................................. 45,351 12,769 (140) 57,980
------- ------- -------- --------
Operating Expenses:
Selling, general, and administrative
expenses................................ 22,018 9,457 67(2) 31,542
Research and development expenses.......... 15,631 5,793 52(3) 21,476
Amortization of goodwill and other
intangible assets....................... -- -- 17,537(4) 17,537
------- ------- -------- --------
Total operating expenses........... 37,649 15,250 17,656 70,555
Other operating income....................... -- 285 -- 285
------- ------- -------- --------
Operating Income (loss)...................... 7,702 (2,196) (17,796) (12,290)
------- ------- -------- --------
Interest Income.............................. 7,086 223 7,309
Other non-operating income................... -- 184 184
Interest Expense............................. (3,551) -- -- (3,551)
------- ------- -------- --------
Income (loss) Before Provision for Income
Taxes and Extraordinary Item............... 11,237 (1,789) (17,796) (8,348)
Provision (benefit) for Income Taxes......... 2,865 -- (5,065)(5) (2,200)
------- ------- -------- --------
Income (loss) Before Extraordinary Item...... $ 8,372 $(1,789) $(12,731) $ (6,148)
======= ======= ======== ========
Basic and Diluted Earnings per Share Before
Extraordinary Item......................... $ 0.22 $ (0.09) $ (0.12)
Weighted Average Shares:
Basic...................................... 38,443 20,446 (6,343)(6) 52,546(6)
Diluted.................................... 38,482 20,446 (6,382)(6) 52,546(6)
</TABLE>
See footnotes beginning at page 22.
19
<PAGE> 32
UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JULY 1, 2000
<TABLE>
<CAPTION>
PRO FORMA COMBINED
CARDIOSYSTEMS THORATEC ADJUSTMENTS PRO FORMA
------------- -------- ----------- ---------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues................................... $42,844 $14,867 $57,711
Cost of revenues........................... 17,824 5,493 $ 70(7) 23,387
------- ------- ------- -------
Gross Profit............................... 25,020 9,374 (70) 34,324
------- ------- ------- -------
Operating Expenses:
Selling, general, and administrative
expenses.............................. 11,992 5,430 34(8) 17,456
Research and development expenses........ 7,650 3,478 26(9) 11,154
Restructuring and unusual costs.......... 707 -- 707
Amortization of goodwill and other
intangible assets..................... -- -- 8,769(10) 8,769
------- ------- ------- -------
Total operating expenses................... 20,349 8,908 8,829 38,086
Other operating income..................... -- 474 474
------- ------- ------- -------
Operating Income........................... 4,671 940 (8,899) (3,288)
------- ------- ------- -------
Interest Income............................ 3,682 267 3,949
Other non-operating income (expense)....... -- (130) (130)
Interest Expense........................... (1,494) -- (1,494)
------- ------- ------- -------
Income Before Provision for Income Taxes
and Extraordinary Item................... 6,859 1,077 (8,899) (963)
Provision for Income Taxes................. 2,641 74 (2,165)(11) 550
------- ------- ------- -------
Income (Loss) Before Extraordinary Item.... $ 4,218 $ 1,003 $(6,734) $(1,513)
======= ======= ======= =======
Basic Earnings (Loss) Per Share Before
Extraordinary Item....................... $ 0.11 $ 0.05 $ (0.03)
Diluted Earnings (Loss) Per Share Before
Extraordinary Item....................... $ 0.11 $ 0.04 $ (0.03)
Weighted Average Shares:
Basic.................................... 38,542 21,258 (6,359)(6) 53,441(6)
Diluted.................................. 38,579 22,779 (7,917)(6) 53,441(6)
</TABLE>
See footnotes beginning at page 22.
20
<PAGE> 33
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF JULY 1, 2000
<TABLE>
<CAPTION>
PRO FORMA COMBINED
CARDIOSYSTEMS THORATEC ADJUSTMENTS PRO FORMA
------------- -------- ----------- ---------
(IN THOUSANDS PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents........... $ 435 $ 5,938 $ 6,373
Advance to affiliate................ 23,091 -- $ (23,091)(12) --
Short-term available-for-sale
investments at market value...... 102,146 12,254 (23,002)(13) 91,398
Accounts receivable, net............ 15,234 5,501 20,735
Inventories......................... 15,215 7,839 23,054
Deferred tax asset.................. 4,172 -- 4,172
Other current assets................ 20 247 267
-------- -------- --------- --------
Total current assets.................. 160,313 31,779 (46,093) 145,999
-------- -------- --------- --------
Property, Plant, and Equipment, at
Cost, Net........................... 7,280 9,204 2,590(14) 19,074
Deferred Tax Asset.................... 2,611 -- 9,750(15) 12,361
Intangible and Other Assets........... 1,249 1,053 248,368(16) 250,670
Goodwill.............................. -- -- 102,634(17) 102,634
-------- -------- --------- --------
$171,453 $ 42,036 $ 317,249 $530,738
======== ======== ========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable.................... $ 3,837 $ 1,173 $ 14,422(18) $ 19,432
Accrued payroll and employee
benefits......................... 3,461 1,494 4,955
Accrued warranty expenses........... 1,133 167 1,300
Accrued income taxes................ 964 12 976
Deferred distributor revenue..... -- 285 285
Other accrued expenses.............. 4,250 409 4,659
Due to parent company and affiliated
companies........................ 1,093 -- (1,093)(19) --
-------- -------- --------- --------
Total Current Liabilities............. 14,738 3,540 13,329 31,607
-------- -------- --------- --------
Deferred Tax Liability................ -- -- 81,347(20) 81,347
Long-term deferred distributor
revenue............................. -- 712 712
Subordinated Convertible Debentures... 54,838 -- 54,838
Shareholders' Equity
Common stock........................ 4,063 89,447 291,705(21) 385,215
Capital in excess of par
value/Paid-in capital............ 96,519 2,541 (99,060)(22) --
Retained earnings................... 53,909 (54,189) (21,204)(23) (21,484)
Treasury stock at cost.............. (51,795) -- 51,795(24) --
Deferred compensation............... (417) -- (678)(24) (1,095)
Accumulated other comprehensive
items............................ (402) (15) 15(24) (402)
-------- -------- --------- --------
Total Shareholders' Equity............ 101,877 37,784 222,573 362,234
-------- -------- --------- --------
Total Liabilities and Shareholders'
Equity.............................. $171,453 $ 42,036 $ 317,249 $530,738
======== ======== ========= ========
Other data:
Shares outstanding.................. 40,626 22,369 (6,703)(25) 56,292
Book value per share................ $ 2.51(26) $ 1.69(26) $ 6.43(26)
</TABLE>
See footnotes beginning at page 22.
21
<PAGE> 34
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The merger will be accounted for as a reverse acquisition purchase in which
Cardiosystems is treated as the acquirer of Thoratec for financial accounting
purposes. Under that method, the fair market value of the outstanding Thoratec
common stock, determined using volume-weighted average beginning two days before
and ending two days after the announcement of the merger, is used to establish
the purchase price for accounting purposes. The pro forma figures appearing here
use $13.74 per share which results in an estimated purchase price of $341
million.
The unaudited pro forma combined condensed balance sheet and statements of
operations are not necessarily indicative of the financial position and
operating results that would have been achieved had the merger been completed as
of the beginning of the earliest periods presented. They should not be construed
as being a representation of financial position or future operating results of
the combined companies. Management does not expect significant changes to the
preliminary valuation of the transaction. However, the final purchase price
allocation could be significantly different from the amounts reflected in the
unaudited pro forma combined condensed information. In addition, the unaudited
pro forma combined condensed financial information gives effect only to the
adjustments set forth in the accompanying notes and does not reflect any
restructuring or merger related costs, nor any potential cost savings or other
synergies that management expects to realize as a result of the merger.
The fair values of Thoratec's net assets have been estimated for the
purpose of allocating the purchase price of the deemed acquisition of Thoratec
and determining the pro forma effect of the acquisition on the combined
financial statements. The estimated purchase price of $341 million has been
assigned to the tangible and intangible assets acquired and liabilities assumed
as follows (in thousands):
<TABLE>
<S> <C>
Net current and other assets at July 1, 2000................ $ 42,036
FAIR VALUE ADJUSTMENTS:
Property lease (property, plant, and equipment) -- 10 year
life................................................... 2,590
Patents -- 8 year life.................................... 22,985
Trademarks and tradenames -- 20 year life................. 13,852
Acquired in-process research and development -- expensed
at closing............................................. 75,393
Assembled work force -- 8 year life....................... 2,321
Developed technology -- 20 year life...................... 164,210
Goodwill -- 20 year life.................................. 102,634
Deferred tax asset........................................ 9,750
Deferred compensation -- 1 to 3 year life................. 678
--------
436,449
Less: Liabilities assumed at July 1, 2000................... (14,102)
Deferred tax liability................................ (81,347)
--------
$341,000
========
</TABLE>
IN-PROCESS RESEARCH AND DEVELOPMENT
In connection with the merger, it is estimated that approximately $75
million of the purchase price will be allocated to in-process research and
development, or IPR&D. Thoratec has engaged an independent third-party appraisal
company to assist in the valuation of the intangible assets acquired. This
valuation is expected to be completed upon the closing of the transaction.
The fair value assigned to purchased IPR&D was estimated by discounting, to
present value, the cash flows expected to result from each project once it has
reached technological feasibility. A discount rate consistent with the risks of
each project was used to estimate the present value of cash flows. In estimating
future cash flows, consideration was given to other tangible and intangible
assets required for the successful development of the technology resulting from
each purchased IPR&D project and adjusted future cash flows
22
<PAGE> 35
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS -- (CONTINUED)
for a charge reflecting the contribution of these assets to each project. The
estimated future cash flows resulting from IPR&D were further adjusted for the
contribution of core technology to the value of each purchased IPR&D project.
Based upon these cash flows the value assigned to purchased research and
development was the amount attributable to the efforts of Thoratec up to the
time of acquisition. This amount was estimated through application of the "stage
of completion" calculation by multiplying the estimated present value of future
cash flows excluding costs of completion by the percentage of completion of each
purchased research and development project at the time of acquisition.
The nature of the efforts to develop the purchased IPR&D into commercially
viable products, principally relates to the completion and/or acceleration of
existing development programs, including the required completion of several
phases of clinical trials and the expenditure of those general and
administrative costs necessary to manage the projects and trials. Assuming the
approval of such products by the FDA, costs related to the full-scale
manufacturing, distribution, and marketing of the products are included in the
cash flow projection upon which the IPR&D value is based. The resulting net cash
flows from such projects are based on Thoratec's estimates of revenues, cost of
sales, research and development costs, sales and marketing, general and
administrative, and the anticipated income tax effect and these estimates were
those considered by the Thoratec board of directors in its evaluation of this
transaction.
The discounting of net cash flows back to their present value is based on a
discount derived from the weighted average cost of capital for Thoratec. The
weighted average cost of capital calculation produces the average required rate
of return of an investment in an operating enterprise, based on various required
rates of return from investments in various areas of that enterprise. The
discount rates used in discounting the net cash flows from purchased in-process
research and development projects ranged from 42% to 48%. These discount rates
are higher than the implied overall rate of return on the Thoratec acquisition
which was computed to be 38%, due to the inherent uncertainties surrounding the
successful development of the IPR&D.
The forecast data employed in the analyses was based upon product level
forecast information obtained by Thoratec from numerous internal and external
sources. Thoratec management has reviewed and challenged the forecast data and
related assumptions and utilized the information in analyzing IPR&D. The
forecast data and assumptions are inherently uncertain and unpredictable.
However, based upon the information available at this time, Thoratec believes
the forecast data and assumptions to be reasonable. These assumptions may be
incomplete or inaccurate, and no assurance can be given that unanticipated
events and circumstances will not occur. Accordingly, actual results may vary
from the forecasted results. Any such variance may result in a material adverse
effect on the future financial condition and results of operations of Thoratec
post merger.
In the allocation of purchase price to the IPR&D, the concept of
alternative future use was specifically considered for each of the programs
under development. The acquired IPR&D consists of Thoratec's work to complete
each of the identified programs. The programs are each very specific to the
disease condition and market for which they are intended. There are no
alternative uses for the in-process programs in the event that the programs fail
in clinical trials or are otherwise deemed not to be feasible. The development
effort for the acquired IPR&D does not possess an alternative future use for
Thoratec post merger as defined by generally accepted accounting principles.
Below is a brief description of IPR&D projects including an estimation of
when Thoratec believes they may realize revenues from the sale of these products
in the respective application.
PVAD (Discharge and Therapeutic Recovery)
PVAD is a paracorporeal ventricular assist device that will be used to
support patients prior to and after hospital discharge, as a
bridge-to-transplant or as a bridge-to-recovery for patients undergoing
open-heart surgery, or suffering from acute cardiac failure or various
infections. The company has undertaken a series of clinical studies and trials
that are designed to demonstrate the system's role as a support or alternative
to transplant. Clinical trials are scheduled for completion in 2000 and 2001 for
these various indications.
23
<PAGE> 36
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS -- (CONTINUED)
Future costs for these programs are estimated at approximately $3.5
million. A discount rate of 42% was utilized in discounting the estimated cash
flows associated with these programs.
TLC-II Driver
The TLC-II driver is a lightweight portable pneumatic drive unit for use
with Thoratec's VAD pump, promoting greater patient mobility and self-care.
Thoratec is in the final stages of obtaining FDA approval. Assuming favorable
results in these studies, it is expected that approval to market this product in
the U.S. will be obtained late in 2000 or early in 2001.
The future cost of this program is estimated to be approximately $1
million. A discount rate of 42% was utilized in discounting these estimated cash
flows.
IVAD
The implantable VAD, or IVAD, is a ventricular assist device which will
provide the option for implantation within the body. Thoratec is currently
undertaking animal testing and preclinical studies and estimates that approval
in the U.S. will be received in 2002.
The future cost of this program is estimated to be approximately $5.5
million. A discount rate of 42% was utilized in discounting these estimated cash
flows.
Aria
The Aria graft is a small diameter prosthetic graft for use in coronary
artery bypass surgery. The graft is currently in clinical trials and product
launch is anticipated in the U.S. in 2003.
The future cost of this program is estimated to be approximately $5.8
million. A discount rate of 48% was utilized in discounting these estimated cash
flows.
The Thoratec research and development programs currently in process were
valued as follows:
<TABLE>
<S> <C>
PVAD (Discharge and Therapeutic recovery)................... $14,867
TLC-II...................................................... 1,801
IVAD........................................................ 963
Aria Graft.................................................. 57,762
-------
$75,393
=======
</TABLE>
ADJUSTMENTS TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The adjustments to the unaudited pro forma combined condensed balance sheet
as of July 1, 2000 and the pro forma combined condensed statements of operations
for the year ended January 1, 2000 and for the six months ended July 1, 2000 in
connection with the proposed merger are presented below:
<TABLE>
<S> <C> <C>
(1) Adjustment to cost of revenues:
Allocation of depreciation expense related to the fair value
adjustment of the property lease (depreciation period 10
years)...................................................... $ 140
(2) Adjustment to selling, general, and administrative expenses:
Allocation of depreciation expense related to the fair value
adjustment of the property lease (amortization period 10
years)...................................................... $ 67
</TABLE>
24
<PAGE> 37
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<S> <C> <C>
(3) Adjustment to research and development expenses:
Allocation of depreciation expense related to the fair value adjustment of the
property lease (amortization period 10 years)........................................ $ 52
(4) Adjustments to amortization of goodwill and other intangible assets:
Amortization of other intangible assets (amortization period 20 years)............... $ 8,903
Amortization of other intangible assets (amortization period 8 years)................ 3,163
Amortization of goodwill (amortization period 20 years).............................. 5,132
Amortization of deferred compensation................................................ 339
---------
$ 17,537
=========
(5) Adjustment to provision (benefit) for income taxes:
Record deferred tax benefit related to amortization of intangible assets............. $ (5,065)
</TABLE>
<TABLE>
<S> <C> <C>
The pro forma per share net income (loss) before extraordinary item
is computed by dividing the pro forma net income (loss) before
extraordinary item by the pro forma weighted average number of shares
(6) outstanding, assuming Thoratec and Cardiosystems had merged at the
beginning of the earliest period presented. The pro forma weighted
average number of shares outstanding, and required pro forma
adjustment to the weighted shares outstanding, are calculated as
follows for the year ended January 1, 2000 and the six months ended
July 1, 2000:
</TABLE>
<TABLE>
<CAPTION>
BASIC DILUTED
------ -------
<S> <C> <C>
For the year ended January 1, 2000:
Cardiosystems weighted average shares.................... 38,443 38,482
Multiplied by exchange ratio of 0.835.................... 0.835 0.835
------ ------
Equivalent Thoratec shares............................... 32,100 32,132
Add Thoratec weighted average shares..................... 20,446 20,446
------ ------
52,546 52,578
Anti-dilutive correction................................. -- (32)
------ ------
Pro forma combined weighted average shares outstanding... 52,546 52,546
Less combined weighted average shares before exchange
ratio effects......................................... 58,889 58,928
------ ------
Required pro forma adjustment............................ (6,343) (6,382)
====== ======
<CAPTION>
BASIC DILUTED
------ -------
<S> <C> <C>
For the six months ended July 1, 2000:
Cardiosystems weighted average shares.................... 38,542 38,579
Multiplied by exchange ratio of 0.835.................... 0.835 0.835
------ ------
Equivalent Thoratec shares............................... 32,183 32,213
Add Thoratec weighted average shares..................... 21,258 22,779
------ ------
53,441 54,992
Anti-dilutive correction................................. -- (1,551)
------ ------
Pro forma combined weighted average shares outstanding... 53,441 53,441
</TABLE>
25
<PAGE> 38
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
BASIC DILUTED
------ -------
<S> <C> <C>
Less combined weighted average shares before exchange
ratio effects......................................... 59,800 61,358
------ ------
Required pro forma adjustment............................ (6,359) (7,917)
====== ======
</TABLE>
<TABLE>
<S> <C> <C>
(7) Adjustment to cost of revenues:
Allocation of depreciation expense related to the fair value $ 70
adjustment of the property lease (amortization period 10
years)......................................................
(8) Adjustment to selling, general, and administrative expenses:
Allocation of depreciation expense related to the fair value $ 34
adjustment of the property lease (amortization period 10
years)......................................................
(9) Adjustment to research and development expenses:
Allocation of depreciation expense related to the fair value $ 26
adjustment of the property lease (amortization period 10
years)......................................................
(10) Adjustments to amortization of goodwill and other intangible
assets:
Amortization of other intangible assets (amortization period $ 4,451
20 years)...................................................
Amortization of other intangible assets (amortization period 1,582
8 years)....................................................
Amortization of goodwill (amortization period 20 years)..... 2,566
Amortization of deferred compensation....................... 170
---------
$ 8,769
=========
(11) Adjustments to provision (benefit) for income taxes:
Record tax provision for Thoratec due to change in valuation $ 400
allowance on deferred tax asset.............................
Record deferred tax benefit related to amortization of (2,565)
intangible assets...........................................
---------
(2,165)
=========
(12) Adjustment to advance to affiliate:
Receipt of cash in settlement of intercompany receivable.... $ (23,091)
</TABLE>
26
<PAGE> 39
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<S> <C> <C>
(13) Adjustments to short-term available-for-sale investments
(assumes that short-term investments will be sold and
purchased to provide required cash):
Segregation of cash in connection with the guaranty of the $ (45,000)
subordinated convertible debentures.........................
Receipt of cash in settlement of intercompany receivable.... 23,091
Payment of cash in settlement of intercompany payable....... (1,093)
---------
$ (23,002)
=========
(14) Adjustment to leasehold improvements (property, plant &
equipment):
Adjust property lease to estimated fair value............... $ 2,590
(15) Adjustment to deferred tax asset:
Adjust valuation allowance on Thoratec deferred tax asset... $ 9,750
(16) Adjustment to intangible and other assets:
Segregation of cash in connection with the guaranty of the $ 45,000
subordinated convertible debentures.........................
Record other intangible assets -- 20 year life.............. 178,062
Record other intangible assets -- 8 year life............... 25,306
---------
$ 248,368
=========
(17) Adjustment to goodwill:
Record goodwill arising from merger......................... $ 102,634
(18) Adjustment to accounts payable:
To record estimated additional merger related liabilities $ 14,422
for accounting, investment banking, legal, advisory and
other liabilities related to merger.........................
(19) Adjustment to due to parent company and affiliated
companies:
Payment of cash in settlement of intercompany payable....... $ (1,093)
(20) Adjustment to deferred tax liability:
Record deferred tax liability on intangible assets.......... $ 81,347
(21) Adjustments to common stock:
Purchase price -- net of transaction costs.................. $ 336,428
Retirement of Cardiosystems treasury stock.................. (51,795)
Elimination of Thoratec common stock........................ (89,447)
Reclassification of Cardiosystems capital in excess of par 96,519
to common stock.............................................
---------
$ 291,705
=========
(22) Adjustments to capital in excess of par/paid-in capital:
Reclassification of Cadiosystems capital in excess of par to $ (96,519)
common stock................................................
Elimination of Thoratec paid-in capital..................... (2,541)
---------
$ (99,060)
=========
</TABLE>
27
<PAGE> 40
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<S> <C> <C>
(23) Adjustments to retained earnings:
Adjustment to record IPR&D at estimated fair value at date $ (75,393)
of merger...................................................
Elimination of Thoratec retained earnings................... 54,189
---------
$ (21,204)
=========
(24) Adjustments to other shareholders' equity items:
Retirement of Cardiosystems treasury stock.................. $ 51,795
Record deferred compensation................................ (678)
Elimination of Thoratec's accumulated other comprehensive 15
items.......................................................
(25) The adjustment to common shares outstanding at July 1, 2000, is
calculated as follows:
As of July 1, 2000: 40,626
Cardiosystems shares outstanding............................
Multiplied by exchange ratio of 0.835....................... 0.835
---------
Equivalent Thoratec shares.................................. 33,923
Add Thoratec shares outstanding............................. 22,369
---------
Pro forma combined shares outstanding....................... 56,292
Less combined shares outstanding before exchange ratio 62,995
effect......................................................
---------
Required pro forma adjustment to shares outstanding......... (6,703)
=========
(26) The book value per share is computed by dividing total shareholders'
equity by the number of shares outstanding.
</TABLE>
28
<PAGE> 41
MARKET PRICE AND DIVIDEND INFORMATION
Thoratec's common stock is traded on the Nasdaq National Market under the
symbol "THOR". Cardiosystems' common stock is traded on the American Stock
Exchange under the symbol "TCA". The following table sets forth, for the periods
indicated, the quarterly high and low close prices per share of Thoratec common
stock (as reported on the Nasdaq National Market) and Cardiosystems common stock
(as reported on the American Stock Exchange).
<TABLE>
<CAPTION>
THORATEC CARDIOSYSTEMS
--------------- ---------------
HIGH LOW HIGH LOW
------ ----- ------ -----
<S> <C> <C> <C> <C>
FISCAL YEAR ENDED JANUARY 1, 2000:
First Quarter........................................... $ 8.63 $6.25 $11.06 $7.94
Second Quarter.......................................... 11.00 6.50 12.25 6.75
Third Quarter........................................... 11.63 6.38 11.06 6.69
Fourth Quarter.......................................... 9.75 5.50 8.00 5.38
FISCAL YEAR ENDING DECEMBER 30, 2000:
First Quarter........................................... $19.88 $8.50 $15.94 $6.13
Second Quarter.......................................... 18.63 8.50 14.25 8.63
Third Quarter........................................... 24.75 15.13 10.25 8.25
</TABLE>
RECENT SHARE PRICE
The table below presents the per share closing prices of Thoratec common
stock on the Nasdaq National Market and Cardiosystems common stock on the
American Stock Exchange and the pro forma equivalent market value of Thoratec
common stock to be issued for Cardiosystems common stock in the merger as of the
dates specified. October 3, 2000 was the last trading date before announcement
of the merger agreement. December , 2000 was the last trading day before this
statement was released for printing. The table also sets forth the equivalent
per share price for Cardiosystems common stock, which was determined by
multiplying the closing prices of the Thoratec common stock as of the specified
dates by the exchange ratio of 0.835.
<TABLE>
<CAPTION>
COMMON
THORATEC CARDIOSYSTEMS STOCK
COMMON COMMON EQUIVALENT
THORATEC STOCK STOCK VALUE
-------- -------- ------------- ----------
<S> <C> <C> <C>
October 3, 2000............................................ $17.75 $8.38 $14.82
December , 2000.......................................... -- -- --
</TABLE>
Stockholders are advised to obtain current market quotations for Thoratec
stock and Cardiosystems stock. No assurance can be given as to the market prices
of Thoratec stock or Cardiosystems stock at any time before the merger or the
market price of Thoratec stock at any time after merger. Because the exchange
ratio is fixed, the exchange ratio will not be adjusted to compensate
Cardiosystems' stockholders for decreases in the market price of Thoratec stock
that have and could occur before or after the merger closes. Nor will the
exchange ratio be adjusted to compensate Thoratec's shareholders for increases
in the market price of Thoratec stock that have or could occur.
DIVIDENDS
Neither Thoratec nor Cardiosystems has ever declared or paid any cash
dividends on its stock. Under the merger agreement, Thoratec and Cardiosystems
have agreed not to pay cash dividends pending completion of the merger, without
the written consent of the other. If the merger is not completed, the
Cardiosystems board anticipates that it would continue its policy of retaining
any and all earnings to finance the expansion of its business. Thoratec expects
to retain any and all earnings for use in the operation and expansion of its
business and does not anticipate paying any cash dividends before or after the
merger.
29
<PAGE> 42
THE THORATEC MEETING
The date, time and place of the special meeting of Thoratec shareholders
are:
, 200
[1:00] p.m. Pacific Standard Time
Thoratec Laboratories Corporation
6035 Stoneridge Drive
Pleasanton, California 94588
PURPOSE OF THE THORATEC SPECIAL MEETING
Thoratec is furnishing this statement to its shareholders in connection
with the solicitation of proxies by Thoratec's board of directors relating to
the proposed merger of Merger Sub into Cardiosystems and the other proposals to
be presented to Thoratec's shareholders described in this statement. The
Thoratec board of directors will use the proxies at the special meeting of
Thoratec's shareholders to be held on , 200 and at any
adjournment or postponement of that meeting.
The special meeting is being held so that Thoratec's shareholders may
consider and vote on the following proposals:
1. To consider and vote on the proposed merger of Merger Sub into
Cardiosystems as contemplated by the merger agreement. In the merger,
Thoratec will issue 0.835 of a share of its common stock for each
outstanding share of Cardiosystems common stock, and Cardiosystems will
become a wholly-owned subsidiary of Thoratec.
2. To consider and vote on an amendment to the Thoratec option plan to
increase the authorized number of shares of Thoratec common stock reserved
for issuance under options granted under the Thoratec option plan by
3,600,000, which is in addition to any increase authorized under proposal
3. This increase will facilitate Thoratec's assumption of options to
purchase shares of Cardiosystems common stock that are outstanding when the
merger closes and the grant of additional options, over time after the
merger closes, to Cardiosystems personnel.
3. To consider and vote on an amendment to the Thoratec option plan to
increase the number of shares of Thoratec common stock reserved for
issuance under options granted under the Thoratec option plan by 2,800,000
shares, which is in addition to any increase authorized under proposal 2.
Since only shares are available for grant under the Thoratec option
plan, this additional increase will allow us to continue to attract and
retain qualified Thoratec personnel.
4. To consider and vote on an amendment to Thoratec's Articles of
Incorporation to change the name of Thoratec from "Thoratec Laboratories
Corporation" to "Thoratec Corporation."
Proposals 1 and 2 are contingent upon each other the effect of this is
that if the merger is not approved then the increase in the Thoratec option
plan contemplated by proposal 2 cannot be approved. Likewise, if the
increase in the Thoratec option plan contemplated by proposal 2 is not
approved then the merger cannot be approved. Proposals 1 and 2 are
contingent on each other because the terms of the merger require Thoratec
to grant options authorized by proposal 2 and because proposal 2 is not
necessary if the merger is not approved.
RECORD DATE AND OUTSTANDING SHARES
Thoratec's board of directors has fixed the close of business on
, 2000 as the record date for the special Thoratec meeting. Only
holders of record of Thoratec's common stock at the close of business on the
record date are entitled to notice of and to vote at the meeting and any
adjournments or postponements of the meeting. As of the close of business on the
record date, there were shares of Thoratec common stock
outstanding and entitled to vote. Those shares were held by approximately
record shareholders. Thoratec has been informed that there are in
excess of beneficial owners of that stock.
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VOTE AND QUORUM REQUIRED
Holders of Thoratec stock are entitled to one vote for each share held as
of the record date. Approval of proposals 1 and 4 (the proposals regarding the
merger agreement and merger, and the change in Thoratec's name) to be voted on
by Thoratec's shareholders requires the affirmative vote of a majority of the
shares of Thoratec common stock outstanding as of the record date for the
meeting. Approval of proposals 2 and 3 (the proposals to amend Thoratec's option
plan to accommodate Cardiosystems options to be assumed if the merger is
completed and to amend Thoratec's option plan unrelated to the merger) to be
voted on by Thoratec's shareholders requires the affirmative vote of a majority
of the shares of Thoratec common stock present or represented at the meeting.
Attendance at the meeting in person or by proxy of a majority of Thoratec's
outstanding shares is required for a quorum.
On the record date, directors, executive officers and affiliates of
Thoratec as a group beneficially owned approximately shares of
Thoratec stock, excluding any shares issuable upon the exercise of options,
which constituted % of the shares of Thoratec stock outstanding on that
date.
VOTING OF PROXIES, ABSTENTIONS AND BROKER NON-VOTES
All properly executed proxies received before the vote at the special
Thoratec meeting, and not properly revoked, will be voted in accordance with the
instructions indicated on the proxies. If no instructions are indicated, the
proxies will be voted FOR proposal 1, 2, 3 and 4, and the proxy holder may vote
the proxy in its discretion as to any other matter which may properly come
before the meeting.
If a broker, bank, custodian, nominee or other record holder of Thoratec's
stock indicates on a proxy that it does not have discretionary authority to vote
certain shares on a particular matter (this is called a broker non-vote), those
shares will be counted for purposes of determining the presence or absence of a
quorum for the transaction of business but will count as a vote AGAINST the
proposals considered at the special meeting.
CALIFORNIA DISSENTERS' RIGHTS
Under Chapter 13 of the California law, Thoratec's shareholders may be
entitled to exercise dissenters' rights in connection with the merger. The
following summary of Chapter 13 is not intended to be a complete statement of
its provisions. Thoratec shareholders are urged to read the full text of Chapter
13. A copy is attached as Annex F.
Because Thoratec's stock is listed on the Nasdaq National Market, no
Thoratec shareholder, except holders of shares that are subject to transfer
restrictions, will have the right to exercise dissenters' rights under Chapter
13 in connection with the merger unless holders of at least 5% of the
outstanding shares of Thoratec stock properly exercise dissenters' rights in the
manner described below. One of the conditions to Thoratec's and Cardiosystems'
obligations to close the merger is that the 5% threshold not be met.
Accordingly, Thoratec and Cardiosystems can refuse to complete the merger if the
holders of 5% or more of the outstanding Thoratec stock properly exercise
dissenters' rights in connection with the merger. In addition, even though a
shareholder who wishes to exercise dissenters' rights is required to take
certain actions before the Thoratec special meeting, if the merger agreement is
later terminated and the merger is abandoned, no Thoratec shareholder will have
the right to any payment from Thoratec by reason of having taken that action.
The following summary is subject to these qualifications.
For a Thoratec shareholder to exercise dissenters' rights as to any shares
of Thoratec stock in connection with the merger, the shareholder must vote
against the merger and merger agreement and make a written demand to have
Thoratec purchase the shares at their fair market price. The demand must:
1. be made by the record holder of the shares; thus, a beneficial
owner of Thoratec stock registered in the record ownership of another
person (such as a broker or nominee) should instruct the record holder to
follow the procedures for perfecting dissenters' rights if the beneficial
owner wants to dissent with respect to any or all of those shares
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2. be mailed to, and received by, Thoratec Laboratories Corporation,
6035 Stoneridge Drive, Pleasanton, California 94588, Attention: Corporate
Secretary not later than the date of the special meeting
3. specify the shareholder's name and mailing address and the number
of Thoratec shares held of record
4. state that the shareholder is demanding purchase of the shares and
payment of their fair market value and
5. state the price which the shareholder claims to be the relevant
(see below) fair market value of the shares (this statement will constitute
an offer by the shareholder to sell the shares to Thoratec at that price).
In addition, within the time period provided in Section 1302 of Chapter 13,
the shareholder must also submit to Thoratec, for endorsement as dissenting
shares, the stock certificates representing the Thoratec shares as to which the
shareholder is exercising dissenters' rights.
Thoratec shares held by shareholders who have perfected their dissenters'
rights in accordance with Chapter 13 and have not withdrawn their demands or
otherwise lost their rights are referred to in this summary as "dissenting
shares." The balance of this discussion and the further use of that term assume
that Thoratec shareholders perfect dissenters' rights with respect to at least
5% of the outstanding Thoratec shares. Otherwise, no Thoratec shareholders have
such rights.
Within ten days after approval of the merger by Thoratec's shareholders,
Thoratec must mail a notice of the approval to all record holders of Thoratec
shares who voted against the merger proposal at the special meeting and made
timely demands for purchase. This notice must state the price determined by
Thoratec to represent the relevant fair market value of the dissenting shares.
Chapter 13 states that the fair market value, for this purpose, is determined
"as of the day before the first announcement" of the terms of the proposed
merger. The statute does not explain whether, in the case of a publicly traded
company like Thoratec, "day" means trading day or calendar day. The terms of the
merger were first announced when the merger agreement was signed, which was
shortly after the close of the trading day for Thoratec's stock on the Nasdaq
National Market on October 3, 2000. Thoratec believes (and in any litigation
would assert) that, given the clear rationale for the statutory rule, the better
interpretation of the statute should be that the fair market value of its stock
for purposes of Chapter 13 should be determined as of October 3, 2000.
Thoratec's notice must also include a brief description of the procedures
to be followed by those holders in order to pursue their dissenters' rights, and
a copy of Sections 1300-1304 of Chapter 13. A statement of price by Thoratec
will constitute an offer by Thoratec to purchase all dissenting shares at the
stated amount if the merger closes.
Irrespective of the percentage of Thoratec shares with respect to which
demands for appraisal have been properly filed, Thoratec must mail the notice
referred to in the preceding paragraph to any shareholder who has filed a demand
with respect to Thoratec shares that are subject to transfer restrictions
imposed by Thoratec. Thoratec is not aware of any transfer restrictions on its
shares, except for those restrictions which apply to some of the shares held by
shareholders who are deemed to be affiliates of Thoratec as that term is defined
in Rule 144 adopted by the SEC under the Securities Act. Any shareholders who
believe there is another type of restriction on their shares should consult with
their own advisor as to the nature of the restriction and its relationship to
the availability of dissenters' rights in connection with the merger.
If Thoratec and a dissenting shareholder agree that the shares are
dissenting shares and agree on the purchase price of the shares, the dissenting
shareholder is entitled to receive the agreed-upon price with interest at the
legal rate on judgments from the date of that agreement. Payment for the
dissenting shares must be made within 30 days after the later of the date of
that agreement or the date on which all statutory and contractual conditions to
the merger are satisfied. Payments are also conditioned on the surrender to
Thoratec of the certificates representing the dissenting shares.
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<PAGE> 45
If Thoratec denies that shares are dissenting shares or the shareholder
fails to agree with Thoratec as to the fair market value of the shares, then,
within the time period provided by Section 1304(a) of Chapter 13, any
shareholder who has made a valid written demand and has not voted in favor of
approval of the merger may file a complaint in the Superior Court in the proper
California county requesting a determination as to whether the shares are
dissenting shares or as to the fair market value of the holder's shares, or
both, or may intervene in any pending action brought by any other Thoratec
shareholder. If the fair market value of the dissenting shares is at issue, the
court may appoint one or more impartial appraisers to determine the fair market
value of such dissenting shares.
On the trial of the action, the court determines the issues. If the status
of the shares as dissenting shares is in issue, the court first resolves that
issue. If the fair market value of the dissenting shares is in issue, the court
determines, or appoints one or more impartial appraisers to determine, the fair
market value of the shares.
If the court appoints an appraiser or appraisers, they proceed to determine
the fair market value per share. Within the time fixed by the court, the
appraisers, or a majority of the appraisers, make and file a report in the
office of the clerk of the court. Thereafter, on the motion of any party, the
report is 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.
If the single appraiser or a majority of the appraisers fails to make and
file a report within 10 days after the date of their appointment or within such
further time as the court allows, or if the court does not confirm the report,
the court determines the fair market value of the dissenting shares. Subject to
Section 1306 of Chapter 13, judgment is 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 that any dissenting shareholder
who is a party, or who has intervened, is entitled to require the corporation to
purchase, with interest at the legal rate from the date on which the judgment is
entered.
The costs of the action, including reasonable compensation to the
appraisers to be fixed by the court, is assessed or apportioned as the court
considers equitable. However, if the appraisal exceeds the price offered by the
corporation, the corporation pays 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).
Except as expressly limited by Chapter 13, 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 holder of dissenting shares may not withdraw a demand for payment unless
Thoratec consents to the withdrawal. Dissenting shares lose their status as
dissenting shares, and dissenting shareholders cease to be entitled to require
Thoratec to purchase their shares, if:
- the merger is abandoned
- the shares are transferred before their submission to Thoratec for the
required endorsement
- the dissenting shareholder and Thoratec do not agree on the status of the
shares as dissenting shares or do not agree on the purchase price, but
neither Thoratec nor the shareholder files a complaint or intervenes in a
pending action within six months after Thoratec mails a notice that its
shareholders have approved the merger or
- with Thoratec's consent, the holder delivers to Thoratec a written
withdrawal of such holder's demand for purchase of the shares.
For federal income tax purposes, Thoratec shareholders who receive cash for
their shares of Thoratec stock after exercising dissenters' rights will realize
taxable gain or loss. See "Material United States Federal Income Tax
Consequences of the Merger."
EXPENSES OF PROXY SOLICITATION
Thoratec will pay the expenses of soliciting proxies to vote shares of its
stock at the special Thoratec meeting. Cardiosystems and Thoratec will each pay
half the expenses incurred in filing and printing this
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<PAGE> 46
statement. After the original mailing of the proxies and other soliciting
materials, Thoratec will request brokers, custodians, nominees and other record
holders of Thoratec stock to forward copies of the proxy and other soliciting
materials to persons for whom they hold shares of Thoratec stock and to request
authority for the exercise of proxies. In such cases, upon the request of the
record holders, Thoratec will reimburse such holders for their reasonable
expenses.
In addition to solicitation by mail, directors, officers and key employees
of Thoratec may solicit proxies in person or by telephone, telegram or other
means of communication. These persons will receive no additional compensation
for solicitation of proxies, but may be reimbursed for reasonable out-of-pocket
expenses.
PROPOSAL ONE: THE MERGER
Proposal 1 is approval of the terms of the merger, the merger agreement and
the issuance of Thoratec stock in the merger. Proposal 1 will be implemented
only if proposal 2 is also approved.
Board Recommendation
The board of directors of Thoratec has unanimously determined that the
terms of merger and the merger agreement (including the issuance of Thoratec
stock in the merger) are in the best interests of Thoratec and the Thoratec
shareholders.
The affirmative vote of the holders of a majority of the shares of Thoratec
outstanding at the record date for the meeting is necessary for approval of
proposal 1. Thoratec's board of directors recommends a vote "FOR" approval of
proposals 1 and 2.
PROPOSAL TWO: APPROVAL OF AMENDMENT TO THE THORATEC OPTION PLAN
If the merger is approved and completed, Thoratec will assume the options
of Cardiosystems that are outstanding just before the merger closes. In
addition, Thoratec expects to grant additional options to Cardiosystems and
Thoratec personnel, over time, after the merger. In order to accomplish this,
Thoratec needs to increase the number of shares available for issuance under the
Thoratec option plan. Accordingly, at the special meeting of Thoratec's
shareholders, Thoratec's shareholders will be asked to approve an additional
amendment to the plan to increase the number of shares available for issuance
under the plan by 3,600,000, which is in addition to any increase authorized
under proposal 3 below. If this proposal 2 is approved by Thoratec's
shareholders, Thoratec will implement it only if the merger is approved and
closes.
Board Recommendation
The affirmative vote of holders of a majority of the shares present or
represented at the special Thoratec meeting is required for approval of proposal
2. Thoratec's board of directors recommends a vote "FOR" approval of proposals 1
and 2.
PROPOSAL THREE: APPROVAL OF AMENDMENT TO THE THORATEC OPTION PLAN
At the special meeting, Thoratec's shareholders will be asked to approve an
amendment to the plan to increase by 2,800,000 the number of shares reserved for
issuance under the plan, which is in addition to any increase pursuant to
proposal 2. Since only shares are available for grant under the
Thoratec option plan, this additional increase will allow us to continue to
attract and retain qualified Thoratec personnel.
Board Recommendation
The affirmative vote of holders of a majority of the shares present or
represented at the special Thoratec meeting is required for approval of proposal
3. Thoratec's board of directors recommends a vote "FOR" approval of this
proposal.
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Description of The Plan
The purposes of the plan are to encourage selected employees, directors and
consultants to improve operations and increase profits of Thoratec; to encourage
selected employees, directors and consultants to accept or continue employment
or association with Thoratec or its affiliates and to increase the interest of
selected employees, directors and consultants in Thoratec's welfare through
participation in the growth in value of the common stock of Thoratec. Thoratec
can grant incentive stock options, called ISOs, and nonqualified stock options
called NQOs, under the plan. Only full-time employees of Thoratec, currently
approximately 185 people, are eligible to receive ISOs or NQOs. Consultants and
directors are eligible to receive only NQOs. The proposed amendments two and
three to the plan would increase the numbers of shares reserved for issuance
under the plan by 6,400,000.
Options granted expire ten years after the date of grant or earlier in the
event of termination of the optionee's employment, consulting or director
relationship with Thoratec. The per share exercise price of ISO's may not be
less than 100% of the fair market value of Thoratec's common stock on the date
of grant. The plan originally authorized 2,800,000 shares for issuance under the
plan. As of [DECEMBER ], 2000, a total of shares had been
purchased under options granted under the plan, an additional
shares were covered by outstanding options under the plan (including unvested
and partially vested options) and shares remained available for
the grant of additional options under the Plan.
The consideration payable for, upon exercise of, or for tax payable in
connection with, an option grant may be paid in cash, by promissory note of the
participant, or by delivery of other property, including securities of Thoratec,
if authorized by the administrator of the plan. Thoratec does not receive any
consideration upon the grant of any options. Options generally may be exercised
immediately, or may vest over two, four or five years, depending upon the
particular grant, and must generally be exercised within three months after a
participant's employment by, or consulting or director relationship with,
Thoratec terminates. If termination is due to the participant's death,
retirement or disability, the options may be exercised for six months
thereafter. Shares issued upon exercise of options may be subject to a right of
repurchase by Thoratec which generally lapses at the rate of 20% per year.
Thoratec's board of directors may amend, alter or discontinue the plan or
any option at any time, except that the consent of a participant is required if
the participant's rights under an outstanding option would be impaired. In
addition, to the extent required for the plan to satisfy the conditions of Rule
16b-3 under the Exchange Act or, with respect to provisions solely as they
relate to ISOs, to the extent required for the plan to comply with Section 422
of the Internal Revenue Code of 1986, as amended. Thoratec's shareholders must
approve any amendment, alteration or discontinuance of the Plan that would (i)
increase the total number of shares reserved under the plan; (ii) change the
minimum price terms for option exercise; (iii) change the class of employees,
consultants or directors eligible to participate in the plan; (iv) extend the
maximum option exercise period or (v) materially increase the benefits accruing
to participants under the plan.
Federal Income Tax Consequences of The Plan
The following summary of federal income tax consequences is based upon
existing statutes, regulations and interpretations. The applicable rules are
complex, and income tax consequences may vary depending upon the particular
circumstances of each plan participant. This statement describes federal income
tax consequences of general applicability but does not purport to describe
particular consequences to each individual Plan participant or foreign, state or
local income tax consequences, which may differ from United States federal
income tax consequences.
Incentive Stock Options
Award and Exercise. ISOs are intended to constitute "incentive stock
options" within the meaning of Section 422 of the Code. ISOs may be granted only
to employees of Thoratec (including directors who are also employees). An
optionee does not recognize taxable income upon either the grant or exercise of
an ISO. However, the excess of the fair market value of the shares purchased
upon exercise over the option exercise
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price, called the option spread, is includable in the optionee's alternative
minimum taxable income, for purposes of the alternative minimum tax. The option
spread is generally measured on the date of exercise and is includable in the
alternative minimum taxable income in the year of exercise.
Special rules regarding the time of alternative minimum taxable income
inclusion may apply for shares subject to a repurchase right or other
"substantial risk of forfeiture" (including, in the case of each person subject
to the reporting requirements of Section 16 of the Exchange Act, limitations on
resale of shares imposed under Section 16(b) of the Exchange Act).
Sale of Option Shares. If an optionee holds the shares purchased under an
ISO for at least two years from the date the ISO was granted and for at least
one year from the date the ISO was exercised, any gain from a sale of the shares
other than to Thoratec is taxable as long-term capital gain. Under these
circumstances, Thoratec would not be entitled to a tax deduction at the time the
ISO is exercised or at the time the stock is sold. If an optionee were to
dispose of stock acquired under an ISO before the end of the required holding
periods, called a disqualifying disposition, the amount by which the market
value of the stock at the time the ISO is exercised exceeds the exercise price
(or, if less, the amount of gain realized on the sale) is taxable as ordinary
income, Thoratec is entitled to a corresponding tax deduction. That income is
subject to information reporting requirements and may become subject to income
and employment tax withholding. Gain from a disqualifying disposition in excess
of the amount required to be recognized as ordinary income is capital gain.
Optionees are required to notify Thoratec immediately before making a
disqualifying disposition. If the stock is sold to Thoratec rather than to a
third party, the sale may not produce a capital gain or loss but may constitute
a redemption taxable as a dividend unless the redemption is "not essentially
equivalent to a dividend" within the meaning of the Code. The timing and amount
of income from a disqualifying disposition and the beginning of the optionee's
holding period for determining whether capital gain or loss is long-or short-
term may be affected if option stock is acquired subject to a repurchase right
or other "substantial risk of forfeiture" (including, in the case of each person
subject to the reporting requirements of Section 16 of the Exchange Act,
limitations on resale of shares imposed under Section 16(b) of the Exchange
Act).
Exercise with Stock. If an optionee pays for ISO shares with shares of
Thoratec acquired under an ISO or a qualified employee stock purchase plan (each
of which are a "statutory option stock"), the tender of shares is a
disqualifying disposition of the statutory option stock if the above-described
(or other applicable) holding periods respecting those shares have not been
satisfied. If the holding periods respecting the statutory stock option are
satisfied, or the shares were not acquired under a statutory stock option of
Thoratec, then any appreciation in value of the surrendered shares is not
taxable upon surrender. Special basis and holding period rules apply where
previously owned non-statutory option stock is used to exercise an ISO.
Nonqualified Stock Options
Award and Exercise. An optionee is not taxable upon the award of an NQO.
Federal income tax consequences upon exercise depend on whether the shares
acquired are subject to a "substantial risk of forfeiture." If the shares are
not subject to a substantial risk of forfeiture, or if they are so restricted
and the optionee timely files an election under Section 83(b) of the Code, with
respect to the shares, the optionee will have ordinary income at the time of
exercise measured by the option spread on the exercise date. The optionee's tax
basis in the shares will be the fair market value of the shares on the date of
exercise, and the holding period for purposes of determining whether capital
gain or loss upon sale is long- or short-term also will begin on or immediately
after that date. If the shares are subject to a substantial risk of forfeiture
and a Section 83(b) election is not filed, the optionee will not be taxable upon
exercise, but instead will have ordinary income on the date the restrictions
lapse, in an amount equal to the difference between the amount paid for the
shares under the NQO and their fair market value as of the date of lapse. In
addition, the optionee's holding period will begin on the date of lapse.
Whether or not the shares are subject to a substantial risk of forfeiture,
the amount of ordinary income taxable to an optionee who is an employee at the
time of grant constitutes "supplemental wages" subject to
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withholding of income and employment taxes by Thoratec, and Thoratec receives a
corresponding income tax deduction.
Sale of Option Shares. Upon sale, other than to Thoratec, of shares
acquired under an NQO, an optionee generally will recognize capital gain or loss
to the extent of the difference between the sale price and the optionee's tax
basis in the shares, which will be long-term gain or loss if the employee's
holding period in the shares is more than one year. If the stock is sold to
Thoratec, rather than to a third party, the sale may not produce capital gain or
loss. A sale of shares to Thoratec will constitute a redemption of such shares,
which could be taxable as a dividend unless the redemption is "not essentially
equivalent to a dividend" under the Code.
Exercise with Stock. If an optionee tenders stock to pay all or part of
the exercise price of an NQO, the optionee will not have a taxable gain or
deductible loss on the surrendered shares. Instead, shares acquired upon
exercise that are equal in value to the fair market value of the shares
surrendered in payment are treated as if they had been substituted for the
surrendered shares, taking as their basis and holding period the basis and
holding period that the optionee had in the surrendered shares. The additional
shares are treated as newly acquired with a zero basis.
If the surrendered shares are statutory option stock as described above
under "Incentive Stock Options", with respect to which the applicable holding
period requirements for favorable income tax treatment have not expired, then
the newly acquired shares substituted for the statutory option shares should
remain subject to the federal income tax rules governing the surrendered shares,
but the surrender should not constitute a disqualifying disposition of the
surrendered stock.
PROPOSAL FOUR: APPROVAL OF AMENDMENT TO THORATEC'S ARTICLES OF INCORPORATION TO
CHANGE THORATEC'S CORPORATE NAME
At the special meeting of Thoratec's shareholders, Thoratec's shareholders
will be asked to approve an amendment to Thoratec's articles of incorporation to
change Thoratec's corporate name from "Thoratec Laboratories Corporation" to
"Thoratec Corporation." Thoratec's board of directors believes that this new
name better reflects Thoratec's transition from a corporation focused on
research and development, as it was in its early years, to a developer,
manufacturer and seller of medical devices.
Board Recommendation
The affirmative vote of the holders of a majority of the shares of Thoratec
outstanding as of the record date for the special Thoratec meeting is required
for approval of the amendment to the articles of incorporation. Thoratec's board
of directors recommends a vote "FOR" approval of this proposal.
THORATEC PROXIES
The proxy accompanying this statement (as mailed to Thoratec's
shareholders) is solicited on behalf of the Thoratec board of directors for use
at the special meeting of Thoratec's shareholders. Please complete, date and
sign the accompanying proxy and promptly return it in the enclosed envelope or
otherwise mail it to the corporate offices of Thoratec to the attention of
Thoratec's corporate secretary. All properly signed proxies that Thoratec
receives before the vote at the meeting that are not properly revoked will be
voted at the meeting according to the instructions indicated on the proxies or,
if no direction is indicated, will be voted FOR each of the proposals described
in this statement to be considered at the Thoratec special meeting. You may
revoke your proxy at any time before it is exercised at the meeting by taking
any of the following actions:
- delivering a written notice to the Corporate Secretary of Thoratec by any
means including facsimile, bearing a date later than the date of the
proxy, stating that the proxy is revoked
- signing and delivering, before the vote at the meeting, a proxy relating
to the same shares and bearing a date later than the proxy being revoked
or
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- attending the meeting and voting in person, although attendance at the
meeting will not, by itself, revoke a proxy.
Please note, however, that if your shares are held of record by a broker,
bank or other nominee and you wish to vote at the meeting, you must bring to the
meeting a letter from the broker, bank or other nominee confirming your
beneficial ownership of the shares in order to act with respect to those shares
at the meeting.
Thoratec's board of directors does not know of any matter that is not
referred to in this statement to be presented for action at the special Thoratec
meeting. However, if any other matters are properly brought before the meeting,
the persons named in the proxies will have discretion to vote on such matters in
accordance with their best judgment.
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE POSTAGE-PAID ENVELOPE
PROVIDED, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. YOU MAY REVOKE YOUR
PROXY AT ANY TIME BEFORE IT IS VOTED.
THE CARDIOSYSTEMS MEETING
The date, time and place of the special meeting of the stockholders of
Cardiosystems are:
, 200
[4:00 P.M.] Eastern Time
Thermo Electron Corporation
81 Wyman Street
Waltham, Massachusetts
PURPOSE OF THE SPECIAL CARDIOSYSTEMS MEETING
Cardiosystems is furnishing this statement to its shareholders in
connection with the solicitation of proxies by the board of directors of
Cardiosystems relating to the proposed merger. The Cardiosystems board of
directors will use the proxies at the special meeting of Cardiosystems'
stockholders to be held on , 200 and at any adjournment or
postponement of that meeting.
The special Cardiosystems meeting is being held so that Cardiosystems
stockholders may consider and vote upon the following proposal:
1. To approve the merger of Thoratec's merger subsidiary into
Cardiosystems, as contemplated by the merger agreement attached to this
statement as Annex A, under which each outstanding share of Cardiosystems
stock will be converted into the right to receive 0.835 of a share of
Thoratec common stock and Cardiosystems will become a wholly-owned
subsidiary of Thoratec.
2. To transact any other business that properly comes before the
special meeting or any adjournments or postponements of that meeting.
RECORD DATE AND OUTSTANDING SHARES
The board of directors of Cardiosystems has fixed the close of business on
, 2000 as the record date for the special Cardiosystems meeting.
Only holders of record of Cardiosystems common stock at the close of business on
the record date are entitled to notice of and to vote at that meeting and at any
adjournments or postponements of the meeting. As of the close of business on
that record date, there were shares of Cardiosystems common stock
outstanding and entitled to vote held of record by approximately
stockholders. Cardiosystems has been informed that there are
approximately beneficial owners of that stock.
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VOTE AND QUORUM REQUIRED
Holders of Cardiosystems stock are entitled to one vote for each such share
held as of the record date. Approval of the proposal to be voted on by
Cardiosystems' stockholders requires the affirmative vote of the holders of a
majority of the outstanding shares of Cardiosystems stock as of the record date.
Attendance at the meeting in person or by proxy of a majority of the outstanding
shares of such Cardiosystems stock is required for a quorum.
On the record date, the Thermo Electron beneficially owned 23,129,293
shares of Cardiosystems stock, representing approximately 60% of the
Cardiosystems stock outstanding. Thermo Electron has agreed to vote all its
Cardiosystems common stock in favor of approval of the merger and merger
agreement. Thermo Electron will only be released from this obligation if the
Cardiosystems board of directors withholds or withdraws its recommendation of
the merger under the circumstances permitted by the merger agreement.
On the record date, directors, executive officers and affiliates of
Cardiosystems as a group beneficially owned approximately shares of
Cardiosystems stock, excluding any shares issuable upon the exercise of options,
which constituted % of the shares of Cardiosystems outstanding on that date.
VOTING OF PROXIES, ABSTENTIONS AND BROKER NON-VOTES
All properly executed proxies received before the vote at the special
Cardiosystems meeting and not properly revoked will be voted in accordance with
the instructions indicated on the proxies. If no instructions are indicated, the
proxies will be voted FOR the proposal to approve the merger agreement and the
merger, and the proxy holder may vote the proxy in its discretion as to any
other matter which may properly come before the meeting.
Shares subject to broker non-votes will be counted for purposes of
determining the presence or absence of a quorum for the transaction of business
but will count as a vote AGAINST any proposal considered at the special
Cardiosystems meeting.
MASSACHUSETTS DISSENTERS' RIGHTS
Sections 85 through 98 of Chapter 156B of the Massachusetts General Laws,
which we call the Massachusetts appraisal statute, entitle any holder of
Cardiosystems stock, who files a written objection to the proposal to approve
the merger and merger agreement before the vote at the Cardiosystems stockholder
meeting and who does not vote in favor of that proposal, to demand in writing
that Cardiosystems pay that holder, in cash, the fair value of such shares
exclusive of any element of value arising from the expectation or accomplishment
of the merger. A copy of the Massachusetts appraisal statute is attached as
Annex G. Cardiosystems stockholders who follow the procedures set out in the
Massachusetts appraisal statute for any of their Cardiosystems shares will be
entitled to have a court appraise those shares and receive that fair value,
together with interest, if the merger closes.
The following is a summary of certain features of the Massachusetts
appraisal statute. It is qualified by reference to the full text of the statute.
A stockholder who intends to exercise appraisal rights must deliver to
Cardiosystems, before the vote of Cardiosystems' stockholders on the merger and
merger agreement, a written objection to the merger and merger agreement,
stating that the stockholder intends to demand payment for shares held by the
stockholder if the merger closes. The written objection should be addressed to
Thermo Cardiosystems Inc., c/o Thermo Electron Corporation, 81 Wyman Street,
Waltham, Massachusetts 02454, Attention: Clerk. A vote against the merger
proposal, not coupled with a timely written objection, will not serve to perfect
appraisal rights. The written objection must be in addition to and separate from
any proxy or vote against the proposal.
Cardiosystems stockholders should execute any demand for appraisal in the
stockholder's name as it appears on the stockholders' stock certificates. If the
stockholder owns shares in a fiduciary capacity, such as a trustee, guardian or
custodian, the stockholder should execute the demand in that capacity. If more
than one
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person owns the shares (for example, a joint tenancy or tenancy in common), all
the joint owners should execute the demand.
A record holder such as a broker who holds shares of Cardiosystems common
stock as a nominee for beneficial owners must exercise appraisal rights on
behalf of those beneficial owners. Any person having a beneficial interest in
any Cardiosystems shares held of record in the name of another person (for
example, a broker or nominee) must act promptly to cause the record holder to
take the steps summarized here, in a timely manner, in order to perfect the
beneficial owner's appraisal rights. The written demand should set forth the
number of shares covered by the demand. Unless a demand specifies a lesser
number of shares, Cardiosystems will treat the demand as applying to all the
shares held in the name of the record holder.
Stockholders who wish to exercise appraisal rights may not vote in favor of
the proposal to approve the merger and merger agreement. A stockholder who votes
in favor of that proposal will not be entitled to exercise appraisal rights. The
submission of a signed blank proxy card will serve to waive appraisal rights.
However, failure to return a proxy card or vote (or abstaining from voting) will
not waive appraisal rights.
Within ten days after the merger closes, Cardiosystems will notify each
record holder of shares of Cardiosystems stock who has purported to comply with
the Massachusetts appraisal statute and whose shares were not voted in favor of
the merger and the merger agreement that the merger closed. That notice will not
be deemed to confer any rights. In other words, if the Cardiosystems stockholder
has not properly perfected appraisal rights, the notice will not change that.
Cardiosystems or its agent will send the notice by registered or certified mail,
addressed to the stockholder at the stockholder's last known address as it
appears on the records of Cardiosystems' transfer agent immediately before the
merger. Within 20 days after that notice is mailed, the Cardiosystems
stockholder must demand an appraisal in writing. Failure to make such a demand,
within that period, will serve to waive appraisal rights.
Once a Cardiosystems stockholder submits a demand for appraisal, the
stockholder may withdraw the demand only with Cardiosystems' approval. If the
demand is effectively withdrawn, then, absent an agreement between the
stockholder and Cardiosystems to the contrary, the stockholder would receive the
Thoratec stock and any cash in lieu of a fractional share payable to
stockholders who did not exercise appraisal rights.
A Cardiosystems stockholder who perfects appraisal rights and reaches
agreement with Cardiosystems on the fair value of the stockholder's shares will
receive that value, with interest, by check. If the stockholder and
Cardiosystems do not reach agreement on fair value within 30 days after the end
of the 20-day period during which stockholders must make their demands for
appraisal, either Cardiosystems or the stockholder may bring an action, within
four months after the end of those 30 days, to have the fair value determined
through judicial proceedings in the Massachusetts Superior Court for Middlesex
County. Neither Cardiosystems nor Thoratec will have any obligation, and
currently do not have any intention, to elect to cause the fair value of the
shares of dissenting stockholders to be determined through judicial proceedings.
Although Massachusetts courts have broad discretion in determining the fair
value of stock of dissenting stockholders, they generally have used a weighted
average of the market, earnings and asset values for the stock. The
Massachusetts Supreme Judicial Court recently held that this method is an
appropriate, but not required, method for determining the fair value of stock of
dissenting stockholders. The trial judge may determine the appropriate valuation
method to apply. The Massachusetts appraisal statute requires that Cardiosystems
pay a fair rate of interest on any award determined by the court. Interest runs
from the date the Cardiosystems board approved the merger.
For federal income tax purposes, Cardiosystems stockholders who receive
cash for their shares of Cardiosystems stock after exercising appraisal rights
will realize taxable gain or loss. See "Material United States Federal Income
Tax Consequences of the Merger."
EXPENSES OF PROXY SOLICITATION
Cardiosystems will pay the expenses of soliciting proxies to vote shares of
its common stock. Thoratec and Cardiosystems will each pay half the expenses
incurred in filing and printing this statement. After the original mailing of
the proxies and other soliciting materials, Cardiosystems will request brokers,
custodians,
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nominees and other record holders of Cardiosystems stock to forward copies of
the proxy and other soliciting materials to persons for whom they hold shares of
Cardiosystems stock and request authority for the exercise of proxies. In such
cases, upon the request of the record holders, Cardiosystems will reimburse such
holders for their reasonable expenses.
Cardiosystems does not anticipate it will solicit proxies in person or by
telephone, telegram or other means of communication other than this statement.
CARDIOSYSTEMS PROXIES
The proxy accompanying this statement (as mailed to Cardiosystems'
stockholders) is solicited on behalf of the Cardiosystems board of directors for
use at the special Cardiosystems meeting. Please complete, date and sign that
proxy and promptly return it in the enclosed envelope or otherwise mail it to
the corporate offices of Cardiosystems to the attention of Cardiosystems'
corporate clerk. All properly signed proxies Cardiosystems receives before the
vote at the Cardiosystems meeting that are not properly revoked will be voted at
the meeting according to the instructions indicated on the proxies or, if no
direction is indicated, will be voted FOR the proposal regarding the merger.
Cardiosystems stockholders may revoke their proxy at any time before it is
exercised at the meeting by taking any of the following actions:
- delivering a written notice to the corporate clerk of Cardiosystems by
any means, including facsimile, bearing a date later than the date of the
proxy, stating that the proxy is revoked
- signing and delivering, before the vote at the meeting, a proxy relating
to the same shares and bearing a date later than the proxy being revoked
or
- attending the meeting and voting in person, although attendance at the
meeting will not, by itself, revoke a proxy.
Please note, however, that if your shares are held of record by a broker,
bank or other nominee and you wish to vote at the meeting, you must bring to the
meeting a letter from the broker, bank or other nominee confirming your
beneficial ownership of the shares in order to act with respect to those shares
at the meeting.
The board of directors of Cardiosystems does not know of any matter not
described in this statement to be presented for action at the special
Cardiosystems meeting. However, if any other matters are properly brought before
the meeting, the persons named in the proxies will have discretion to vote on
such matters in accordance with their best judgment.
RECOMMENDATION OF THE CARDIOSYSTEMS BOARD OF DIRECTORS
The board of directors of Cardiosystems has unanimously determined that the
terms of the merger and the merger agreement are in the best interests of
Cardiosystems and the Cardiosystems stockholders. Accordingly, the Cardiosystems
board of directors recommends that Cardiosystems' stockholders vote FOR the
proposal to approve the merger and the merger agreement.
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE POSTAGE-PAID ENVELOPE
PROVIDED, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. YOU MAY REVOKE YOUR
PROXY AT ANY TIME BEFORE IT IS VOTED.
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THE MERGER
This section of this statement describes the proposed merger. While
Thoratec and Cardiosystems believe that this description covers the material
terms of the merger and related matters, it may not contain all the information
that is important to you. You should carefully read this entire statement, the
merger agreement and the other documents referred to for a more complete
understanding of the merger.
BACKGROUND OF THE MERGER
On January 17, 2000, Thermo Electron (Cardiosystems' majority stockholder)
formally engaged J.P. Morgan and The Beacon Group to provide strategic and
financial advice with regard to a restructuring plan being considered by Thermo
Electron's management. On January 31, 2000, Thermo Electron publicly announced a
broad-based restructuring plan, including its intention to pursue the
divestiture of Cardiosystems.
Beginning in March 2000, representatives of J.P. Morgan contacted parties,
including Thoratec, whom J.P. Morgan and Cardiosystems believed might have a
strategic interest in pursuing a transaction with Cardiosystems. J.P. Morgan
also contacted several parties that J.P. Morgan and Cardiosystems believed might
have a financial interest in pursuing a transaction with Cardiosystems.
On March 16, 2000, Thoratec signed a confidentiality agreement regarding
information concerning Cardiosystems and subsequently received materials about
Cardiosystems' products, business and prospects.
On April 28, 2000, to initiate the due diligence process Thoratec submitted
a preliminary, non-binding indication of interest regarding a proposed
acquisition of Cardiosystems by Thoratec. Thoratec indicated it would be willing
to pay between $11.00 and $12.50 in Thoratec common stock for each share of
Cardiosystems common stock, subject to satisfactory completion of due diligence
by Thoratec. Other parties previously contacted by J.P. Morgan also submitted
non-binding indications of interest. After J.P. Morgan and Cardiosystems
reviewed these indications of interest, certain parties, including Thoratec,
were permitted to conduct further due diligence regarding Cardiosystems.
On May 18 and 19, 2000, due diligence meetings were held in Waltham,
Massachusetts. At that meeting, Cardiosystems' management team made a
presentation to, and answered questions from, Thoratec's management team about
Cardiosystems' clinical milestones, sales and marketing strategy, research and
development, and historical and financial performance. A facilities tour was
also conducted.
Between May 19 and June 14, 2000, Thoratec and Cardiosystems participated
in a series of follow-up due diligence calls.
On June 15, 2000, representatives of Thoratec, including Keith Grossman,
Tom Burnett and Cheryl Hess, met with the management of Cardiosystems, including
Mike Kleine, Vic Poirier and Joe Tobin, in Waltham, Massachusetts to discuss the
Cardiosystems business and present their intended strategy and perceived
benefits of combining Cardiosystems and Thoratec. In addition, Thoratec received
additional financial and business due diligence information. After this meeting,
Thoratec management conducted a detailed review of financial projections
provided by Cardiosystems and derived their own set of projections that
reflected a downward revision to the projections presented by Cardiosystems.
Through the signing of the merger agreement, Thoratec's representatives
continued their due diligence investigation of Cardiosystems.
On June 22, 2000, Cardiosystems' board of directors held a regularly
scheduled meeting. At that meeting, J.P. Morgan updated the board on the
solicitation of indications of interest in Cardiosystems, including the one by
Thoratec. J.P. Morgan reported on the ongoing due diligence investigation by
Thoratec and the possibility that Thoratec would submit a revised proposal for
the acquisition of Cardiosystems in a stock-for-stock transaction.
On June 26, 2000, J.P. Morgan informed Lehman Brothers that Thermo Electron
and Cardiosystems were speaking with other prospective purchasers of
Cardiosystems but that there was still significant interest in the Thoratec
proposal. Lehman Brothers confirmed to J.P. Morgan Thoratec's interest in
continuing discussions.
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On June 30, 2000, Thoratec submitted a revised proposal to acquire
Cardiosystems in a stock-for-stock transaction in which Cardiosystems'
stockholders would receive 0.66 of a share of Thoratec common stock for each
share of Cardiosystems common stock, resulting in a 52% ownership stake for the
Cardiosystems stockholders in the combined company. This proposal was subject to
the signing of an exclusivity agreement by Cardiosystems and Thermo Electron,
completion of confirmatory due diligence by Thoratec and approval by the
Thoratec board of directors, among other conditions.
Commencing in July 2000 through the signing of the merger agreement,
representatives of Thermo Electron, Cardiosystems and Thoratec, with their
respective financial and legal advisors, held numerous discussions during which
they negotiated various terms of the Thoratec proposal, including the exchange
ratio proposed by Thoratec and limitations on the disposition of the shares of
Thoratec stock to be received by Thermo Electron in the merger.
On July 26, 2000, Cardiosystems and Thermo Electron signed a
confidentiality agreement with respect to information concerning Thoratec.
On August 1, 2000 J.P. Morgan, Lehman Brothers, Thoratec's and
Cardiosystems' accounting and legal advisors and members of their senior
management met in Boston to explore alternative structures for a potential
transaction.
Also on August 1, 2000, Cardiosystems' board of directors held a meeting at
which the management of Cardiosystems and representatives of J.P. Morgan
reviewed the status of proposals received by Cardiosystems and the ongoing
negotiations with Thoratec. The Cardiosystems board also discussed the potential
advantages and disadvantages of a proposed stock-for-stock transaction with
Thoratec in comparison to other strategic alternatives. The Cardiosystems board
of directors gave authority to Cardiosystems' management to negotiate on an
exclusive basis with Thoratec and formally engaged J.P. Morgan to serve as its
financial advisor with respect to the proposed transaction with Thoratec.
On August 4, 2000, representatives of Thoratec and Cardiosystems discussed
a general framework for a merger in which the Cardiosystems stockholders would
receive 57% of the common stock of a combined entity on a fully diluted basis.
On August 9, 2000, Cardiosystems and Thermo Electron signed and delivered
to Thoratec an agreement under which they agreed to negotiate exclusively with
Thoratec through September 6, 2000.
On August 15 and 16, 2000, Cardiosystems' senior management and
representatives of J.P. Morgan met with Thoratec's management and their
representatives in San Francisco to review Thoratec's business. The parties also
discussed the potential strategic benefits from a combination of the two
companies. In addition, Cardiosystems was provided additional financial and
business due diligence information about Thoratec. A tour of Thoratec's
Pleasanton, California facility was also conducted. Through the signing of the
merger agreement, Cardiosystems' representatives continued their due diligence
investigation of Thoratec.
On August 16, 2000, Thoratec's legal counsel delivered to Cardiosystems an
initial draft of the merger agreement. Through the signing of the merger
agreement, the attorneys and financial advisors for Cardiosystems, Thermo
Electron and Thoratec held numerous discussions regarding the terms and
conditions of the proposed merger agreement and related documents, including the
shareholder and registration rights agreements.
On August 18, 2000, management of Thoratec and Cardiosystems' International
Technidyne subsidiary, Lehman Brothers, J.P. Morgan and Deloitte & Touche met at
International Technidyne to perform due diligence and receive a presentation by
the management of International Technidyne. A tour of the facility was also
conducted.
On September 5, 2000, Thermo Electron signed an extension of the
exclusivity arrangement with Thoratec through September 11, and on September 14
Thermo Electron entered into a further extension of the exclusivity arrangement
through September 29.
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On September 15, 2000, the Cardiosystems board of directors held a
regularly scheduled meeting during which the board reviewed the status of the
negotiations with Thoratec and again considered the benefits to Cardiosystems
and its stockholders of the Thoratec proposal, the results of the due diligence
investigation of Thoratec to date and the terms of the proposed merger agreement
and related agreements. The board also reviewed the potential advantages and
disadvantages of other strategic alternatives, including Cardiosystems'
remaining as a stand-alone entity. Management was instructed to continue
negotiations with Thoratec.
On September 27, 2000, Cardiosystems' board of directors again met to
consider the terms and conditions of the proposed merger with its outside
financial and legal advisors. Keith Grossman, Thoratec's Chief Executive Officer
and President, was present at a portion of this meeting and reviewed Thoratec's
business and finances and discussed the strategic rationale and perceived
benefits of the proposed merger to both Cardiosystems and Thoratec.
Representatives of J.P. Morgan reviewed the historical and prospective financial
results for both Cardiosystems and Thoratec, its analyses of the terms of the
proposed merger from a financial perspective, and strategic alternatives to the
proposed merger. These representatives then responded to questions from the
directors. Cardiosystems' legal counsel then reviewed the proposed terms of the
merger agreement and the related agreements. J.P. Morgan rendered its oral
opinion, later confirmed in writing, that the exchange ratio for the exchange of
Cardiosystems shares into Thoratec shares in the merger was fair, from a
financial point of view, to the stockholders of Cardiosystems. Cardiosystems'
board of directors then further discussed the terms of the proposed merger,
including the strategic benefits of the combination, the terms and conditions of
the proposed merger agreement and the analyses and opinion of J.P. Morgan.
On September 28, 2000, Thoratec's board of directors met to review the
proposed transaction. At that meeting, representatives of Thoratec management
and its financial advisors and counsel were present. Thoratec's management
reported on the status of negotiations and all open issues. The Thoratec board
directed management to continue negotiations.
On September 29, 2000, a conference call was conducted among
representatives of Cardiosystems, Thermo Electron, Thoratec, J.P. Morgan, Lehman
Brothers, Hale and Dorr and Heller Ehrman to resolve various issues presented by
the proposed merger agreement and to finalize the exchange ratio which resulted
in a 57%/43% ownership split to the Cardiosystems and Thoratec stockholder
groups, respectively.
On October 2, 2000, the Thoratec board met again to review the transaction.
Lehman Brothers delivered its oral opinion to the board, later confirmed in
writing, to the effect that the proposed exchange ratio was fair to Thoratec
from a financial point of view. The Thoratec board approved the merger and
merger agreement at that meeting, subject to the satisfactory resolution of
certain issues that at that time were still unresolved. The Thoratec board then
authorized management to proceed with the final negotiation and signing of the
merger agreement and the related agreements.
On October 2, 2000, Cardiosystems' board of directors met to review the
terms of the proposed merger agreement with its legal advisors. Representatives
of J.P. Morgan confirmed their previously-rendered fairness opinion.
Cardiosystems' legal counsel reviewed all significant changes in the proposed
terms of the merger agreement and related agreements from those discussed on
September 27, 2000. After additional discussions, Cardiosystems' board of
directors' determined that the proposed merger and merger agreement were fair to
and in the best interests of Cardiosystems and its stockholders and resolved to
recommend that Cardiosystems' stockholders vote to adopt the merger agreement
and approve the merger. Cardiosystems' board of directors then authorized
management to proceed with the final negotiation and signing of the merger
agreement and the related agreements.
On the afternoon of October 3, 2000, the parties signed the definitive
merger agreement and issued press releases announcing the transaction.
THORATEC'S REASONS FOR THE MERGER
At a meeting held on October 2, 2000, the board of directors of Thoratec
unanimously concluded that the merger was in the best interests of Thoratec and
its shareholders and determined to recommend that the Thoratec shareholders
approve the issuance of the shares of Thoratec stock in the merger. In its
evaluation of
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the merger, the Thoratec board consulted Thoratec's management, as well as its
outside financial advisors, consultants and legal counsel and, over the course
of several meetings, identified a number of potential benefits of the merger,
the most important of which included:
- the view of the Thoratec board that the merger should result in a
combined medical device company with:
- substantially greater resources than Thoratec as a stand-alone company
- a more diversified product base than that of Thoratec as a stand-alone
company
- an enhanced research and development and manufacturing capability, and
a broader international presence and
- a larger sales force able to reach more hospitals and doctors with a
more diversified product offering
- the view of the Thoratec board of directors that the merger will enable
the companies to combine their respective research and development
programs and thereby enable the companies to achieve greater product
diversification
- the assessment of the Thoratec board of Thoratec's strategic alternatives
to the merger
- information regarding historical market prices and other information with
respect to the Thoratec stock and Cardiosystems stock, and the financial
performance and condition, assets, liabilities and business operations of
the two companies
- the prospects of each of Thoratec and Cardiosystems and their projected
future values and prospects as separate entities and on a combined basis
- the oral presentation delivered by Lehman Brothers to the Thoratec board
of directors and the subsequent written opinion of Lehman Brothers
addressed to the Thoratec board of directors to the effect that, as of
the date of the opinion and based on and subject to the matters set forth
in that opinion, the exchange ratio was fair, from a financial point of
view, to Thoratec's shareholders
- a comparison of selected recent acquisition and merger transactions in
the industry, as well as the trading performance of comparable companies
in the industry
- the expected tax and accounting treatment of the merger and
- reports from management, financial advisors, consultants and legal
advisors as to the results of their investigation of Cardiosystems.
The Thoratec board of directors also considered a number of potentially
negative factors in its deliberations concerning the merger, including, but not
limited to:
- the risk that the benefits sought to be achieved in the merger will not
be achieved and
- the other risks described above under "Risk Factors."
This discussion of information and factors considered by the Thoratec board
of directors is not intended to be exhaustive but is believed to include the
material factors considered by the Thoratec board. In view of the wide variety
of factors considered by the Thoratec board, the Thoratec board did not find it
practical to quantify or otherwise assign relative weights to the specific
factors considered. However, after taking into account all the factors,
Thoratec's board of directors unanimously agreed that the merger agreement and
the merger were fair to, and in the best interests of, Thoratec and its
shareholders and that Thoratec should enter into the merger agreement.
RECOMMENDATION OF THORATEC'S BOARD OF DIRECTORS
After careful consideration, the Thoratec board of directors has determined
the merger agreement and the merger to be fair to and in the best interests of
Thoratec's shareholders. Thoratec's board of directors
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unanimously recommends approval of the issuance of shares of Thoratec stock in
the merger as described in this statement.
In considering the recommendation of the Thoratec board of directors with
respect to the merger, you should be aware that certain directors and officers
of Thoratec have certain interests in the merger that are different from, or are
in addition to, the interests of Thoratec's shareholders generally. Please see
the section of this statement entitled "Interests of Thoratec Directors and
Officers in the Merger."
CARDIOSYSTEMS' REASONS FOR THE MERGER
The Cardiosystems board of directors, at a meeting held on October 2, 2000,
unanimously voted to enter into the merger agreement and to recommend that
Cardiosystems' stockholders vote to approve the merger and the merger agreement.
In the course of reaching its decision, the Cardiosystems board of directors
consulted Cardiosystems' management, as well as its outside financial advisors
and legal counsel, and considered the following material factors:
- the belief that the combined company resulting from the merger would have
a much broader product offering and a larger sales force, especially in
Europe where Cardiosystems did not have a strong distribution channel in
place, and would realize increased revenues as a result
- the belief that the combined company could realize cost savings by
leveraging existing assets in the areas of manufacturing, marketing,
clinical trials and regulatory compliance over a larger revenue base
- the belief that combining research and development efforts would result
in more diversified product and technology risks and result in achieving
important development milestones more frequently
- the benefits to be gained from becoming part of a larger operating
entity, including increased market capitalization and public float,
better access to capital markets and a broader and more skilled
management team
- the historical trading prices and markets for both the Cardiosystems and
Thoratec stock
- the historical and projected financial results for each of Cardiosystems
and Thoratec, and the risks of not achieving these projected financial
results, including as a result of not achieving product development
milestones
- the process undertaken by J.P. Morgan and management to elicit proposals
from third parties relating to a prospective combination with
Cardiosystems and the belief that this proposal represented the best
value for Cardiosystems and its stockholders, and
- the presentation of J.P. Morgan, including its analyses of comparable
public companies and other recent merger transactions in the industry,
and its opinion regarding the fairness of the exchange ratio in the
merger, from a financial point of view
The Cardiosystems board of directors also considered other strategic
alternatives, including:
- merging with other entities that had expressed interest through the
process conducted by J.P. Morgan
- remaining a stand-alone entity with or without a disposition of shares by
Thermo Electron to third parties, and
- combining with other businesses operated by Thermo Electron or its
subsidiaries
The board of directors concluded that the benefits of such alternatives
were lesser, and the potential drawbacks of such alternatives greater, than the
benefits and potential drawbacks of the combination with Thoratec.
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The Cardiosystems board of directors also considered the following
potentially negative factors in its deliberations concerning the merger:
- the risk that the benefits sought to be achieved in the merger will not
be achieved
- the risk that the large block of Thoratec stock held by Thermo Electron
after the merger and any significant sales of such shares could adversely
affect the market price of the Thoratec stock, and
- the other risks described above under "Risk Factors."
In view of the number and wide variety of factors considered in connection
with its evaluation of the merger and the complexity of these matters, the
Cardiosystems board of directors did not find it practical to, nor did it
attempt to, quantify, rank or otherwise assign relative weights to the specific
factors it considered. In addition, the Cardiosystems board of directors did not
undertake to make any specific determination as to whether any particular factor
was favorable or unfavorable to its ultimate determination or assign any
particular weight to any factor, but conducted an overall analysis of the
factors described above, including through discussions with and questioning of
Cardiosystems' management and management's analysis of the proposed merger based
on information received from Cardiosystems' legal, financial and accounting
advisors. In considering the factors described above, individual members of the
board of directors may have given different weight to different factors.
Cardiosystems' board of directors considered all these factors together and, on
the whole, considered them to be favorable to, and to support, its
determination.
RECOMMENDATION OF THE CARDIOSYSTEMS BOARD OF DIRECTORS
The board of directors of Cardiosystems believes that the terms of the
merger agreement and merger are fair to and in the best interests of
Cardiosystems and its stockholders and unanimously recommends to its
stockholders that they vote "FOR" the proposal to approve the merger agreement
and the merger.
In considering the recommendation of the Cardiosystems board of directors
with respect to the merger, you should be aware that certain directors and
officers of Cardiosystems' have certain interests in the merger that are
different from, or are in addition to, the interests of Cardiosystems'
stockholders generally. Please see the section of this statement entitled
"Interests of Cardiosystems Directors, Officers and Significant Stockholder in
the Merger."
OPINION OF THORATEC'S FINANCIAL ADVISOR
In April, 2000, Thoratec formally retained Lehman Brothers to act as its
financial advisor to review strategic alternatives, including a potential
acquisition of Cardiosystems. On October 3, 2000, Lehman Brothers rendered its
written opinion that, as of the date of that opinion, and based upon and subject
to the various considerations set forth in its opinion, the exchange ratio of
0.835 of a share of Thoratec common stock for every share of Cardiosystems
common stock (the "Exchange Ratio") to be paid to Cardiosystems' stockholders in
the merger was fair to Thoratec from a financial point of view.
The full text of the written opinion of Lehman Brothers dated October 3,
2000 is attached as Annex B and is incorporated into this statement by
reference. Stockholders may read the Lehman Brothers opinion for a description
of assumptions made, factors considered and limitations on the review undertaken
by Lehman Brothers in rendering its opinion. The Lehman Brothers opinion was
provided for the information and assistance of the Thoratec board of directors
in connection with the merger and addresses only the fairness to Thoratec of the
exchange ratio from a financial point of view as of the date of the opinion. The
Lehman Brothers opinion does not address any other aspect of the merger and does
not constitute a recommendation to any holder of Thoratec or Cardiosystems stock
as to how to vote with respect to the merger. Lehman Brothers was not requested
to, and the opinion does not address, the underlying business decision to
proceed with or effect the merger. The summary of the Lehman Brothers opinion
set forth in this statement is qualified in its entirety by reference to the
full text of the opinion.
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<PAGE> 60
In arriving at its opinion, Lehman Brothers reviewed and analyzed:
- the merger agreement and the specific terms of the merger
- publicly available information concerning Thoratec and Cardiosystems that
Lehman Brothers believed to be relevant to its analysis, including Annual
Reports on Form 10-K for the fiscal year ended January 1, 2000 and
Quarterly Reports on Form 10-Q for the quarters ended April 1, 2000 and
July 1, 2000
- financial and operating information with respect to the business,
operations and prospects of Thoratec furnished to Lehman Brothers by
Thoratec including, without limitation, the results expected by the
management of Thoratec for the quarter ended September 30, 2000
- financial and operating information with respect to the business,
operations and prospects of Cardiosystems furnished to Lehman Brothers by
Cardiosystems including, without limitation, the results expected by the
management of Cardiosystems for the quarter ended September 30, 2000
- the trading histories of the common stock of Thoratec and Cardiosystems
from October 4, 1999 to October 2, 2000 and a comparison of these trading
histories with each other and with those of other companies that Lehman
Brothers deemed relevant
- a comparison of the historical financial results and present financial
condition of Thoratec with those of other companies that Lehman Brothers
deemed relevant
- a comparison of the historical financial results and present financial
condition of Cardiosystems with those of other companies that Lehman
Brothers deemed relevant
- a comparison of the financial terms of the merger with the financial
terms of certain other transactions that Lehman Brothers deemed relevant
- the potential pro forma effect of the merger on the future financial
performance of Thoratec, including the cost savings, operating synergies
and other strategic benefits that the management of Thoratec has
estimated will result from a combination of the businesses of Thoratec
and Cardiosystems which we refer to as the expected synergies.
- the relative contributions of Thoratec and Cardiosystems to the future
financial performance of the combined company on a pro forma basis and
- publicly available reports prepared by independent research analysts
regarding the future financial performance of Thoratec and Cardiosystems.
In addition, Lehman Brothers had discussions with the managements of
Thoratec and Cardiosystems concerning their respective businesses, operations,
assets, financial conditions and prospects and undertook such other studies,
analyses and investigations as Lehman Brothers deemed appropriate.
In arriving at its opinion, Lehman Brothers assumed and relied upon the
accuracy and completeness of the financial and other information used by it
without assuming any responsibility for independent verification of such
information and further relied upon the assurances of Thoratec and Cardiosystems
management that they were not aware of any facts or circumstances that would
make such information inaccurate or misleading. With respect to the financial
projections of Cardiosystems prepared by management of Thoratec which we call
the Cardiosystems projections, upon the advice of Thoratec Lehman Brothers
assumed that such projections were reasonably prepared on a basis reflecting the
best currently available estimates and judgments of the management of Thoratec
as to the future financial performance of Cardiosystems and that, on a stand
alone basis, Cardiosystems would perform substantially in accordance with those
projections. With respect to the financial projections of Thoratec which we call
the Thoratec projections, upon advice of Thoratec, Lehman Brothers assumed that
such projections were reasonably prepared on a basis reflecting the best
currently available estimates and judgments of the management of Thoratec as to
the future financial performance of Thoratec and that, on a stand alone basis,
Thoratec would perform substantially in accordance with such projections. In
addition, Lehman Brothers assumed that the expected synergies will be realized
substantially in
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<PAGE> 61
accordance with such estimates. In arriving at its opinion, Lehman Brothers
conducted only a limited physical inspection of the properties and facilities of
Thoratec and Cardiosystems and did not make or obtain any evaluations or
appraisals of the assets or liabilities of Thoratec and Cardiosystems. Upon
advice of Thoratec and its legal and accounting advisors, Lehman Brothers
assumed that the merger will qualify as a reorganization within the meaning of
Section 368(a) of the Code and therefore be a tax-free transaction to the
shareholders of Thoratec and Cardiosystems. The Lehman Brothers opinion
necessarily is based upon market, economic and other conditions as they existed
on, and could be evaluated as of, the date of the Lehman Brothers opinion.
In addition, Lehman Brothers did not express any opinion as to the prices
at which the shares of Thoratec stock will trade after the merger. Its opinion
should not be viewed as providing any assurances that the market value of
Thoratec stock to be received by the stockholders of Cardiosystems will be in
excess of the market value of the shares of Cardiosystems common stock owned by
those stockholders at any time before the merger.
In arriving at its opinion, Lehman Brothers did not ascribe a specific
range of value to Cardiosystems or Thoratec, but rather made its determination
as to fairness, from a financial point of view, of the exchange ratio to be
offered to Cardiosystems' stockholders in the merger on the basis of the
financial and comparative analyses as summarized below. The preparation of a
fairness opinion involves various determinations as to the most appropriate and
relevant method of financial and comparative analysis and the application of
these methods to the particular circumstances. Therefore, such an opinion is not
readily susceptible to summary description. Furthermore, in arriving at its
opinion, Lehman Brothers did not attribute any particular weight to any analysis
or factor considered by it, but rather made qualitative judgments as to the
significance and relevance of each analysis and factor. Accordingly, Lehman
Brothers believes that its analyses must be considered as a whole and that
considering any portions of such analyses and factors without considering all
analyses and factors could create a misleading or incomplete view of the process
underlying its opinion. In its analysis, Lehman Brothers made numerous
assumptions with respect to industry performance, general business and economic
conditions and other matters, many of which are beyond the control of Thoratec
or Cardiosystems. Any estimates contained in these analyses are not necessarily
indicative of actual values or predictive of future results or values which may
be significantly more or less favorable than as set forth in its analyses. In
addition, analyses relating to the value of businesses do not purport to be
appraisals or to reflect the prices at which businesses actually may be sold.
The following is a brief summary of the analyses performed by Lehman
Brothers and reviewed with the Thoratec board of directors in connection with
rendering the Lehman Brothers opinion. Some of the summaries of the financial
and comparative analyses include information presented in tabular format. In
order fully to understand the methodologies used by Lehman Brothers and the
results of its financial and comparative analyses, the tables must be read
together with the text of each summary. The tables alone do not constitute a
complete description of the financial and comparative analyses. Accordingly, the
information presented in the tables and described below must be considered as a
whole. Throughout the analyses, Lehman Brothers used a range of Thoratec stock
prices from $14.00 to $20.56 (the price of Thoratec's stock on October 2, 2000,
before the announcement of the merger to derive a range of implied exchange
ratios. The range was used in order to analyze the merger based on historical
trading levels.
Contribution Analysis
The contribution analysis measures the relative contributions of
Cardiosystems and Thoratec to the combined company for various measures such as
revenue, earnings before interest, taxation, depreciation and amortization, or
EBITDA, earnings before interest and taxation, or EBIT, and net income. Lehman
Brothers used the Cardiosystems projections and the Thoratec projections to
calculate the relative contributions of each company to the pro forma combined
company with respect to estimated calendar year 2000 and 2001 revenues, EBITDA,
EBIT and net income. In 2000, it was estimated that Cardiosystems would
contribute no less than 72% of revenue, EBITDA, EBIT or net income and in 2001
would contribute no less than 66% of revenue, EBITDA, EBIT or net income. Lehman
Brothers compared such contributions to the pro forma diluted ownership of the
combined company by Cardiosystems stockholders of approximately 57%.
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<PAGE> 62
Historical Exchange Ratio Analysis
Lehman Brothers compared the exchange ratio of .835 pursuant to the merger
agreement to the ratio of the closing market prices of Thoratec common stock and
Cardiosystems common stock to selected average historical ratios of the closing
market prices of Cardiosystems common stock to Thoratec common stock over
various periods ending October 2, 2000. Lehman Brothers then calculated
Thoratec's pro forma ownership represented by these exchange ratios. The results
of this analysis are set forth below:
<TABLE>
<CAPTION>
AVERAGE MARKET IMPLIED THORATEC
PERIOD ENDING OCTOBER 2, 2000 PRICE RATIO OWNERSHIP
----------------------------- -------------- ----------------
<S> <C> <C>
prior 30 days.......................................... 0.480x 56.9%
prior 60 days.......................................... 0.507 55.6
prior 200 days......................................... 0.750 45.8
prior year............................................. 0.805 44.1
since January 1, 2000.................................. 0.755 45.6
since April 28, 2000................................... 0.623 50.5
</TABLE>
Comparable Transaction Analysis
The comparable transaction analysis provides a market benchmark based on
the consideration paid in selected comparable transactions. For this analysis,
Lehman Brothers reviewed publicly available information to determine the
purchase prices and multiples paid in certain transactions that were publicly
announced since June 28, 1998 involving target companies that were similar to
Cardiosystems in terms of business mix, product portfolio and/or markets served.
These included nine transactions from June 28, 1998 to the present.
For this analysis, Lehman Brothers reviewed publicly available information
to determine the purchase prices and multiples in the comparable transactions.
Lehman Brothers calculated the enterprise value of the relevant transaction
(calculated as the consideration offered for the common equity and short- and
long-term debt, subtracting its cash and cash equivalents), and applied it to
certain historical financial criteria (including revenue, EBITDA and EBIT) of
the acquired business for the last 12-month, or LTM period. Lehman Brothers also
calculated the equity value of the relevant transactions (the consideration
offered for the common equity), and applied it to certain historical financial
criteria (including LTM and forward year net income). The following table
summarizes the results from the Comparable Transaction analysis:
<TABLE>
<CAPTION>
IMPLIED EXCHANGE
METRIC MEAN COMPARABLES RATIO RANGE
------ ---------------- ----------------
<S> <C> <C>
EQUITY VALUE MULTIPLES
LTM Net Income.................................... 56.20x 0.649x to 0.961x
Forward Year Net Income........................... 43.50 0.521x to 0.771
ENTERPRISE VALUE MULTIPLES
LTM Revenue....................................... 8.19x 0.929x to 1.379x
Forward Year Revenue.............................. 5.19 0.684x to 1.013
LTM EBITDA........................................ 33.00 0.563x to 0.834
</TABLE>
Using the mean forward net income multiple and forward revenue multiple
from the relevant comparable transaction and historical financial data, an
implied exchange ratio range of 0.521x to 0.771x and 0.684x to 1.013x
respectively was determined. The exchange ratio fell above the range for forward
net income multiples, but within the range of forward revenue multiples, to the
implied exchange ratio using the comparable transactions analysis.
In selecting the companies and transactions to be included in the
comparable transaction analysis, Lehman Brothers included all transactions that
Lehman Brothers, in its judgment, believed to be comparable to the merger.
However, because the reasons for and the circumstances surrounding each of the
relevant comparable transactions were specific to those transactions, and
because of the inherent differences among the businesses, operations and
prospects of Cardiosystems and the selected acquired companies analyzed, Lehman
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<PAGE> 63
Brothers believed that it was inappropriate to, and therefore did not, rely
solely on the quantitative results of the comparable transactions analysis and,
accordingly, also made qualitative judgments concerning differences between the
terms and characteristics of the merger and the relevant comparable transactions
that would affect the transaction values of Cardiosystems and such acquired
companies. In particular, Lehman Brothers considered the size and desirability
of the markets served by the companies included, the strategic fit involved in
the transactions, and the form of consideration of the transactions. These
qualitative judgments did not lead to specific conclusions regarding the implied
exchange ratio of the merger, but rather were part of Lehman Brothers'
evaluation of their relevancy of the comparable transaction analysis under the
particular circumstances of the merger.
Transaction Premiums Analysis
The transaction premiums analysis measures the amount paid by the acquiror
over the target share price before public announcement of the transaction. For
this analysis, Lehman Brothers considered premiums paid in selected comparable
transactions in the medical device sector from June 28, 1998 through the date of
its opinion.
Lehman Brothers calculated the premium per share paid by the acquiror
compared to the share price of the target company for five days before the
announcement and 30 days before the announcement. The following table presents
the mean premium paid to the target company's share price at these two periods
and the range of implied exchange ratios at these two periods for the relevant
transactions.
<TABLE>
<CAPTION>
MEAN PREMIUM IMPLIED EXCHANGE
PERIOD OF COMPARABLES RATIO RANGE
------ --------------- ----------------
<S> <C> <C>
five days before announcement...................... 39.3% 0.618x to 0.908x
30 days before announcement........................ 66.0 0.757 to 1.112
</TABLE>
In selecting the companies and transactions to be included in the
comparable transaction premiums analysis, Lehman Brothers included all
transactions which Lehman Brothers, in its judgment, believed to be comparable
to the merger. However, because the reasons for and the circumstances
surrounding each of the relevant comparable transactions were specific to those
transactions, and because of the inherent differences among the businesses,
operations and prospects of Cardiosystems and the selected acquired companies
analyzed, Lehman Brothers believed that it was inappropriate to, and therefore
did not, rely solely on the quantitative results of the transaction premium
analysis and, accordingly, also made qualitative judgments concerning
differences between the terms and characteristics of the merger and the relevant
comparable transaction that would affect the transaction values of Cardiosystems
and such acquired companies. In particular, Lehman Brothers considered the size
and desirability of the markets served by the companies included, the strategic
fit involved in the transactions and the form of consideration of the
transactions. These qualitative judgments did not lead to specific conclusions
regarding the implied exchange ratio of the merger, but rather were part of
Lehman Brothers' evaluation of their relevancy of the transaction premium
analysis under the particular circumstances of the merger.
Comparable Companies Analysis
The comparable companies trading analysis provides a market valuation
benchmark based on the common stock trading multiples of selected comparable
companies. Using publicly available information, Lehman Brothers compared
selected financial data of Cardiosystems with similar data of comparable
companies engaged in businesses considered by Lehman Brothers to be comparable
to that of Cardiosystems including:
- Abiomed
- Thoratec
- World Heart
- Medtronic
- Guidant
- Boston Scientific
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<PAGE> 64
- St. Jude Medical
- Edwards LifeSciences
- Novoste
- Arrow International
- Zoll Medical
- Cryolife
- Possis Medical
For each of the relevant comparable companies, Lehman Brothers calculated
and analyzed the common equity market value multiples of certain historical and
projected financial criteria (such as net income) and enterprise value multiples
of certain historical financial criteria (such as revenues, EBITDA and EBIT) as
of October 2, 2000. Projected revenues for the selected comparable companies was
based on independent research analysts' projections. Net income for the selected
comparable companies was based on research analysts' estimates published by
First Call, a service reporting equity analyst estimates. The following table
presents the implied exchange ratio range for the revenue, EBITDA, EBIT and net
income multiples for the relevant comparable companies.
<TABLE>
<CAPTION>
MEAN IMPLIED EXCHANGE
METRIC COMPARABLES RATIO RANGE
------ ----------- ----------------
<S> <C> <C>
EQUITY VALUE MULTIPLES
2001 Net Income......................................... 52.40x 0.418x to 0.613x
2002 Net Income......................................... 34.30 0.608x to 0.894
ENTERPRISE VALUE MULTIPLES
LTM Revenue............................................. 6.87x 0.793x to 1.174x
2000 Revenue............................................ 5.87 0.761x to 1.127
LTM EBITDA.............................................. 20.00 0.376x to 0.556
</TABLE>
Using the price/earnings multiples for 2001 and 2002 for the relevant
comparable companies, financial data and the Cardiosystems projections, an
implied exchange ratio ranging between 0.418x and 0.613 for 2001 and 0.608x to
0.894x for 2002 was determined for Cardiosystems.
In selecting the companies to be included in the comparable companies
analysis, Lehman Brothers included all companies which Lehman Brothers, in its
judgment, believed to be comparable to Cardiosystems. However, because of the
inherent differences between the business, operations and prospects of
Cardiosystems and the business, operating and prospects of the companies
included as the relevant comparable companies, Lehman Brothers believed that it
was inappropriate to, and therefore did not, rely solely on the quantitative
results of the comparable company analysis , and accordingly also made
qualitative judgments concerning differences between the financial and operation
characteristics and prospects of Cardiosystems and the companies included in the
comparable company analysis. In particular, Lehman Brothers considered the size
and desirability of the markets served by the companies included. These
qualitative judgments did not lead to specific conclusions regarding the implied
exchange ratio, but rather were part of Lehman Brothers' evaluation of the
relevancy of the comparable companies analysis under the particular
circumstances of the merger.
Discounted Cash Flow Analysis
The discounted cash flow analysis provides a net present valuation of the
projected after-tax unlevered free cash flows (defined as operating cash flow
available after working capital, capital spending, tax and other operating
requirements). In preparing the discounted cash flow analysis, Lehman Brothers
used forecasts of cash flows included in the Cardiosystems projections for the
years 2000 through 2004, excluding expected synergies, and forecasts of cash
flows included in the Cardiosystems Projections for the years 2000 through 2004,
including the expected synergies.
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<PAGE> 65
To determine the present value of the cash flows, Lehman Brothers
discounted those cash flows at discount rates ranging from 10% to 14% per year
for Cardiosystems. The discount rates chosen reflect Lehman Brothers' judgment
regarding the appropriate expected returns by investors in Cardiosystems'
business. The terminal values were computed based on projected free cash flow in
the year 2004 for Cardiosystems and a range of perpetual growth rates of 5% to
7% based on a review of the trading characteristics of companies included as
comparable companies. The following table presents the implied range of exchange
ratios calculated for Cardiosystems under both scenarios using a discount rate
of 12%.
<TABLE>
<CAPTION>
EXCLUDING EXPECTED INCLUDING EXPECTED
SYNERGIES SYNERGIES
------------------ ------------------
<S> <C>
0.644x to 0.851x 0.923x to 1.232x
</TABLE>
Based on the Cardiosystems Projections and excluding the Expected
Synergies, the consideration paid by Thoratec is within the implied exchange
ratio calculated using the discounted cash flow analysis. Based on projections
of Cardiosystems revised by the management of Thoratec and including synergies,
the exchange ratio offered by Thoratec is less than the implied exchange ratio
calculated using the discounted cash flow analysis. However, because of the
subjectivity inherent in the assignment of discount rates to projected cash
flows, Lehman Brothers believed that it was inappropriate to and therefore did
not, rely solely on the quantitative results of the discounted cash flow
analysis.
Pro Forma Merger Analysis
Lehman Brothers reviewed and analyzed certain pro forma financial impacts
of the merger on holders of Thoratec common stock based on the following:
- the exchange ratio
- the Cardiosystems projections and the Thoratec projections (including the
expected synergies)
- purchase accounting treatment and
- an assumption for analytical purposes that the merger will be completed
on December 31, 2000.
Lehman Brothers analyzed the potential pro forma effects of the merger on
Thoratec's projected earnings per share as derived through generally accepted
accounting principles, called GAAP EPS, and projected cash earnings per share,
called Cash EPS, which is calculated by adding amortization of goodwill per
share to GAAP EPS. Lehman Brothers performed such analysis because Wall Street
analysts and investors use projected GAAP EPS and Cash EPS as valuation
benchmarks, along with other valuation benchmarks, and due to the uncertainty
surrounding the ultimate amount of goodwill caused by the transaction, thus
causing uncertainty in determining a precise GAAP EPS estimate. This analysis
indicated that, with estimated synergies, the merger would be dilutive in 2001
to Thoratec's GAAP EPS while being immediately accretive to Thoratec's Cash EPS.
The actual results achieved by the combined company may vary from projected
results. The variations could be material.
Lehman Brothers is an internationally recognized investment banking firm
and, as part of its investment banking activities, is regularly engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, and competitive bids, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. The Thoratec board of directors
selected Lehman Brothers because of its expertise, reputation and familiarity
with Thoratec and the medical device industry generally and because is
investment banking professionals have substantial experience in transactions
comparable to the merger.
As compensation for its services in connection with the merger, Thoratec
has agreed to pay Lehman Brothers a transaction fee of 1% of the transaction
value (as measured on the last trading day before the closing of the merger. In
addition, Thoratec has agreed to reimburse Lehman Brothers for its reasonable
out-of-pocket expenses incurred in connection with the merger and indemnify
Lehman Brothers for certain liabilities that may arise out of its engagement by
Thoratec and the rendering of the Lehman Brothers opinion. Lehman Brothers also
has performed various investment banking services for Thoratec in the past
(including
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<PAGE> 66
acting as underwriter for an equity offering of common stock of Thoratec in
April 2000) and has received customary fees for such services.
In the ordinary course of its business, Lehman Brothers may actively trade
in the equity securities of Thoratec and the equity and debt securities of
Cardiosystems and Thermo Electron for its own account and for the accounts of
its customers and, accordingly, may at any time hold a long or short position in
such securities.
INTERESTS OF THORATEC DIRECTORS AND OFFICERS IN THE MERGER
When considering the recommendation of Thoratec's board of directors that
Thoratec's shareholders should approve the merger, Thoratec's shareholders
should be aware that Thoratec's executive officers have interests in the merger
that are different, or are in addition to the interests of Thoratec's other
shareholders. The Thoratec board was aware of these potential conflicts and
considered them. These include:
As of December , 2000, Thoratec's six executive officers own a total of
unvested options to purchase stock of Thoratec with a weighted average
exercise price of $ per share. Upon completion of the merger, all these
options will vest. In connection with the merger, Thoratec's executive officers
signed waivers under which they agreed not to transfer the shares of Thoratec
stock issuable to them upon exercise of the accelerated options for periods of
up to 18 months after the merger closes. They also signed retention bonus
agreements under which, in exchange for those waivers, they will receive
retention bonuses, payable 12 months after and only if the merger closes, which
are equal to one to one and one half times such officer's salary.
Under the terms of employment agreements and the Thoratec executive officer
severance benefits plan, Thoratec's executive officers are entitled to
substantial severance payments if their employment is terminated after the
merger for any reason other than cause.
As a result, these executive officers could be more likely to vote in favor
of recommending the merger agreement and the merger than if they did not hold
these interests.
OPINION OF CARDIOSYSTEMS' FINANCIAL ADVISOR
Pursuant to an engagement letter dated August 1, 2000, Cardiosystems
retained J.P. Morgan to act as its financial advisor in connection with the
merger.
At the meeting of the Cardiosystems' board of directors on October 2, 2000,
J.P. Morgan rendered its oral opinion, subsequently confirmed in writing, to the
board of directors that, as of that date and on the basis of and subject to the
various considerations set forth in the opinion, the exchange ratio in the
merger was fair, from a financial point of view, to the holders of Cardiosystems
common stock. Cardiosystems' board of directors did not limit J.P. Morgan in any
way in the investigations it made or the procedures it followed in rendering its
opinion.
We have attached as Annex C to this statement the full text of J.P.
Morgan's written opinion. This opinion sets forth the assumptions made, matters
considered and limits on the review undertaken by J.P. Morgan. We urge you to
read the opinion carefully and in its entirety. The summary of the opinion of
J.P. Morgan set forth immediately below and elsewhere in this statement is
qualified in its entirety by reference to the full text of the opinion.
J.P. Morgan's written opinion is addressed to the board of directors of
Cardiosystems, is directed only to the exchange ratio to be paid in the merger
to the holders of Cardiosystems common stock and does not constitute a
recommendation to any stockholder of Cardiosystems as to how such stockholder
should vote on the merger or any other matter.
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<PAGE> 67
In arriving at its opinion, J.P. Morgan reviewed, among other things:
- the merger agreement
- certain publicly available information concerning the business of
Cardiosystems and of certain other companies engaged in businesses
comparable to that of Cardiosystems, and the reported market prices for
certain other companies' securities deemed comparable
- publicly available terms of certain transactions involving businesses
comparable to that of Cardiosystems and the consideration received for
such businesses
- current and historical market prices of the common stock of Cardiosystems
and Thoratec
- the audited financial statements of Cardiosystems and Thoratec,
respectively, for the fiscal year ended January 1, 2000, and the
unaudited financial statements of Cardiosystems and Thoratec,
respectively, for the period ended July 1, 2000
- certain agreements with respect to outstanding indebtedness or
obligations of Cardiosystems, Thermo Electron and Thoratec
- certain internal financial analyses and forecasts prepared by
Cardiosystems and Thoratec and their respective managements
- the terms of other business combinations that J.P. Morgan deemed
relevant.
J.P. Morgan also held discussions with certain members of the management of
Cardiosystems and Thoratec with respect to certain aspects of the merger, and
the past and current business operations of Cardiosystems and Thoratec, the
financial condition and future prospects and operations of Cardiosystems and
Thoratec, the effects of the merger on the financial condition and future
prospects of Cardiosystems and Thoratec, and certain other matters J.P. Morgan
believed necessary or appropriate to its inquiry. In addition, J.P. Morgan
reviewed other financial studies and analyses and considered such other
information as it deemed appropriate for the purposes of its opinion.
J.P. Morgan relied upon and assumed, without independent verification, the
accuracy and completeness of all information that was publicly available or that
was furnished to it by Cardiosystems and Thoratec or otherwise reviewed by J.P.
Morgan, and J.P. Morgan has not assumed any responsibility or liability for that
information. J.P. Morgan did not conduct any valuation or appraisal of any
assets or liabilities, and no valuations or appraisals were provided to J.P.
Morgan. In relying on financial analyses and forecasts provided to J.P. Morgan,
J.P. Morgan assumed that they had been reasonably prepared based on assumptions
reflecting the best currently available estimates and judgments by management as
to the expected future results of operations and financial condition of
Cardiosystems and Thoratec to which such analyses or forecasts relate. J.P.
Morgan assumed that the merger will have the tax and accounting consequences
described in discussions with, and materials furnished to J.P. Morgan by,
representatives of Cardiosystems and Thoratec, that the other transactions
contemplated by the merger agreement will be consummated as described in the
merger agreement and that the Exchange Ratio will not be adjusted. J.P. Morgan
relied as to all legal matters relevant to rendering its opinion upon the advice
of counsel.
The projections furnished to J.P. Morgan for Cardiosystems and Thoratec
were prepared by our respective managements. Neither Cardiosystems nor Thoratec
publicly discloses internal management projections of the type provided to J.P.
Morgan in connection with its analysis of the merger, and such projections were
not prepared with a view toward public disclosure. These projections were based
on numerous variables and assumptions that are inherently uncertain and may be
beyond the control of management, such as factors related to general economic
and competitive conditions and prevailing interest rates. Accordingly, actual
results could vary significantly from those set forth in these projections.
As is customary in the rendering of fairness opinions, J.P. Morgan based
its opinion on economic, market and other conditions as in effect on, and the
information made available to J.P. Morgan as of, the date of the opinion.
Subsequent developments may affect J.P. Morgan's opinion, and J.P. Morgan does
not have any
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obligation to update, revise, or reaffirm its opinion. J.P. Morgan expressed no
opinion as to the price at which Thoratec shares will trade in the future.
The terms of the merger were determined through negotiations between
Cardiosystems and Thoratec and were approved by the Cardiosystems board of
directors.
Although J.P. Morgan provided advice to Cardiosystems during the course of
these negotiations, the decision to enter into the merger was solely that of the
Cardiosystems board of directors. As described above, the opinion of J.P. Morgan
and its presentation to the Cardiosystems board of directors constituted only
one of a number of factors taken into consideration by the Cardiosystems board
of directors in making its determination to approve the merger.
In accordance with customary investment banking practice, J.P. Morgan
employed generally accepted valuation methods in reaching its opinion. The
following is a summary of the material financial analyses used by J.P. Morgan in
connection with its opinion. We have presented some of the summaries of
financial analyses in tabular format. In order to understand the financial
analyses used by J.P. Morgan more fully, you should read the tables together
with the text of each summary. The tables alone do not constitute a complete
description of J.P. Morgan's financial analyses.
Selected Public Trading Multiples:
Using publicly available information, J.P. Morgan compared selected
financial data of Cardiosystems' Left Ventricular Assist Systems, or LVAS,
business and Cardiosystems' consolidated financial information with similar data
for selected publicly traded companies engaged in businesses which J.P. Morgan
judged to be analogous. The selected companies were:
<TABLE>
<CAPTION>
BROAD GROUP NARROW GROUP
----------- ------------
<S> <C>
Arrow International Inc. Boston Scientific Corp.
Abiomed Inc. Guidant Corp.
Boston Scientific Corp. Medtronic Inc.
CR Bard Inc.
Eclipse Surgical Technologies Inc.
Edwards Lifesciences Corp.
Guidant Corp.
Medtronic Inc.
St. Jude Medical Inc.
Sulzer Medica Ltd.
Thoratec
</TABLE>
J.P. Morgan selected these companies because they engage in businesses
reasonably comparable to those of Cardiosystems. J.P. Morgan used publicly
available financial projections by equity analysts covering each of these
companies to determine the ratio of market capitalization to projected net
income and used publicly available filings by each company to determine
enterprise value, equal to market capitalization plus net debt, to the last
twelve months' sales. The following table presents a comparison of the mean,
median, high and low multiples of the comparable companies based on the
foregoing ratios.
<TABLE>
<CAPTION>
MEAN MEDIAN HIGH LOW
----- ------ ----- -----
<S> <C> <C> <C> <C>
Enterprise value to last twelve months' sales
(Broad Group).................................... 8.0x 4.2x 28.0x 2.2x
Market capitalization to 2001 net income (Narrow
Group)........................................... 30.1x 34.6x 41.4x 14.2x
</TABLE>
The enterprise value multiples were applied to the last twelve months'
sales of Cardiosystems' LVAS business, yielding an implied value for the LVAS
business. The value of the LVAS business was then combined with the estimated
pre-tax value of Cardiosystems' International Technidyne subsidiary of $65-$75
million, which was estimated by J.P. Morgan due to a lack of public comparable
companies for this business. Additionally, the market capitalization to 2001 net
income multiples were applied to the consolidated
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<PAGE> 69
projected financials of Cardiosystems. This analysis yielded a range of implied
equity valuations of approximately $9.00 to $13.00 per share for Cardiosystems'
common stock.
It should be noted that no company utilized in the analysis above is
identical to Cardiosystems. In evaluating companies identified by J.P. Morgan as
comparable to Cardiosystems, J.P. Morgan made judgments and assumptions with
regard to industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of
Cardiosystems, such as the impact of competition on the businesses of
Cardiosystems and the industry generally, industry growth and the absence of any
material change in the financial condition and prospects of Cardiosystems or the
industry or in the financial markets in general.
Comparable Transaction Analysis.
Using publicly available information, J.P. Morgan examined selected
transactions with respect to Cardiosystems' LVAS business. Specifically, J.P.
Morgan reviewed the following transactions:
<TABLE>
<CAPTION>
ACQUIRER TARGET
-------- ------
<S> <C>
Medtronic............................................... Xomed
Guidant................................................. Cardiothoracic Systems
Abbott Labs............................................. Perclose
Medtronic............................................... Arterial Vascular Engineering
Medtronic............................................... Sofamor-Danek
Medtronic............................................... PhysioControl
Boston Scientific....................................... Schneider (from Pfizer)
Baxter.................................................. Research Medical
St. Jude................................................ Ventritex
</TABLE>
J.P. Morgan applied a range of multiples derived from such analysis to the
last twelve months' revenues of the LVAS business. Due to a lack of public
comparable transactions for Cardiosystems' International Technidyne subsidiary,
J.P. Morgan estimated a pre-tax value of Cardiosystems' International Technidyne
subsidiary to be between $65.0 and $75.0 million. Based on this analysis, J.P.
Morgan arrived at an estimated range of equity values of approximately $11.75 to
$13.00 per share for Cardiosystems' common stock.
Discounted Cash Flow Analysis.
J.P. Morgan conducted a discounted cash flow analysis for the purpose of
estimating the fully diluted equity value per share for Cardiosystems' common
stock. J.P. Morgan estimated the free cash flows that Cardiosystems is expected
to generate during fiscal years 2000 through 2005 based upon financial
projections prepared by the management of Cardiosystems through the year ended
2004. J.P. Morgan derived projections for 2005 by keeping operating margins flat
and projecting total sales growth at one-half the rate of the prior two years
reflecting the much higher sales base and the impact on the prior years' results
of the launch of new products. J.P. Morgan also calculated a range of terminal
asset values of Cardiosystems at the end of the five-year period ending December
31, 2005 by applying a perpetual growth rate ranging from 3.0% to 4.0% of the
free cash flow of Cardiosystems during the final year of the five-year period.
The free cash flows and the range of terminal asset values were then discounted
to present values using a range of discount rates from 11.0% to 12.0%. The
discount rate range was calculated by estimating the cost of debt financing and
the cost of equity financing for Cardiosystems, taking into account such
variables as company size, industry risk, and debt and equity market conditions.
The present value of the free cash flows and the range of terminal asset values
were then adjusted for Cardiosystems' July 1, 2000 quarter-end estimated excess
cash and total debt. Based on these projections and the indicated discount rate
range, the discounted cash flow analysis indicated a range of equity values of
approximately $13.00 to $15.50 per share for Cardiosystems' common stock.
The summary set forth above does not purport to be a complete description
of the analyses or data presented by J.P. Morgan. The preparation of a fairness
opinion is a complex process and is not necessarily susceptible to partial
analysis or summary description. J.P. Morgan believes that one must consider its
opinion,
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<PAGE> 70
the summary set forth above and its analyses as a whole. Selecting portions of
the summary, without considering all of the analyses, could create an incomplete
view of the processes underlying the analyses and opinion. In arriving at its
opinion, J.P. Morgan considered the results of all of the analyses as a whole.
No single factor or analysis was determinative of J.P. Morgan's fairness
determination. Rather, the totality of the factors considered and analyses
performed operated collectively to support its determination. J.P. Morgan based
its analyses on assumptions that it deemed reasonable, including assumptions
concerning general business and economic conditions and industry-specific
factors. The other principal assumptions upon which J.P. Morgan based its
analyses are set forth above under the description of each such analysis.
Analyses based upon forecasts of future results are inherently uncertain, as
they are subject to numerous factors or events beyond the control of the parties
and their advisors. Accordingly, these forecasts and analyses are not
necessarily indicative of actual future results, which may be significantly more
or less favorable than suggested by those analyses. Therefore, neither we nor
J.P. Morgan nor any other person assumes responsibility if future results are
materially different from those forecasted. Moreover, J.P. Morgan's analyses are
not appraisals and do not reflect the prices at which businesses actually could
be bought or sold.
As a part of its investment banking business, J.P. Morgan and its
affiliates are continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, investments for passive
and control purposes, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements, and valuations for estate,
corporate and other purposes. The Cardiosystems board of directors selected J.P.
Morgan to act as its financial advisor due to J.P. Morgan's qualifications,
expertise, reputation, on-going financial advisory work with Thermo Electron, as
well as J.P. Morgan's experience and familiarity with Cardiosystems and its
business.
J.P. Morgan has acted as financial advisor to Cardiosystems with respect to
the merger, for which Cardiosystems has agreed to pay J.P. Morgan a transaction
fee likely to be between 0.97% - 1.47% of the transaction value, depending on
the transaction value, which will be calculated using the average trading price
of Thoratec common stock for the twenty trading days ending two days prior to
the closing of the transaction. In addition, Cardiosystems has agreed to
indemnify J.P. Morgan against certain liabilities, including liabilities arising
under the federal securities laws.
J.P. Morgan and its affiliates may maintain banking and other business
relationships with Cardiosystems, Thermo Electron and Thoratec and their
affiliates, respectively, for which J.P. Morgan receives customary fees. Over
the past several months, J.P. Morgan has been acting as financial advisor to
Thermo Electron for the purpose of advising Thermo Electron in connection with
its strategic alternatives, including the proposed reorganization of Thermo
Electron and its subsidiaries, for which J.P. Morgan has received and will
continue to receive separate, customary fees from Thermo Electron. These other
fees include a minimum retainer fee and additional compensation if some or all
of the elements of Thermo Electron's reorganization are completed. In addition,
in the ordinary course of their businesses, J.P. Morgan and its affiliates may
actively trade the debt and equity securities of Cardiosystems, Thermo Electron
or Thoratec for their own accounts or for the accounts of customers and,
accordingly, they may at any time hold long or short positions in such
securities.
INTERESTS OF THERMO ELECTRON AND CARDIOSYSTEMS' DIRECTORS, OFFICERS AND
SIGNIFICANT STOCKHOLDERS IN THE MERGER
When considering the recommendation of Cardiosystems' board of directors
that Cardiosystems' stockholders approve the merger, you should be aware that
Thermo Electron and some Cardiosystems directors and officers have interests in
the merger that are different from, or are in addition to, your interests. The
Cardiosystems board of directors was aware of these potential conflicts and
considered them. These include:
- severance and retention payments
- accelerated vesting
- employment
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<PAGE> 71
- lock-up agreements and Thermo Electron registration rights
- indemnification
As a result, Thermo Electron and these directors, executive officers and
shareholders could be more likely to vote in favor of recommending the merger
agreement and the merger than if they did not hold these interests.
COMPLETION AND EFFECTIVENESS OF THE MERGER
The merger will be completed if and after all the conditions to the merger
are satisfied or waived, including approval of the merger agreement and the
merger by the Cardiosystems stockholders and the Thoratec shareholders,
including the approval of the issuance of Thoratec stock in the merger by the
Thoratec shareholders. The merger will become effective upon the filing of
Articles of Merger with the Secretary of the Commonwealth of Massachusetts.
Thoratec will issue a press release if and promptly after the merger closes.
STRUCTURE OF THE MERGER AND CONVERSION OF CARDIOSYSTEMS COMMON STOCK
Under the merger agreement, Lighting Acquisition Corp., a Massachusetts
corporation that is wholly-owned by Thoratec, will merge into Cardiosystems. As
a result of the merger, Cardiosystems will become a wholly-owned subsidiary of
Thoratec.
Upon completion of the merger, each outstanding share of Cardiosystems
common stock other than shares whose holders exercise dissenters' rights will be
converted into the right to receive .835 of a share of Thoratec common stock. No
fractional shares of Thoratec common stock will be issued in the merger. In lieu
of any fractional share, Cardiosystems' stockholders will receive cash equal to
the product of such fractional share, after combining all fractional shares to
which a Cardiosystems stockholder would otherwise be entitled, and the closing
price of Thoratec stock as reported on Nasdaq National Market for the trading
day immediately before the date the merger closes.
EXCHANGE OF CARDIOSYSTEMS STOCK CERTIFICATES FOR THORATEC STOCK CERTIFICATES
When the merger is completed, American Securities Transfer and Trust, Inc.,
Thoratec's exchange agent, will mail to Cardiosystems' (by then former)
stockholders a letter of transmittal and related instructions to surrender their
Cardiosystems stock certificates in exchange for Thoratec stock certificates.
When former Cardiosystems stockholders deliver their Cardiosystems stock
certificates to the exchange agent with an executed letter of transmittal and
any other required documents, the Cardiosystems stock certificates will be
canceled and the former Cardiosystems stockholders will receive Thoratec stock
certificates representing the number of full shares of Thoratec stock to which
they are entitled under the merger agreement. They will receive a check, without
interest, for any aggregated fractional share of Thoratec stock they otherwise
would have received in the merger.
Cardiosystems stockholders should not submit their Cardiosystems stock
certificates for exchange until after the merger closes and they receive the
transmittal instructions and form of letter of transmittal.
Thoratec will only issue Cardiosystems stockholders a Thoratec stock
certificate and check in lieu of a fractional share in the name in which the
surrendered Cardiosystems stock certificate is registered. If Cardiosystems
stockholders wish to have their certificates and check issued in another name,
they must present the exchange agent with all documents required to show and
effect the unrecorded transfer of ownership and show that they paid any
applicable stock transfer taxes.
ACCOUNTING TREATMENT OF THE MERGER
The parties intend to account for the transaction as a purchase for
accounting and financial reporting purposes under generally accepted accounting
principles. Because Cardiosystems' stockholders will own approximately 57% of
the common stock of Thoratec after the merger, the merger will be accounted for
as a reverse acquisition and the financial statements of Cardiosystems will be
the financial statements of the
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<PAGE> 72
surviving corporation. Under the purchase method, Thoratec's results of
operations will be included in Cardiosystems' results of operations from and
after the closing of the transaction. For purposes of preparing Cardiosystems'
results of operations, Cardiosystems will establish a new accounting basis for
Thoratec's identifiable tangible and intangible assets and liabilities based
upon the fair values thereof, and record goodwill for the difference between the
purchase price, including the direct costs of the transaction, and the fair
value of such net assets. A final determination of required purchase accounting
adjustments and of the fair value of the assets and liabilities of Thoratec has
not yet been made. Accordingly, the purchase accounting adjustments made in
connection with the development of the comparative pro forma per share financial
information appearing elsewhere in this statement are preliminary and subject to
change.
REGULATORY FILINGS AND APPROVALS REQUIRED TO COMPLETE THE MERGER
The merger is subject to review, before the closing, by the Department of
Justice and the Federal Trade Commission to determine whether those agencies
believe the merger complies with federal antitrust laws. Under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, the merger may
not be completed until the waiting period requirements of that Act have been
satisfied and neither of the agencies has acted, effectively, to block the
merger.
On November , 2000, the parties filed the required notification reports
with the Department of Justice and the Federal Trade Commission under the
Hart-Scott-Rodino statute.
In addition, the completion of the merger is subject to the continuing
effectiveness of the registration statement of which this statement is a part,
and compliance with applicable corporate laws of the Massachusetts and
California.
CERTAIN SECURITIES LAWS CONSIDERATIONS
The Thoratec common stock to be issued in the merger will be registered
under the Securities Act. Those shares will be freely transferable under the
Securities Act, except for Thoratec common stock issued to any person or entity
that is considered an "affiliate" of Thoratec or Cardiosystems under the
Securities Act. Persons and entities that may be considered affiliates include
individuals or entities that control, are controlled by or are under common
control with Cardiosystems. Thermo Electron is an affiliate of Cardiosystems.
Cardiosystems' affiliates may not sell their Thoratec common stock acquired in
the merger, except pursuant to:
- an effective registration statement under the Securities Act covering the
resale of those shares
- an exemption under Rule 145 under the Securities Act or
- any other applicable exemption under the Securities Act.
Thoratec and Thermo Electron have signed a shareholder agreement and a
registration rights agreement, copies of which are attached as Annex E and D,
respectively, under which Thermo Electron has agreed not to transfer any
Thoratec stock received in the merger during the period ending four months after
the merger closes and thereafter to transfer no more than 25% of such shares
before the anniversary of the merger and no more than an additional 25% of such
shares (for a cumulative total of 50%) before 18 months after the merger and all
of the shares (for a total of 100%) after 18 months. Thermo Electron has certain
rights to cause Thoratec to register the Thoratec stock received by it in the
merger under the registration rights agreement. (See Sections 3 and 4 of the
registration rights agreement and Section 6 of the shareholder agreement.)
LISTING ON THE NASDAQ NATIONAL MARKET OF THORATEC COMMON STOCK TO BE ISSUED IN
THE MERGER
Thoratec has undertaken to cause the shares of Thoratec common stock to be
issued in the merger to be approved for listing on the Nasdaq National Market.
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DELISTING AND DEREGISTRATION OF CARDIOSYSTEMS COMMON STOCK AFTER THE MERGER
If the merger is completed, Cardiosystems' common stock will be delisted
from the American Stock Exchange and will be deregistered under the Exchange
Act.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The discussion below constitutes the opinion of Hale and Dorr LLP, counsel
to Cardiosystems, and Heller Ehrman White & McAuliffe LLP, counsel to Thoratec,
regarding material United States federal income tax considerations generally
applicable to United States holders of Cardiosystems common stock who, in the
merger, exchange their Cardiosystems common stock solely for Thoratec common
stock and cash in lieu of an aggregated fractional share of Thoratec common
stock. Completion of the merger is conditioned upon Thoratec's and
Cardiosystems' receipt of opinions of their respective counsel, confirming their
opinions as described in this section, to the effect that the merger will
qualify as a "reorganization" within the meaning of Section 368(a) of the Code.
The opinions of Hale and Dorr and Heller Ehrman set forth in this section
are subject to certain limitations, qualifications and assumptions and are based
on certain facts and representations, including representations contained in
certificates executed by officers of Thoratec and Cardiosystems. The opinions
assume the absence of changes in relevant facts or in law between the date of
this statement and the closing date. The opinions are not binding on the
Internal Revenue Service or any court. No ruling from the Internal Revenue
Service has been or will be sought. The discussion below is based upon current
provisions of the Code, currently applicable U.S. Treasury regulations adopted
under the Code, and judicial and administrative decisions and rulings. Future
legislative, judicial or administrative changes or interpretations could alter
or modify (including on a retroactive basis) the discussion below.
This discussion does not purport to deal with all aspects of United States
federal income taxation that may affect particular stockholders in light of
their individual circumstances, and is not intended for stockholders subject to
special treatment under federal income tax law. Stockholders subject to special
treatment include, but are not limited to, insurance companies, tax-exempt
organizations, financial institutions, broker-dealers, foreign persons,
stockholders who are subject to the alternative minimum tax provisions of the
Code, stockholders who hold their stock as part of a hedge or straddle,
appreciated financial position, straddle or conversion transaction, stockholders
who do not (or will not at the time of the merger) hold their stock as a capital
asset and stockholders who have acquired their stock upon the exercise of
employee options or otherwise as compensation. This discussion does not consider
the effect of state, local or foreign tax laws and does not consider any tax
consequence of transactions effectuated by stockholders subsequent to, or
concurrently with, the merger.
In the opinion of Hale and Dorr, counsel to Cardiosystems, and Heller
Ehrman, counsel to Thoratec, the merger will be a "reorganization" within the
meaning of Section 368(a) of the Code. "Reorganization" status means that:
- A holder of Cardiosystems common stock will not have taxable gain or
deductible loss upon the receipt of whole shares of Thoratec common stock
solely in exchange for Cardiosystems common stock in the merger.
- Cash payments received by holders of Cardiosystems common stock in lieu
of a fractional share of Thoratec common stock will result in taxable
capital gain (or capital loss) measured by the difference between the
cash payment received and the portion of the tax basis in the shares of
Cardiosystems common stock surrendered that is allocable to such
fractional share, assuming that the Cardiosystems common stock is held as
a capital asset at the time of the merger. Capital gain (or capital loss)
will be long-term capital gain (or loss) if the shares of Cardiosystems
common stock allocable to such fractional share have been held for more
than one year when the merger closes.
- Cardiosystems or Thoratec stockholders who receive cash for their
Cardiosystems common stock or Thoratec common stock as a result of
exercising statutory appraisal rights will have a taxable capital
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gain (or capital loss) measured by the difference between the cash
payment received and their tax basis in the shares as to which the
appraisal rights are exercised, assuming that those shares are held as
capital assets when the appraisal rights are elected. In general, such
stockholders should also be entitled to reduce that capital gain (or
increase that capital loss) by the amount of any expenses they incur in
pursuing or prosecuting their appraisal rights.
- The total tax basis of the Thoratec common stock received by
Cardiosystems stockholders in the merger will be the same as the total
tax basis of the Cardiosystems common stock surrendered in exchange,
reduced by any tax basis allocable to a fractional share of Thoratec
common stock for which cash is received.
- A Cardiosystems stockholder's holding period with respect to Thoratec
common stock received in the merger will include the stockholder's
holding period for the Cardiosystems common stock surrendered in
exchange.
- None of Thoratec, Cardiosystems and Merger Sub will have taxable gain (or
deductible loss) solely as a result of the merger.
Long-term capital gains of individuals are subject to federal income tax at
a maximum stated rate of 20%. Short-term capital gains of individuals are
taxable at the rates applicable to ordinary income. The maximum stated federal
income tax rate on ordinary income of individuals is 39.6%. Phase-outs of
deductions and exemptions at certain income levels may have the effect of
imposition of federal income tax at rates higher than the stated maximums.
Capital loss of an individual applies first to offset the individual's capital
gain and then applies to offset up to $3,000 of ordinary income per taxable
year. Capital gains of corporations are subject to federal income tax at the
rates applicable to ordinary income. Capital losses of corporations offset
capital gains and do not reduce ordinary taxable income.
THIS DISCUSSION IS INTENDED ONLY AS A SUMMARY OF THE MATERIAL UNITED STATES
FEDERAL INCOME TAX CONSIDERATIONS RELATING TO THE MERGER AND DOES NOT PURPORT TO
BE A COMPLETE ANALYSIS OR DISCUSSION OF ALL POTENTIAL RELEVANT TAX EFFECTS.
STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX
CONSEQUENCES TO THEM OF THE MERGER, INCLUDING TAX-RETURN REPORTING REQUIREMENTS
AND THE EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS.
THE MERGER AGREEMENT
This section of the statement summarizes the merger agreement. While
Thoratec and Cardiosystems believe that this description covers the material
terms of the merger agreement, this summary may not contain all the information
that is important to you. The merger agreement is attached to this statement as
Annex A. Thoratec and Cardiosystems urge you to read it carefully.
GENERAL
After approval of the merger agreement and merger by Cardiosystems'
stockholders and Thoratec's shareholders and the satisfaction or waiver of the
other conditions to the merger, Merger Sub a wholly-owned subsidiary of
Thoratec, will merge into Cardiosystems. Cardiosystems will survive the merger
as a wholly-owned subsidiary of Thoratec. The merger will become effective when
the parties file Articles of Merger with the Secretary of State of the
Commonwealth of Massachusetts.
THE EXCHANGE RATIO AND TREATMENT OF CARDIOSYSTEMS COMMON STOCK
When the merger closes, each issued and outstanding share of Cardiosystems
common stock will be converted into the right to receive .835 of a share of
Thoratec common stock. However, any shares owned by Cardiosystems and any shares
owned by Thoratec or Thoratec's merger subsidiary will be cancelled without
conversion. Thoratec will adjust the exchange ratio to reflect any
reclassification, stock split, stock dividend,
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reorganization or other similar change respecting Thoratec common stock or
Cardiosystems common stock occurring before the merger closes. However, no such
changes are contemplated.
Based on the exchange ratio of .835 and the number of shares of
Cardiosystems stock outstanding as of December , 2000, a total of
approximately shares of Thoratec stock are expected to be issued
in the merger.
TREATMENT OF CARDIOSYSTEMS STOCK OPTIONS
When the merger closes, Thoratec will assume each then outstanding stock
option of Cardiosystems, and convert them into options to purchase Thoratec
common stock subject to the same terms and conditions as were applicable before
the merger, including accelerated vesting, on the terms provided in
Cardiosystems' 1999 Amended and Restated Directors Stock Option Plan and 1999
Amended and Restated Non-Qualified Stock Option Plan. The number of shares of
Thoratec common stock issuable upon the exercise of the assumed options will be
adjusted based on the .835 merger exchange ratio. Any fractional share of
Thoratec stock resulting from such adjustment will be rounded down to the
nearest whole share. The exercise price per share of Thoratec stock issuable
under each assumed option will equal the total exercise price of the
Cardiosystems stock purchasable under the assumed option divided by the number
of whole Thoratec shares the optionholder is entitled to purchase based on the
exchange ratio. The exercise price will be rounded up to the nearest whole cent.
Thoratec is submitting, for approval at its special shareholder meeting, a
proposal to amend the Thoratec Option Plan to increase the number of shares
reserved for issuance under that plan by 6,200,000 to accommodate the
Cardiosystems options to be assumed by Thoratec in the merger and to enable
Thoratec to grant additional options to Cardiosystems (as well as Thoratec)
personnel over time after the merger. If that proposal is approved, Thoratec
will reserve for issuance a sufficient number of its common stock for delivery
upon exercise of the assumed options. Thoratec will file a registration
statement on Form S-8 covering the shares of Thoratec stock issuable under the
assumed Cardiosystems stock options.
CARDIOSYSTEMS' EMPLOYEE STOCK PURCHASE PLAN
Cardiosystems suspended its Employee Stock Purchase Plan on October 31,
2000 after completion of purchases under that plan on that date. If the merger
is completed, that plan will be terminated. If the merger is abandoned,
Cardiosystems may or may not choose to reactivate that plan.
EMPLOYEE BENEFITS MATTERS
Individuals who continue to be employed by Cardiosystems after the merger
is completed who become participants in, or are subject to, Thoratec's employee
benefit plans will, to the fullest extent permitted by applicable law, receive
credit for length of service with Cardiosystems before the merger for
eligibility and vesting purposes.
REPRESENTATIONS AND WARRANTIES
Thoratec, Thoratec's merger subsidiary and Cardiosystems each made a number
of representations and warranties in the merger agreement regarding aspects of
their respective businesses, financial condition, structure and other facts
pertinent to the merger. The representations and warranties in the merger
agreement are complicated and not easily summarized. You are urged to read the
articles of the merger agreement entitled "Representations and Warranties of
Cardiosystems" relating to Cardiosystems and "Representations and Warranties of
Thoratec and Merger Sub" relating to Thoratec and its merger subsidiary.
Thoratec and Cardiosystems each made representations and warranties to the
other including representations as to:
- corporate organization and qualification to do business
- articles of incorporation and bylaws
- authorization of the merger agreement
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- the effect of the merger and obligations under applicable laws
- regulatory approvals required to complete the merger
- approval by its board of directors
- the fairness opinion received from its financial advisor
- capitalization
- filings and reports with the SEC
- financial statements
- liabilities
- changes in business since the second quarter of 2000
- ownership of the stock of subsidiaries
- litigation
- insurance coverage
- material contracts
- labor relations
- compliance with applicable laws
- intellectual property
- taxes
- employee benefit plans
- environmental laws
- payments required to be made to investment bankers, brokers and agents
because of the merger
- information in this statement and the related registration statement
filed by Thoratec
- title to properties
- FDA matters and
- inventories.
Cardiosystems also made representations about the absence of discussions
relating to competing acquisition proposals.
The representations and warranties of the parties expire when the merger
closes.
CONDUCT OF BUSINESS BEFORE COMPLETION OF THE MERGER
Thoratec and Cardiosystems agreed that, until the earlier of completion of
the merger or termination of the merger agreement, or unless consented to in
writing, each party will use its commercially reasonable efforts consistent with
past practices and policies to:
- conduct its business operations according to its ordinary and usual
course of business
- preserve intact its present business organization
- keep available the services of its present officers and employees
- maintain satisfactory relationships with suppliers, distributors, and
customers and
- take no action that would adversely affect its ability to complete the
merger.
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Thoratec and Cardiosystems each also agreed that, until the earlier of the
completion of the merger or termination of the merger agreement, or unless
consented to in writing, each party will conduct its business in compliance with
certain specific restrictions relating to:
- intellectual property rights
- stock splits, combinations or reclassification
- liquidation, dissolution, acquisition of assets, disposal of assets,
changes in capitalization, partnership, associations, joint venture,
joint development, technology transfer, or other business alliances
- maintenance of insurance policies
- maintenance of books and records
- entering into hedging, option, derivative or other such transactions
- suspension of research and development activities
- issuance of stock or debt instruments - incurrence of indebtedness
- purchase of its own shares or debt
- payment or settlement of liabilities
- granting of options, calls, subscriptions or other similar instruments
- revaluation of assets
- suffering of losses or damages exceeding certain limits
- increasing director or officer compensation
- granting severance payments or entering into employment contracts
- amending employee benefit plans
- repricing options
- modification of its articles of organization or bylaws
- becoming party to a merger, consolidation, share exchange or similar
transaction
- disposing of material claims and litigation
- entering into new material contracts
- changing accounting policies and procedures
- incurring obligations to make certain expenditures, payments or otherwise
satisfy liabilities
- making tax elections and
- making capital expenditures in excess of specified thresholds.
The agreements related to the conduct of Cardiosystems' and Thoratec's
businesses in the merger agreement are complicated and not easily summarized.
You are urged to read Article V of the merger agreement, the article in which
those agreements appear.
NO SOLICITATION OF OTHER TRANSACTIONS BY THERMO ELECTRON, CARDIOSYSTEMS AND
SUBSIDIARIES
Thermo Electron, Cardiosystems and subsidiaries agreed to cease, as of the
date of the merger agreement, any and all existing activities, discussions or
negotiations with any parties conducted before that date with respect to any
Cardiosystems acquisition proposal (explained below), other than the merger, by
a
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third party. Until the merger is completed or the merger agreement is
terminated, Thermo Electron, Cardiosystems and its subsidiaries agreed not,
directly or indirectly, to:
- solicit, initiate, encourage or induce the making, submission or
announcement of any Cardiosystems acquisition proposal
- participate in any discussions or negotiations regarding any
Cardiosystems acquisition proposal or furnish to any person any
information with respect to any Cardiosystems acquisition proposal
- engage in discussions with any person with respect to any Cardiosystems
acquisition proposal
- subject to certain limited exceptions discussed below, approve, endorse
or recommend any Cardiosystems acquisition proposal or
- enter into any letter of intent or similar document or any contract,
agreement or commitment contemplating or otherwise relating to any
acquisition transaction.
Thermo Electron's and Cardiosystems' boards of directors may, without
breaching the merger agreement, respond to an unsolicited, bona fide written
Cardiosystems acquisition proposal by discussing the proposal with, and
furnishing information to the party making the proposal, if all of the following
conditions are met:
- Thermo Electron's and Cardiosystems' boards conclude, upon written advice
from their financial advisor, that the proposal constitutes a superior
offer (explained below)
- Thermo Electron's and Cardiosystems' boards determine in good faith,
after considering the advice of its outside legal counsel, that its
fiduciary obligations require it to do so
- Thermo Electron's and Cardiosystems' give prior written notice to
Thoratec of planned discussions with, or the furnishing of information to
the party making the proposal, and Cardiosystems receives a customary
confidentiality agreement from that party and
- upon determining to provide information to the party making the
Cardiosystems acquisition proposal, Cardiosystems informs Thoratec within
24 hours of deciding to provide information to any third party and
provides Thoratec with the identity of the recipient of the information
or the potential acquiror and the terms of the Cardiosystems superior
offer.
For purposes of the foregoing, any action by any officer, director,
affiliate or employee of Cardiosystems or any investment banker, attorney or
other advisor or representative of Cardiosystems is deemed to be a breach of
these obligations.
A Cardiosystems acquisition proposal is an offer or proposal, other than by
Thoratec, relating to:
- the purchase from Cardiosystems or acquisition by any person or "group"
(as defined under Section 13(d) of the Exchange Act and the related rules
and regulations) of more than a 15% interest in the total outstanding
voting securities of Cardiosystems or any of its subsidiaries
- any tender offer or exchange offer that if consummated would result in
any person or group beneficially owning 15% or more of the total
outstanding voting securities of Cardiosystems or any of its subsidiaries
- any merger, consolidation, business combination or similar transaction
involving Cardiosystems in which the stockholders of Cardiosystems
immediately preceding that transaction hold less than 85% of the equity
interests in the surviving or resulting entity
- any sale, lease outside the ordinary course of business, exchange,
transfer, license outside the ordinary course of business, acquisition or
disposition of more than 15% of the assets of Cardiosystems or
- any liquidation, dissolution or recapitalization of Cardiosystems.
A Cardiosystems superior offer is a Cardiosystems acquisition proposal that
is an unsolicited, bona fide, written offer from third party to consummate: (i)
a merger or consolidation with Cardiosystems that would result in Cardiosystems'
stockholders holding less than half of the equity interest in the combined or
surviving
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company or (ii) the acquisition by any person or group, directly or indirectly,
of ownership of 100% of the outstanding shares of capital stock of Cardiosystems
on terms that Cardiosystems' board of directors determines in its reasonable
good faith judgment (based on the written advice of its financial advisors) to
be more favorable to Cardiosystems' stockholders than the terms of the merger if
no financing is required to complete that transaction.
Regardless of whether there has been a superior offer, Cardiosystems is
obligated under the merger agreement to hold and convene the Cardiosystems
special meeting of stockholders for purposes of voting on the merger agreement
and the merger.
NO SOLICITATION OF OTHER TRANSACTIONS BY THORATEC AND ITS SUBSIDIARIES
Thoratec and its subsidiaries agreed to cease, as of the date of the merger
agreement, any and all existing activities, discussions or negotiations with any
parties conducted before that date with respect to any Thoratec acquisition
proposal (explained below). Thoratec and its subsidiaries were not engaged in
any such discussions or negotiations at that time. Until the merger is completed
or the merger agreement is terminated, Thoratec and its subsidiaries agreed not,
directly or indirectly, to:
- solicit, initiate, encourage or induce the making, submission or
announcement of any Thoratec acquisition proposal
- participate in any discussions or negotiations regarding any Thoratec
acquisition proposal or furnish to any person any information with
respect to any Thoratec acquisition proposal
- engage in discussions with any person with respect to any Thoratec
acquisition proposal
- subject to certain limited exceptions discussed below, approve, endorse
or recommend any Thoratec acquisition proposal or
- enter into any letter of intent or similar document or any contract,
agreement or commitment contemplating or otherwise relating to any
Thoratec acquisition transaction.
Thoratec's board may, without breaching the merger agreement, respond to an
unsolicited, bona fide written Thoratec acquisition proposal by discussing the
proposal with, and furnishing information to the party making the proposal, if
all of the following conditions are met:
- Thoratec's board concludes, upon written advice from its financial
advisor, that the proposal constitutes a Thoratec superior offer
(explained below)
- Thoratec's board determines in good faith, after considering the advice
of its outside legal counsel, that its fiduciary obligations require it
to do so
- Thoratec gives prior written notice to Cardiosystems of planned
discussions with, or the furnishing of information to the party making
the proposal, and Thoratec receives a customary confidentiality agreement
from that party and
- upon determining to provide information to the party making the Thoratec
acquisition proposal, Thoratec informs Cardiosystems within 24 hours of
deciding to provide information to any third party and provides
Cardiosystems with the identity of the recipient of the information or
the potential acquiror and the terms of the Thoratec superior offer.
For purposes of the foregoing, any action by any officer, director,
affiliate or employee of Thoratec or any investment banker, attorney or other
advisor or representative of Thoratec is deemed to be a breach of these
obligations.
A Thoratec acquisition proposal is an offer or proposal other than by
Thoratec relating to:
- the purchase from Thoratec or acquisition by any person or "group" of
more than a 15% interest in the total outstanding voting securities of
Thoratec or any of its subsidiaries
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- any tender offer or exchange offer that if consummated would result in
any person or group beneficially owning 15% or more of the total
outstanding voting securities of Thoratec or any of its subsidiaries
- any merger, consolidation, business combination or similar transaction
involving Thoratec in which the shareholders of Thoratec immediately
preceding that transaction hold less than 85% of the equity interests in
the surviving or resulting entity
- any sale, lease outside the ordinary course of business, exchange,
transfer, license outside the ordinary course of business, acquisition or
disposition of more than 15% of the assets of Thoratec or
- any liquidation, dissolution or recapitalization of Thoratec.
A "Thoratec superior offer" is a Thoratec acquisition proposal that is an
unsolicited, bona fide, written offer from third party to consummate: (i) a
merger or consolidation with Thoratec that would result in Thoratec's
shareholders holding less than half of the equity interest in the combined or
surviving company or (ii) the acquisition by any person or group, directly or
indirectly, of ownership of 100% of the outstanding shares of capital stock of
Thoratec on terms that Thoratec's board of directors determines in its
reasonable good faith judgment (based on the written advice of its financial
advisors) to be more favorable to Thoratec's shareholders than the terms of the
merger if no financing is required to complete that transaction.
Regardless of whether there has been a Thoratec superior offer, Thoratec is
obligated under the merger agreement to hold and convene the Thoratec special
meeting of shareholders for purposes of voting on the merger agreement and the
merger.
CONDITIONS TO COMPLETION OF THE MERGER
The obligations of Thoratec and Cardiosystems to complete the merger and
the other transactions contemplated by the merger agreement are subject to the
satisfaction or waiver, to the extent legally permissible, of each of the
following conditions before completion of the merger:
- Thoratec's registration statement on Form S-4 must be effective, no stop
order suspending its effectiveness shall have been issued by the SEC and
still be in effect, and no proceedings for such purpose shall be pending
before the SEC
- the merger agreement and merger must be approved by the required vote of
holders of Cardiosystems stock
- the issuance of Thoratec's shares to Cardiosystems' stockholders in the
merger must be approved by the required vote of Thoratec's shareholders
- the shares of Thoratec stock issuable in the merger must be approved for
listing on the Nasdaq National Market
- the applicable waiting periods under the Hart-Scott-Rodino act must have
expired or been terminated and all necessary government consents and
approvals must be received
- Thoratec and Cardiosystems must each receive, from their respective tax
counsel, an opinion to the effect that the merger will constitute a
reorganization within the meaning of Section 368(a) of the Code
- no law, regulation or order shall have been enacted or issued that has
the effect of making the merger illegal or otherwise prohibiting
completion of the merger
- holders of Cardiosystems stock shall not have exercised dissenters'
rights with respect to 5% or more of the outstanding Cardiosystems stock
and
- holders of Thoratec stock shall not have exercised dissenters' rights
with respect to 5% or more of the outstanding Thoratec stock.
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Cardiosystems' obligation to complete the merger and the other transactions
contemplated by the merger agreement are subject to the satisfaction or waiver
of each of the following additional conditions:
- the representations and warranties of Thoratec and Merger Sub must be
true and correct in all material respects as of the closing of the merger
- Thoratec and its merger subsidiary shall have furnished a certificate or
certificates to evidence their compliance with the conditions contained
in the merger agreement
- nothing shall have occurred to cause a material adverse effect on
Thoratec
- Thoratec shall have performed or complied in all material respects with
all its agreements and obligations required by the merger agreement to be
performed or complied with by Thoratec on or before the closing of the
merger and
- the security arrangements respecting Cardiosystems' convertible
debentures and the related guarantee of Thermo Electron regarding those
debentures described under "Cardiosystems Convertible Debentures"
beginning at page of this statement shall have been completed.
Thoratec's obligations to complete the merger and the other transactions
contemplated by the merger agreement are subject to the satisfaction or waiver
of each of the following additional conditions before completion of the merger:
- Cardiosystems' representations and warranties must be true and correct in
all material respects as of the closing of the merger
- Cardiosystems shall have furnished a certificate or certificates to
evidence its compliance with the conditions contained in the merger
agreement
- nothing shall have occurred to cause a material adverse effect on
Cardiosystems
- Cardiosystems shall have performed or complied in all material respects
with all its agreements and obligations required by the merger agreement
to be performed or complied with by Cardiosystems on or before the
closing of the merger
- Thermo Electron shall have entered into a Termination of Corporate
Services Agreement with Cardiosystems, in form and substance previously
agreed to, assuring Cardiosystems short-term access to transition
services from Thermo Electron personnel and access to
Cardiosystems-related records in Thermo Electron's custody
- Thermo Electron and Cardiosystems shall have paid all intercompany
payables (at December , 2000 the net intercompany payable was a
receivable of Cardiosystems from Thermo Electron; of approximately $___
million)
- The sum of Cardiosystems' "cash and cash equivalents" and "short term
investments available for sale" shall be at least $125,700,000 after
giving effect to the netting of intercompany payables referred to
previously and before giving effect to the payment of certain fees and
the implementation of security arrangements regarding Cardiosystems'
subordinated convertible debentures (discussed in the section of this
statement called Cardiosystems Convertible Debentures)
- Thermo Electron and Cardiosystems shall have entered into an amended
sublease for property occupied by Cardiosystems in Woburn, Massachusetts
in form and substance previously agreed to
- Cardiosystems shall have made or obtained all consents, notifications,
disclosures, filings and approvals required by the merger agreement.
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TERMINATION OF THE MERGER AGREEMENT
The merger agreement may be terminated at any time before the merger,
whether before or after approval of the merger agreement and merger by
Cardiosystems' stockholders and Thoratec's shareholders:
- by mutual consent of the boards of directors of Thoratec and
Cardiosystems
- by Thoratec or Cardiosystems, if the merger is not completed before March
1, 2000, except that this right to terminate the merger agreement is not
available to a party whose action or failure to act has been a principal
cause of or resulted in the failure of the merger to occur on or before
March 1, 2000 and such action or failure to act constitutes a material
breach of the merger agreement
- by Thoratec or Cardiosystems, if there is any final and nonappealable
action of a court or governmental authority having jurisdiction over
Thoratec or Cardiosystems permanently restraining, enjoining or
prohibiting the completion of the merger
- by Thoratec or Cardiosystems, if the merger agreement fails to receive
the requisite vote by the stockholders of Cardiosystems at the
Cardiosystems stockholder meeting or by the shareholders of Thoratec at
the Thoratec shareholder meeting, except that this right is not available
to any party where the failure to obtain shareholder approval was caused
by that party's action or failure to act and that action or failure to
act constitutes a breach of the merger agreement
- by Cardiosystems, upon a breach of any representation, warranty or
agreement on the part of Thoratec in the merger agreement, or if any of
Thoratec's representations or warranties are or become untrue so that the
corresponding condition to completion of the merger would not be met,
except that, if the breach or inaccuracy is curable by Thoratec and
Thoratec exercises best efforts, Cardiosystems may not terminate the
merger agreement during the 10 days after delivery of written notice from
Cardiosystems to Thoratec of the breach
- by Thoratec, upon a breach of any representation, warranty or agreement
on the part of Cardiosystems set forth in the merger agreement, or if any
of Cardiosystems' representations or warranties are or become untrue so
that the corresponding condition to completion of the merger would not be
met, except that, if the breach or inaccuracy is curable by Cardiosystems
and Cardiosystems exercises best efforts, Thoratec may not terminate the
merger agreement during the 10 days after delivery of written notice from
Thoratec to Cardiosystems of the breach
- by Cardiosystems, if the average closing price per share of Thoratec's
stock, as reported on the Nasdaq National Market for the 20 trading-day
period ending [INSERT DATE OF SHAREHOLDER MEETING], 200 , is less than
$14.00, but only if Cardiosystems gives written notice of termination to
Thoratec within 48 hours after that 20-trading day period ends
- by Thoratec, if the average closing price per share of Thoratec's stock
for that same period is less than $11.00, but only if Thoratec gives
written notice of termination to Cardiosystems and Thermo Electron within
48 hours after that period ends or
- by Thoratec (at any time before the approval of the merger agreement and
the merger by the required vote of the stockholders of Cardiosystems), if
any of the following Thoratec termination events shall have occurred:
- the board of directors of Cardiosystems or any committee of that board
shall for any reason have withdrawn or amended or modified in a manner
adverse to Thoratec its recommendation in favor of the adoption of the
merger agreement or the merger
- the board of directors of Cardiosystems fails to reaffirm its
recommendation in favor of the approval of the merger agreement and
the merger within 10 days after Thoratec requests in writing that such
recommendation be reaffirmed
- the board of directors of Cardiosystems or any committee of that board
shall have approved or recommended any Cardiosystems acquisition
proposal or
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- a tender or exchange offer relating to securities of Cardiosystems
shall have been commenced by a person unaffiliated with Thoratec, and
Cardiosystems shall not have sent to its security holders under Rule
14e-2 adopted by the SEC under the Securities Act, within 10 business
days after the tender or exchange offer is first published, sent or
given, a statement disclosing that Cardiosystems recommends rejection
of such tender or exchange offer.
- by Cardiosystems (at any time before approval of the issuance of Thoratec
common stock in the merger by the required vote of the stockholders of
Thoratec), if any of the following Cardiosystems termination events shall
have occurred:
- the board of directors of Thoratec or any committee of that board
shall for any reason have withdrawn or amended or modified in a manner
adverse to Cardiosystems its recommendation in favor of the issuance
of Thoratec stock in the merger
- the board of directors of Thoratec fails to reaffirm its
recommendation in favor of the approval of the merger agreement and
the merger within 10 days after Cardiosystems requests in writing that
such recommendation be reaffirmed
- the board of directors of Thoratec or any committee of that board
shall have approved or recommended any Thoratec acquisition proposal
or
- a tender or exchange offer relating to securities of Thoratec shall
have been commenced by a person unaffiliated with Cardiosystems, and
Thoratec shall not have sent to its security holders under Rule 14e-2
adopted by the SEC under the Securities Act, within 10 business days
after the tender or exchange offer is first published, sent or given,
a statement disclosing that Thoratec recommends rejection of the
tender or exchange offer.
PAYMENT OF TERMINATION FEES
Cardiosystems and Thermo Electron have agreed, jointly and severally, to
pay Thoratec a termination fee of $12 million if:
- a Cardiosystems termination event occurs
- the merger agreement is terminated because the merger has failed to
receive the requisite vote for approval by the stockholders of
Cardiosystems at the Cardiosystems stockholders meeting
- Thermo Electron fails to vote its Cardiosystems stock in favor of the
merger and is not excused from doing so under the merger agreement or
- Cardiosystems breaches any of the obligations regarding Cardiosystems
acquisition proposals or Cardiosystems superior offers in the merger
agreement.
Thoratec has agreed to pay Cardiosystems a termination fee of:
- $3 million if the merger agreement is terminated because the issuance of
shares of Thoratec in the merger has failed to receive the requisite vote
for approval by the shareholders of Thoratec at the Thoratec shareholders
meeting or
- $12 million if a Thoratec termination event occurs or Thoratec breaches
any of its obligations regarding Thoratec acquisition proposals or
Thoratec superior offers in the merger agreement.
CARDIOSYSTEMS CONVERTIBLE DEBENTURES
Cardiosystems has $54.8 million of 4 -3/4% subordinated convertible
debentures outstanding. Those debentures are due May 15, 2004 and are guaranteed
by Thermo Electron. That guarantee will remain outstanding after the merger.
The debentures are currently convertible into shares of Cardiosystems
common stock at a price of $31.415. If and when the merger closes, the
debentures will remain obligations of Cardiosystems but will
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become convertible into shares of Thoratec common stock. The conversion price
will then be $37.623, i.e., $31.415 divided by the 0.835 merger exchange ratio.
The merger agreement calls for the parties to put in place special security
arrangements, before the merger closes, to support repayment of the debentures.
These arrangements will reduce the prospect that Thermo Electron will be
required to pay any amounts under its guarantee of the debentures. The
arrangements are that, at the option of Thermo Electron: (i) Thoratec,
Cardiosystems and Thermo Electron will enter into a collateral and security
agreement under which Cardiosystems will grant Thermo Electron a first priority
security interest in $45 million to secure payment on the Cardiosystems
Debentures, (ii) Thoratec, Cardiosystems, Thermo Electron and a trustee will
enter into a collateral and security agreement under which Cardiosystems will
grant the trustee a first priority security interest in $45 million for that
same purpose or (iii) Thoratec will obtain a standby letter of credit in favor
of Thermo Electron or a trustee in the amount of $45 million for that same
purpose. These $45 million figures and any related accounts that support these
arrangements will be reduced by: (i) half of any amount paid to Cardiosystems
stockholders due to their exercise of statutory appraisal rights, (ii) subject
to certain limitations, the principal amount of any Cardiosystems Debentures
that are repurchased and retired and (iii) an amount equal to 40.75% of any
investment income earned on these funds in order to defray taxes on that income.
OPERATIONS AFTER THE MERGER
After the merger, Thoratec expects that Cardiosystems will continue its
operations as a wholly-owned subsidiary of Thoratec. The stockholders of
Cardiosystems will become shareholders of Thoratec, and their rights as
shareholders will be governed by Thoratec's articles of incorporation and
bylaws, as currently in effect, and the corporate laws of California. See
"Comparison of Shareholder Rights and Corporate Governance Matters" beginning at
page of this statement.
EXTENSION, WAIVER AND AMENDMENT OF THE MERGER AGREEMENT
Thoratec and Cardiosystems may amend the merger agreement before completion
of the merger by mutual written consent. Either Thoratec or Cardiosystems may
extend the other's time for the performance of any obligation under the merger
agreement, waive any inaccuracies in the other's representations and warranties,
and waive compliance by the other with any of the agreements or conditions
contained in the merger agreement. However, no party can waive a closing
condition that cannot be waived by law.
AGREEMENTS RELATED TO THE MERGER
This section of the statement describes certain agreements related to the
merger, including the shareholder agreement and the registration rights
agreement. While Thoratec and Cardiosystems believe that these descriptions
cover the material terms of those agreements, these summaries may not contain
all the information that is important to you. The registration rights agreement
and the shareholder agreement are attached as exhibits to Annex D and as Annex E
to this statement. You are urged to read them carefully.
THE SHAREHOLDER AGREEMENT
Thoratec and Thermo Electron have entered into a shareholder agreement, a
copy of which is attached as Annex E, under which Thoratec agreed that, after
the merger, as long as Thermo Electron beneficially owns Thoratec voting
securities representing at least 10% of the voting power of all Thoratec voting
securities outstanding, Thoratec will take all necessary action to cause a
nominee of Thermo Electron to be elected to Thoratec's board of directors.
Thermo Electron has designated to serve as its initial representative
on Thoratec's board of directors. will be elected to Thoratec's board
effective when the merger closes. (The current, seven members of Thoratec's
board of directors are expected to remain on Thoratec's board after the merger
and Thoratec expects to fill the existing vacancy on the board.)
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Thermo Electron agreed that, so long as Thermo Electron beneficially owns
Thoratec voting securities representing at least 5% of the voting power of all
Thoratec voting securities outstanding, Thermo Electron will not:
- acquire any voting securities of Thoratec without prior consent of the
board of directors of Thoratec
- sell or otherwise transfer any Thoratec shares received in the merger
before four months after the merger
- sell or otherwise transfer more than 25% of the Thoratec shares received
in the merger before the first anniversary of the merger
- sell or otherwise transfer more than 50% of the Thoratec shares received
in the merger before 18 months after the merger or
- sell or transfer any Thoratec shares in privately negotiated transactions
if, after giving effect to that sale or transfer, the transferee would
own Thoratec securities representing more than 10% of the voting power of
all Thoratec outstanding voting securities.
Thermo Electron also agreed that, with respect to the Thoratec shares it
receives in the merger, it will:
- cause its Thoratec shares to appear or otherwise be counted as present
for purposes of establishing a quorum at any Thoratec shareholders
meeting and
- provide Thoratec's management with a proxy or consent to vote the
Thoratec shares owned by Thermo Electron, but not more than a number of
shares representing 5% of the voting power of securities of Thoratec
outstanding at the closing of the merger.
THE REGISTRATION RIGHTS AGREEMENT
Thoratec and Thermo Electron have also entered into a registration rights
agreement, a copy of which is attached to this statement as Annex D, under which
Thoratec agreed to:
- file with the SEC and use reasonable best efforts to cause to become
effective an "evergreen" or "shelf" registration statement registering
for resale by Thermo Electron of the Thoratec shares received by Thermo
Electron in the merger
- file a registration statement, or a post-effective amendment to the shelf
registration statement, for an underwritten offering of the Thoratec
shares received by Thermo Electron in the merger at various times and
- provide Thermo Electron the right to include the Thoratec shares it
receives in the merger in any registration statement filed by Thoratec
with the SEC, other than registration statements relating to employee
plans and acquisitions.
Thermo Electron has granted certain officers, directors and employees of
Thermo Electron options to purchase shares of Cardiosystems common stock
currently owned by Thermo Electron (a total of 68,000 Cardiosystems shares).
Those officers, directors and employees are entitled to have Thoratec register
the Thoratec shares into which those Cardiosystems shares will be converted in
the merger.
The timing of the effectiveness of the "shelf" registrations corresponds to
the timing of the transfer restrictions that apply to the Thoratec shares to be
received by Thermo Electron in the merger. The registration rights granted under
the registration rights agreement are subject to other customary terms and
conditions.
COMPARISON OF SHAREHOLDER RIGHTS
AND CORPORATE GOVERNANCE MATTERS
The rights of Thoratec shareholders are currently governed by California
law, Thoratec's articles of incorporation and Thoratec's bylaws. The rights of
Cardiosystems stockholders are currently governed by
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Massachusetts law, Cardiosystems' articles of organization and Cardiosystems'
bylaws. Upon completion of the merger, the rights of Cardiosystems stockholders
who become shareholders of Thoratec in the merger will be governed by California
law, Thoratec's articles of incorporation and Thoratec's bylaws. While the
rights and privileges of shareholders of a California corporation are, in many
instances, comparable to those of a shareholder of a Massachusetts corporation,
there are certain differences.
The following description summarizes significant differences that may
affect the rights of shareholders of Thoratec and stockholders of Cardiosystems.
However, it is not a complete statement of all those differences or a complete
description of the specific provisions referred to in this summary. The
identification of specific differences is not intended to indicate that other
equally or more significant differences do not exist. Thoratec's shareholders
and Cardiosystems' stockholders should carefully read the relevant provisions of
California law, Thoratec's articles of incorporation, Thoratec's bylaws, the
Massachusetts law, Cardiosystems' articles of organization and Cardiosystems'
bylaws.
CAPITALIZATION
Thoratec. The total authorized shares of capital stock of Thoratec consist
of: (i) 100,000,000 shares of common stock, no par value, of which there were
22,419,753 shares issued and outstanding at the close of business on October 3,
2000 and (ii) 2,500,000 shares of preferred stock, no par value, of which no
shares were issued and outstanding at the close of business October 3, 2000.
The Thoratec board of directors is authorized to issue preferred stock from
time to time in any series, and to fix and alter the designations, preferences
and relative, participating, optional or other special rights of wholly-unissued
series of preferred shares.
Cardiosystems. The total authorized shares of capital stock of
Cardiosystems consist of 100,000,000 shares of common stock, $0.10 par value per
share. At the close of business on October 3, 2000, there were 38,562,477 shares
of Cardiosystems common stock outstanding and 2,063,653 treasury shares. As of
that same date, $54.8 million principal amount of Cardiosystems' 4.75%
subordinated convertible debentures due 2004 were outstanding.
VOTING RIGHTS
Thoratec. California law allows for more or less than one vote per share
and permits cumulative voting, unless it is eliminated in the articles of
incorporation. Each holder of Thoratec common stock is entitled to one vote for
each share held of record and may cumulate votes for the election of directors.
Cardiosystems. Massachusetts law provides that stockholders entitled to
vote shall have one vote for each share of stock owned by them. It also allows a
corporation with two or more classes of stock to specify different voting powers
for the different classes of stock.
Each holder of Cardiosystems common stock is entitled to one vote for each
share held of record. Massachusetts law does not have cumulative voting
provisions, and neither Cardiosystems' articles of organization nor bylaws
provide for it.
NUMBER, ELECTION, VACANCY AND REMOVAL OF DIRECTORS
Thoratec. California law provides that the board of directors of a
California corporation will consist of one or more directors, as fixed by the
corporation's articles of incorporation or bylaws. Thoratec's bylaws provide
that the authorized number of directors will be within a range of five to nine
inclusive, with the exact number within that range specified by the board. Under
Thoratec's articles of incorporation and bylaws, vacancies on the board (other
than vacancies caused by the removal of a director by the shareholders) and
newly created directorships resulting from any increase in the authorized number
of directors may be filled by the directors.
California law provides that a director or the entire board of directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors. Vacancies so
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created can only be filled by the shareholders, unless the articles of
incorporation or a bylaw approved by the shareholders authorizes the board to
fill such vacancies.
Cardiosystems. Massachusetts law requires classification of a public
corporation's board of directors into three classes, each having a three-year
term, unless the directors vote to be exempt from such requirement or the
stockholders elect to be exempt from such requirement by a vote of two-thirds of
such class of stock outstanding. The Massachusetts law further requires that the
number of directors be determined in the corporation's bylaws. In addition,
whenever there are more than two stockholders of record, there must be at least
three directors.
Massachusetts law provides that holder of a majority of the shares of
Cardiosystems capital stock entitled to vote in an election of directors may
remove a director with or without cause, and a majority of the board of
directors may remove a director for cause. However, a director may only be
removed for cause after receiving notice and an opportunity to be heard by the
group proposing to remove him or her.
Cardiosystems has elected to be exempt from the classified board
requirement described above. As a result, all of Cardiosystems' directors are
elected on an annual basis. Cardiosystems' bylaws provide that the Cardiosystems
board must consist of not fewer than three and not more than nine directors.
Currently, the Cardiosystems board of directors is composed of seven members.
Cardiosystems' bylaws also provide that in the event of a vacancy in the board
of directors, including a vacancy resulting from the enlargement of the board,
the remaining directors, by majority vote, may elect a director to fill the
vacancy.
CHARTER AMENDMENTS
Thoratec. Under California law, amendments to a corporation's articles of
incorporation require the approval of the board of directors and shareholders
holding a majority of the outstanding stock, unless a different proportion is
specified in the articles of incorporation or by other provisions of California
law. Thoratec's articles of incorporation do not contain any such provision.
Under California law, certain minor amendments to a corporation's articles of
incorporation do not require shareholder approval.
Cardiosystems. Under Massachusetts law, a majority vote each class of
stock outstanding and entitled to vote is required to authorize an amendment to
the articles of organization effecting one or more of the following:
- an increase or reduction of the capital stock of any authorized class
- a change in the par value of authorized shares with par value, or any
class thereof
- a change of authorized shares from shares with par value to shares
without par value, or from shares without par value to shares with par
value
- certain changes in the number of authorized shares or
- a corporate name change.
Subject to certain conditions, a two-thirds vote of each class of stock
outstanding and entitled to vote is required to authorize any other amendment of
the articles of organization. However, Massachusetts law does permit a
corporation's articles of organization to specify a threshold vote of less than
two-thirds, but of at least a majority. Cardiosystems' articles of organization
expressly permits a majority vote to make any amendment to its articles of
organization.
BYLAW AMENDMENTS
Thoratec. Under California law, bylaws of a corporation may be amended or
repealed by shareholders or by the board of directors. With the exception noted
previously regarding the authorized number of Thoratec directors, Thoratec's
bylaws provide that the bylaws may be amended or repealed by a majority of the
board of directors then in office or by the affirmative vote of the holders of a
majority of the outstanding shares entitled to vote in an election of directors.
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Cardiosystems. Under Massachusetts law, the power to make, amend or repeal
bylaws lies with the stockholders entitled to vote. Directors, however, may also
make, amend or repeal the bylaws, except with respect to any provisions which by
law, the articles or organization or bylaws require action by the stockholders.
If the directors make, amend or repeal any bylaw, Cardiosystems must notify the
stockholders of that action on or before the time notice of the next stockholder
meeting is given. Any bylaw adopted by the board of directors may be amended or
repealed by the stockholders.
SHAREHOLDER AND STOCKHOLDER ACTION
Thoratec. California law authorizes shareholder action without a meeting
unless otherwise provided in a corporation's articles of incorporation.
Thoratec's articles of incorporation do not prohibit shareholder action by
written consent.
Cardiosystems. Under Massachusetts law and Cardiosystems' bylaws, any
action required or permitted to be taken by its stockholders may be taken
without a meeting if a consent in writing is signed by the holders of all of the
outstanding stock entitled to vote on the matter.
NOTICE OF SPECIFIC ACTIONS BY HOLDERS OF SHARES
Thoratec. Thoratec's bylaws provide that, for business to be properly
brought before a meeting of shareholders, Thoratec must deliver notice not fewer
than 10 nor more than 60 days in advance of the date of that meeting.
Cardiosystems. Cardiosystems' bylaws provide that a written or printed
notice of each meeting of stockholders, stating the place, date, hour and
purpose of the meeting shall be given to each stockholder entitled to vote at
the meeting at least 10 days before the meeting.
SPECIAL SHAREHOLDER AND STOCKHOLDER MEETINGS
Thoratec. Under California law, a special meeting of shareholders may be
called by the board, the chair of the board, the president or the holders of
shares entitled to cast not less than 10% of the votes at the meeting or such
additional persons as may be provided in the articles of incorporation or
bylaws. Neither Thoratec's articles of incorporation nor its bylaws specify any
such additional persons.
Cardiosystems. Under Massachusetts law, a special meeting of the
stockholder of a corporation may be called by the president or by the directors.
Additionally, special meetings of stockholders of a corporation that has a class
of voting stock registered under the Securities Act of 1934 must be called by
the clerk of the corporation upon written request by stockholders holding at
least 40% of the capital stock entitled to vote.
Cardiosystems' bylaws permit Cardiosystems' chairman of the board,
president or board of directors to call a special meeting. Additionally,
Cardiosystems' clerk must call a special meeting upon the written request of one
or more stockholders who hold at least 10% of Cardiosystems' capital stock
entitled to vote at the special meeting.
LIMITATION OF PERSONAL LIABILITY OF DIRECTORS AND INDEMNIFICATION
Thoratec. California law specifies that a California corporation's
articles of incorporation may include a provision limiting the personal
liability of a director to the corporation or its shareholders for monetary
damages for breach of fiduciary duty as a director. However, no provision can
eliminate or limit the liability of a director for:
- any breach of the director's duty of loyalty to the corporation or its
shareholders
- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law
- violation of California law regarding unlawful payment of dividends or
unlawful stock purchases or redemptions
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- any transaction from which the director derived an improper personal
benefit or
- any act or omission before the adoption of a provision eliminating or
limiting the liability of a director for breach of fiduciary duty in the
articles of incorporation.
Thoratec's articles of incorporation and bylaws limit or eliminate the
liability of directors to the fullest extent permitted by California law.
California law permits a corporation to indemnify any director, officer,
employee or agent of the corporation for expenses, monetary damages, fines and
settlement amounts to the extent the person acted in good faith and in a manner
he or she believed to be in the best interests of the corporation and, with
respect to any criminal action, had no reasonable cause to believe the conduct
was unlawful. California law does not permit indemnification if the person is
held liable to the corporation, except to the extent that an appropriate court
concludes, upon application by the person, that despite the adjudication of
liability but in view of all the circumstances, the person is fairly and
reasonably entitled to indemnification for those expenses that the court deems
proper.
Thoratec's articles of incorporation and bylaws provide that the
corporation shall indemnify its directors and executive officers and may
indemnify other officers and employees and its agents to the fullest extent
permitted by law.
Cardiosystems. In Massachusetts, a corporation's articles of organization
may limit the personal liability of its directors for breaches off their
fiduciary duties. Under Massachusetts law, this limitation is generally
unavailable for acts or omissions by a director that constitute any of the
following:
- any breach of the director's duty of loyalty to the corporation or its
stockholders
- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of the law
- violation of Massachusetts law regarding unlawful payment of dividends or
unlawful stock purchases or redemptions or
- any transaction from which the director derived an improper personal
benefit. Cardiosystems' articles of organization limits or eliminates the
liability of directors to the fullest extent permitted by Massachusetts
law.
Massachusetts law also permits indemnification of directors, officers,
employees and certain others for expenses incurred by reason of their position
with the corporation, if he or she acted in good faith with a reasonable belief
that his or her conduct was in the best interest of the corporation.
Under Cardiosystems' bylaws, Cardiosystems will indemnify its directors,
officers, employees and agents against all liabilities and expenses incurred by
reason of his or her position with the corporation unless a court or
administrative body has determined that the director, officer, employee, or
agent has not acted in good faith in the reasonable belief that his or her
actions were in the best interest of Cardiosystems or, with respect to any
criminal proceeding, had reasonable cause to believe his or her conduct was
unlawful.
DIVIDENDS
Thoratec. As a California corporation, Thoratec may declare and distribute
dividends: (a) if the amount of its retained earnings immediately before the
declaration is equal to or exceeds the amount of the proposed distribution and
(b)(i) the sum of the assets of the company (exclusive of goodwill, capitalized
research and development expenses and deferred charges) is at least equal to
1.25 times the liabilities of the company (not including deferred taxes,
deferred income and other deferred credits) and (ii) the current assets of the
corporation are at least equal to its current liabilities or, if the average of
the earnings of the corporation before taxes on income and before interest
expense for the two preceding fiscal years was less than the average of the
interest expense of the corporation for those fiscal years, at least equal to
1.25 times its current liabilities. However, in determining the amount of the
assets of the company, profits derived from an exchange of assets are not
included unless the assets received are currently realizable in cash. Also,
"current assets" may
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include net amounts that the board determines in good faith may reasonably be
expected to be received from customers during the 12-month period used in
calculating current liabilities under existing contractual relationships
obligating those customers to make fixed or periodic payments during the term of
the contract after giving effect to future costs not then included in current
liabilities but reasonably expected to be incurred by the corporation in
performing those contracts. This provision is not applicable to a corporation
that does not classify its assets into current and fixed under generally
accepted accounting principles.
Cardiosystems. Under Massachusetts law, a corporation may pay dividends or
repurchase stock so long as
- the corporation is not insolvent
- the dividend or repurchase does not render the corporation insolvent and
- the dividend or repurchase does not violate the corporation's articles of
organization.
Cardiosystems' board of directors may declare, from time to time, dividends
in cash, stock, or otherwise, on the outstanding shares of common stock of out
of funds legally available for that purpose.
SPECIAL PROVISIONS RELATING TO CERTAIN ACQUISITIONS AND BUSINESS COMBINATIONS
Thoratec. In general, California law provides that, in the case of a cash
and certain other mergers of a California corporation with another corporation,
where the latter corporation or certain affiliates of the latter corporation own
shares having more than 50% but less than 90% of the voting power of that first
corporation, the merger must be approved by all of the first corporation's
shareholders or the California Commissioner of Corporations must determine that
the terms and conditions of the merger are fair following a hearing.
In addition, California law requires that an opinion be delivered to the
board or shareholders of a corporation, like Thoratec, if any party deemed to
"control" that corporation or that has certain other special relationships with
that corporation makes a tender offer for that corporation or the shareholders
of that corporation are asked to approve a reorganization or sale-of-assets
transaction involving that party. The opinion must address the fairness of the
tender offer, reorganization or asset sale and be rendered by a firm,
unaffiliated with the corporation, that engages in the business of advising
others about the value of businesses or securities. California law also requires
that shareholders of the corporation be advised about certain subsequent tender
offers and reorganization and asset sale transactions and be afforded an
opportunity to withdraw shares they tendered in the original tender offer or
withdraw their votes or consents previously given in favor of the reorganization
or asset sale.
Cardiosystems. The Massachusetts "Control Share Acquisition" statute
provides that each and any acquisition by a person of 20%, 33 1/3% or a majority
of the corporation's voting stock cannot vote the shares exceeding that
threshold unless a majority of the outstanding shares, other than those shares
owned by the acquiror, the corporation's officers and employee-directors, vote
to permit it. Under its bylaws, Cardiosystems has elected not to be governed by
this statute.
The Massachusetts "Business Combination" statute prohibits a Massachusetts
corporation from engaging in a "business combination" with a person owning 5% or
more of the corporation's voting stock without the approval of its board to
acquire that stock, thereby becoming an "interested stockholder," for three
years from the time the person became an interested stockholder, unless:
- the board approves the stock acquisition or the combination transaction
prior to the person becoming an interested stockholder;
- the person became an interested stockholder and 90% owner of the voting
stock of the corporation in the transaction, excluding voting stock owned
by directors who are also officers and certain employee stock plans, or
- the transaction is approved by the board of directors and by the
affirmative vote of two-thirds of the outstanding voting stock which is
not owned by the interested stockholder.
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The applicability of this statute if subject to certain exceptions, and does not
apply to corporations with less than 200 stockholders or corporations that elect
not to be governed by the statute.
Cardiosystems has not made an election not to be covered by the Business
Combination statute. However, potential transactions with Thermo Electron and
its affiliates are not subject to the provisions of the statute.
MERGERS, ACQUISITIONS AND OTHER TRANSACTIONS
Thoratec. Under California law, a merger, consolidation or sale of all or
substantially all of a corporation's assets must be approved by the board of
directors and a majority of the outstanding stock of the corporation entitled to
vote on the matter, except that no vote of shareholders of a constituent
corporation surviving a merger is required unless the corporation provides
otherwise in its articles of incorporation if:
- the merger agreement does not amend the articles of incorporation of the
surviving corporation
- each share of stock of the surviving corporation outstanding before the
merger is an identical outstanding share after the merger and
- either no shares of common stock of the surviving corporation are issued
or delivered in the merger or, if common stock is issued or delivered, it
will not increase the number of shares of common stock outstanding
immediately before the merger by more than 20%.
Cardiosystems. Under Massachusetts law, approval of mergers and
consolidations and sales, mortgages, leases or exchanges of all or substantially
all of a corporation's property requires the affirmative vote of two-thirds of
the shares of each class of stock outstanding and entitled to vote on the
transaction. A corporation's articles of organization may provide for a vote of
a lesser proportion, but not less than a majority of each such class. As
permitted by Massachusetts law, Cardiosystems' articles of organization provide
that the required vote for the approval of a consolidation or merger of
Cardiosystems with any other corporation shall be a majority of each class of
stock of Cardiosystems outstanding and entitled to vote on the transaction. In
addition, Massachusetts law provides that, unless otherwise required by the
articles of organization, a merger may be approved solely by vote of a surviving
corporation's directors if:
- there is no amendment to the surviving corporation's articles of
organization
- the shares of any class of stock of the corporation issued in the merger
do not exceed fifteen percent (15%) of the shares of the same class
outstanding immediately prior to the merger and
- any stock issued in the merger has been authorized in accordance with
Massachusetts law.
DISSENTERS' APPRAISAL RIGHTS
Thoratec. The earlier section of this statement headed The Thoratec
Meeting -- California Dissenters' Rights summarizes the rights of Thoratec
shareholders to exercise dissenters' rights in connection with the merger. Those
rights are available in other types of transactions as well.
Under California law, if the approval of the outstanding shares of a
corporation is required for a merger or other reorganization, each shareholder
entitled to vote on the reorganization who did not vote in favor of the
reorganization may require the corporation to purchase for cash, at their fair
market value, the shares owned by such shareholder. No appraisal rights are
available for shares listed on any national securities exchange certified by the
Commissioner of Corporations or listed on the list of OTC margin stocks issued
by the Board of Governors of the Federal Reserve Systems, unless there exists
with respect to such shares any restriction on transfer imposed by the
corporation or by any law or regulation or unless demands for payment are filed
with respect to 5% or more of the outstanding shares of that class.
Cardiosystems. The earlier section of this statement headed "The
Cardiosystems Meeting -- Massachusetts Dissenters' Rights" summarizes the rights
of Cardiosystems stockholders to exercise dissenters' rights in connection with
the merger. Those rights are available in other types of transactions as well.
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Under Massachusetts law, a properly dissenting stockholder is entitled to
receive the appraised value of his or her shares when the corporation votes to:
- sell, lease, or exchange all or substantially all of its property and
assets
- adopt an amendment to its articles of organization that adversely affects
the rights of the stockholder or
- merge or consolidate with another corporation.
No appraisal rights are available, however, to stockholders of a corporation
surviving the merger, if the merger does not require the approval of these
stockholders. In order to exercise their appraisal rights, stockholders must not
vote in favor of the corporate action triggering the appraisal right. Also, they
must send the corporation a written objection to the corporate action stating
their intention to demand payment for their shares. If stockholders follow the
appraisal procedures set out under Massachusetts law, the "fair value" of their
stock will be determined as of the day before effectiveness of the corporate
action. The appraisal rights provisions are the only remedy for stockholders who
object to the corporate action, unless the corporate action is determined to
have been illegal, fraudulent or in breach of the board's fiduciary duties.
PREEMPTIVE RIGHTS
Thoratec. Under California law, shareholders do not have a statutory
preemptive right to acquire proportional amounts of a corporation's unissued
shares upon a decision by the board of directors to issue additional shares.
Thoratec's articles of incorporation do not provide preemptive rights.
Cardiosystems. Under Massachusetts law, stockholders do not have any
pre-emptive rights unless they are provided in the corporation's articles of
incorporation or in bylaw provisions adopted by stockholders. Neither
Cardiosystems' articles of incorporation nor bylaws provide for preemptive
rights.
LEGAL MATTERS
Heller Ehrman White & McAuliffe LLP, Menlo Park, California will pass on
the validity of the shares of Thoratec common stock to be issued in the merger.
EXPERTS
The financial statements incorporated in this statement by reference from
Thoratec's Annual Report on Form 10-K for the year ended January 1, 2000 have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
The financial statements and the financial statement schedules of Thermo
Cardiosystems Inc. incorporated by reference in this registration statement have
been audited by Arthur Andersen LLP, independent public accountants, to the
extent and for the periods as indicated in their reports with respect thereto,
and are incorporated by reference in reliance upon the authority of said firm as
experts in giving said reports.
SHAREHOLDER PROPOSALS
Shareholders of Thoratec may submit proper proposals for inclusion in
Thoratec's proxy statement for the next annual meeting of its shareholders by
submitting their proposals in writing to the Secretary of Thoratec in a timely
manner. In order to be included in Thoratec's proxy materials for the annual
meeting of shareholders to be held in 2001, shareholder proposals must be
received by the Secretary of Thoratec no later than , 200 , and
must otherwise comply with the requirements of Rule 14a-8 of the Exchange Act.
If the proposed merger is completed, there will be no public stockholders
of Cardiosystems and no public participation in any future meetings of
Cardiosystems stockholders. If the proposed merger is not completed,
stockholders of Cardiosystems may submit proper proposals in writing to the
clerk of Cardiosystems in a timely manner. In order to be included in
Cardiosystems' proxy materials for the annual meeting of
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stockholders to be held in 2001, stockholder proposals must be received by the
clerk of Cardiosystems no later than , 200 , and must otherwise
comply with the requirements of Rule 14a-8 of the Exchange Act.
THIS STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO PURCHASE, THE THORATEC COMMON STOCK OR THE SOLICITATION OF A PROXY,
IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO
MAKE THE OFFER, SOLICITATION OF AN OFFER OR PROXY SOLICITATION IN THAT
JURISDICTION. NEITHER THE DELIVERY OF THIS STATEMENT NOR ANY DISTRIBUTION OF
SECURITIES MEANS, UNDER ANY CIRCUMSTANCES, THAT THERE HAS BEEN NO CHANGE IN THE
INFORMATION SET FORTH IN THIS STATEMENT OR IN THORATEC'S OR CARDIOSYSTEMS'
AFFAIRS SINCE THE DATE OF THIS STATEMENT. THE INFORMATION CONTAINED IN THIS
STATEMENT RESPECTING CARDIOSYSTEMS AND ITS SUBSIDIARIES WAS PROVIDED BY
CARDIOSYSTEMS. THE INFORMATION CONTAINED IN THIS STATEMENT RESPECTING THORATEC
WAS PROVIDED BY THORATEC.
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ANNEX A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of October 3, 2000 by and among Thoratec Laboratories Corporation, a
California corporation ("Thoratec"), Lightning Acquisition Corp., a
Massachusetts corporation and wholly owned subsidiary of Thoratec ("Merger
Sub"), Thermo Cardiosystems Inc., a Massachusetts corporation ("TCA"), and
Thermo Electron Corporation, a Delaware corporation and majority stockholder of
TCA ("TEC"), with respect to the following facts:
A. The respective boards of directors of Thoratec, Merger Sub, TCA and
TEC have approved and declared advisable the merger of Merger Sub with and
into TCA (the "Merger"), upon the terms and subject to the conditions set
forth herein, and have determined that the Merger and the other
transactions contemplated by this Agreement are fair to, and in the best
interests of, their respective stockholders.
B. Pursuant to the Merger, among other things, the outstanding shares
of TCA Common Stock, $0.10 par value ("TCA Common Stock"), will be
converted into the right to receive shares of Thoratec Common Stock, no par
value ("Thoratec Common Stock"), at the rate set forth herein.
C. Simultaneously with the execution and delivery of this Agreement
and as a condition and inducement to the parties' willingness to enter into
this Agreement, TEC and Thoratec are entering into a Shareholder Agreement
(the "Shareholder Agreement") and a Registration Rights Agreement (the
"Registration Rights Agreement").
D. For United States federal income tax purposes, it is intended that
the Merger will qualify as a reorganization under the provisions of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code").
ACCORDINGLY, THE PARTIES AGREE AS FOLLOWS:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of Massachusetts Business Corporation Law (the
"Massachusetts Law"), (i) Merger Sub shall be merged with and into TCA, (ii) the
separate corporate existence of Merger Sub shall cease, and (iii) TCA shall be
the surviving corporation. TCA, as the surviving corporation after the Merger,
is hereinafter sometimes referred to as the "Surviving Corporation".
1.2 Closing; Effective Time. The closing of the Merger and the other
transactions contemplated hereby (the "Closing") will take place at 10:00 a.m.,
local time, on a date to be specified by the parties (the "Closing Date"), which
shall be no later than the third business day after satisfaction or waiver of
the conditions set forth in Articles VI and VII, unless another time or date is
agreed to by the parties hereto. The Closing shall take place at the offices of
Heller Ehrman White & McAuliffe LLP, 333 Bush Street, San Francisco, California,
or at such other location as the parties hereto shall mutually agree. At the
Closing, the parties hereto shall cause the Merger to be consummated by filing
Articles of Merger (the "Articles of Merger") with the Secretary of State of the
Commonwealth of Massachusetts that, as appropriate, reflect the provisions of
this Agreement and are otherwise in accordance with the relevant provisions of
the Massachusetts Law (the time of such filing, or such later time as may be
agreed in writing by the parties and specified in the Articles of Merger, being
the "Effective Time").
1.3 Effects of the Merger. The effects of the Merger shall be as provided
in this Agreement, the Articles of Merger and the applicable provisions of the
Massachusetts Law. Without limiting the foregoing, at the Effective Time all the
property, rights, privileges, powers and franchises of TCA and Merger Sub shall
vest
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in the Surviving Corporation, and all debts, liabilities and duties of TCA and
Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 Certificate of Incorporation; Bylaws.
(a) Subject to Section 5.8, from and after the Effective Time, the Articles
of Organization of Merger Sub, as in effect immediately prior to the Effective
Time, shall be the Articles of Organization of the Surviving Corporation,
provided that the name of the Surviving Corporation shall be changed to a name
that does not include the word "Thermo" or any confusingly similar name.
(b) Subject to Section 5.8, from and after the Effective Time, the bylaws
of Merger Sub, as in effect immediately prior to the Effective Time, shall be
the bylaws of the Surviving Corporation.
1.5 Directors and Officers of the Surviving Corporation. At the Effective
Time, all of the directors and officers of TCA and Subsidiaries of TCA shall
resign. The directors and officers of Merger Sub immediately prior to the
Effective Time shall serve as the initial directors and officers of the
Surviving Corporation, until their respective successors are duly elected or
appointed and qualified.
ARTICLE II
CONVERSION OF SHARES
2.1 Conversion of Stock. Pursuant to the Merger, and without any action on
the part of the holders of any outstanding shares of capital stock or securities
of TCA or Merger Sub:
(a) As of the Effective Time, each share of TCA Common Stock issued
and outstanding immediately prior to the Effective Time (other than shares
of TCA Common Stock to be canceled pursuant to Section 2.1(c) and other
than TCA Dissenting Shares (as defined in Section 2.3(f)) shall be
automatically converted into .835 (the "Exchange Ratio") of a fully paid
and nonassessable share of Thoratec Common Stock.
(b) As of the Effective Time, each holder of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding shares of TCA Common Stock shall cease to have any rights with
respect thereto, except the right to receive (i) a certificate (or direct
registration) representing the number of whole shares of Thoratec Common
Stock into which such shares have been converted (the "Thoratec
Certificates"), and (ii) cash in lieu of any aggregate fractional share of
Thoratec Common Stock in accordance with Section 2.1(f), without interest.
(c) As of the Effective Time, each share of TCA Common Stock held of
record immediately prior to the Effective Time by TCA, Merger Sub, Thoratec
or any Subsidiary (as defined in Section 2.1(g)) of TCA or of Thoratec
shall be canceled and extinguished without any conversion thereof.
(d) As of the Effective Time, each share of Common Stock, $0.001 par
value, of Merger Sub (the "Merger Sub Common Stock") issued and outstanding
immediately prior to the Effective Time shall be canceled, extinguished and
automatically converted into one validly issued, fully paid and
nonassessable share of Common Stock, $0.10 par value, of the Surviving
Corporation. Each certificate evidencing ownership of a number of shares of
Merger Sub Common Stock shall be deemed to evidence ownership of the same
number of shares of Common Stock, $0.10 par value, of the Surviving
Corporation.
(e) The Exchange Ratio shall be adjusted, or Thoratec shall make
appropriate provision, to reflect appropriately the effect of any stock
split, reverse stock split, stock dividend (including any dividend or
distribution of securities convertible into Thoratec Common Stock or TCA
Common Stock), extraordinary dividend or distribution, reorganization,
recapitalization or other like change with respect to Thoratec Common Stock
or (subject to Section 5.1) TCA Common Stock occurring or having a record
date or an effective date on or after the date hereof and prior to the
Effective Time.
(f) No fraction of a share of Thoratec Common Stock will be issued by
virtue of the Merger. Instead, each holder of shares of TCA Common Stock
who would otherwise be entitled to a fraction of a
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share of Thoratec Common Stock (after aggregating all fractional shares of
Thoratec Common Stock to be received by such holder) shall receive from
Thoratec an amount of cash (rounded down to the nearest whole cent) equal
to the product of (i) such fraction, multiplied by (ii) the Thoratec
Closing Value. For the purposes of this Agreement, "Thoratec Closing Value"
shall mean the closing price per share of Thoratec Common Stock as reported
on the Nasdaq National Market System ("Nasdaq") on the trading day
immediately preceding the Effective Time.
(g) For the purposes of this Agreement, the "Exchange Multiple" of any
quantity means the product obtained by multiplying such quantity by the
Exchange Ratio, and the "Exchange Quotient" of any quantity means the
quotient obtained from dividing such quantity by the Exchange Ratio. For
purposes of this Agreement, the term "Subsidiary", when used with respect
to any Person, means any corporation or other organization, whether
incorporated or unincorporated, of which (A) at least a majority of the
securities or other interests having by their terms ordinary voting power
to elect a majority of the board of directors or others performing similar
functions with respect to such corporation or other organization is
directly or indirectly owned or controlled by such Person (through
ownership of securities, by contract or otherwise) or (B) such Person or
any Subsidiary of such Person is a general partner of any general
partnership or a manager of any limited liability company. For purposes of
this Agreement, "Person" means any individual, group, organization,
corporation, partnership, joint venture, limited liability company, trust
or entity of any kind.
2.2 TCA Options; TCA Purchase Plan.
(a) As of the Effective Time, Thoratec shall, to the full extent permitted
by applicable law, assume all of the stock options of TCA, whether or not vested
or immediately exercisable, outstanding immediately prior to the Effective Time
under the TCA Stock Plans (as defined below) (the "TCA Options"). For purposes
of this Agreement, "TCA Stock Plans" means TCA's 1999 Amended and Restated
Directors Stock Option Plan, 1999 Amended and Restated Equity Incentive Plan and
1999 Amended and Restated Non-Qualified Stock Option Plan. Each TCA Option,
whether or not exercisable at the Effective Time, shall, to the full extent
permitted by applicable law, be assumed by Thoratec in such a manner that it
shall vest and otherwise be exercisable upon the same terms and conditions as
under the TCA Stock Plan pursuant to which it was granted and the applicable
option agreement issued thereunder; provided that (i) each such option
thereafter shall be exercisable for a number of shares of Thoratec Common Stock
(rounded down to the nearest whole share) equal to the Exchange Multiple of the
number of shares of TCA Common Stock subject to such option, and (ii) the option
price per share of Thoratec Common Stock thereafter shall equal the Exchange
Quotient (rounded up to the nearest whole cent) of the option price per share of
TCA Common Stock subject to such option in effect immediately prior to the
Effective Time (the "Thoratec Exchange Options"). Prior to the Effective Time,
TCA shall make all adjustments provided for in the TCA Stock Plans with respect
to the TCA Options to facilitate the implementation of this Section 2.2(a).
(b) Effective November 1, 2000, TCA shall suspend participation in its
November 1, 1992 Amended and Restated Employee Stock Purchase Plan (the "TCA
Purchase Plan"). Accordingly, immediately before the Effective Time there will
be no outstanding purchase rights under the TCA Purchase Plan. Further, the TCA
Purchase Plan shall be terminated effective at the Effective Time, with the
result that no additional purchase rights shall be granted after the Effective
Time.
(c) TCA shall terminate its Deferred Compensation Plan for Directors (the
"Directors' Plan") so that as of the Effective Time no additional rights shall
be granted under the Directors' Plan. As of the Effective Time, each
then-outstanding right to purchase TCA Common Stock granted under the Directors'
Plan shall be assumed by Thoratec in such a manner that each such purchase right
shall thereafter be exercisable for whole shares of Thoratec Common Stock
(rounded down to the nearest whole share) equal to the Exchange Multiple of the
number of shares of TCA Common Stock for which such purchase right would
otherwise have been exercisable determined as of the relevant grant date under
the Directors' Plan, with the exercise price for each share of Thoratec Common
Stock under those assumed purchase rights being equal to the Exchange Quotient
(rounded up to the nearest whole cent) of the price per share of TCA Common
Stock under those
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rights just before the Effective Time. Thoratec shall include all such shares of
Thoratec Common Stock issuable under the Directors' Plan in the Registration
Statement (as described in Section 3.24).
2.3 Exchange of Stock Certificates.
(a) At or prior to the Effective Time, Thoratec shall enter into an
agreement with a bank or trust company selected by Thoratec and reasonably
acceptable to TCA to act as the exchange agent for the Merger (the "Exchange
Agent").
(b) At or prior to the Effective Time, Thoratec shall supply or cause to be
supplied to or for the account of the Exchange Agent in trust for the benefit of
the holders of TCA Common Stock, for exchange pursuant to this Section 2.3: (i)
certificates (or direct registration) evidencing the shares of Thoratec Common
Stock issuable pursuant to Section 2.1 to be exchanged for outstanding shares of
TCA Common Stock, and (ii) cash in an aggregate amount sufficient to make the
payments in lieu of fractional shares provided for in Section 2.1(f).
(c) Within three business days after the transfer agent for the TCA Common
Stock delivers, to the Exchange Agent, the required information about the record
holders of TCA Common Stock as of the record time for determining the
stockholders of TCA who will receive the merger consideration, Thoratec shall
mail or shall cause to be mailed to each Holder a letter of transmittal in
customary form (which shall specify that delivery shall be effected, and risk of
loss and title to the TCA Certificates shall pass, only upon proper delivery of
the TCA Certificates to the Exchange Agent) and instructions for surrender of
the TCA Certificates. Upon surrender to the Exchange Agent of a TCA Certificate,
together with such letter of transmittal duly executed, the Holder shall be
entitled to receive in exchange therefor: (i) certificates evidencing that
number of shares of Thoratec Common Stock issuable to such Holder in accordance
with this Article II; (ii) any dividends or other distributions that such Holder
has the right to receive pursuant to Section 2.3(d) and (iii) cash in respect of
fractional shares as provided in Section 2.1(f), and such TCA Certificate so
surrendered shall forthwith be canceled. No certificate representing shares of
Thoratec Common Stock will be issued to a Person who is not the registered owner
of a surrendered TCA Certificate unless (i) the TCA Certificate so surrendered
has been properly endorsed or otherwise is in proper form for transfer, and (ii)
such Person shall either (A) pay any transfer or other tax required by reason of
such issuance or (B) establish to the reasonable satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable. Until surrendered
in accordance with this Section 2.3, from and after the Effective Time, each TCA
Certificate shall be deemed to represent, for all purposes other than payment of
dividends, the right to receive a certificate representing the number of full
shares of Thoratec Common Stock as determined in accordance with this Article II
and cash in lieu of fractional shares as provided in Section 2.1(f). For
purposes of this Agreement, "TCA Certificate" means a certificate that
immediately prior to the Effective Time represented shares of TCA Common Stock,
and "Holder" means a person who holds one or more TCA Certificates as of the
Effective Time.
(d) No dividend or other distribution declared with respect to Thoratec
Common Stock with a record date after the Effective Time will be paid to Holders
of unsurrendered TCA Certificates until such Holders surrender their TCA
Certificates. Upon the surrender of such TCA Certificates, there shall be paid
to such Holders, promptly after such surrender, the amount of dividends or other
distributions, excluding interest, declared with a record date after the
Effective Time and not paid because of the failure to surrender TCA Certificates
for exchange.
(e) Notwithstanding anything to the contrary in this Agreement, neither the
Exchange Agent, Thoratec, the Surviving Corporation nor any party hereto shall
be liable to any holder of shares of TCA Common Stock for shares of Thoratec
Common Stock or cash in lieu of fractional shares delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(f) Notwithstanding any provision of this Agreement to the contrary, the
shares of TCA Common Stock (i) held by a Holder who, acting in accordance with
Sections 85 et seq. of Chapter 156B of the Massachusetts Law, before the TCA
Special Meeting (as defined in Section 5.4(a)) has delivered to TCA a written
notice of such Holder's intention to demand payment in cash for such Holder's
shares of TCA Common Stock if the
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Merger is completed and (ii) that are not voted in favor of the Merger, shall
not be converted into a right to receive shares of Thoratec Common Stock but
rather shall entitle their Holder to receive the appraised value of such shares
under those sections of the Massachusetts Law. (Shares of TCA Common Stock
meeting the requirements of clauses (i) and (ii) of the previous sentence are
referred to in this Agreement as "TCA Dissenting Shares".) If, however, after
the Effective Time such Holder validly and effectively withdraws that Holder's
right to demand payment for that Holder's TCA Dissenting Shares, those shares
shall be treated as if they had been converted as of the Effective Time into the
right to receive that number of shares of Thoratec Common Stock set forth in
Section 2.1(a), without interest and irrespective of the then-value of such
shares. Subject in all respects to Sections 2.1 and 2.3, Thoratec shall then
cause the Exchange Agent to deliver a certificate representing those shares to
that Holder.
(g) TCA shall give Thoratec: (A) prompt notice of any written demands for
payment of any TCA Common Stock, withdrawals of such demands, and any other
documents and written communications that relate to such demands, and (B) the
opportunity to direct all negotiations and proceedings with respect to demands
for appraisal under the Massachusetts Law. TCA shall not, except with the prior
written consent of Thoratec, make any payment with respect to any demands for
appraisal of TCA Common Stock or offer to settle or settle any such demands.
2.4 Lost, Stolen or Destroyed Certificates. In the event that any TCA
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue and pay in respect of such lost, stolen or destroyed TCA Certificates,
upon the making of an affidavit of that fact by the holder thereof, certificates
representing the shares of Thoratec Common Stock as may be required pursuant to
Section 2.1 and cash in lieu of fractional shares, if any, as may be required
pursuant to Section 2.1(f) and any dividends or distributions payable pursuant
to Section 2.3(d); provided that Thoratec may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed TCA Certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against
Thoratec or the Exchange Agent with respect to the TCA Certificates alleged to
have been lost, stolen or destroyed.
2.5 Tax Consequences. For United States federal income tax purposes, it is
intended by the parties hereto that the Merger qualify as a reorganization
within the meaning of Section 368(a) of the Code. The execution and delivery of
this Agreement by each party shall be considered the adoption of a plan of
reorganization by such party for purposes of Section 368 of the Code.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TCA
TCA makes to Thoratec and Merger Sub the representations and warranties
contained in this Article III, in each case subject to the exceptions set forth
in the disclosure statement, dated as of the date hereof, delivered by TCA to
Thoratec prior to the execution of this Agreement (the "TCA Disclosure
Statement"). The TCA Disclosure Statement is arranged in schedules corresponding
to the numbered and lettered Sections of this Article III, and the disclosure in
any Schedule of the TCA Disclosure Statement shall qualify only the
corresponding Section of this Article III.
3.1 Organization, Etc.
(a) Each of TCA and its Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, and has all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted. Each
of TCA and its Subsidiaries is duly qualified as a foreign Person to do
business, and is in good standing, in each jurisdiction where the character of
its owned or leased properties or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified or in good
standing would not, individually or in the aggregate, have a TCA Material
Adverse Effect. For the purposes of this Agreement, "TCA Material Adverse
Effect" means any change, event, circumstance or effect that is, or (including
with the passage of time) is likely to be or become, materially adverse to the
general affairs, business, operations, prospects, assets, condition (financial
or otherwise) or results of operations of TCA and its Subsidiaries taken as a
whole,
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provided that: (i) any adverse change, event, circumstance or effect arising
from or relating to general business or economic conditions which does not
affect TCA and its Subsidiaries in a materially disproportionate manner compared
to other entities in TCA's and its Subsidiaries' industries shall not be deemed
to constitute, and shall not be taken into account in determining, whether there
has been, a "TCA Material Adverse Effect" and (ii) any adverse change,
circumstance, event or effect arising from or relating to the announcement or
pendency of the Merger shall not be deemed to constitute, and shall not be taken
into account in determining whether there has been, a "TCA Material Adverse
Effect".
(b) Neither TCA nor any of its Subsidiaries is in violation of any
provision of its Articles of Organization, bylaws or any other charter document.
Schedule 3.1(b) of the TCA Disclosure Statement sets forth (i) the full name of
each Subsidiary of TCA, its capitalization and the ownership interest of TCA and
each other Person (if any) therein, (ii) the jurisdiction in which each such
Subsidiary is organized, (iii) each jurisdiction in which TCA and each of its
Subsidiaries is qualified to do business as a foreign Person, (iv) a brief
summary of the business and material operations of each Subsidiary of TCA, and
(v) the names of the current directors and officers of TCA and of each
Subsidiary of TCA. TCA has made available to Thoratec accurate and complete
copies of the Articles of Organization, bylaws and any other charter documents,
as currently in effect, of TCA and each of its Subsidiaries.
3.2 Authority. TCA has full corporate power and authority to execute and
deliver this Agreement and the other agreements required to be signed by it
under this Agreement to complete the Merger (together, the "TCA Agreements")
and, assuming the approval of the Merger by a majority of the outstanding shares
of TCA Common Stock at the TCA Special Meeting or any adjournment or
postponement thereof in accordance with Massachusetts Law, consummate the Merger
and the other transactions contemplated hereby. TEC has full corporate power and
authority to execute and deliver this Agreement, the Shareholder Agreement, the
Registration Rights Agreement and the other agreements required to be signed by
it under this Agreement to complete the Merger (collectively, the "TEC
Agreements") and consummate the transaction contemplated thereby. The execution
and delivery of the TCA Agreements and the TEC Agreements and the consummation
of the Merger and the other transactions contemplated hereby and thereby, have
been duly and validly authorized by the boards of directors of TCA (with respect
to the Merger and the TCA Agreements) and TEC (with respect to the Merger and
the TEC Agreements), and no other corporate proceedings on the part of TCA or
TEC are necessary to authorize the TCA Agreements or the TEC Agreements or to
consummate the Merger and the other transactions contemplated hereby and thereby
(other than, with respect to the Merger, the approval of the Merger by a
majority of the outstanding shares of TCA Common Stock at the TCA Special
Meeting or any adjournment or postponement thereof in accordance with the
Massachusetts Law). The TCA Agreements have been duly and validly executed and
delivered by TCA and, assuming due authorization, execution and delivery by
Thoratec and Merger Sub, constitute valid and binding agreements of TCA,
enforceable against TCA in accordance with their terms, except to the extent
that their enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement of creditors'
rights generally or by general equitable principles. The TEC Agreements have
been duly and validly executed and delivered by TEC and, assuming due
authorization, execution and delivery by Thoratec and Merger Sub, constitute the
valid and binding agreements of TEC, enforceable against TEC in accordance with
their terms, except to the extent that their enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors' rights generally or by general equitable
principles.
3.3 No Violations, Etc. No filing with or notification to, and no permit,
authorization, consent or approval of, any domestic or foreign court,
administrative agency, commission, or other governmental or regulatory body,
authority or instrumentality ("Government Entity") is necessary on the part of
TCA or TEC for the consummation by TCA of the Merger or any of the other
transactions contemplated by the TCA Agreements or the TEC Agreements, or for
the exercise by Thoratec, TCA and their Subsidiaries of full rights to own and
operate their businesses as presently being conducted, except (i) for the filing
of the Articles of Merger as required by the Massachusetts Law, (ii) the
applicable requirements of the Securities Exchange Act of 1934, as amended
(together with the Rules and Regulations promulgated thereunder, the "Exchange
Act"), state securities or "blue sky" laws and state takeover laws, and (iii)
filings required under the Hart-
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Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"). None of the
execution and delivery of the TCA Agreements and the TEC Agreements, the
consummation of the Merger or any of the other transactions contemplated hereby
and thereby, or compliance by TCA and TEC with all of the provisions hereof and
thereof, or the exercise by Thoratec, TCA and their Subsidiaries of full rights
to own and operate their businesses after the Merger as presently being
conducted (subject to obtaining the approval of the Merger by the holders of a
majority of the outstanding shares of TCA Common Stock at the TCA Special
Meeting or any adjournment or postponement thereof in accordance with the
Massachusetts Law) will: (i) conflict with or result in any breach of any
provision of the Articles of Organization, bylaws or any other charter document
of TCA or any of its Subsidiaries, (ii) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to TCA or any of its
Subsidiaries, or by which any of its properties or assets may be bound, or (iii)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default under, or result in any material change in, or
give rise to any right of termination, cancellation, acceleration, redemption or
repurchase under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease, contract, agreement or other
instrument or obligation to which TEC, TCA or any of its Subsidiaries is a party
or by which any of them or any of their properties or assets may be bound.
Schedule 3.3 of the TCA Disclosure Statement lists all consents, waivers and
approvals required to be obtained in connection with the consummation of the
transactions contemplated by the TCA Agreements or the TEC Agreements under any
of TEC's, TCA's or any of their Subsidiaries' notes, bonds, mortgages,
indentures, deeds of trust, licenses or leases, contracts, agreements or other
instruments or obligations.
3.4 Board Recommendation. The board of directors of TCA has, at a meeting
duly held on October 2, 2000: (i) approved and adopted the Merger and the TCA
Agreements, (ii) determined that the Merger and the TCA Agreements are fair to
and in the best interests of the stockholders of TCA and (iii) resolved to
recommend approval of the Merger and the TCA Agreements to the stockholders of
TCA. The board of directors of TEC has, at a meeting duly held on September 27,
2000: (i) approved and adopted the Merger and the TEC Agreements, (ii)
determined that the Merger and the TEC Agreements are fair to and in the best
interests of the stockholders of TEC, and (iii) resolved that TEC shall vote or
cause to be voted all of its shares of TCA Common Stock and any such shares held
by any Subsidiaries of TEC in favor of the Merger and the TEC Agreements at the
TCA Special Meeting, including any adjournments or postponements of that
meeting.
3.5 Fairness Opinion. TCA has received the opinion of J.P. Morgan
Securities Inc. dated on or before the date of this Agreement to the effect that
the Exchange Ratio is fair to TCA's stockholders from a financial point of view,
and has provided a copy of that opinion to Thoratec.
3.6 Capitalization.
(a) The authorized capital stock of TCA consists of 100,000,000 shares of
TCA Common Stock. As of the date of this Agreement, there were 38,562,477 shares
of TCA Common Stock outstanding and 2,063,653 treasury shares. As of the date of
this Agreement, there were 4 3/4% subordinated convertible debentures due 2004
(the "TCA Debentures") outstanding in the aggregate principal amount of
$53,300,000. Neither the Merger nor any of the other transactions contemplated
by this Agreement will accelerate the date that any principal or interest is due
under any TCA Debentures, will constitute a default under any TCA Debentures,
will give rise to any rights of redemption respecting any TCA Debentures or will
confer any other rights respecting any TCA Debentures, except that the rights to
convert TCA Debentures into shares of TCA Common Stock shall become rights to
convert TCA Debentures into shares of Thoratec Common Stock, as adjusted to
reflect the Exchange Ratio.
(b) Except for the TCA Debentures, there are no warrants, options,
convertible securities, calls, rights, stock appreciation rights, preemptive
rights, rights of first refusal, or agreements or commitments of any nature
obligating TCA to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock or other equity interests of TCA, or
obligating TCA to grant, issue, extend, accelerate the vesting of, or enter
into, any such warrant, option, convertible security, call, right, stock
appreciation right, preemptive right, right of first refusal, agreement or
commitment. To the knowledge of TCA and TEC, except for the
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Shareholder Agreement, there are no voting trusts, proxies or other agreements
or understandings with respect to the capital stock of TCA.
(c) True and complete copies of each TCA Stock Plan, the Directors' Plan
and the TCA Purchase Plan, and of the forms of all agreements and instruments
relating to or issued under each thereof, have been made available to Thoratec.
Such agreements, instruments, and forms have not been amended, modified or
supplemented, and there are no agreements to amend, modify or supplement any
such agreements, instruments or forms.
(d) Schedule 3.6(d) of the TCA Disclosure Statement sets forth the
following information with respect to each TCA Option: the aggregate number of
shares issuable thereunder, the type of option, the grant date, the expiration
date, the exercise price and the vesting schedule. Each TCA Option was granted
in accordance with the terms of the TCA Stock Plan applicable thereto. The terms
of each of the TCA Stock Plans do not prohibit the assumption of the TCA Options
as provided in Section 2.2(a). Schedule 3.6(d) of the TCA Disclosure Statement
sets forth the following information with respect to the Directors' Plan: the
name of each director of TCA eligible to receive cash or TCA Common Stock under
the Directors' Plan, the amount of cash and TCA Common Stock issuable as of the
date of this Agreement to each such director and an estimate of such amounts as
of the Closing Date. Under the terms of the Directors' Plan, each director of
TCA will cease to accrue any rights under the Directors' Plan upon resignation
of such director at the Effective Time.
3.7 SEC Filings. TCA has filed with the Securities and Exchange Commission
(the "SEC") all required forms, reports, registration statements and documents
required to be filed by it with the SEC (collectively, all such forms, reports,
registration statements and documents filed after January 1, 1997 are referred
to herein as the "TCA SEC Reports"). All of the TCA SEC Reports complied as to
form, when filed, in all material respects with the applicable provisions of the
Securities Act of 1933, as amended (together with the rules and regulations
promulgated thereunder, the "Securities Act") and the Exchange Act. Accurate and
complete copies of the TCA SEC Reports have been made available to Thoratec. As
of their respective dates, the TCA SEC Reports (including all exhibits and
schedules thereto and documents incorporated by reference therein) did not, at
the time they were filed (or, if amended or superseded by a filing prior to the
date hereof, then on the date of such filing) 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 light of the circumstances under
which they were made, not misleading. To the knowledge of TCA, no director or
officer of TCA has failed to comply with any filing requirements under Section
13 or Section 16(a) of the Exchange Act.
3.8 Financial Statements. Each of the consolidated financial statements
(including, in each case, any related notes thereto) contained in the TCA SEC
Reports (the "TCA Financial Statements"), (x) was prepared in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes thereto
or, in the case of unaudited interim financial statements, as may be permitted
by the SEC on Form 10-Q under the Exchange Act) and (y) fairly presented the
consolidated financial position of TCA and its Subsidiaries in all material
respects as of the respective dates thereof and the consolidated results of its
operations and cash flows for the periods indicated, consistent with the books
and records of TCA, except that the unaudited interim financial statements were
or are subject to normal and recurring year-end adjustments which were not, or
are not expected to be, material in amount. The balance sheet of TCA contained
in TCA's Form 10-Q for the quarter ended June 30, 2000 (the "Reference Date") is
hereinafter referred to as the "TCA Balance Sheet".
3.9 Absence of Undisclosed Liabilities. Neither TCA nor any of its
Subsidiaries has any liabilities (absolute, accrued, contingent or otherwise)
other than (i) liabilities included in the TCA Balance Sheet and the related
notes to the financial statements, (ii) normal or recurring liabilities incurred
in the ordinary course of business consistent with past practice which,
individually or in the aggregate, are not and would not be reasonably likely to
have a TCA Material Adverse Effect, and (iii) liabilities under this Agreement.
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3.10 Absence of Changes or Events. Except as contemplated by this
Agreement, since the Reference Date no TCA Material Adverse Effect has occurred
and, in addition, TCA and its Subsidiaries have not, directly or indirectly:
(a) purchased, otherwise acquired, or agreed to purchase or otherwise
acquire, any shares of capital stock or any indebtedness of TCA or any of
its Subsidiaries (including, without limitation, any TCA Debentures), or
declared, set aside or paid any dividend or otherwise made a distribution
(whether in cash, stock, debt or property or any combination thereof) in
respect of their capital stock (other than dividends or other distributions
payable solely to TCA or a wholly-owned Subsidiary of TCA);
(b) authorized for issuance, issued, sold, delivered, granted or
issued any options, warrants, calls, subscriptions or other rights for, or
otherwise agreed or committed to issue, sell or deliver any shares of any
class of capital stock of TCA or its Subsidiaries or any securities
convertible into or exchangeable or exercisable for shares of any class of
capital stock of TCA or its Subsidiaries, other than pursuant to and in
accordance with the TCA Stock Plans, Directors' Plan and TCA Purchase Plan
other than as disclosed on Schedule 3.6 to the TCA Disclosure Statement;
(c) (i) created or incurred any indebtedness for borrowed money
exceeding $250,000 in the aggregate, (ii) assumed, guaranteed, endorsed or
otherwise as an accommodation become responsible for the obligations of any
other individual, firm or corporation, made any loans or advances to any
other individual, firm or corporation (including, without limitation, TEC
or any Subsidiary of TEC that is not TCA or a Subsidiary of TCA) exceeding
$100,000 in the aggregate, (iii) entered into any oral or written
agreement, commitment or transaction or incurred any liability involving,
in any one case, in excess of $100,000;
(d) instituted any change in accounting methods, principles or
practices other than as required by GAAP or the rules and regulations
promulgated by the SEC and disclosed in the notes to the TCA Financial
Statements;
(e) revalued any assets, including, without limitation, writing down
the value of inventory or writing off notes or accounts receivable in
excess of amounts previously reserved as reflected in the TCA Balance
Sheet;
(f) suffered any damage, destruction or loss, whether covered by
insurance or not, except for such as would not, individually or in the
aggregate exceed $100,000;
(g) (i) increased in any manner the compensation of any of its
directors, officers or, other than in the ordinary course of business and
consistent with past practice, non-officer employees, (ii) granted any
severance or termination pay to any Person; (iii) entered into any oral or
written employment, consulting, indemnification or severance agreement with
any Person; (iv) other than as required by law, adopted, become obligated
under, or amended any employee benefit plan, program or arrangement; or (v)
repriced any TCA Options;
(h) sold, transferred, leased, licensed, pledged, mortgaged,
encumbered, or otherwise disposed of, or agreed to sell, transfer, lease,
license, pledge, mortgage, encumber, or otherwise dispose of, any material
properties, (including intangibles, real, personal or mixed), it being
understood that this clause (h) does not extend to sales of inventory in
the ordinary course of business;
(i) amended its Articles of Organization, bylaws, or any other charter
document, or effected or been a party to any merger, consolidation, share
exchange, business combination, recapitalization, reclassification of
shares, stock split, reverse stock split or similar transaction;
(j) made any capital expenditure in any calendar month which, when
added to all other capital expenditures made by or on behalf of TCA and its
Subsidiaries in such calendar month resulted in such capital expenditures
exceeding $150,000 in the aggregate;
(k) paid, discharged or satisfied any material claims, liabilities or
obligations (absolute, accrued, contingent or otherwise), other than the
payment, discharge or satisfaction of liabilities (including
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accounts payable) in the ordinary course of business and consistent with
past practice, or collected, or accelerated the collection of, any amounts
owed (including accounts receivable) other than their collection in the
ordinary course of business;
(l) waived, released, assigned, settled or compromised any material
claim or litigation, or commenced a lawsuit other than for the routine
collection of bills; or
(m) agreed or proposed to do any of the things described in the
preceding clauses (a) through (l) other than as expressly contemplated or
provided for in this Agreement.
3.11 Capital Stock of Subsidiaries. TCA is the record and beneficial owner
of all of the outstanding shares of capital stock or other equity interests of
each of its Subsidiaries. All of such shares have been duly authorized and are
validly issued, fully paid, nonassessable and free of preemptive rights with
respect thereto and are owned by TCA free and clear of any claim, lien or
encumbrance of any kind with respect thereto. There are no proxies or voting
agreements with respect to such shares, and there are not any existing options,
warrants, calls, subscriptions, or other rights or other agreements or
commitments obligating TCA or any Subsidiaries to issue, transfer or sell any
shares of capital stock of any Subsidiary or any other securities convertible
into, exercisable for, or evidencing the right to subscribe for any such shares.
TCA does not directly or indirectly own any equity interest in any Person except
the Subsidiaries.
3.12 Litigation.
(a) There is no private or governmental claim, action, suit, investigation
or proceeding of any nature ("Action") pending or, to the knowledge of TCA or
TEC, threatened in writing against TCA or any of its Subsidiaries, or any of
their respective officers and directors (in their capacities as such), or
involving any of their assets, before any court, Government Entity, or
arbitration tribunal, except for those Actions which, individually or in the
aggregate, would not have a TCA Material Adverse Effect. There is no Action
pending or, to the knowledge of TCA, threatened which in any manner challenges,
seeks to, or is reasonably likely to prevent, enjoin, alter or delay any of the
transactions contemplated by the TCA Agreements or the TEC Agreements.
(b) There is no outstanding judgment, order, writ, injunction or decree of
any court, Government Entity, or arbitration tribunal in a proceeding to which
TCA, any Subsidiary of TCA, or any of their assets is or was a party or by which
TCA, any Subsidiary of TCA, or any of their assets is bound.
3.13 Insurance. Schedule 3.13 of the TCA Disclosure Statement lists all
insurance policies (including, without limitation, workers' compensation
insurance policies) covering any business, properties, assets or operations of
TCA or any of its Subsidiaries, whether or not they are policies issued directly
to TCA or any Subsidiary of TCA (for example, because they have been issued to
or procured by TEC), and all claims in excess of $50,000 made against or under
any such policies with respect to TCA or any Subsidiary of TCA (but not other
insured entities) since January 1, 1997. Neither TCA nor TEC has received notice
of the cancellation or threat of cancellation of any of such policy.
3.14 Contracts and Commitments.
(a) Schedule 3.14(a) of the TCA Disclosure Statement contains a complete
and accurate list of all agreements, understanding and arrangements, whether
written, oral or established through common practice, between TCA or any TCA
Subsidiary and any Person that directly or indirectly beneficially owns, or is
controlled by or under common control with any Person that beneficially owns,
more than five percent of the outstanding TCA Common Stock (the "TCA Related
Party Agreements"). True and correct copies of all TCA Related Party Agreements
have been provided to Thoratec. To the knowledge of TCA, the terms of the TCA
Related Party Agreements are no less favorable to TCA and its Subsidiaries than
could be obtained from a third party in an arms-length transaction.
(b) Except as filed (including by incorporation by reference to
earlier-filed documents) as an exhibit to the TCA SEC Reports filed after
January 1, 2000 or as identified on Schedule 3.14 to the TCA Disclosure
Statement (collectively the "TCA Contracts", it being understood that the
failure to identify an agreement, etc. on that schedule that is required to be
identified on that schedule shall nevertheless be considered a
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"TCA Contract"), neither TCA nor any of its Subsidiaries is a party to or bound
by any oral or written contract, obligation or commitment of any type in any of
the following categories:
(i) agreements with any employees or consultants of TCA or any TCA
Subsidiary respecting their employment, consulting, salary, wages, bonuses,
incentive compensation, severance or retention pay, or other compensation,
except for those employees or consultants whose annual rate of
compensation, including potential bonuses and incentive compensation, is
less than $100,000;
(ii) agreements or plans under which benefits will be increased or
accelerated by the occurrence of any of the transactions contemplated by
the TCA Agreements or the TEC Agreements or under which the value of the
benefits will be calculated on the basis of any of the transactions
contemplated by such agreements;
(iii) agreements, contracts or commitments currently in force relating
to the disposition or acquisition of assets other than in the ordinary
course of business, or relating to an ownership interest in any
corporation, partnership, joint venture or other business enterprise;
(iv) agreements, contracts or commitments for the purchase of goods,
supplies or equipment: (A) which are with sole or single source suppliers
or (B) for a cost, for any one such agreement, contract and commitment, in
excess of $250,000 and which, in the case of this clause (B), provide for
purchase prices substantially greater than those presently prevailing for
such materials, supplies or equipment;
(v) guarantees or other agreements, contracts or commitments under
which TCA or any of its Subsidiaries is absolutely or contingently liable
for (A) the performance of any other Person (other than TCA or any of its
Subsidiaries), or (B) the whole or any part of the indebtedness or payment
obligations of any other Person (other than TCA or its Subsidiaries);
(vi) powers of attorney authorizing the incurrence of a material
obligation on the part of TCA or any of its Subsidiaries;
(vii) agreements, contracts or commitments which limit or restrict (A)
where TCA or any of its Subsidiaries may conduct business, (B) the type or
lines of business (current or future) in which they may engage, or (C) any
acquisition of assets or stock (tangible or intangible) by TCA or any of
its Subsidiaries;
(viii) agreements, contracts or commitments containing any agreement
with respect to a change of control of TCA or any of its Subsidiaries;
(ix) agreements, contracts or commitments for the borrowing or lending
of money, or the availability of credit (except credit extended by TCA or
any of its Subsidiaries to customers in the ordinary course of business and
consistent with past practice);
(x) any hedging, option, derivative or other similar transaction and
any foreign exchange position or contract for the exchange of currency; or
(xi) any joint marketing or joint development agreement, or any
license or distribution agreement relating to any TCA product or planned
product.
(c) Neither TCA nor any of its Subsidiaries, nor to TCA's knowledge any
other party to any TCA Contract, has materially breached, violated or defaulted
under, or received notice that it has breached, violated or defaulted under (nor
does there exist any condition under which, with the passage of time or the
giving of notice or both, could reasonably be expected to cause a material
breach, violation or default under), any TCA Contract.
(d) Each TCA Contract is a valid, binding and enforceable obligation of
TCA, and to TCA's knowledge of the other party or parties thereto, in accordance
with its terms, and in full force and effect, except for any TCA Related Party
Agreements that will be terminated as of the Effective Time and except where the
failure to be valid, binding, enforceable and in full force and effect would not
have a TCA Material Adverse Effect
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and to the extent enforcement may be limited by applicable bankruptcy,
insolvency, moratorium or other laws affecting the enforcement of creditors'
rights or by general principles of equity.
(e) An accurate and complete copy of each TCA Contract has been made
available to Thoratec.
(f) The obligations to pay transaction bonuses or other compensation
occasioned by the Merger to the persons listed on Schedule 3.14(f) to the TCA
Disclosure Statement are obligations of TEC and not obligations of TCA or any
Subsidiary of TCA.
3.15 Labor Matters; Employment and Labor Contracts.
(a) None of TCA or any of its Subsidiaries is a party to any union contract
or other collective bargaining agreement, nor to the knowledge of TCA, TEC or
any of their Subsidiaries are there any activities or proceedings of any labor
union to organize any of its employees. Each of TCA and its Subsidiaries is in
compliance with all applicable (i) laws, regulations and agreements respecting
employment and employment practices, (ii) terms and conditions of employment,
and (iii) occupational health and safety requirements, except for those failures
to comply which, individually or in the aggregate, would not have a TCA Material
Adverse Effect.
(b) There is no labor strike, slowdown or stoppage pending (or any labor
strike or stoppage threatened) against TCA or any of its Subsidiaries. No
petition for certification has been filed and is pending before the National
Labor Relations Board with respect to any employees of TCA or any of its
Subsidiaries. Neither TCA nor any of its Subsidiaries has any obligations under
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA"), with respect to any former employees or qualifying beneficiaries
thereunder, except for obligations that would not have, individually or in the
aggregate, a TCA Material Adverse Effect. There are no controversies pending or,
to the knowledge of TEC, TCA or any of its Subsidiaries, threatened, between TCA
or any of its Subsidiaries and any of their respective employees, which
controversies would have, individually or in the aggregate, a TCA Material
Adverse Effect.
3.16 Compliance with Laws. Neither TCA nor any of its Subsidiaries has
violated or failed to comply with any statute, law, ordinance, rule or
regulation (including, without limitation relating to the export or import of
goods or technology) of any Government Entity, except where any such violations
or failures to comply would not, individually or in the aggregate, have a TCA
Material Adverse Effect. TCA and its Subsidiaries have all permits, licenses and
franchises from Government Entities required to conduct their businesses as now
being conducted and as proposed to be conducted, except for those, the absence
of which would not, individually or in the aggregate, have a TCA Material
Adverse Effect.
3.17 Intellectual Property Rights.
(a) TCA and its Subsidiaries own or have the right to use all intellectual
property used to conduct their respective businesses (such intellectual property
and the rights thereto are collectively referred to as the "TCA IP Rights"). No
royalties or other payments are payable to any Person with respect to
commercialization of any products presently sold by TCA or its Subsidiaries.
(b) The execution, delivery and performance of the TCA Agreements and the
consummation of the transactions contemplated hereby will not: (i) constitute a
material breach of any instrument or agreement governing any TCA IP Rights, (ii)
cause the modification of any terms of any licenses or agreements relating to
any TCA IP Rights including, but not limited to, the modification of the
effective rate of any royalties or other payments provided for in any such
license or agreement, (iii) cause the forfeiture or termination of any TCA IP
Rights, (iv) give rise to a right of forfeiture or termination of any TCA IP
Rights or (v) materially impair the right of TCA, Thoratec or any of their
Subsidiaries to use, sell or license any TCA IP Rights or portion thereof.
(c) Neither the manufacture, marketing, license, sale or intended use of
any product or technology currently licensed or sold or under development by TCA
or any of its Subsidiaries: (i) violates in any material respect any license or
agreement between TCA or any of its Subsidiaries and any third party or (ii) to
the knowledge of TCA, infringes in any material respect any patents or other
intellectual property rights of any other party. There is no pending or, to the
knowledge of TCA, threatened claim or litigation contesting the
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validity, ownership or right to use, sell, license or dispose of any TCA IP
Rights, or asserting that any TCA IP Rights or the proposed use, sale, license
or disposition thereof, or the manufacture, use or sale of any TCA products,
conflicts or will conflict with the rights of any other party.
(d) TCA has provided to Thoratec a worldwide list of all patents, trade
names, trademarks and service marks, and applications for any of the foregoing
owned or possessed by TCA or any of its Subsidiaries.
(e) TCA has provided to Thoratec a true and complete copy of its standard
form of employee confidentiality agreement and taken commercially reasonable
steps to ensure that all key employees and scientific employees (whether or not
key) of TCA and its Subsidiaries have executed such an agreement. All scientific
consultants with access to proprietary information of TCA or any Subsidiary of
TCA have executed appropriate non-disclosure agreements with respect to such
proprietary information.
(f) Neither TCA nor any of its Subsidiaries is aware that any of its key or
scientific employees or scientific consultants is obligated under any contract,
covenant or other agreement or commitment of any nature, or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with the use of such employee's or consultant's best efforts to
promote the interests of TCA and its Subsidiaries or that would conflict with
the business of TCA or any of its Subsidiaries as presently conducted or
proposed to be conducted. Neither TCA nor any of its Subsidiaries has entered
into any agreement to indemnify any other person, including but not limited to
any employee or consultant of TCA or any of its Subsidiaries, against any charge
of infringement, misappropriation or misuse of any intellectual property, other
than indemnification provisions contained in purchase orders or customer
agreements arising in the ordinary course of business. All current and former
key or scientific employees and scientific consultants of any of TCA or any of
its Subsidiaries who in TCA's reasonable business judgment were appropriate have
signed valid and enforceable written assignments to TCA or one or more of its
Subsidiaries of any and all rights or claims in any intellectual property that
any such employee or consultant has or may have by reason of any contribution,
participation or other role in the development, conception, creation, reduction
to practice or authorship of any invention, innovation, development or work of
authorship or any other intellectual property that is used in the business of
TCA or any of its Subsidiaries, and TCA and its Subsidiaries possess signed
copies of all such written assignments by such employees and consultants.
(g) There are no existing licenses between International Technidyne
Corporation ("ITC"), on the one hand, and TEC or any Subsidiary of TEC, on the
other hand, respecting any intellectual property owned or used by ITC.
3.18 Taxes.
(a) For purposes of this Agreement, "Tax" or "Taxes" refers to any and all
federal, state, local and foreign taxes, assessments and other governmental
charges, duties, impositions and liabilities relating to taxes, including taxes
based upon or measured by gross receipts, income, profits, sales, use and
occupation, and value added, ad valorem, transfer, franchise, withholding,
payroll, recapture, employment, excise and property taxes, together with all
interest, penalties and additions imposed with respect to such amounts and any
obligations under any agreements or arrangements with any other person with
respect to such amounts and including any liability for taxes of a predecessor
entity. For purposes of this Agreement, "Tax Return" or "Tax Returns" refers to
all federal, state and local and foreign returns, estimates, information
statements and reports relating to Taxes, in each case filed or required to be
filed with a Government Entity.
(b) TCA and each of its Subsidiaries have filed all Tax Returns required to
have been filed by them, and have paid (or TCA has paid on behalf of its
Subsidiaries), all Taxes required to have been shown on such Tax Returns. The
most recent financial statements contained in the TCA SEC Reports reflect an
adequate accrual (which accruals were established in accordance with GAAP) for
the payment of all Taxes payable by TCA and its Subsidiaries, as of the date of
such financial statements. Except as reasonably would not have a TCA Material
Adverse Effect, no deficiencies for any Taxes have been proposed, asserted or
assessed against TCA or any of its Subsidiaries. Neither TCA nor any of its
Subsidiaries has filed for any extension of time to file any Tax Return which
has not since been filed. Neither TCA nor any of its Subsidiaries has been
included in a
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consolidated or combined Tax Return that has included TEC for any period not now
closed under all applicable statutes of limitations.
(c) Neither TCA nor any of its Subsidiaries is a party to any contract,
agreement, plan or arrangement including, but not limited to, the TCA
Agreements, covering any employee or former employee of TCA or any of its
Subsidiaries that: (i) could give rise to the payment of any amounts that would
constitute excess parachute payments within the meaning of Sections 280G of the
Code with respect to the change in ownership or control that may occur upon the
consummation of the Merger, or (ii) could give rise to the payment of any amount
that would constitute a parachute payment within the meaning of Sections 280G of
the Code with respect to any change in ownership or control of TCA occurring
after the Closing Date. During the taxable year ending on the Closing Date, TCA
and its Subsidiaries have not become obligated to make any payment the deduction
of which would be disallowed pursuant to Section 162(m) of the Code.
(d) None of TCA and its Subsidiaries has filed any consent agreement under
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply
to any disposition of a Subsection (f) asset (as defined in Section 341(f)(4) of
the Code) owned by TCA or any of its Subsidiaries.
(e) None of TCA and its Subsidiaries: (i) has received any notice that it
is being audited by any taxing authority, (ii) has granted any presently
operative waiver of any statute of limitations with respect to, or any extension
of a period for the assessment of, any Tax, (iii) has permitted any Tax lien to
be placed on any asset of TCA or any of its Subsidiaries, except with respect to
Taxes not yet due and payable or (iv) has availed itself of any Tax amnesty or
similar relief in any taxing jurisdiction.
(f) None of TCA and its Subsidiaries is aware of any reason why the Merger
will fail to qualify as a reorganization under the provisions of Section 368(a)
of the Code.
(g) TCA has not been a United States real property holding corporation
within the meaning of Section 897 of the Code at any time after June 30, 1995.
(h) Neither TCA nor any of its Subsidiaries has any liability for the Taxes
of any Person other than itself, TCA or another present Subsidiary of TCA.
Neither TCA nor any of its Subsidiaries is a party to any tax sharing or tax
indemnity agreement.
3.19 Employee Benefit Plans; ERISA.
(a) There are no "employee pension benefit plans" as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA") ("TCA Pension Plans"), "welfare benefit plans" as defined in Section
3(1) of ERISA ("TCA Welfare Plans"), or stock bonus, stock option, restricted
stock, stock appreciation right, stock purchase, bonus, incentive, deferred
compensation, severance, holiday, or vacation plans, or any other employee
benefit plan, program, policy or arrangement covering employees (or former
employees) employed in the United States that either is maintained or
contributed to by TCA or any TCA ERISA Affiliate (as hereinafter defined) or to
which TCA or any TCA ERISA Affiliate is obligated to make payments or otherwise
may have any liability (collectively, the "TCA Employee Benefit Plans") with
respect to employees or former employees of TCA or any of its Subsidiaries, or
any TCA ERISA Affiliate. For purposes of this Agreement, "TCA ERISA Affiliate"
means any person (as defined in Section 3(9) of ERISA) that is or has been a
member of any group of persons described in Section 414(b), (c), (m) or (o) of
the Code, including, without limitation, TCA or a Subsidiary.
(b) TCA and each of its Subsidiaries, and each of the TCA Pension Plans and
TCA Welfare Plans, are in compliance in all material respects with the
applicable provisions of ERISA, the Code and other applicable laws.
(c) All contributions to, and payments from, the TCA Pension Plans which
are required to have been made in accordance with the TCA Pension Plans have
been timely made.
(d) All TCA Pension Plans intended to qualify under Section 401 of the Code
have been determined by the Internal Revenue Service ("IRS") to be so qualified,
and no event has occurred and no condition exists
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with respect to the form or operation of any TCA Pension Plan which would cause
the loss of such qualification or the imposition of any material liability,
penalty or tax under ERISA or the Code.
(e) There are no (i) investigations pending by any Government Entity
involving any TCA Pension Plan or TCA Welfare Plan, or (ii) pending or, to the
knowledge of TCA, threatened claims (other than routine claims for benefits),
suits or proceedings against any TCA Pension Plan or TCA Welfare Plan, against
the assets of any of the trusts under any TCA Pension Plan or TCA Welfare Plan
or against any fiduciary of any TCA Pension Plan or TCA Welfare Plan with
respect to the operation of such plan or asserting any rights or claims to
benefits under any TCA Pension Plan or TCA Welfare Plan or against the assets of
any trust under any such plan, except for those which would not, individually or
in the aggregate, give rise to any liability which would have a TCA Material
Adverse Effect. To the best of TCA's knowledge, there are no facts which would
give rise to any liability under this Section 3.19(e), except for those which
would not, individually or in the aggregate, either impair TCA's ability to
consummate the Merger or any of the other transactions contemplated hereby or
have a TCA Material Adverse Effect.
(f) None of TCA, any of its Subsidiaries or any employee of the foregoing,
nor any trustee, administrator, other fiduciary or any other "party in interest"
or "disqualified person" with respect to any TCA Pension Plan or TCA Welfare
Plan, has engaged in a "prohibited transaction" (as that term is defined in
Section 4975 of the Code or Section 406 of ERISA) other than such transactions
that would not, individually or in the aggregate, either impair TCA's ability to
consummate the Merger or any of the other transactions contemplated hereby or
have a TCA Material Adverse Effect.
(g) None of TCA, any of its Subsidiaries, or any TCA ERISA Affiliate
maintains or contributes to, nor has it ever maintained or contributed to, any
pension plan subject to Title IV of ERISA or Section 412 of the Code or Section
302 of ERISA.
(h) None of TCA, any Subsidiary of TCA or any TCA ERISA Affiliate has
incurred any material liability under Title IV of ERISA that has not been
satisfied in full.
(i) None of TCA, any of its Subsidiaries or any TCA ERISA Affiliate has any
material liability (including any contingent liability under Section 4204 of
ERISA) with respect to any multiemployer plan, within the meaning of Section
3(37) of ERISA, covering employees (or former employees) employed in the United
States.
(j) With respect to each of the TCA Employee Benefit Plans, true, correct
and complete copies of the following documents have been made available to
Thoratec: (i) the plan document and any related trust agreement, including
amendments thereto, (ii) any current summary plan descriptions and other
material communications to participants relating to the TCA Employee Benefit
Plans, (iii) the three most recent Forms 5500, if applicable, and (iv) the most
recent IRS determination letter, if applicable.
(k) None of the TCA Welfare Plans provides for continuing benefits or
coverage for any participant or any beneficiary of a participant following
termination of employment, except as may be required under COBRA, or except at
the expense of the participant or the participant's beneficiary. TCA and each of
its Subsidiaries which maintain a "group health plan" within the meaning of
Section 5000(b)(1) of the Code have complied with the notice and continuation
requirements of Section 4980B of the Code, COBRA, Part 6 of Subtitle B of Title
I of ERISA and the regulations thereunder except where the failure to comply
would not, individually or in the aggregate, either impair TCA's ability to
consummate the Merger or any other transaction contemplated hereby or have a TCA
Material Adverse Effect.
(l) No liability under any TCA Pension Plan or TCA Welfare Plan has been
funded nor has any such obligation been satisfied with the purchase of a
contract from an insurance company as to which TCA or any of its Subsidiaries
has received notice that such insurance company is in rehabilitation or a
comparable proceeding.
(m) The consummation of the transactions contemplated by the TCA Agreements
will not result in an increase in the amount of compensation or benefits or
accelerate the vesting or timing of payment of any benefits or compensation
payable to or in respect of any employee of TCA or any of its Subsidiaries.
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(n) Schedule 3.19(n) of the TCA Disclosure Statement lists each TCA Foreign
Plan (as hereinafter defined). TCA and each of its Subsidiaries and each of the
TCA Foreign Plans are in compliance with applicable laws, and all required
contributions have been made to the TCA Foreign Plans, except where the failure
to comply or make contributions would not, individually or in the aggregate,
either impair TCA's ability to consummate the Merger or any other transaction
contemplated hereby or have a TCA Material Adverse Effect. Each of the TCA
Foreign Plans that is a funded defined benefit pension plan has a fair market
value of plan assets that is greater than the plan's liabilities, as determined
in accordance with applicable laws. For purposes hereof, "TCA Foreign Plan"
means any plan, program, policy, arrangement or agreement maintained or
contributed to by, or entered into with, TCA or any Subsidiary with respect to
any employees (or former employees) employed outside the United States to the
extent the benefits provided thereunder are not mandated by the laws of the
applicable foreign jurisdiction.
(o) Each of the TCA Employee Benefit Plans and the TCA Foreign Plans can be
terminated by TCA within 30 days following the Effective Time in accordance with
the terms of such Plan and applicable law, without any additional contribution
to such TCA Employee Benefit Plan or TCA Foreign Plan or the payment of any
additional compensation or amount or the additional vesting or acceleration of
any vesting provided under the TCA Employee Benefit Plan or TCA Foreign Plan.
3.20 Environmental Matters.
(a) For purposes of this Agreement:
(i) "TCA Contractor" means any Person with which TCA or any Subsidiary
formerly or presently has any agreement or arrangement (whether oral or
written) under which such Person has or had physical possession of, and was
or is obligated to develop, test, process, manufacture or produce any
product or substance on behalf of TCA or any Subsidiary.
(ii) "Environment" means any land including, without limitation,
surface land and sub-surface strata, seabed or river bed, ecosystem and any
water (including, without limitation, coastal and inland waters, surface
waters and ground waters and water in drains and sewers) and air
(including, without limitation, air within buildings), other natural or
manmade structures above or below ground, and natural resources.
(iii) "Environmental Law" means any law or regulation, and any
judicial or administrative interpretation thereof, in each case relating to
the Environment or harm to or the protection of human health, animals,
plants or ecosystems, including, without limitation, laws relating to
public and workers health and safety, emissions, discharges or releases of
chemicals or any other pollutants or contaminants or industrial,
radioactive, dangerous, toxic or hazardous substances or wastes (whether in
solid or liquid form or in the form of a gas or vapor and including noise
and genetically modified organisms) into the Environment or otherwise
relating to the manufacture processing use, treatment, storage,
distribution, disposal transport or handling of substances or wastes.
Environmental Laws include, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act, as amended
("CERCLA"), the Resource Conservation and Recovery Act 42 USC, 6901 et
seq., the Hazardous Materials Transportation Act 49 USC, 6901 et seq., the
Clean Water Act 33, 1251 et seq., the Toxic Substances Control Act 15 USC,
2601 et seq., the Clean Air Act 42 USC, 7401 et seq., the Safe Drinking
Water Act 42 USC, 300f et seq., the Atomic Energy Act 42 USC, 2201 et seq.,
the Federal Food Drug and Cosmetic Act 21 USC, 136 et seq., and the Federal
Food Drug and Cosmetic Act 21 USC, 301 et seq., and equivalent statutes and
other laws in states and other jurisdictions of the United States and
countries other than the United States.
(iv) "Environmental Permit" means any permit, license, consent,
approval, certificate, qualification, specification, registration and other
authorization, and the filing of all notifications, reports and
assessments, required by any federal, state, local or foreign government or
regulatory entity pursuant to any Environmental Law.
(v) "Hazardous Material" means any pollutant, contaminant, or
hazardous, toxic, medical, biohazardous, infectious or dangerous waste,
substance, gas, constituent or material, defined or regulated as
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such in, or for purposes of, any Environmental Law, including, without
limitation, any asbestos, petroleum, oil (including crude oil or any
fraction thereof), radioactive substance, polychlorinated biphenyls, toxin,
chemical, virus, infectious disease or disease causing agent, and any other
substances that can give rise to liability under any Environmental Law.
(b) Except for such cases that, individually or in the aggregate, have not
and would not have a TCA Material Adverse Effect:
(i) Each of TCA and its Subsidiaries possesses all Environmental
Permits required under applicable Environmental Laws to conduct its current
business and to use and occupy the TCA Real Property (as defined below) for
its current business. All Environmental Permits are in full force and
effect and TCA and each of its Subsidiaries are, and to TCA's knowledge
have at all times been, in compliance with such Environmental Permits.
(ii) There are no facts or circumstances indicating that any
Environmental Permit possessed by TCA or any of its Subsidiaries would or
might be revoked, suspended, canceled or not renewed, and all appropriate
necessary action in connection with the renewal or extension of all
Environmental Permits possessed by TCA or any its Subsidiaries relating to
the current business and the TCA Real Property has been taken.
(iii) The execution and delivery of the TCA Agreements and the
consummation by TCA of the Merger and the other transactions contemplated
hereby and the exercise by Thoratec and the Surviving Corporation of rights
to own and operate the business of TCA and its Subsidiaries and use and
occupy the TCA Real Property and carry on its business as presently
conducted will not affect the validity or require the transfer of any
Environmental Permits held by TCA or any of its Subsidiaries and will not
require any notification, disclosure, registration, reporting, filing,
investigation or remediation under any Environmental Law.
(iv) TCA and each of its Subsidiaries and, to the knowledge of TCA,
all previous owners, lessees, operators and occupants of the real property
now or previously owned, leased or occupied by TCA or any of its
Subsidiaries (the "TCA Real Property"), are in compliance with, and within
the period of all applicable statutes of limitation, have complied with all
applicable Environmental Laws and have not received written notice of any
liability under any Environmental Law, and neither TCA or any of its
Subsidiaries nor any portion of the TCA Real Property is in violation of
any Environmental Law.
(v) There is no civil, criminal or administrative action, suit,
demand, claim, complaint, hearing, notice of violation, investigation,
notice or demand letter, proceeding or request for information pending or
any liability (whether actual or contingent) to make good, repair,
reinstate or clean up any of the TCA Real Property or any real property
previously owned, leased, occupied or used by TCA or any of its
Subsidiaries.
(vi) There has not been any disposal, spill, discharge, or release of
any Hazardous Material generated, used, owned, stored, or controlled by
TCA, any of its Subsidiaries, or respective predecessors in interest, on,
at, or under any TCA Real Property, or by any TCA Contractor, and there are
no Hazardous Materials located in, at, on, or under, or in the vicinity of,
any such facility or property, or at any other location, in any such case
that could reasonably be expected to require investigation, removal,
remedial, or corrective action by TCA or any of its Subsidiaries.
(vii) (A) Other than cleaning and office supplies normally used in the
operation of an office, Hazardous Materials have not been generated, used,
treated, handled or stored on, or transported to or from, or released on
any TCA Real Property or, any property adjoining any TCA Real Property; (B)
TCA and its Subsidiaries have disposed of all wastes, including those
wastes containing Hazardous Materials, in compliance with all applicable
Environmental Law and Environmental Permits; and (C) neither TCA nor any of
its Subsidiaries has transported or arranged for the transportation of any
Hazardous Materials to any location that is listed or proposed for listing
on the National Priorities List under CERCLA or on the CERCLIS or any
analogous state or country list or which is the subject of any
environmental claim.
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(viii) There has not been any underground or above ground storage tank
or other underground storage receptacle or related piping, or any
impoundment or other disposal area containing Hazardous Materials located
on any TCA Real Property, and no asbestos or polychlorinated biphenyls have
been used or disposed of, or have been located at, on, or under any TCA
Real Property.
(ix) TCA and its Subsidiaries have taken all actions necessary under
applicable requirements of Environmental Law to register any products or
materials required to be registered by TCA or any of its Subsidiaries (or
any of their respective agents) thereunder.
(c) After a reasonable investigation made by TCA and TEC, TCA has made
available to Thoratec all records and files, including, but not limited to, all
assessments, reports, studies, audits, analyses, tests and data in possession of
TEC, TCA and its Subsidiaries concerning the existence of Hazardous Materials at
any TCA Real Property or concerning compliance by TCA and its Subsidiaries with,
or liability under, any Environmental Law.
3.21 Officer's Certificate as to Tax Matters. TCA knows of no reason why
it will be unable to deliver to Heller Ehrman White & McAuliffe LLP and Hale and
Dorr LLP, at the Closing, an officer's certificate in the form and substance of
Exhibit B to this Agreement. TCA shall use its best efforts to obtain and
deliver that certificate to both of those law firms. (There is no Exhibit A to
this Agreement.)
3.22 Affiliates. TCA has delivered to Thoratec in accordance with Section
5.9 a list identifying all persons who, to TCA's knowledge, may be deemed to be
"affiliates" of TCA for purposes of Rule 145 under the Securities Act.
3.23 Finders or Brokers. Except for J.P. Morgan Securities Inc. and The
Beacon Group Capital Services, LLC, whose fees have been disclosed to Thoratec,
none of TEC, TCA or any of their Subsidiaries has employed any investment
banker, broker, finder or intermediary in connection with any of the
transactions contemplated hereby who might be entitled to a fee or commission
relating to the Merger or any other transaction contemplated by this Agreement.
3.24 Registration Statement; Joint Proxy Statement/Prospectus. The
information to be supplied by TCA in writing for inclusion or incorporation by
reference in the Registration Statement on Form S-4 registering the Thoratec
Common Stock to be issued in the Merger (the "Registration Statement") as it
relates to TCA, at the time the Registration Statement is declared effective by
the SEC, shall not 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 to be supplied by
TCA in writing for inclusion in the joint proxy statement/prospectus to be sent
to the stockholders of TCA in connection with the TCA Special Meeting and to the
shareholders of Thoratec in connection with the Thoratec Special Meeting (such
joint proxy statement/prospectus, as amended and supplemented, is referred to as
the "Joint Proxy Statement/Prospectus"), at the date the Joint Proxy
Statement/Prospectus is first mailed to stockholders, at the time of the TCA
Special Meeting and the Thoratec Special Meeting, and at the Effective Time
shall not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. If, at any time prior to the Effective Time, any event with
respect to TCA or any of its Subsidiaries shall occur which is required to be
described in the Joint Proxy Statement/Prospectus, such event shall be so
described, and an amendment or supplement shall be promptly filed with the SEC
and, as required by law, disseminated to the stockholders of TCA, Thoratec or
both, as appropriate.
3.25 Title to and Condition of Property. TCA and its Subsidiaries have
good and valid title to all of their respective properties, interests in
properties and assets, real and personal, reflected in the TCA Balance Sheet or
acquired after the Reference Date, and have valid leasehold interests in all
leased properties and assets, in each case free and clear of all mortgages,
liens, pledges, charges or encumbrances of any kind or character, except (i)
liens for current taxes not yet due and payable, (ii) such imperfections of
title, liens and easements as do not and will not materially detract from or
interfere with the use of the properties subject thereto or affected thereby, or
otherwise materially impair business operations involving such properties, or
(iii) liens securing debt reflected on the TCA Balance Sheet. Schedule 3.25 of
the TCA Disclosure Statement
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identifies each parcel of real property owned or leased by TCA or any of its
Subsidiaries. TCA's and its Subsidiaries' real and tangible personal property
has been maintained in accordance with normal industry practice, is in good
operating condition and repair (subject to normal wear and tear), and is
suitable for the purposes for which it is used.
3.26 No Existing Discussions. As of the date hereof, none of TEC, TCA or
any their representatives is engaged, directly or indirectly, in any discussions
or negotiations with any other Person relating to any TCA Acquisition Proposal
(as defined in Section 5.2(c)).
3.27 Food and Drug Administration Matters.
(a) For purposes of this Agreement:
(i) "FDA" means the United States Food and Drug Administration and
corresponding regulatory agencies in other counties and states of the
United States.
(ii) "FDA clearance and approval" means any pre-market notification or
pre-market approval application, consent, certificate, registration,
permit, license or other authorization, and the filing of any notification,
application, report or information, required by the FDA or any other
Government Entity pursuant to any FDA Law.
(iii) "FDA TCA Contractor" means any Person with which TCA or any
Subsidiary of TCA formerly or presently had or has any agreement or
arrangement (whether oral or written) under which that Person has or had
physical possession of, or was or is obligated to develop, test, process,
investigate, manufacture or produce, any FDA Regulated Product on behalf of
TCA or any Subsidiary of TCA.
(iv) "FDA Law" means any statute, regulation, judicial or
administrative interpretation, guideline, point-to-consider, recommendation
or standard international guidance relating to any FDA Regulated Product.
"FDA Law" includes, without limitation, the Federal Food, Drug, and
Cosmetic Act, 21 U.S.C. sec. 301 et seq., the FDA Modernization Act of
1997, Stand Alone Provisions, Pub. L. No. 105-115, 111 Stat. 2295 (1997),
and equivalent statutes, regulations and guidances adopted by countries,
international bodies and other jurisdictions, in addition to the United
States, where TCA or any TCA Subsidiary (or, as the term "FDA Law" is used
in Section 4.25, where Thoratec or any Thoratec Subsidiary) has facilities,
does business, or directly or through others sells or offers for sale any
FDA Regulated Product.
(v) "FDA Regulated Product" means any product or component including,
without limitation, any medical device, that is studied, used, held or
offered for sale for human research or investigation or clinical use.
(b) TCA and each of its Subsidiaries possesses all FDA clearances and
approvals required under all applicable FDA Laws to conduct its current
businesses, to manufacture, hold and sell FDA Regulated Products, and to use and
occupy the TCA Real Property (defined in Section 3.20(b)(iv)). All FDA
clearances and approvals are in full force and effect.
(c) There are no facts or circumstances known to TCA that could lead to any
FDA clearances or approvals possessed by TCA or any of its Subsidiaries being
revoked, suspended, canceled or not renewed. TCA and its Subsidiaries have
submitted all necessary reports and filings to the FDA.
(d) The execution and delivery of the TCA Agreements, the consummation of
the Merger and the other transactions contemplated by the TCA Agreements, and
the exercise by TCA and its Subsidiaries of the rights to own and operate the
businesses of TCA and its Subsidiaries and to use and occupy the TCA Real
Property with respect to the TCA Real Property, as presently conducted and
operated, will not affect the validity or require the transfer of any FDA
clearances or approvals held by TCA or any of its Subsidiaries.
(e) TCA and its Subsidiaries and, to the knowledge of TCA, all previous
owners, lessees, operators and occupants of all TCA Real Property with respect
to the TCA Real Property, are in material compliance with, and have materially
complied with, all applicable FDA Laws and have not received (or, in the case of
such previous owners, lessees, operators and occupants, to the knowledge of TCA
have not received) any notice of any non-compliance with any FDA Laws within the
past three years.
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(f) There is no civil, criminal or administrative action, suit, demand,
claim, complaint, hearing, notice of violation, investigation, notice, demand
letter, proceeding or request for information pending or any liability (whether
actual or contingent) to comply with any FDA Laws that requires any change in
any manufacturing procedures by TCA or any Subsidiary of TCA or the repair,
reinstatement or clean-up of any TCA Real Property. There is no act, omission,
event or circumstance of which TCA or any of its Subsidiaries has knowledge that
may give rise to any such action, suit, demand, claim, complaint, hearing,
notice of violation, investigations, notice, demand letter, proceeding or
request, or any such liability: (i) against, involving or of TCA or any of its
Subsidiaries or (ii) against, involving or of any other Person (including,
without limitation, any FDA TCA Contractor) that could be imputed or attributed
to TCA or any Subsidiary of TCA.
(g) There has not been any material violation of any FDA Laws by TCA or its
Subsidiaries in their prior product developmental efforts, clinical studies,
submissions or reports to the FDA or any other Government Entity (or any failure
to make any such submission or report) that could reasonably be expected to
require investigation, corrective action or enforcement action.
(h) TCA, its Subsidiaries and their respective agents (in their capacities
as such agents) have registered with the FDA all facilities required to be
registered and have listed all FDA Regulated Products required to be listed with
the FDA.
3.28 Inventories. The inventories of TCA and its Subsidiaries consist of
raw materials and supplies, manufactured and purchased parts, work in progress
and finished products, all of which are merchantable and fit for the purposes
for which they were manufactured. Subject only to the reserves reflected on the
TCA Balance Sheet determined in a manner consistent with TCA's past practices,
none of those inventories is slow moving, obsolete, damaged or defective.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
THORATEC AND MERGER SUB
Thoratec and Merger Sub jointly and severally make to TCA the
representations and warranties contained in this Article IV, in each case
subject to the exceptions set forth in the disclosure statement, dated as of the
date hereof, delivered by Thoratec to TCA prior to the execution of this
Agreement (the "Thoratec Disclosure Statement"). The Thoratec Disclosure
Statement is arranged in schedules corresponding to the numbered and lettered
Sections of this Article IV, and the disclosure in any schedule of the Thoratec
Disclosure Statement shall qualify only the corresponding Section of this
Article IV.
4.1 Organization, Etc.
(a) Each of Thoratec, its subsidiaries listed on Schedule 4.1(a) of the
Thoratec Disclosure Statement (the "Thoratec Subsidiaries") and Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. Thoratec and each Thoratec Subsidiary are duly qualified
to do business, and are each in good standing, in each jurisdiction where the
character of its owned or leased properties or the nature of its activities
makes such qualification necessary, except where the failure to be so qualified
or in good standing would not, individually or in the aggregate, have a Thoratec
Material Adverse Effect. For purposes of this Agreement, "Thoratec Material
Adverse Effect" means any change, circumstance, event or effect that is, or
(including with the passage of time) is likely to be or become, materially
adverse to the general affairs, business, operations, prospects, assets,
condition (financial or otherwise) or results of operations of Thoratec and the
Thoratec Subsidiaries taken as a whole, provided that: (i) any adverse change,
event, circumstance or effect arising from or relating to general business or
economic conditions which does not affect Thoratec and the Thoratec Subsidiaries
in a materially disproportionate manner compared to other entities in Thoratec's
and the Thoratec Subsidiaries' industries shall not be deemed to constitute, and
shall not be taken into account in determining whether there has been, a
"Thoratec Material Adverse Effect" and (ii) any adverse change, circumstance,
event or effect arising from or
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relating to the announcement or pendency of the Merger shall not be deemed to
constitute, and shall not be taken into account in determining whether there has
been, a "Thoratec Material Adverse Effect".
(b) None of Thoratec, any Thoratec Subsidiary or Merger Sub is in violation
of any provision of its articles of incorporation, bylaws or any other charter
document. Schedule 4.1(b) of the Thoratec Disclosure Statement sets forth: (i)
the full name of each Thoratec Subsidiary, its capitalization and the ownership
interest of Thoratec and each other Person (if any) therein, (ii) the
jurisdiction in which each such Thoratec Subsidiary is organized, (iii) each
jurisdiction in which Thoratec and each of the Thoratec Subsidiaries is
qualified to do business as a foreign Person and (iv) a brief summary of the
business and material operations of each Thoratec Subsidiary. Thoratec has made
available to TCA and TEC accurate and complete copies of the articles of
incorporation, bylaws and any other charter documents, as currently in effect,
of Thoratec and each of the Thoratec Subsidiaries.
4.2 Authority Relative to This Agreement. Each of Thoratec and Merger Sub
has full corporate power and authority to execute and deliver the TCA Agreements
and the TEC Agreements and to consummate the Merger and the other transactions
contemplated hereby and thereby. The execution and delivery of the TCA
Agreements and the TEC Agreements, and the consummation of the Merger and the
other transactions contemplated hereby and thereby have been duly and validly
authorized by the board of directors of each of Thoratec and Merger Sub and no
other corporate proceedings on the part of either Thoratec or Merger Sub are
necessary to authorize the TCA Agreements and the TEC Agreements or to
consummate the Merger and the other transactions contemplated hereby and thereby
(other than, with respect to the Merger, the approval of the issuance of the
Thoratec Common Stock in the Merger at the Thoratec Special Meeting or any
adjournment or postponement thereof in accordance with California law). Each of
the TCA Agreements and the TEC Agreement has been duly and validly executed and
delivered by Thoratec (and in the case of this Agreement, Merger Sub) and,
assuming due authorization, execution and delivery by TCA, constitutes a valid
and binding agreement of each of Thoratec and Merger Sub, enforceable against
each of them in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the enforcement of creditors'
rights generally or by general equitable principles.
4.3 No Violations, Etc. No filing with or notification to, and no permit,
authorization, consent or approval of, any Government Entity is necessary on the
part of Thoratec or Merger Sub for the consummation by Thoratec or Merger Sub of
the Merger or the other transactions contemplated by the TCA Agreements or by
the TEC Agreements, or the exercise by Thoratec, TCA and their Subsidiaries of
full rights to own and operate their businesses as presently being conducted,
except (i) for the filing of the Articles of Merger as required by the
Massachusetts Law, (ii) the filing with the SEC and the effectiveness of the
Registration Statement, (iii) the applicable requirements of the Exchange Act
(including with respect to the Joint Proxy Statement/Prospectus), state
securities or "blue sky" laws, state takeover laws and the listing requirements
of Nasdaq and (iv) filings required under the HSR Act. None of the execution and
delivery of the TCA Agreements and the TEC Agreements, the consummation of the
Merger or any of the other transactions contemplated hereby and thereby,
compliance by Thoratec and Merger Sub with all of the provisions hereof and
thereof, or the exercise by Thoratec, TCA or any of their Subsidiaries of full
rights to own and operate their businesses after the Merger as presently being
conducted (subject to obtaining the approval of the issuance of the shares of
Thoratec Common Stock in the Merger by the Holders of a majority of the
outstanding shares of such stock at the Thoratec Special Meeting or any
adjournment or postponement thereof in accordance with the California Law) will
(i) conflict with or result in any breach of any provision of the articles of
incorporation, bylaws or any other charter document of Thoratec or any Thoratec
Subsidiary, (ii) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Thoratec or any Thoratec Subsidiary, or by which any of
its properties or assets may be bound, or (iii) result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default under, or result in any material change in, or give rise to any right of
termination, cancellation, acceleration, redemption or repurchase under, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture, deed
of trust, license, lease, agreement or other instrument or obligation to which
Thoratec or any Thoratec Subsidiary is a party or by which any of them or any of
their properties or assets may be bound. Schedule 4.3 of the
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Thoratec Disclosure Statement lists all consents, waivers and approvals required
to be obtained in connection with the consummation of the transactions
contemplated by the TCA Agreements or the TEC Agreements under any of Thoratec's
or any Thoratec Subsidiary's notes, bonds, mortgages, indentures, deeds of
trust, licenses or leases, contracts, agreements or other instruments or
obligations.
4.4 Board Recommendation. The board of directors of Thoratec has, at a
meeting duly held on October 2, 2000: (i) approved and adopted the Merger, the
TCA Agreements and the TEC Agreements, (ii) determined that the Merger, the TCA
Agreements and the TEC Agreements are fair to and in the best interests of the
shareholders of Thoratec and (iii) resolved to recommend the approval and
adoption of the Merger, the TCA Agreements and the TEC Agreements at the
Thoratec Special Meeting, including any adjournments or postponements of that
meeting.
4.5 Capitalization.
(a) The authorized capital stock of Thoratec consists of 100,000,000 shares
of Common Stock, no par value, of which there were 22,419,753 shares issued and
outstanding as of the date of this Agreement, and 2,500,000 shares of Preferred
Stock, no par value, of which no shares are issued or outstanding. The
authorized capital stock of Merger Sub consists of 1,000 shares of Common Stock,
$0.001 par value, 100 of which, as of the date hereof, are issued and
outstanding and are held by Thoratec. Merger Sub was formed for the purpose of
consummating the Merger and has no material assets or liabilities except as
necessary for such purpose. All outstanding shares of Thoratec Common Stock are
duly authorized, validly issued, fully paid and nonassessable and are not
subject to preemptive rights created by statute, the articles of incorporation
or bylaws of Thoratec or any agreement to which Thoratec is a party or by which
it is bound.
(b) There are no warrants, options, convertible securities, calls, rights,
stock appreciation rights, preemptive rights, rights of first refusal, or
agreements or commitments of any nature obligating Thoratec to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock or other equity interests of Thoratec, or obligating Thoratec to grant,
issue, extend, accelerate the vesting of, or enter into, any such warrant,
option, convertible security, call, right, stock appreciation right, preemptive
right, right of first refusal, agreement or commitment. Schedule 4.5 to the
Thoratec Disclosure Statement sets forth the weighted average exercise price of
all outstanding options to purchase Thoratec Common Stock. To the knowledge of
Thoratec, except for the Shareholder Agreement there are no voting trusts,
proxies or other agreements or understandings with respect to the capital stock
of Thoratec.
(c) Schedule 4.5(c) of the Thoratec Disclosure Statement sets forth the
following information with respect to each outstanding option to purchase
Thoratec Common Stock: the aggregate number of shares issuable thereunder, the
type of option, the grant date, the expiration date, the exercise price and the
vesting schedule. Each option to purchase Thoratec Common Stock was granted in
accordance with the terms of the Thoratec stock option plan applicable thereto.
Schedule 4.5(c) of the Thoratec Disclosure Statement sets forth the following
information with respect to Thoratec's Amended 1996 Nonemployee Directors Stock
Option Plan: the name of each director of Thoratec eligible to receive options
under such plan, the number of options issuable as of the date of this Agreement
to each such director and an estimate of such amounts as of the Closing Date.
4.6 Registration Statement; Joint Proxy Statement/Prospectus. The
information to be supplied by Thoratec for inclusion or incorporation by
reference in the Registration Statement as it relates to Thoratec, the Thoratec
Subsidiaries or Merger Sub, at the time the Registration Statement is declared
effective by the SEC, shall not 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 to be
supplied by Thoratec for inclusion in the Joint Proxy Statement/Prospectus, at
the date the Joint Proxy Statement/ Prospectus is first mailed to stockholders,
at the time of the TCA Special Meeting and the Thoratec Special Meeting, and at
the Effective Time shall not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. If at any time prior to the Effective Time, any
event with respect to Thoratec or any Thoratec Subsidiary (including Merger Sub)
shall occur which is required to be described in the Joint Proxy
Statement/Prospectus, such event shall be so described, and an
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amendment or supplement shall be promptly filed with the SEC and, as required by
law, disseminated to the shareholders of TCA, Thoratec or both, as appropriate.
4.7 SEC Filings. Thoratec has filed with the SEC all required forms,
reports, registration statements and documents required to be filed by it with
the SEC (collectively, all such forms, reports, registration statements and
documents filed after January 1, 1997 are referred to herein as the "Thoratec
SEC Reports"), all of which complied as to form when filed in all material
respects with the applicable provisions of the Securities Act and the Exchange
Act, as the case may be. Accurate and complete copies of the Thoratec SEC
Reports have been made available to TCA and TEC. As of their respective dates,
the Thoratec SEC Reports (including all exhibits and schedules thereto and
documents incorporated by reference therein) did not, at the time they were
filed (or, if amended or superseded by a filing prior to the date hereof, then
on the date of such filing) 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 light of the circumstances under which they were
made, not misleading. To the knowledge of Thoratec, no director or officer of
Thoratec has failed to comply with any filing requirements under Section 13 or
Section 16(a) of the Exchange Act.
4.8 Compliance with Laws. Neither Thoratec nor any Thoratec Subsidiary has
violated or failed to comply with any statute, law, ordinance, rule or
regulation (including, without limitation, relating to the export or import of
goods or technology) of any Government Entity, except where any such violations
or failures to comply would not, individually or in the aggregate, have a
Thoratec Material Adverse Effect. Thoratec and each Thoratec Subsidiary have all
permits, licenses and franchises from Government Entities required to conduct
their businesses as now being conducted and as proposed to be conducted, except
for those the absence of which would not, individually or in the aggregate, have
a Thoratec Material Adverse Effect.
4.9 Financial Statements. Each of the consolidated financial statements
(including, in each case, any related notes thereto) contained in the Thoratec
SEC Reports (the "Thoratec Financial Statements"): (i) was prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited interim financial statements, as may be permitted by the SEC on Form
10-Q under the Exchange Act) and (ii) fairly presented the consolidated
financial position of Thoratec and the Thoratec Subsidiaries in all material
respects as of the respective dates thereof and the consolidated results of its
operations and cash flows for the periods indicated, consistent with the books
and records of Thoratec, except that the unaudited interim financial statements
were or are subject to normal and recurring year-end adjustments which were not,
or are not expected to be, material in amount. The balance sheet of Thoratec
contained in Thoratec's Form 10-Q for the quarter ended July 1, 2000 is
hereinafter referred to as the "Thoratec Balance Sheet".
4.10 Absence of Undisclosed Liabilities. Neither Thoratec nor any Thoratec
Subsidiary has any liabilities (absolute, accrued, contingent or otherwise)
other than (i) liabilities included in the Thoratec Balance Sheet and the
related notes to the financial statements, (ii) normal or recurring liabilities
incurred in the ordinary course of business consistent with past practice,
which, individually or in the aggregate, are not or would not be reasonably
likely to have, a Thoratec Material Adverse Effect, and (iii) liabilities under
this Agreement.
4.11 Absence of Changes or Events. Except as contemplated by this
Agreement, since July 1, 2000 no Thoratec Material Adverse Effect has occurred
and, in addition, Thoratec and the Thoratec Subsidiaries have not, directly or
indirectly:
(a) purchased, otherwise acquired, or agreed to purchase or otherwise
acquire, any shares of capital stock or any indebtedness of Thoratec or any
Thoratec Subsidiary, or declared, set aside or paid any dividend or
otherwise made a distribution (whether in cash, stock, debt or property or
any combination thereof) in respect of their capital stock (other than
dividends or other distributions payable solely to Thoratec or a wholly
owned Thoratec Subsidiary);
(b) authorized for issuance, issued, sold, delivered, granted or
issued any options, warrants, calls, subscriptions or other rights for, or
otherwise agreed or committed to issue, sell or deliver any shares of any
class of capital stock of Thoratec or any Thoratec Subsidiary or any
securities convertible into or
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exchangeable or exercisable for shares of any class of capital stock of
Thoratec or any Thoratec Subsidiary, other than pursuant to and in
accordance with the Thoratec stock option plans and warrants disclosed on
Schedule 4.5 to the Thoratec Disclosure Statement;
(c) (i) created or incurred any indebtedness for borrowed money
exceeding $250,000 in the aggregate, (ii) assumed, guaranteed, endorsed or
otherwise as an accommodation become responsible for the obligations of any
other individual, firm or corporation, made any loans or advances to any
other individual, firm or corporation exceeding $100,000 in the aggregate,
(iii) entered into any oral or written agreement, commitment or transaction
or incurred any liability involving, in any one case, in excess of
$100,000;
(d) instituted any change in accounting methods, principles or
practices other than as required by GAAP or the rules and regulations
promulgated by the SEC and disclosed in the notes to the Thoratec Financial
Statements;
(e) revalued any assets, including, without limitation, writing down
the value of inventory or writing off notes or accounts receivable in
excess of amounts previously reserved as reflected in the Thoratec Balance
Sheet;
(f) suffered any damage, destruction or loss, whether covered by
insurance or not, except for such as would not, individually or in the
aggregate exceed $100,000;
(g) (i) increased in any manner the compensation of any of its
directors, officers or, other than in the ordinary course of business and
consistent with past practice, non-officer employees, (ii) granted any
severance or termination pay to any Person; (iii) entered into any oral or
written employment, consulting, indemnification or severance agreement with
any Person; (iv) other than as required by law, adopted, become obligated
under, or amended any employee benefit plan, program or arrangement or (v)
repriced any options granted under the Thoratec stock option plans;
(h) sold, transferred, leased, licensed, pledged, mortgaged,
encumbered, or otherwise disposed of, or agreed to sell, transfer, lease,
license, pledge, mortgage, encumber, or otherwise dispose of, any material
properties, (including intangibles, real, personal or mixed), it being
understood that this clause (h) does not extend to sales of inventory in
the ordinary course of business;
(i) amended its articles of incorporation, bylaws or any other charter
document, or effected or been a party to any merger, consolidation, share
exchange, business combination, recapitalization, reclassification of
shares, stock split, reverse stock split or similar transaction;
(j) made any capital expenditure in any calendar month which, when
added to all other capital expenditures made by or on behalf of Thoratec
and the Thoratec Subsidiaries in such calendar month resulted in such
capital expenditures exceeding $150,000 in the aggregate;
(k) paid, discharged or satisfied any material claims, liabilities or
obligations (absolute, accrued, contingent or otherwise), other than the
payment, discharge or satisfaction of liabilities (including accounts
payable) in the ordinary course of business and consistent with past
practice, or collected, or accelerated the collection of, any amounts owed
(including accounts receivable) other than their collection in the ordinary
course of business;
(l) waived, released, assigned. settled or compromised any material
claim or litigation, or commenced a lawsuit other than for the routine
collection of bills or
(m) agreed or proposed to do any of the things described in the
preceding clauses (a) through (l) other than as expressly contemplated or
provided for in this Agreement.
4.12 Capital Stock of Subsidiaries. Thoratec is the record and beneficial
owner of all of the outstanding shares of capital stock or other equity
interests of each Thoratec Subsidiary. All of such shares have been duly
authorized and are validly issued, fully paid, nonassessable and free of
preemptive rights with respect thereto and are owned by Thoratec free and clear
of any claim, lien or encumbrance of any kind with respect thereto. There are no
proxies or voting agreements with respect to such shares, and there are not any
existing options,
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warrants, calls, subscriptions, or other rights or other agreements or
commitments obligating Thoratec or any Thoratec Subsidiary to issue, transfer or
sell any shares of capital stock of any Thoratec Subsidiary or any other
securities convertible into, exercisable for, or evidencing the right to
subscribe for any such shares. Thoratec does not directly or indirectly own any
equity interest in any Person except the Thoratec Subsidiaries.
4.13 Litigation.
(a) There is no Action pending or, to the knowledge of Thoratec, threatened
in writing against Thoratec or any Thoratec Subsidiary, or any of their
respective officers and directors (in their capacities as such), or involving
any of their assets, before any court, Governmental Entity or arbitration
tribunal, except for those Actions which, individually or in the aggregate,
would not have a Thoratec Material Adverse Effect. There is no Action pending
or, to the knowledge of Thoratec, threatened which in any manner challenges,
seeks to, or is reasonably likely to prevent, enjoin, alter or delay any of the
transactions contemplated by this Agreement.
(b) There is no outstanding judgment, order, writ, injunction or decree of
any court, Governmental Entity or arbitration tribunal in a proceeding to which
Thoratec, any Thoratec Subsidiary or any of their assets is a party, or by which
Thoratec, any Thoratec Subsidiary or any of their assets is bound.
4.14 Insurance. Schedule 4.14 of the Thoratec Disclosure Statement lists
all insurance policies (including, without limitation, workers' compensation
insurance policies) covering any business, properties or assets of Thoratec or
any Thoratec Subsidiary, and all claims in excess of $50,000 made against any
such policies since January 1, 1997. All such policies are in effect, and true
and complete copies of all such policies have been made available to TCA and
TEC. Thoratec has not received any notice of the cancellation or threat of
cancellation of any of such policy.
4.15 Contracts and Commitments.
(a) Schedule 4.15(a) of the Thoratec Disclosure Statement contains a
complete and accurate list of all agreements, understanding and arrangements,
whether written, oral or established through common practice, between Thoratec
or any Thoratec Subsidiary and any Person that directly or indirectly
beneficially owns, or is controlled by or under common control with any Person
that beneficially owns, more than five percent of the outstanding Thoratec
Common Stock (the "Thoratec Related Party Agreements"). True and correct copies
of all Thoratec Related Party Agreements have been provided to TCA and TEC. To
the knowledge of Thoratec, the terms of the Thoratec Related Party Agreements
are no less favorable to Thoratec and the Thoratec Subsidiaries than could be
obtained from a third party in an arms-length transaction.
(b) Except as filed (including by incorporation by reference to
earlier-filed documents) as an exhibit to the Thoratec SEC Reports filed after
January 1, 2000 or as identified on Schedule 4.15(b) to the Thoratec Disclosure
Statement (collectively the "Thoratec Contracts", it being understood that the
failure to identify an agreement, etc. on that schedule that is required to be
identified on that schedule shall nevertheless be considered a "Thoratec
Contract"), neither Thoratec nor any Thoratec Subsidiary is a party to or bound
by any oral or written contract, obligation or commitment of any type in any of
the following categories:
(i) agreements with any employees or consultants of Thoratec or any
Thoratec Subsidiary respecting their employment, consulting, salary, wages,
bonuses, incentive compensation, severance or retention pay, or other
compensation, except for those employees or consultants whose annual rate
of compensation, including potential bonuses and incentive compensation, is
less than $100,000;
(ii) agreements or plans under which benefits will be increased or
accelerated by the occurrence of any of the transactions contemplated by
the TCA Agreements or the TEC Agreements or under which the value of the
benefits will be calculated on the basis of any of the transactions
contemplated by such agreements;
(iii) agreements, contracts or commitments currently in force relating
to the disposition or acquisition of assets other than in the ordinary
course of business, or relating to an ownership interest in any
corporation, partnership, joint venture or other business enterprise;
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(iv) agreements, contracts or commitments for the purchase of goods,
supplies or equipment: (A) which are with sole or single source suppliers
or (B) for a cost, for any one such agreement, contract and commitment, in
excess of $250,000 and which, in the case of this clause (B), provide for
purchase prices substantially greater than those presently prevailing for
such materials, supplies or equipment;
(v) guarantees or other agreements, contracts or commitments under
which Thoratec or any Thoratec Subsidiary is absolutely or contingently
liable for (A) the performance of any other Person (other than Thoratec or
any Thoratec Subsidiary), or (B) the whole or any part of the indebtedness
or payment obligations of any other Person (other than Thoratec or any
Thoratec Subsidiary);
(vi) powers of attorney authorizing the incurrence of a material
obligation on the part of Thoratec or any Thoratec Subsidiary;
(vii) agreements, contracts or commitments which limit or restrict (A)
where Thoratec or any Thoratec Subsidiary may conduct business, (B) the
type or lines of business (current or future) in which they may engage or
(C) any acquisition of assets or stock (tangible or intangible) by Thoratec
or any Thoratec Subsidiary;
(viii) agreements, contracts or commitments containing any agreement
with respect to a change of control of Thoratec or any Thoratec Subsidiary;
(ix) agreements, contracts or commitments for the borrowing or lending
of money, or the availability of credit (except credit extended by Thoratec
or any Thoratec Subsidiary to customers in the ordinary course of business
and consistent with past practice);
(x) any hedging, option, derivative or other similar transaction and
any foreign exchange position or contract for the exchange of currency or
(xi) any joint marketing or joint development agreement, or any
license or distribution agreement relating to any Thoratec product or
planned product.
(c) Neither Thoratec or any Thoratec Subsidiary, nor to Thoratec's
knowledge any other party to a Thoratec Contract, has materially breached,
violated or defaulted under, or received notice that it has breached, violated
or defaulted under (nor does there exist any condition under which, with the
passage of time or the giving of notice or both, could reasonably be expected to
cause a material breach, violation or default under), any Thoratec Contract.
(d) Each Thoratec Contract is a valid, binding and enforceable obligation
of Thoratec, and to Thoratec's knowledge of the other party or parties thereto,
in accordance with its terms, and is in full force and effect, except where the
failure to be valid, binding, enforceable and in full force and effect would not
have a Thoratec Material Adverse Effect and to the extent enforcement may be
limited by applicable bankruptcy, insolvency, moratorium or other laws affecting
the enforcement of creditors' rights or by general principles of equity.
(e) An accurate and complete copy of each Thoratec Contract has been made
available to TCA and TEC.
4.16 Labor Matters; Employment and Labor Contracts.
(a) None of Thoratec or any Thoratec Subsidiary is a party to any union
contract or other collective bargaining agreement, nor to the knowledge of
Thoratec or any Thoratec Subsidiary are there any activities or proceedings of
any labor union to organize any of its employees. Each of Thoratec and the
Thoratec Subsidiaries is in compliance with all applicable (i) laws, regulations
and agreements respecting employment and employment practices, (ii) terms and
conditions of employment, and (iii) occupational health and safety requirements,
except for those failures to comply which, individually or in the aggregate,
would not have a Thoratec Material Adverse Effect.
(b) There is no labor strike, slowdown or stoppage pending (or any labor
strike or stoppage threatened) against Thoratec or any Thoratec Subsidiary. No
petition for certification has been filed and is pending before
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the National Labor Relations Board with respect to any employees of Thoratec or
any Thoratec Subsidiary. Neither Thoratec nor any Thoratec Subsidiary has any
obligations under COBRA, with respect to any former employees or qualifying
beneficiaries thereunder, except for obligations that would not have,
individually or in the aggregate, a Thoratec Material Adverse Effect. There are
no controversies pending or, to the knowledge of Thoratec or any Thoratec
Subsidiary, threatened, between Thoratec or any Thoratec Subsidiary and any of
their respective employees, which controversies would have, individually or in
the aggregate, a Thoratec Material Adverse Effect.
4.17 Fairness Opinion. Thoratec has received the opinion of Lehman
Brothers Inc. dated on or before the date of this Agreement to the effect that,
as of the date hereof, the Exchange Ratio is fair to Thoratec from a financial
point of view, and has provided a copy of that opinion to TCA and TEC.
4.18 Intellectual Property Rights.
(a) Thoratec and the Thoratec Subsidiaries own or have the right to use all
intellectual property used to conduct their respective businesses (such
intellectual property and the rights thereto are collectively referred to as the
"Thoratec IP Rights"). No royalties or other payments are payable to any Person
with respect to commercialization of any products presently sold by Thoratec or
the Thoratec Subsidiaries.
(b) The execution, delivery and performance of the TCA Agreements and the
consummation of the transactions contemplated hereby will not: (i) constitute a
material breach of any instrument or agreement governing any Thoratec IP Rights,
(ii) cause the modification of any terms of any licenses or agreements relating
to any Thoratec IP Rights including, but not limited to, the modification of the
effective rate of any royalties or other payments provided for in any such
license or agreement, (iii) cause the forfeiture or termination of any Thoratec
IP Rights, (iv) give rise to a right of forfeiture or termination of any
Thoratec IP Rights or (v) materially impair the right of Thoratec or any of the
Thoratec Subsidiaries to use, sell or license any Thoratec IP Rights or portion
thereof.
(c) Neither the manufacture, marketing, license, sale or intended use of
any product or technology currently licensed or sold or under development by
Thoratec or any of the Thoratec Subsidiaries: (i) violates in any material
respect any license or agreement between Thoratec or any of the Thoratec
Subsidiaries and any third party or (ii) to the knowledge of Thoratec, infringes
in any material respect any patents or other intellectual property rights of any
other party. There is no pending or, to the knowledge of Thoratec, threatened
claim or litigation contesting the validity, ownership or right to use, sell,
license or dispose of any Thoratec IP Rights, or asserting that any Thoratec IP
Rights or the proposed use, sale, license or disposition thereof, or the
manufacture, use or sale of any Thoratec products, conflicts or will conflict
with the rights of any other party.
(d) Thoratec has provided to TCA a worldwide list of all patents, trade
names, trademarks and service marks, and applications for any of the foregoing
owned or possessed by Thoratec or any of the Thoratec Subsidiaries.
(e) Thoratec has provided to TCA a true and complete copy of its standard
form of employee confidentiality agreement and taken commercially reasonable
steps to ensure that all key employees and scientific employees (whether or not
key) of Thoratec and the Thoratec Subsidiaries have executed such an agreement.
All scientific consultants with access to proprietary information of Thoratec or
any Thoratec Subsidiary have executed appropriate non-disclosure agreements with
respect to such proprietary information.
(f) Neither Thoratec nor any Thoratec Subsidiary is aware that any of its
key or scientific employees or scientific consultants is obligated under any
contract, covenant or other agreement or commitment of any nature, or subject to
any judgment, decree or order of any court or administrative agency, that would
interfere with the use of such employee's or consultant's best efforts to
promote the interests of Thoratec and the Thoratec Subsidiaries or that would
conflict with the business of Thoratec or any of the Thoratec Subsidiaries as
presently conducted or proposed to be conducted. Neither Thoratec nor any of the
Thoratec Subsidiaries has entered into any agreement to indemnify any other
person, including but not limited to any employee or consultant of Thoratec or
any of the Thoratec Subsidiaries, against any charge of infringement,
misappropriation or misuse of any intellectual property, other than
indemnification provisions contained in purchase orders
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or customer agreements arising in the ordinary course of business. All current
and former key or scientific employees and key consultants of any of Thoratec or
any of the Thoratec Subsidiaries who in Thoratec's reasonable business judgment
were appropriate have signed valid and enforceable written assignments to
Thoratec or one or more of the Thoratec Subsidiaries of any and all rights or
claims in any intellectual property that any such employee or consultant has or
may have by reason of any contribution, participation or other role in the
development, conception, creation, reduction to practice or authorship of any
invention, innovation, development or work of authorship or any other
intellectual property that is used in the business of Thoratec or any of the
Thoratec Subsidiaries, and Thoratec and the Thoratec Subsidiaries possess signed
copies of all such written assignments by such employees and consultants.
4.19 Taxes.
(a) Thoratec and each of the Thoratec Subsidiaries have filed all Tax
Returns required to have been filed by them, and have paid (or Thoratec has paid
on behalf of the Thoratec Subsidiaries), all Taxes required to have been shown
on such Tax Returns. The most recent financial statements contained in the
Thoratec SEC Reports reflect an adequate accrual (which accruals were
established in accordance with GAAP) for the payment of all Taxes payable by
Thoratec and the Thoratec Subsidiaries, as of the date of such financial
statements. Except as reasonably would not have a Thoratec Material Adverse
Effect, no deficiencies for any Taxes have been proposed, asserted or assessed
against Thoratec or any of the Thoratec Subsidiaries. Neither Thoratec nor any
of the Thoratec Subsidiaries has filed for any extension of time to file any Tax
Return which has not since been filed, in each case filed or required to be
filed with a Government Entity.
(b) Neither Thoratec nor any of the Thoratec Subsidiaries is a party to any
contract, agreement, plan or arrangement including, but not limited to, the TCA
Agreements, covering any employee or former employee of Thoratec or any of the
Thoratec Subsidiaries that: (i) could give rise to the payment of any amounts
that would constitute excess parachute payments within the meaning of Sections
280G of the Code with respect to the change in ownership or control that may
occur upon the consummation of the Merger or (ii) could give rise to the payment
of any amount that would constitute a parachute payment within the meaning of
Section 280G of the Code with respect to any change in ownership or control of
Thoratec occurring after the Closing Date. During the taxable year ending on the
Closing Date, Thoratec and the Thoratec Subsidiaries have not become obligated
to make any payment the deduction of which would be disallowed pursuant to
Section 162(m) of the Code.
(c) None of Thoratec and the Thoratec Subsidiaries has filed any consent
agreement under Section 341(f) of the Code or agreed to have Section 341(f)(2)
of the Code apply to any disposition of a Subsection (f) asset (as defined in
Section 341(f)(4) of the Code) owned by Thoratec or any of the Thoratec
Subsidiaries.
(d) None of Thoratec and the Thoratec Subsidiaries: (i) has received any
notice that it is being audited by any taxing authority, (ii) has granted any
presently operative waiver of any statute of limitations with respect to, or any
extension of a period for the assessment of, any Tax, (iii) has permitted any
Tax lien to be placed on any asset of Thoratec or any of the Thoratec
Subsidiaries, except with respect to Taxes not yet due and payable or (iv) has
availed itself of any Tax amnesty or similar relief in any taxing jurisdiction.
(e) None of Thoratec and the Thoratec Subsidiaries is aware of any reason
why the Merger will fail to qualify as a reorganization under the provisions of
Section 368(a) of the Code.
(f) Thoratec has not been a United States real property holding corporation
within the meaning of Section 897 of the Code at any time after June 30, 1995.
(g) Neither Thoratec nor any of the Thoratec Subsidiaries has any liability
for the Taxes of any Person other than itself, Thoratec or another present
Thoratec Subsidiary. Neither Thoratec nor any of the Thoratec Subsidiaries is a
party to any tax sharing or tax indemnity agreement.
4.20 Employee Benefit Plans; ERISA.
(a) There are no "employee pension benefit plans" as defined in Section
3(2) of ERISA ("Thoratec Pension Plans"), "welfare benefit plans" as defined in
Section 3(1) of ERISA ("Thoratec Welfare Plans"),
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or stock bonus, stock option, restricted stock, stock appreciation right, stock
purchase, bonus, incentive, deferred compensation, severance, holiday, or
vacation plans, or any other employee benefit plan, program, policy or
arrangement covering employees (or former employees) employed in the United
States that either is maintained or contributed to by Thoratec, any of the
Thoratec Subsidiaries or any Thoratec ERISA Affiliate (as hereinafter defined)
or to which Thoratec, any of the Thoratec Subsidiaries or any Thoratec ERISA
Affiliate is obligated to make payments or otherwise may have any liability
(collectively, the "Thoratec Employee Benefit Plans") with respect to employees
or former employees of Thoratec, any of the Thoratec Subsidiaries, or any
Thoratec ERISA Affiliate. For purposes of this Agreement, "Thoratec ERISA
Affiliate" means any person (as defined in Section 3(9) of ERISA) that is or has
been a member of any group of persons described in Section 414(b), (c), (m) or
(o) of the Code, including, without limitation, Thoratec or a Thoratec
Subsidiary.
(b) Thoratec and each of the Thoratec Subsidiaries, and each of the
Thoratec Pension Plans and Thoratec Welfare Plans, are in compliance in all
material respects with the applicable provisions of ERISA, the Code and other
applicable laws.
(c) All contributions to, and payments from, the Thoratec Pension Plans
which are required to have been made in accordance with the Thoratec Pension
Plans have been timely made.
(d) All Thoratec Pension Plans intended to qualify under Section 401 of the
Code have been determined by the IRS to be so qualified, and no event has
occurred and no condition exists with respect to the form or operation of any
Thoratec Pension Plan which would cause the loss of such qualification or the
imposition of any material liability, penalty or tax under ERISA or the Code.
(e) There are no (i) investigations pending by any Government Entity
involving any Thoratec Pension Plan or Thoratec Welfare Plan, or (ii) pending
or, to the knowledge of Thoratec, threatened claims (other than routine claims
for benefits), suits or proceedings against any Thoratec Pension Plan or
Thoratec Welfare Plan, against the assets of any of the trusts under any
Thoratec Pension Plan or Thoratec Welfare Plan or against any fiduciary of any
Thoratec Pension Plan or Thoratec Welfare Plan with respect to the operation of
such plan or asserting any rights or claims to benefits under any Thoratec
Pension Plan or Thoratec Welfare Plan or against the assets of any trust under
any such plan, except for those which would not, individually or in the
aggregate, give rise to any liability which would have a Thoratec Material
Adverse Effect. To the best of Thoratec's knowledge, there are no facts which
would give rise to any liability under this Section 4.20(e), except for those
which would not, individually or in the aggregate, either impair Thoratec's
ability to consummate the Merger or any of the other transactions contemplated
hereby or have a Thoratec Material Adverse Effect.
(f) None of Thoratec, any of the Thoratec Subsidiaries or any employee of
the foregoing, nor any trustee, administrator, other fiduciary or any other
"party in interest" or "disqualified person" with respect to any Thoratec
Pension Plan or Thoratec Welfare Plan, has engaged in a "prohibited transaction"
(as that term is defined in Section 4975 of the Code or Section 406 of ERISA)
other than such transactions that would not, individually or in the aggregate,
either impair Thoratec's ability to consummate the Merger or any of the other
transactions contemplated hereby or have a Thoratec Material Adverse Effect.
(g) None of Thoratec, any of the Thoratec Subsidiaries, or any Thoratec
ERISA Affiliate maintains or contributes to, nor has it ever maintained or
contributed to, any pension plan subject to Title IV of ERISA or Section 412 of
the Code or Section 302 of ERISA.
(h) None of Thoratec, any Thoratec Subsidiary or any Thoratec ERISA
Affiliate has incurred any material liability under Title IV of ERISA that has
not been satisfied in full.
(i) None of Thoratec, any of the Thoratec Subsidiaries or any Thoratec
ERISA Affiliate has any material liability (including any contingent liability
under Section 4204 of ERISA) with respect to any multiemployer plan, within the
meaning of Section 3(37) of ERISA, covering employees (or former employees)
employed in the United States.
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(j) With respect to each of the Thoratec Employee Benefit Plans, true,
correct and complete copies of the following documents have been made available
to TCA: (i) the plan document and any related trust agreement, including
amendments thereto, (ii) any current summary plan descriptions and other
material communications to participants relating to the Thoratec Employee
Benefit Plans, (iii) the three most recent Forms 5500, if applicable, and (iv)
the most recent IRS determination letter, if applicable.
(k) None of the Thoratec Welfare Plans provides for continuing benefits or
coverage for any participant or any beneficiary of a participant following
termination of employment, except as may be required under COBRA, or except at
the expense of the participant or the participant's beneficiary. Thoratec and
each of the Thoratec Subsidiaries which maintain a "group health plan" within
the meaning of Section 5000(b)(1) of the Code have complied with the notice and
continuation requirements of Section 4980B of the Code, COBRA, Part 6 of
Subtitle B of Title I of ERISA and the regulations thereunder except where the
failure to comply would not, individually or in the aggregate, either impair
Thoratec's ability to consummate the Merger or any other transaction
contemplated hereby or have a Thoratec Material Adverse Effect.
(l) No liability under any Thoratec Pension Plan or Thoratec Welfare Plan
has been funded nor has any such obligation been satisfied with the purchase of
a contract from an insurance company as to which Thoratec or any of its
Subsidiaries has received notice that such insurance company is in
rehabilitation or a comparable proceeding.
(m) The consummation of the transactions contemplated by the Thoratec
Agreements will not result in an increase in the amount of compensation or
benefits or accelerate the vesting or timing of payment of any benefits or
compensation payable to or in respect of any employee of Thoratec or any of its
Subsidiaries.
(n) Schedule 4.20(n) of the Thoratec Disclosure Statement lists each
Thoratec Foreign Plan (as hereinafter defined). Thoratec and each of the
Thoratec Subsidiaries and each of the Thoratec Foreign Plans are in compliance
with applicable laws, and all required contributions have been made to the
Thoratec Foreign Plans, except where the failure to comply or make contributions
would not, individually or in the aggregate, either impair Thoratec's ability to
consummate the Merger or any other transaction contemplated hereby or have a
Thoratec Material Adverse Effect. Each of the Thoratec Foreign Plans that is a
funded defined benefit pension plan has a fair market value of plan assets that
is greater than the plan's liabilities, as determined in accordance with
applicable laws. For purposes hereof, "Thoratec Foreign Plan" means any plan,
program, policy, arrangement or agreement maintained or contributed to by, or
entered into with, Thoratec or any Thoratec Subsidiary with respect to any
employees (or former employees) employed outside the United States to the extent
the benefits provided thereunder are not mandated by the laws of the applicable
foreign jurisdiction.
4.21 Environmental Matters.
(a) For purposes of this Agreement, "Thoratec Contractor" means any Person
with which Thoratec or any Thoratec Subsidiary formerly or presently has any
agreement or arrangement (whether oral or written) under which such Person has
or had physical possession of, and was or is obligated to develop, test,
process, manufacture or produce any product or substance on behalf of Thoratec
or any Thoratec Subsidiary.
(b) Except for such cases that, individually or in the aggregate, have not
and would not have a Thoratec Material Adverse Effect:
(i) Each of Thoratec and the Thoratec Subsidiaries possesses all
Environmental Permits required under applicable Environmental Laws to
conduct its current business and to use and occupy the Thoratec Real
Property (as defined below) for its current business. All Environmental
Permits are in full force and effect and Thoratec and each Thoratec
Subsidiary are, and to Thoratec's knowledge have at all times been, in
compliance with such Environmental Permits.
(ii) There are no facts or circumstances indicating that any
Environmental Permit possessed by Thoratec or any of the Thoratec
Subsidiaries would or might be revoked, suspended, canceled or not renewed,
and all appropriate necessary action in connection with the renewal or
extension of all
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Environmental Permits possessed by Thoratec or any Thoratec Subsidiary
relating to the current business and the Thoratec Real Property has been
taken.
(iii) The execution and delivery of the TCA Agreements and the
consummation by Thoratec of the Merger and the other transactions
contemplated hereby and the exercise by Thoratec and the Surviving
Corporation of rights to own and operate the business of Thoratec and the
Thoratec Subsidiaries and use and occupy the Thoratec Real Property and
carry on its business as presently conducted will not affect the validity
or require the transfer of any Environmental Permits held by Thoratec or
any of the Thoratec Subsidiaries and will not require any notification,
disclosure, registration, reporting, filing, investigation or remediation
under any Environmental Law.
(iv) Thoratec and each of the Thoratec Subsidiaries and, to the
knowledge of Thoratec, all previous owners, lessees, operators and
occupants of the real property now or previously owned, leased or occupied
by Thoratec or any of the Thoratec Subsidiaries (the "Thoratec Real
Property"), are in compliance with, and within the period of all applicable
statutes of limitation, have complied with all applicable Environmental
Laws and have not received written notice of any liability under any
Environmental Law, and neither Thoratec or any of the Thoratec Subsidiaries
nor any portion of the Thoratec Real Property is in violation of any
Environmental Law.
(v) There is no civil, criminal or administrative action, suit,
demand, claim, complaint, hearing, notice of violation, investigation,
notice or demand letter, proceeding or request for information pending or
any liability (whether actual or contingent) to make good, repair,
reinstate or clean up any of the Thoratec Real Property or any real
property previously owned, leased, occupied or used by Thoratec or any of
the Thoratec Subsidiaries.
(vi) There has not been any disposal, spill, discharge, or release of
any Hazardous Material generated, used, owned, stored, or controlled by
Thoratec, any of the Thoratec Subsidiaries, or respective predecessors in
interest, on, at, or under any Thoratec Real Property, or by any Thoratec
Contractor, and there are no Hazardous Materials located in, at, on, or
under, or in the vicinity of, any such facility or property, or at any
other location, in any such case that could reasonably be expected to
require investigation, removal, remedial, or corrective action by Thoratec
or any of the Thoratec Subsidiaries.
(vii) (A) Other than cleaning and office supplies normally used in the
operation of an office, Hazardous Materials have not been generated, used,
treated, handled or stored on, or transported to or from, or released on
any Thoratec Real Property or, any property adjoining any Thoratec Real
Property; (B) Thoratec and the Thoratec Subsidiaries have disposed of all
wastes, including those wastes containing Hazardous Materials, in
compliance with all applicable Environmental Law and Environmental Permits;
and (C) neither Thoratec nor any of the Thoratec Subsidiaries has
transported or arranged for the transportation of any Hazardous Materials
to any location that is listed or proposed for listing on the National
Priorities List under CERCLA or on the CERCLIS or any analogous state or
country list or which is the subject of any environmental claim.
(viii) There has not been any underground or above ground storage tank
or other underground storage receptacle or related piping, or any
impoundment or other disposal area containing Hazardous Materials located
on any Thoratec Real Property, and no asbestos or polychlorinated biphenyls
have been used or disposed of, or have been located at, on, or under any
Thoratec Real Property.
(ix) Thoratec and the Thoratec Subsidiaries have taken all actions
necessary under applicable requirements of Environmental Law to register
any products or materials required to be registered by Thoratec or any of
the Thoratec Subsidiaries (or any of their respective agents) thereunder.
(c) After a reasonable investigation made by Thoratec, Thoratec has made
available to TCA all records and files, including, but not limited to, all
assessments, reports, studies, audits, analyses, tests and data in possession of
Thoratec and the Thoratec Subsidiaries concerning the existence of Hazardous
Materials at any Thoratec Real Property or concerning compliance by Thoratec and
the Thoratec Subsidiaries with, or liability under, any Environmental Law.
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4.22 Finders or Brokers. Except for Lehman Brothers Inc., whose fees have
been disclosed to TCA, neither Thoratec nor any Thoratec Subsidiary has employed
any investment banker, broker, finder or intermediary in connection with any of
the transactions contemplated hereby who might be entitled to a fee or
commission relating to the Merger or any other transaction contemplated by this
Agreement.
4.23 Title to and Condition of Property. Thoratec and the Thoratec
Subsidiaries have good and valid title to all of their respective properties,
interests in properties and assets, real and personal, reflected in the Thoratec
Balance Sheet or acquired after the Reference Date, and have valid leasehold
interests in all leased properties and assets, in each case free and clear of
all mortgages, liens, pledges, charges or encumbrances of any kind or character,
except (i) liens for current taxes not yet due and payable, (ii) such
imperfections of title, liens and easements as do not and will not materially
detract from or interfere with the use of the properties subject thereto or
affected thereby, or otherwise materially impair business operations involving
such properties, or (iii) liens securing debt reflected on the Thoratec Balance
Sheet. Schedule 4.23 of the Thoratec Disclosure Statement identifies each parcel
of real property owned or leased by Thoratec or any Thoratec Subsidiary.
Thoratec's and the Thoratec Subsidiaries' real and tangible personal property
has been maintained in accordance with normal industry practice, is in good
operating condition and repair (subject to normal wear and tear), and is
suitable for the purposes for which it is used.
4.24 Officer's Certificate as to Tax Matters. Thoratec does not know of
any reason why it will be unable to deliver to Heller Ehrman White & McAuliffe
LLP and Hale and Dorr LLP, at the Closing, an officer's certificate in the form
and substance of Exhibit C to this Agreement. Thoratec shall use its best
efforts to obtain and deliver that certificate to both of those firms.
4.25 Food and Drug Administration Matters.
(a) For purposes of this Agreement, "FDA Thoratec Contractor" means any
Person with which Thoratec or any Thoratec Subsidiary formerly or presently had
or has any agreement or arrangement (whether oral or written) under which that
Person has or had physical possession of, or was or is obligated to develop,
test, process, manufacture or produce, any FDA Regulated Product on behalf of
Thoratec or any Thoratec Subsidiary.
(b) Thoratec and each Thoratec Subsidiary possesses all FDA clearances and
approvals required under all applicable FDA Laws to conduct its current
businesses, to manufacture, hold and sell FDA Regulated Products, and to use and
occupy the Thoratec Real Property (defined in Section 4.21(b)(iv)). All FDA
clearances and approvals are in full force and effect.
(c) There are no facts or circumstances known to Thoratec that could lead
to any FDA clearances or approvals possessed by Thoratec or any Thoratec
Subsidiary being revoked, suspended, canceled or not renewed. Thoratec and each
Thoratec Subsidiary have submitted all necessary reports and filings to the FDA.
(d) The execution and delivery of the TCA Agreements, the consummation of
the Merger and the other transactions contemplated by the TCA Agreements, and
the exercise by Thoratec and the Thoratec Subsidiaries of the rights to own and
operate the businesses of Thoratec and the Thoratec Subsidiaries and to use and
occupy the Thoratec Real Property with respect to the Thoratec Real Property, as
presently conducted and operated, will not affect the validity or require the
transfer of any FDA clearances or approvals held by Thoratec or any Thoratec
Subsidiary.
(e) Thoratec and the Thoratec Subsidiaries and, to the knowledge of
Thoratec, all previous owners, lessees, operators and occupants of all Thoratec
Real Property with respect to the Thoratec Real Property, are in material
compliance with, and have materially complied with, all applicable FDA Laws and
have not received (or, in the case of such previous owners, lessees, operators
and occupants, to the knowledge of Thoratec have not received) any notice of any
non-compliance with any FDA Laws within the past three years.
(f) There is no civil, criminal or administrative action, suit, demand,
claim, complaint, hearing, notice of violation, investigation, notice, demand
letter, proceeding or request for information pending or any liability (whether
actual or contingent) to comply with any FDA Laws that requires any change in
any manufacturing
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procedures by Thoratec or any Thoratec Subsidiary or the repair, reinstatement
or clean-up of any Thoratec Real Property. There is no act, omission, event or
circumstance of which Thoratec or any Thoratec Subsidiary has knowledge that may
give rise to any such action, suit, demand, claim, complaint, hearing, notice of
violation, investigations, notice, demand letter, proceeding or request, or any
such liability: (i) against, involving or of Thoratec or any Thoratec Subsidiary
or (ii) against, involving or of any other Person (including, without
limitation, any FDA Thoratec Contractor) that could be imputed or attributed to
Thoratec or any Thoratec Subsidiary.
(g) There has not been any material violation of any FDA Laws by Thoratec
or any Thoratec Subsidiary in their prior product developmental efforts,
clinical studies, submissions or reports to the FDA or any other Government
Entity (or any failure to make any such submission or report) that could
reasonably be expected to require investigation, corrective action or
enforcement action.
(h) Thoratec, Thoratec Subsidiaries and their respective agents (in their
capacities as such agents) have registered with the FDA all facilities required
to be registered and have listed all FDA Regulated Products required to be
listed with the FDA.
4.26 Inventories. The inventories of Thoratec and the Thoratec
Subsidiaries consist of raw materials and supplies, manufactured and purchased
parts, work in progress and finished products, all of which are merchantable and
fit for the purposes for which they were manufactured. Subject only to the
reserves reflected on the Thoratec Balance Sheet determined in a manner
consistent with Thoratec's past practices, none of those inventories is slow
moving, obsolete, damaged or defective.
ARTICLE V
COVENANTS
5.1 Conduct of Business During Interim Period. Except as contemplated or
required by this Agreement, as set forth on Schedule 5.1 to the TCA Disclosure
Statement or Schedule 5.1 to the Thoratec Disclosure Statement, or as expressly
consented to in writing by Thoratec or TCA, as the case may be, during the
period from the date of this Agreement to the earlier of the termination of this
Agreement and the Effective Time, each of TCA and its Subsidiaries, on the one
hand, and Thoratec and the Thoratec Subsidiaries, on the other hand, shall (i)
conduct its operations according to its ordinary and usual course of business
consistent with past practice, (ii) use commercially reasonable efforts to
preserve intact its business organization, to keep available the services of its
officers and employees in each business function and to maintain satisfactory
relationships with suppliers, distributors, customers and others having business
relationships with it, and (iii) not take any action which would adversely
affect its ability to consummate the Merger or the other transactions
contemplated hereby. Without limiting the generality of the foregoing, and
except as otherwise expressly provided in this Agreement, prior to the earlier
of the termination of this Agreement and the Effective Time, neither TCA nor any
of its Subsidiaries will, without the prior written consent of Thoratec, and
neither Thoratec nor any Thoratec Subsidiary will, without the prior written
consent of TCA, directly or indirectly, do any of the following:
(a) enter into, violate, extend, amend or otherwise modify or waive
any of the terms of (i) any joint venture, license, or agreement relating
to the joint development or transfer of technology or TCA IP Rights or
Thoratec IP Rights, as the case may be, or (ii) except in the ordinary
course of business and consistent with past practice, any other agreements,
commitments or contracts;
(b) split, combine or reclassify any shares of its capital stock;
(c) except as permitted in Section 5.4(e) or (f), as appropriate, of
this Agreement, authorize, solicit, propose or announce an intention to
authorize, recommend or propose, or enter into any agreement in principle
or an agreement with any other Person with respect to, any plan of
liquidation or dissolution, any acquisition of a material amount of assets
or securities, any disposition of a material amount of assets or
securities, any material change in capitalization, or any partnership,
association, joint venture, joint development, technology transfer, or
other material business alliance;
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(d) fail to renew any insurance policy naming it as a beneficiary or a
loss payee, or take any steps or fail to take any steps that would permit
any insurance policy naming it as a beneficiary or a loss payee to be
canceled, terminated or materially altered, except in the ordinary course
of business and consistent with past practice and following written notice
to Thoratec or TCA, as the case may be;
(e) maintain its books and records in a manner other than in the
ordinary course of business and consistent with past practice;
(f) enter into any hedging, option, derivative or other similar
transaction or any foreign exchange position or contract for the exchange
of currency other than in the ordinary course of business and consistent
with past practice;
(g) institute any change in its accounting methods, principles or
practices other than as required by GAAP, or the rules and regulations
promulgated by the SEC, or revalue any assets, including, without
limitation, writing down the value of inventory or writing off notes or
accounts receivables;
(h) in respect of any Taxes, make or change any material election,
change any accounting method, enter into any closing agreement, settle any
material claim or assessment, or consent to any extension or waiver of the
limitation period applicable to any material claim or assessment except as
required by applicable law;
(i) suspend, terminate or otherwise discontinue any planned or ongoing
material research and development activities, programs or other such
activities;
(j) issue any capital stock or debt instruments (other than upon
conversion or exercise of existing options, warrants or debt instruments
that have been disclosed in Section 3.6 or 4.5 of this Agreement or the
related schedules to the related disclosure statements), or any options,
warrants or other rights to purchase or acquire any capital stock or debt
instruments;
(k) purchase any capital stock or debt instruments, or any options,
warrants or other rights to purchase or acquire any capital stock or debt
instruments or
(l) take or agree to take, any of the actions described in Section
3.10, in the case of TCA, or Section 4.11, in the case of Thoratec, or any
action which would make any of its representations or warranties contained
in this Agreement untrue or incorrect or prevent it from performing or
cause it not to perform its covenants hereunder.
5.2 No Solicitation.
(a) From and after the date of this Agreement until the Effective Time or
termination of this Agreement pursuant to Article VIII, TEC, TCA and their
Subsidiaries will not, nor will they authorize or permit any of their respective
officers, directors, affiliates or employees or any investment banker, attorney
or other advisor or representative retained by any of them to, directly or
indirectly: (i) solicit, initiate, encourage or induce the making, submission or
announcement of any TCA Acquisition Proposal (as hereinafter defined), (ii)
participate in any discussions or negotiations regarding, or furnish to any
Person any non-public information with respect to, 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 TCA Acquisition Proposal, (iii) engage in
discussions with any Person with respect to any TCA Acquisition Proposal, except
as to the existence of these provisions, (iv) approve, endorse or recommend any
TCA Acquisition Proposal or (v) enter into any letter of intent or similar
document or any contract agreement or commitment contemplating or otherwise
relating to any TCA Acquisition Transaction. Notwithstanding anything to the
contrary contained in this Section 5.2 or in any other provision of this
Agreement, TEC, TCA and their boards of directors: (i) may participate in
discussions or negotiations with or furnish information to any third party that,
after the date of this Agreement, makes an unsolicited TCA Acquisition Proposal
(a "TCA Potential Acquiror") or approve an unsolicited TCA Acquisition Proposal
if the respective board is advised by its financial advisor that the TCA
Potential Acquiror submitting such TCA Acquisition Proposal has the financial
wherewithal to consummate that TCA Acquisition Proposal, and that board
determines in good faith (A) after receiving written advice from its financial
advisor, that such TCA Acquisition Proposal is a TCA Superior Offer (as defined
in Section 5.4(e)),
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and (B) following consultation with outside legal counsel, that the failure to
participate in such discussions or negotiations or to furnish such information
or approve the TCA Acquisition Proposal would violate the board's fiduciary
duties under applicable law and even in the absence of this Section 5.2. TCA and
TEC agree that any non-public information furnished to a TCA Potential Acquiror
will be pursuant to a confidentiality and nonsolicitation agreement containing
provisions at least as favorable to TCA as the confidentiality and
nonsolicitation provisions of the Confidentiality Agreements (as defined in
Section 5.3). If TCA or TEC shall determine to provide any information as
described above, or shall receive a TCA Acquisition Proposal, it shall promptly,
and in any event within 24 hours, inform Thoratec in writing as to that fact and
shall furnish to Thoratec the identity of the recipient of such information to
be provided and/or the TCA Potential Acquiror and the terms of such TCA
Acquisition Proposal.
(b) From and after the date of this Agreement until the Effective Time or
termination of this Agreement pursuant to Article VIII, Thoratec and the
Thoratec Subsidiaries will not, nor will they authorize or permit any of their
respective officers, directors, affiliates or employees or any investment
banker, attorney or other advisor or representative retained by any of them to,
directly or indirectly: (i) solicit, initiate, encourage or induce the making,
submission or announcement of any Thoratec Acquisition Proposal (as hereinafter
defined), (ii) participate in any discussions or negotiations regarding, or
furnish to any Person any non-public information with respect to, 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 Thoratec Acquisition
Proposal, (iii) engage in discussions with any Person with respect to any
Thoratec Acquisition Proposal, except as to the existence of these provisions,
(iv) approve, endorse or recommend any Thoratec Acquisition Proposal or (v)
enter into any letter of intent or similar document or any contract agreement or
commitment contemplating or otherwise relating to any Thoratec Acquisition
Transaction. Notwithstanding anything to the contrary contained in this Section
5.2 or in any other provision of this Agreement, Thoratec and its board of
directors may participate in discussions or negotiations with or furnish
information to any third party that, after the date of this Agreement, makes an
unsolicited Thoratec Acquisition Proposal (a "Thoratec Potential Acquiror") or
approve an unsolicited Thoratec Acquisition Proposal if the board is advised by
its financial advisor that the Thoratec Potential Acquiror submitting such
Thoratec Acquisition Proposal has the financial wherewithal to consummate that
Thoratec Acquisition Proposal, and the board determines in good faith, following
consultation with outside legal counsel, that the failure to participate in such
discussions or negotiations or to furnish such information or approve the
Thoratec Acquisition Proposal would violate the board's fiduciary duties under
applicable law and even in the absence of this Section 5.2. Thoratec agrees that
any non-public information furnished to a Thoratec Potential Acquiror will be
pursuant to a confidentiality and nonsolicitation agreement containing
provisions at least as favorable to Thoratec as the confidentiality and
nonsolicitation provisions of the Confidentiality Agreements (as defined in
Section 5.3). If Thoratec shall determine to provide any information as
described above, or shall receive any Thoratec Acquisition Proposal, it shall
promptly, and in any event within 24 hours, inform TCA and TEC in writing as to
that fact and shall furnish to TCA and TEC the identity of the recipient of such
information to be provided and/or the Thoratec Potential Acquiror and the terms
of such Thoratec Acquisition Proposal.
(c) For purposes of this Agreement, "TCA Acquisition Proposal" means any
offer or proposal (other than an offer or proposal by Thoratec) relating to any
TCA Acquisition Transaction. For purposes of this Agreement, "TCA Acquisition
Transaction" means any transaction or series of related transactions involving:
(A) any purchase from TCA or acquisition by any person or "group" (as defined
under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) of more than a 15% interest in the total outstanding voting
securities of TCA or any tender offer or exchange offer that if consummated
would result in any person or "group" (as defined under Section 13(d) of the
Exchange Act and the rules and regulations thereunder) beneficially owning 15%
or more of the total outstanding voting securities of TCA or any merger,
consolidation, business combination or similar transaction involving TCA; (B)
any sale, lease (other than in the ordinary course of business), exchange,
transfer, license (other than in the ordinary course of business), acquisition
or disposition of more than 15% of the assets of TCA or (C) any liquidation or
dissolution of TCA.
(d) For purposes of this Agreement, "Thoratec Acquisition Proposal" means
any offer or proposal relating to any Thoratec Acquisition Transaction. For
purposes of this Agreement, "Thoratec Acquisition
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Transaction" means any transaction or series of related transactions involving:
(A) any purchase from Thoratec or acquisition by any person or "group" (as
defined under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) of more than a 15% interest in the total outstanding voting
securities of Thoratec or any tender offer or exchange offer that if consummated
would result in any person or "group" (as defined under Section 13(d) of the
Exchange Act and the rules and regulations thereunder) beneficially owning 15%
or more of the total outstanding voting securities of Thoratec or any merger,
consolidation, business combination or similar transaction involving Thoratec;
(B) any sale, lease (other than in the ordinary course of business), exchange,
transfer, license (other than in the ordinary course of business), acquisition
or disposition of more than 15% of the assets of Thoratec or (C) any liquidation
or dissolution of Thoratec.
(e) In addition to the obligations of TCA and TEC set forth in Section
5.2(a), TCA and TEC as promptly as practicable shall advise Thoratec orally and
in writing of any TCA Acquisition Proposal or any request for non-public
information or inquiry which TCA or TEC reasonably believes would lead to a TCA
Acquisition Proposal or to any TCA Acquisition Transaction, the material terms
and conditions of such TCA Acquisition Proposal, request or inquiry, and the
identity of the Person or group making any such TCA Acquisition Proposal or any
amendment or modification thereto, request or inquiry. TCA and TEC shall keep
Thoratec informed as promptly as practicable in all material respects of the
status and details (including material amendments or proposed material
amendments) of any such TCA Acquisition Proposal, request or inquiry.
(f) In addition to the obligations of Thoratec set forth in Section 5.2(b),
Thoratec as promptly as practicable shall advise TCA and TEC orally and in
writing of any Thoratec Acquisition Proposal or any request for non-public
information or inquiry which Thoratec reasonably believes would lead to a
Thoratec Acquisition Proposal or to any Thoratec Acquisition Transaction, the
material terms and conditions of such Thoratec Acquisition Proposal or any
amendments or modifications thereto, request or inquiry, and the identity of the
Person or group making any such Thoratec Acquisition Proposal, request or
inquiry.
5.3 Access to Information. From the date of this Agreement until the
Effective Time, TCA and Thoratec shall each afford to the other and their
authorized representatives (including counsel, consultants, accountants,
auditors and agents) reasonable access during normal business hours and upon
reasonable notice to all of its facilities, personnel and operations and to all
of its and its Subsidiaries books and records, shall permit the other and its
authorized representatives to conduct inspections as they may reasonably request
and shall instruct its officers and those of its Subsidiaries to furnish such
persons with such financial and operating data and other information with
respect to its business and properties as they may from time to time reasonably
request, subject to the restrictions set forth in the Confidentiality Agreements
dated as of March 15, 2000 and July 26, 2000 between Thoratec and TCA (the
"Confidentiality Agreements").
5.4 Special Meetings; Registration Statement; Board Recommendations.
(a) TCA Special Meeting. Promptly after the date hereof, TCA will take all
action necessary in accordance with Massachusetts Law and its Articles of
Organization and bylaws to convene a meeting of TCA's stockholders to consider
adoption and approval of this Agreement and approval of the Merger (the "TCA
Special Meeting") to be held as promptly as practicable, and in any event (to
the extent permissible under applicable law) within 45 days after the
declaration of effectiveness of the Registration Statement. Subject to Section
5.4(e), TCA will use its commercially reasonable efforts to solicit from its
stockholders proxies in favor of the adoption and approval of this Agreement and
the approval of the Merger and will take all other action necessary or advisable
to secure the vote or consent of its stockholders required by the rules of the
American Stock Exchange or Massachusetts Law to obtain such approvals.
Notwithstanding anything to the contrary contained in this Agreement, TCA may
adjourn or postpone the TCA Special Meeting to the extent necessary to ensure
that any necessary supplement or amendment to the Joint Proxy Statement/
Prospectus is provided to TCA's stockholders in advance of a vote on the Merger
and this Agreement or, if as of the time for which the TCA Special Meeting is
originally scheduled (as set forth in the Joint Proxy Statement/Prospectus)
there are insufficient shares of TCA Common Stock represented (either in person
or by proxy) to constitute a quorum necessary to conduct the business of the TCA
Special Meeting. TCA shall ensure that the TCA Special Meeting is called,
noticed, convened, held and conducted, and that all proxies
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solicited by TCA in connection with the TCA Special Meeting are solicited, in
compliance with the Massachusetts Law, TCA's Articles of Organization and
bylaws, the rules of the American Stock Exchange and all other applicable legal
requirements. TCA's obligation to call, give notice of, convene and hold the TCA
Special Meeting in accordance with this Section 5.4(a) shall not be limited to
or otherwise affected by the commencement, disclosure, announcement or
submission to TCA of any TCA Acquisition Proposal, or by any withdrawal,
amendment or modification of the recommendation of the board of directors of TCA
with respect to the Merger or this Agreement.
(b) Thoratec Special Meeting. Promptly after the date hereof, Thoratec will
take all action necessary in accordance with California Law and its articles of
incorporation and bylaws to convene a meeting of Thoratec's shareholders to
consider the issuance of Thoratec Common Stock in the Merger (the "Thoratec
Special Meeting") to be held as promptly as practicable, and in any event (to
the extent permissible under applicable law) within 45 days after the
declaration of effectiveness of the Registration Statement. Subject to Section
5.4(f), Thoratec will use its commercially reasonable efforts to solicit from
its shareholders proxies in favor of the issuance of Thoratec Common Stock in
the Merger and will take all other action necessary or advisable to secure the
vote or consent of its shareholders required by the rules of Nasdaq or
California Law to obtain such approval. Notwithstanding anything to the contrary
contained in this Agreement, Thoratec may adjourn or postpone the Thoratec
Special Meeting to the extent necessary to ensure that any necessary supplement
or amendment to the Joint Proxy Statement/Prospectus is provided to Thoratec's
shareholders in advance of a vote on the issuance of Thoratec Common Stock in
the Merger and this Agreement or, if as of the time for which the Thoratec
Special Meeting is originally scheduled (as set forth in the Joint Proxy
Statement/Prospectus) there are insufficient shares of Thoratec Common Stock
represented (either in person or by proxy) to constitute a quorum necessary to
conduct the business of the Thoratec Special Meeting. Thoratec shall ensure that
the Thoratec Special Meeting is called, noticed, convened, held and conducted,
and that all proxies solicited by Thoratec in connection with the Thoratec
Special Meeting are solicited, in compliance with the California Law, Thoratec's
articles of incorporation and bylaws, the rules of Nasdaq and all other
applicable legal requirements. Thoratec's obligation to call, give notice of,
convene and hold the Thoratec Special Meeting in accordance with this Section
5.4(b) shall not be limited to or otherwise affected by the commencement,
disclosure, announcement or submission to Thoratec of any Thoratec Acquisition
Proposal, or by any withdrawal, amendment or modification of the recommendation
of the board of directors of Thoratec with respect to the issuance of Thoratec
Common Stock in the Merger.
(c) Subject to Section 5.4(e): (i) the board of directors of TCA shall
recommend that TCA's stockholders vote in favor of and adopt and approve this
Agreement and approve the Merger at the TCA Special Meeting; (ii) the Joint
Proxy Statement/Prospectus shall include a statement to the effect that the
board of directors of TCA has recommended that TCA's stockholders vote in favor
of and adopt and approve this Agreement and the Merger at the TCA Special
Meeting; and (iii) neither the board of directors of TCA nor any committee
thereof shall withdraw, amend or modify, or propose or resolve to withdraw,
amend or modify in a manner adverse to Thoratec, the recommendation of the board
of directors of TCA that TCA's stockholders vote in favor of and adopt and
approve this Agreement and the Merger.
(d) Subject to Section 5.4(f): (i) the board of directors of Thoratec shall
recommend that Thoratec's shareholders vote in favor of the issuance of Thoratec
Common Stock in the Merger at the Thoratec Special Meeting; (ii) the Joint Proxy
Statement/Prospectus shall include a statement to the effect that the board of
directors of Thoratec has recommended that Thoratec's shareholders vote in favor
of the issuance of Thoratec Common Stock in the Merger at the Thoratec Special
Meeting; and (iii) neither the board of directors of Thoratec nor any committee
thereof shall withdraw, amend or modify, or propose or resolve to withdraw,
amend or modify in a manner adverse to TCA, the recommendation of Thoratec's
board of directors of Thoratec that Thoratec's shareholders vote in favor of the
issuance of Thoratec Common Stock in the Merger.
(e) Nothing in this Agreement shall prevent the board of directors of TCA
from withholding, withdrawing, amending or modifying its recommendation in favor
of the Merger if (i) a TCA Superior Offer (as defined below) is made to TCA and
is not withdrawn, (ii) TCA shall have provided written notice to Thoratec (a
"Notice of TCA Superior Offer") advising Thoratec that TCA has received a TCA
Superior Offer, specifying the material terms and conditions of such TCA
Superior Offer and identifying the Person or
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entity making such TCA Superior Offer, (iii) Thoratec shall not have, within
five business days of Thoratec's receipt of the Notice of TCA Superior Proposal,
made an offer that the TCA board of directors by a majority vote determines in
its good faith judgment (based on the written advice of its financial advisor)
to be at least as favorable to TCA's stockholders as such TCA Superior Offer (it
being agreed that the TCA board of directors shall convene a meeting to consider
any such offer by Thoratec promptly following the receipt thereof), (iv) the
board of directors of TCA concludes in good faith, after consultation with its
outside counsel, that, in light of such TCA Superior Offer, the withholding,
withdrawal, amendment or modification of such recommendation is required in
order for the board of directors of TCA to comply with its fiduciary obligations
to TCA's stockholders under applicable law and (v) TCA shall not have violated
any of the restrictions set forth in Section 5.2 or this Section 5.4(e). TCA
shall provide Thoratec with at least three business days prior notice (or such
lesser prior notice as provided to the members of TCA's board of directors but
in no event less than 24 hours) of any meeting of TCA's board of directors at
which TCA's board of directors is reasonably expected to consider any TCA
Acquisition Transaction. Subject to applicable laws, nothing contained in this
Section 5.4(e) shall limit TCA's obligation to hold and convene the TCA Special
Meeting (regardless of whether the recommendation of the board of directors of
TCA shall have been withdrawn, amended or modified). For purposes of this
Agreement, "TCA Superior Offer" means an unsolicited, bona fide written offer
made by a third party to consummate any of the following transactions: (i) a
merger or consolidation involving TCA pursuant to which the stockholders of TCA
immediately preceding such transaction hold less than a majority of the equity
interests in the surviving or resulting entity of such transaction or (ii) the
acquisition by any Person or group (including by way of a tender offer or an
exchange offer or a two-step transaction involving a tender offer followed with
reasonable promptness by a cash-out merger, directly or indirectly, of ownership
of 100% of the then outstanding shares of capital stock of TCA on terms that the
board of directors of TCA determines, in its reasonable good faith judgment
(based on the written advice of its financial advisor) to be more favorable to
the TCA stockholders than the terms of the Merger, provided that any such offer
shall not be deemed to be a "TCA Superior Offer" if any financing required to
consummate the transaction contemplated by such offer is not fully committed.
(f) Nothing in this Agreement shall prevent the board of directors of
Thoratec from withholding, withdrawing, amending or modifying its recommendation
in favor of the issuance of Thoratec Common Stock in the Merger if (i) a
Thoratec Superior Offer (as defined below) is made to Thoratec and is not
withdrawn, (ii) Thoratec shall have provided written notice to TCA and TEC (a
"Notice of Thoratec Superior Offer") advising TCA and TEC that Thoratec has
received a Thoratec Superior Offer, specifying the material terms and conditions
of such Thoratec Superior Offer and identifying the Person or entity making such
Thoratec Superior Offer, (iii) the board of directors of Thoratec concludes in
good faith, after consultation with its outside counsel, that, in light of such
Thoratec Superior Offer, the withholding, withdrawal, amendment or modification
of such recommendation is required in order for the board of directors of
Thoratec to comply with its fiduciary obligations to Thoratec's shareholders
under applicable law and (iv) Thoratec shall not have violated any of the
restrictions set forth in Section 5.2 or this Section 5.4(f). Thoratec shall
provide TCA and TEC with at least three business days prior notice (or such
lesser prior notice as provided to the members of Thoratec's board of directors
but in no event less than 24 hours) of any meeting of Thoratec's board of
directors at which Thoratec's board of directors is reasonably expected to
consider any Thoratec Acquisition Transaction. Subject to applicable laws,
nothing contained in this Section 5.4(f) shall limit Thoratec's obligation to
hold and convene the Thoratec Special Meeting (regardless of whether the
recommendation of the board of directors of Thoratec shall have been withdrawn,
amended or modified). For purposes of this Agreement, "Thoratec Superior Offer"
means an unsolicited, bona fide written offer made by a third party to
consummate any of the following transactions: (i) a merger or consolidation
involving Thoratec pursuant to which the shareholders of Thoratec immediately
preceding such transaction hold less than a majority of the equity interests in
the surviving or resulting entity of such transaction or (ii) the acquisition by
any Person or group (including by way of a tender offer or an exchange offer or
a two-step transaction involving a tender offer followed with reasonable
promptness by a cash-out merger, directly or indirectly, of ownership of 100% of
the then outstanding shares of capital stock of Thoratec on terms that the board
of directors of Thoratec determines, in its reasonable good faith judgment
(based on the written advice of its financial advisor) to be more favorable to
the Thoratec shareholders than the terms of the Merger, provided that any such
offer shall
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not be deemed to be a "Thoratec Superior Offer" if any financing required to
consummate the transaction contemplated by such offer is not fully committed.
(g) Nothing in this Agreement shall prohibit TCA or its board of directors
or Thoratec or its board of directors from taking and disclosing to its
stockholders a position contemplated by Rules 14d-9 and 14e-2(a) promulgated
under the Exchange Act.
(h) As promptly as practicable after the execution of this Agreement, TCA
and Thoratec shall mutually prepare, and TCA shall file with the SEC, a
preliminary form of the Joint Proxy Statement/Prospectus. As promptly as
practicable following receipt of SEC comments on such preliminary Joint Proxy
Statement/ Prospectus, Thoratec and TCA shall mutually prepare a response to
such comments. Upon resolution of all comments, Thoratec shall file the
Registration Statement with the SEC. Thoratec and TCA shall use all commercially
reasonable efforts to have the preliminary Joint Proxy Statement/Prospectus
cleared by the SEC and the Registration Statement declared effective by the SEC
as promptly as practicable. Thoratec shall also take any action required to be
taken under applicable state blue sky or securities laws in connection with
Thoratec Common Stock to be issued in exchange for the shares of TCA Common
Stock. Thoratec and TCA shall promptly furnish to each other all information,
and take such other actions (including, without limitation, using all
commercially reasonable efforts to provide any required consents of their
respective independent auditors), as may reasonably be requested in connection
with any action by any of them in connection with the preceding sentences of
this Section 5.4(h). Whenever any party learns of the occurrence of any event
which is required to be set forth in an amendment or supplement to the Joint
Proxy Statement/ Prospectus, the Registration Statement or any other filing made
pursuant to this Section 5.4(h), Thoratec or TCA, as the case may be, shall
promptly inform the other of such occurrence and cooperate in filing with the
SEC or its staff and/or mailing of such amendment or supplement to the
stockholders of TCA, Thoratec or both, as appropriate.
(i) Subject to Section 5.4(e), the Joint Proxy Statement/Prospectus shall
contain the recommendation of the board of directors of TCA in favor of the
approval and adoption of the Merger and this Agreement.
(j) Subject to Section 5.4(f), the Joint Proxy Statement/Prospectus shall
contain the recommendation of the board of directors of Thoratec in favor of the
issuance of Thoratec Common Stock in the Merger.
(k) Subject to the next sentence, TEC shall vote (or cause to be voted) all
the shares of TCA Common Stock held directly or indirectly by it in favor of
this Agreement and the Merger at the TCA Special Meeting and any adjournments or
postponements thereof. However, TEC shall be excused from that obligation if,
but only if, the TCA board of directors withholds or withdraws its
recommendation in accordance with Section 5.4(e).
5.5 Commercially Reasonable Efforts.
(a) Subject to the terms and conditions herein provided, Thoratec, Merger
Sub, TEC and TCA shall use their commercially reasonable efforts to take, or
cause to be taken, all actions and do, or cause to be done, all things
necessary, proper or appropriate under this Agreement and applicable laws to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation: (i) entering into or causing their appropriate
Subsidiaries to enter into the agreements required to be entered into by them or
those Subsidiaries as referenced in Sections 7.1 and 7.2 of this Agreement, (ii)
satisfying the other conditions to closing set forth in those sections over
which they have control or influence, (iii) promptly filing Notification and
Report Forms under the HSR Act with the Federal Trade Commission (the "FTC") and
the Antitrust Division of the Department of Justice (the "Antitrust Division")
and responding as promptly as practicable to any inquiries received from the FTC
or the Antitrust Division for additional information or documentation, (iv)
using commercially reasonable efforts to obtain all necessary governmental and
private party consents, approvals or waivers, and (v) using commercially
reasonable efforts to lift any legal bar to the Merger.
(b) Notwithstanding anything to the contrary in this Agreement, none of
Thoratec, TCA or any of their respective Subsidiaries shall be required to (i)
divest, hold separate or license any business, product line or assets, (ii) take
any action or accept any limitation that could reasonably be expected to have a
Thoratec
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Material Adverse Effect or a TCA Material Adverse Effect or (iii) agree to any
of the foregoing in order to effect or facilitate the Merger.
5.6 Public Announcements. Before issuing any press release or otherwise
making any public statement with respect to the Merger or any of the other
transactions contemplated hereby, Thoratec, Merger Sub, TEC and TCA shall
consult with each other as to its form and substance, and agree not to issue any
such press release or general communication to employees or make any public
statement prior to obtaining the consent of the others (which shall not be
unreasonably withheld or delayed), except as may be required by applicable law
or by the rules and regulations of or listing agreement with Nasdaq, The
American Stock Exchange, the New York Stock Exchange or as may otherwise be
required by Nasdaq, The American Stock Exchange, the New York Stock Exchange or
the SEC.
5.7 Notification of Certain Matters. TCA and TEC shall promptly notify
Thoratec, and Thoratec shall promptly notify TCA and TEC, of the occurrence or
non-occurrence of any event the respective occurrence or non-occurrence of which
would be likely to cause any condition to the obligations of the notifying party
to effect the Merger not to be fulfilled. TCA and TEC shall give prompt notice
to Thoratec, and Thoratec shall give prompt notice to TCA and TEC, of any
communication from any Person alleging that the consent of such Person is or may
be required in connection with the Merger or other transactions contemplated
hereby.
5.8 Indemnification.
(a) The articles of organization and bylaws of the Surviving Corporation
shall contain, and Thoratec shall cause the Surviving Corporation to fulfill and
honor, the provisions with respect to indemnification and exculpation that are
substantially identical to those set forth in the articles of organization and
bylaws of TCA as of the date of this Agreement, which provisions shall not be
amended, repealed or otherwise modified for a period of six years from the
Effective Time in any manner that would adversely affect the rights thereunder
of any of the Indemnified Parties. In addition, Thoratec shall guarantee the
obligations of TCA pursuant to any indemnification agreements between TCA and
any of the Indemnified Parties. "Indemnified Parties" shall include each person
who is or was a director or officer of TCA or any Subsidiary of TCA at any time
before the Effective Time, and each person who serves or has in the past served
at the request of TCA or any subsidiary of TCA as a director, officer, trustee,
partner, fiduciary, employee or agent of another corporation, partnership, joint
venture, trust, pension or other employee benefit plan or enterprise at any time
before the Effective Time. Notwithstanding the foregoing, Thoratec's and the
Surviving Corporation's obligations set forth in this Section 5.8(a) are in all
respects conditioned upon TEC's performance of its obligations set forth in
Section 5.8(b).
(b) For a period of six years after the Effective Time, TEC shall maintain
in effect directors' and officers' liability insurance covering those persons
who are (as of the Closing) or at any time before the Closing were directors or
officers of TCA or any of TCA's Subsidiaries on terms comparable to those of the
directors' and officers' liability insurance policy currently maintained by TEC.
Thoratec shall reimburse TEC for the costs of that policy not to exceed $75,000
per year.
(c) Each Indemnified Party shall comply with the reasonable requests of the
Surviving Corporation or Thoratec in defending or settling any action hereunder,
provided that no proposed settlement of any such action need be considered by
any Indemnified Party unless (A) such settlement involves no finding or
admission of any liability by any Indemnified Party, and (B) the sole relief
provided in connection with such settlement is monetary damages that are paid in
full by the Surviving Corporation or Thoratec.
5.9 Affiliate Agreements. Concurrently with the execution and delivery
hereof, TCA shall deliver to Thoratec a list (reasonably satisfactory to counsel
for Thoratec), setting forth the names of all persons who are expected to be, at
the Effective Time, in TCA's reasonable judgment, Affiliates of TCA. TCA shall
furnish such information and documents as Thoratec may reasonably request for
the purpose of reviewing such list. TCA shall deliver a written agreement in
substantially the form of Exhibit D hereto (a "TCA Affiliate Agreement")
executed by each person (other than TEC) identified as an Affiliate in the list
furnished pursuant to this Section 5.9 within 10 days after the execution of
this Agreement.
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5.10 Nasdaq Listing. Prior to the Effective Time, Thoratec shall file with
Nasdaq a notification form for listing additional shares with respect to the
shares of Thoratec Common Stock issuable, and those required to be reserved for
issuance, in connection with the Merger.
5.11 Resignation of Directors and Officers. Without prejudice to TEC's
rights under the Shareholder Agreement, prior to the Effective Time TCA shall
deliver to Thoratec at no cost the resignations of such directors and officers
of TCA and its Subsidiaries as Thoratec shall specify at least 10 business days
prior to the Closing, effective at the Effective Time.
5.12 Consents of Thoratec's and TCA's Accountants. Each of Thoratec and
TCA shall use commercially reasonable efforts to cause its independent
accountants to deliver to Thoratec a consent, dated the date on which the
Registration Statement shall become effective, in form reasonably satisfactory
to Thoratec and customary in scope and substance for consents delivered by
independent public accountants in connection with the Registration Statement and
the Joint Proxy Statement/Prospectus.
5.13 Ancillary Agreements. Concurrently with the execution hereof, TEC and
Thoratec are executing and delivering the Shareholder Agreement and the
Registration Rights Agreement.
5.14 Form S-8. No later than 10 days after the Effective Time, Thoratec
shall file with the SEC a Registration Statement, on Form S-8 or other
appropriate form under the Securities Act, to register Thoratec Common Stock
issuable upon exercise of the Thoratec Exchange Options.
5.15 SEC Filings.
(a) TCA will deliver promptly to Thoratec true and complete copies of each
report, registration statement or statement mailed by it to its security holders
generally or filed by it with the SEC, in each case subsequent to the date
hereof and prior to the Effective Time. As of their respective dates, such
reports, including the consolidated financial statements included therein, and
statements (excluding any information therein provided by Thoratec or Merger
Sub, as to which TCA makes no representation) will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading and will comply in all
material respects with all applicable requirements of law. Each of the
consolidated financial statements (including, in each case, any related notes
thereto) contained in such reports, (x) shall comply as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, (y) shall be prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited interim financial statements, as may be permitted by the SEC on Form
10-Q under the Exchange Act) and (z) shall fairly present the consolidated
financial position of TCA and its Subsidiaries in all material respects as of
the respective dates thereof and the consolidated results of its operations and
cash flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not, or are not expected to be, material in amount.
(b) Thoratec will deliver promptly to TCA true and complete copies of each
report, registration statement and other statement mailed by it to its security
holders generally or filed by it with the SEC, in each case subsequent to the
date hereof and prior to the Effective Time. As of their respective dates, such
reports, including the consolidated financial statements included therein, and
statements (excluding any information therein provided by TCA, as to which
Thoratec makes no representation) will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading and will comply in all material respects
with all applicable requirements of law. Each of the consolidated financial
statements (including, in each case, any related notes thereto) contained in
such reports (x) shall comply as to form in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, (y) shall be prepared in accordance with GAAP
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto or, in the case of unaudited interim financial
statements, as may be permitted by the SEC on Form 10-Q under the Exchange Act)
and (z) shall fairly present the consolidated financial position of Thoratec and
the Thoratec
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Subsidiaries in all material respects as of the respective dates thereof and the
consolidated results of its operations and cash flows for the periods indicated,
except that the unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments which were not, or are not expected to
be, material in amount.
5.16 Employee Benefit Matters.
(a) With respect to the "401(k) plan" maintained by TEC in which employees
of TCA and its Subsidiaries participate, effective as of the Closing TEC shall
cause the accrued benefits of such employees under that plan to be fully vested
and immediately distributable to or on behalf of those employees to the full
extent permitted by law. As soon as practicable after the Closing, Thoratec
shall cause the employees of TCA and its Subsidiaries to be eligible to
participate in the 401(k) plan maintained by Thoratec and to allow such
employees to elect to roll over their distributable accrued benefits under the
401(k) plan maintained by TEC, including any outstanding loans of such
employees, to Thoratec's 401(k) plan.
(b) The current severance policy of TCA and its Subsidiaries with respect
to their employees is set forth in the TCA Employee Policy and Procedure Manual
(the January 2000 version, as modified September 27, 2000), a copy of which has
been provided to Thoratec. After the Closing, Thoratec shall cause TCA and the
Subsidiaries of TCA to honor that policy for qualifying terminations of
employment, occurring within 12 months after the Closing, of persons who are
employed by TCA or any such Subsidiary just before the Closing. Nothing in this
Section 5.16(b) shall in any manner diminish TCA's Parent's obligations
referenced in Section 3.14(f).
(c) With respect to the participation of employees of TCA and its
Subsidiaries in the Thoratec Welfare Plans, Thoratec shall (i) cause to be
waived any pre-existing condition limitations, (ii) give effect, in determining
any deductible and maximum out-of-pocket limitations, to claims incurred and
amounts paid by, and amounts reimbursed to, such employees with respect to
similar plans maintained by TCA immediately before the Closing and (iii)
recognize all credited service for purposes of eligibility and level of benefits
to the same extent such service was recognized under similar plans maintained by
TCA immediately before the Closing. Thoratec shall make appropriate arrangements
to allow the use by TCA employees of any accrued benefits under any cafeteria
plan (as defined in Section 125 of the Code) which was maintained by TCA or any
of its Subsidiaries for such employees.
(d) Thoratec shall provide any required notice under the Worker Adjustment
and Retraining Notification Act and any other applicable law and to otherwise
comply with any such statute with respect to any "plant closing" or "mass
layoff" (as defined in that act) or similar event affecting employees of TCA or
any TCA Subsidiary and occurring after the Closing.
(e) Thoratec shall provide any required notice under COBRA for any persons
employed by TCA or any Subsidiary of TCA.
5.17 Notification of Certain Matters. TCA and TEC shall give prompt notice
to Thoratec, and Thoratec shall give prompt notice to TCA and TEC, of (i) the
occurrence or nonoccurrence of any event the occurrence or nonoccurrence of
which would be likely to cause any representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respect at or prior to the
Effective Time, (ii) any material failure of the TCA or TEC, Thoratec or Merger
Sub, as the case may be, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder, (iii) any notice or
other communication from any third party alleging that the consent of such third
party is or may be required in connection with any transaction contemplated by
this Agreement, or (iv) any facts or circumstances arise that could reasonably
be expected to result in an TCA Material Adverse Effect or a Thoratec Material
Adverse Effect, as the case may be.
5.18 Relinquishment of Name. Within 60 days after the Closing, TCA shall
cease, and shall cause its Subsidiaries to cease, using the name "Thermo" or any
confusingly similar name in its business and operations. However, TCA and its
Subsidiaries shall not be required to remove the "Thermo" name from any products
or product components that are in inventory as of the Closing or that are
completed within one year after the Closing. Nothing in this Section 5.18 shall
require that TCA or any Subsidiary of TCA cancel any
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order for any product, product component, literature or other item that includes
the "Thermo" name, placed before the Closing, if its doing so would constitute a
breach of any obligation or result in any requirement to pay any material
termination or cancellation fee. Without time limit, Thoratec, TCA and the
Subsidiaries of TCA shall be permitted to explain that TCA is the same company
that was formerly named "Thermo Cardiosystems Inc." and that TCA's Subsidiaries
are subsidiaries of that company.
5.19 Special Retention Agreements. Upon request by Thoratec including, if
Thoratec so requests, promptly after this Agreement is signed, TCA shall
cooperate with Thoratec: (a) to adopt a written retention plan, containing such
terms and conditions as Thoratec shall prescribe (subject to the consent of TCA,
which Thoratec shall not unreasonably withhold), for the benefit of those of
TCA's and TCA's Subsidiaries' key employees whom Thoratec identifies with TCA's
assistance, under which (subject to whatever further conditions Thoratec may
prescribe) rights will vest if and when the Merger closes and (b) shall deliver
a copy of that plan to those employees.
5.20 Cooperation in Tax Matters. Until the applicable statutes of
limitations (including any extensions) have expired, TEC and TCA shall each: (i)
provide the other with such assistance as the other may reasonably request in
connection with the preparation or amendment of any Tax Return or in connection
with any audit or other examination by any taxing authority or any judicial or
administrative proceedings relating to liability for any Taxes respecting any
period ending on or before the Closing Date or that otherwise includes the
Closing Date, (ii) retain and provide the other with any records or other
information that may be relevant to any such Tax Return, audit, examination,
proceeding or determination and (iii) provide the other with any final
determination of any such audit, examination, proceedings or determination that
affects any amount required to be shown on any such Tax Return. Without limiting
the generality of the foregoing, TEC and TCA shall each retain, until the
applicable statutes of limitations (including any extensions) have expired,
copies of all Tax Returns, supporting work schedules and other records and
information that may be relevant to such Tax Returns as may be necessary to
allow it to satisfy its obligations under this Section 5.20 and shall not
destroy or otherwise dispose of any such records without first providing the
other with a reasonable opportunity to review and copy them. To the extent TEC
reasonably requests, TCA and Thoratec shall agree to maintain the
confidentiality of any information furnished by TEC under this Section 5.20,
provided that TCA and Thoratec may use such information in connection with any
Tax Return of Thoratec, TCA or any Subsidiary of TCA, any communication to or
from any taxing authority, and in connection with any controversy regarding any
Taxes payable or paid by Thoratec, TCA or any Subsidiary of TCA. Without
limiting the generality of any of the foregoing, during the period ending 60
days after the Effective Time TEC shall use its commercially reasonable efforts
to secure for TCA and TCA's Subsidiaries any tax benefit to which they are
entitled as a result of any settlement or other agreement between TEC and any
tax authority.
5.21 Environmental Insurance. Thoratec may choose to assess, before the
Closing, whether to purchase so-called "environmental insurance" with respect to
one or more of the properties that are occupied by TCA or Subsidiaries of TCA.
If Thoratec does choose to make that assessment, TEC and TCA shall cooperate
with Thoratec to assist that assessment including, for example, by permitting
one or more representatives of Thoratec or prospective insurers to inspect those
properties and records relating to those properties, provided that that
inspection shall not extend beyond those non-invasive procedures and steps that
comprise a so-called "ASTM Phase I Environmental Site Assessment" and provided
further that, before the Closing, any information generated by such inspection
shall not be disclosed to any Governmental Entity or third party, other than a
prospective insurer, except and only to the extent required by law. Nothing in
this Section 5.21 shall be construed to diminish any of the representations and
warranties set forth in Article III including, for example, those set forth in
Section 3.20.
5.22 ITC Patent. ITC holds U.S. Patent No. 5731212 (the "Patent"). TEC has
requested that ITC grant a license under the Patent to TEC or an affiliate of
TEC that is not TCA or a Subsidiary of TCA. However, Thoratec has not as yet had
an opportunity to assess whether that is an appropriate or desirable course of
action for ITC. Accordingly, promptly after this Agreement is signed, TEC will
give Thoratec access to ITC personnel and information relevant to the Patent and
its applications in order to enable Thoratec to make that assessment. Thoratec
will make that assessment in good faith and a commercially reasonable manner.
Thoratec will then advise TEC whether Thoratec is prepared to license the Patent
to TEC or such an
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affiliate and, if so, in what field or fields of use, in which case Thoratec and
TEC shall then, in good faith, exercise commercially reasonable efforts to
negotiate such a license.
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF EACH PARTY
The respective obligations of each party to this Agreement to effect the
Merger shall be subject to the fulfillment on or before the Effective Time of
each of the following conditions, any one or more of which may be waived in
writing by all the parties hereto:
6.1 Registration Statement. The Registration Statement shall have become
effective in accordance with the provisions of the Securities Act. No stop order
suspending the effectiveness of the Registration Statement shall have been
issued by the SEC and remain in effect and no proceedings for such purpose shall
be pending before or threatened by the SEC.
6.2 TCA Stockholder Approval. The approval of a majority of the
outstanding shares of TCA Common Stock for adoption of the Merger Agreement and
approval of the Merger shall have been obtained at the TCA Special Meeting or
any adjournment or postponement thereof.
6.3 Thoratec Shareholder Approval. The approval of a majority of the
outstanding shares of Thoratec Common Stock in favor of the issuance of Thoratec
Common Stock in the Merger shall have been obtained at the Thoratec Special
Meeting or any adjournment or postponement thereof.
6.4 Listing of Additional Shares. The shares of Thoratec Common Stock
issuable in connection with the Merger shall have been approved for listing on
Nasdaq.
6.5 Governmental Clearances. The waiting periods applicable to
consummation of the Merger under the HSR Act shall have expired or been
terminated. Other than the filing of the Articles of Merger which shall be
accomplished as provided in Section 1.2, all authorizations, consents, orders or
approvals of, or declarations or filings with, or expirations of waiting periods
imposed by, any Government Entity the failure of which to obtain or comply with
would be reasonably likely to have a TCA Material Adverse Effect or a Thoratec
Material Adverse Effect shall have been obtained or filed.
6.6 Tax Matters. Each of Thoratec and Merger Sub shall have received an
opinion of Heller Ehrman White & McAuliffe LLP, counsel to Thoratec and Merger
Sub, and TCA shall have received an opinion of Hale and Dorr LLP, counsel to
TCA, each such opinion dated as of the Effective Time, substantially to the
effect that on the basis of the facts, representations and assumptions set forth
in such opinions, (i) the Merger will qualify as a reorganization within the
meaning of Section 368(a) of the Code; (ii) each of Thoratec, Merger Sub and TCA
will be a party to such reorganization within the meaning of Section 368(b) of
the Code; and (iii) except with respect to cash received in lieu of fractional
share interests in Thoratec Common Stock or upon the exercise of dissenters'
appraisal rights, no gain or loss will be recognized, for United States federal
income tax purposes, by a stockholder of TCA as a result of the Merger with
respect to the shares of TCA Common Stock converted into Thoratec Common Stock.
If counsel to either Thoratec or TCA does not render such opinion, this
condition shall nonetheless be deemed to be satisfied with respect to such party
if counsel to the other party renders such opinion in the required form to such
party.
6.7 Statute or Decree. No writ, order, temporary restraining order,
preliminary injunction or injunction shall have been enacted, entered,
promulgated or enforced by any court or other tribunal or governmental body or
authority, which remains in effect, and prohibits the consummation of the Merger
or otherwise makes it illegal, nor shall any Government Entity have instituted
any action, suit or proceeding which remains pending and which seeks to enjoin,
restrain or prohibit the consummation of the Merger in accordance with the terms
of this Agreement.
6.8 TCA Dissenting Shares. Holders of shares of TCA Common Stock shall not
have satisfied the requirements of clauses (i) and (ii) of Section 2.3(f) with
respect to 5% or more of the shares of TCA Common Stock outstanding at the
record date for the TCA Special Meeting.
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6.9 Thoratec Dissenting Shares. Holders of shares of Thoratec Common Stock
shall not have satisfied the requirements of Sections 1300(b)(2) and (3) of the
California Law with respect to 5% or more of the shares of Thoratec Common Stock
outstanding at the record date for the Thoratec Special Meeting.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF
TCA AND THORATEC
7.1 Additional Conditions to the Obligations Of TCA. The obligations of
TCA to effect the Merger shall be subject to the fulfillment of each of the
following additional conditions, any one or more of which may be waived in
writing by TCA:
(a) The representations and warranties of Thoratec and Merger Sub
contained in this Agreement shall be true and correct, in all material
respects as of the Effective Time, with the same force and effect as if
made at the Effective Time, provided that the word "material" in this
sentence shall be ignored when considered with reference to a
representation or warranty that already includes a quantitative
qualification (for example, a dollar threshold, a reference to "material"
or "materiality", or a reference to a "Thoratec Material Adverse Effect".
(b) Thoratec and Merger Sub shall have performed and complied in all
material respects with all agreements and obligations required by this
Agreement to be performed or complied with by them on or prior to the
Closing Date.
(c) Thoratec and Merger Sub shall have furnished a certificate or
certificates of Thoratec and Merger Sub executed on behalf of one or more
of their respective officers to evidence compliance with the conditions set
forth in Sections 7.1(a) and (b) of this Agreement.
(d) There shall not have occurred, since the date hereof, any Thoratec
Material Adverse Effect.
(e) At the option of TEC: (i) Thoratec, TCA and TEC shall have entered
into a collateral and security agreement pursuant to which TCA will grant
to TEC a first priority security interest in and to $45,000,000 to secure
payment on the TCA Debentures on the other terms and conditions set forth
in Exhibit E-1 to this Agreement, (ii) Thoratec, TCA, TEC and a trustee
shall have entered into a collateral and security agreement pursuant to
which TCA will grant to a trustee a first priority security interest in and
to $45,000,000 to secure payment on the TCA Debentures and on the other
terms and conditions set forth in Exhibit E-2 to this Agreement or (iii)
Thoratec shall have secured a standby letter of credit in favor of TEC or a
trustee in the amount of $45,000,000 to secure payment on the TCA
Debentures on the other terms and conditions set forth in Exhibit E-3 to
this Agreement, provided that TEC notify Thoratec of its election in
writing at least 30 days before the date scheduled for the Special Thoratec
Meeting and provided further that, in each case, TEC shall be responsible
for all third party fees and costs associated with any agreement or letter
of credit entered into pursuant to this Section 7.1(e). Notwithstanding the
foregoing, if TEC elects the agreement in clause (i) above, TEC may, at any
time after the Effective Time, substitute the agreement in clause (ii) or
the letter of credit in clause (iii) at its sole cost and expense and
Thoratec shall (and shall cause TCA to) execute any documents or agreements
reasonably necessary to effectuate that election.
7.2 Additional Conditions to the Obligations Of Thoratec And Merger
Sub. The obligations of Thoratec and Merger Sub to effect the Merger shall be
subject to the fulfillment of each of the following additional conditions, any
one or more of which may be waived in writing by Thoratec:
(a) The representations and warranties of TCA contained in this
Agreement shall be true and correct, in all material respects as of the
Effective Time, provided that the word "material" in this sentence shall be
ignored when considered with reference to a representation or warranty that
already includes a quantitative qualification (for example, a dollar
threshold, a reference to "material" or "materiality", or a reference to a
"TCA Material Adverse Effect".
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(b) TCA shall have performed and complied in all material respects
with all agreements and obligations required by this Agreement to be
performed or complied with by it on or prior to the Closing Date.
(c) TCA shall have furnished a certificate of TCA executed by one or
more of its officers to evidence compliance with the conditions set forth
in Sections 7.2(a) and (b) of this Agreement.
(d) Any consents, approvals, notifications, disclosures, and filings
and registrations listed or required to be listed in Schedule 3.3 of the
TCA Disclosure Statement shall have been obtained or made.
(e) There shall not have occurred, since the date hereof, any TCA
Material Adverse Effect.
(f) TEC shall have entered into the Termination of Corporate Services
Agreement in substantially the form of Exhibit F to this Agreement.
(g) TEC and all the Subsidiaries of TEC (other than TCA and the
Subsidiaries of TCA) shall have paid in full all advances and other
payables that are due and owing to TCA or any Subsidiary of TCA and
regardless of their due date, net of all advances and other payables that
are due and owing to TEC and Subsidiaries of TEC (other than TCA and
Subsidiaries of TCA) by TCA and Subsidiaries of TCA regardless of their due
date. At the Closing, the Chief Financial Officer of TCA and TEC shall
furnish Thoratec with a certificate itemizing all such advances and
payables in whatever reasonable detail Thoratec may request.
(h) After giving effect to the net payment referenced in Section
7.2(g), but before giving effect to the arrangements adopted under Section
7.1(e) and before payment of the fees owed to J.P. Morgan Securities Inc.
and The Beacon Group Capital Services, LLC, TCA's consolidated "cash and
cash equivalents" and "short-term investments available for sale" as of the
Closing Date, determined in the same way that those items were determined
in preparing the TCA Financial Statements, shall total at least
$125,700,000.
(i) TEC and TCA shall have entered into an Amendment No. 2 to the
August 19, 1988 Sublease Agreement respecting the property located in
Woburn, Massachusetts in the form of Exhibit G to this Agreement. TEC shall
also have provided Thoratec with written evidence, reasonably satisfactory
to Thoratec, that the term of such Sublease Agreement and the term of the
lease dated November 1983 between WGO Limited Partnership and TEC, as
successor to Thermedics Inc., has been extended to February 28, 2004.
(j) TCA shall have timely exercised its right to extend, through June
30, 2001, its sublease with Sycamore Networks, Inc. respecting the premises
located in Chelmsford, Massachusetts that are currently leased there by
TCA.
ARTICLE VIII
TERMINATION
8.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after the requisite approval of the
stockholders of TCA or Thoratec:
(a) by mutual written consent duly authorized by the boards of
directors of Thoratec and TCA;
(b) by either TCA or Thoratec if the Merger shall not have been
consummated by March 1, 2001 (the "End Date") for any reason, provided that
the right to terminate this Agreement under this Section 8.1(b) shall not
be available to any party whose action or failure to act has been a
principal cause of or resulted in the failure of the Merger to occur on or
before such date and such action or failure to act constitutes a material
breach of this Agreement;
(c) by either TCA or Thoratec if a court of competent jurisdiction or
other Government Entity shall have issued an order, decree or ruling or
taken any other action, in any case having the effect of
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permanently restraining, enjoining or otherwise prohibiting the Merger,
which order, decree, ruling or other action is final and nonappealable;
(d) by TCA or Thoratec if the required approval of the stockholders of
TCA contemplated by this Agreement shall not have been obtained by reason
of the failure to obtain the required vote at a meeting of TCA stockholders
duly convened therefore or at any adjournment thereof if the final vote is
taken in fact or the meeting is completed without such a vote having been
taken and the meeting is not postponed or adjourned, provided that the
right to terminate this Agreement under this Section 8.1(d) shall not be
available to TCA where the failure to obtain TCA stockholder approval shall
have been caused by (i) the action or failure to act of TCA and such action
or failure to act constitutes a breach by TCA of this Agreement or (ii) a
breach of any of the TEC Agreements by TEC;
(e) by TCA or Thoratec if the required approval of the shareholders of
Thoratec contemplated by this Agreement shall not have been obtained by
reason of the failure to obtain the required vote at a meeting of Thoratec
shareholders duly convened therefore or at any adjournment thereof if the
final vote is taken in fact or the meeting is completed without such a vote
having been taken and the meeting is not postponed or adjourned, provided
that the right to terminate this Agreement under this Section 8.1(e) shall
not be available to Thoratec where the failure to obtain Thoratec
shareholder approval shall have been caused by the action or failure to act
of Thoratec and such action or failure to act constitutes a breach by
Thoratec of this Agreement;
(f) by Thoratec (at any time prior to the adoption and approval of
this Agreement and the Merger by the required vote of the stockholders of
TCA) if a TCA Triggering Event (as defined below) shall have occurred;
(g) by TCA (at any time prior to the approval of the issuance of
Thoratec Common Stock in the Merger by the required vote of the
stockholders of Thoratec) if a Thoratec Triggering Event (as defined below)
shall have occurred;
(h) by TCA, upon a breach of any representation, warranty, covenant or
agreement on the part of Thoratec set forth in this Agreement, or if any
representation or warranty of TCA shall have become untrue, in either case
such that the conditions set forth in Section 7.1(a) or Section 7.1(b)
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided that such
inaccuracy in Thoratec's representations and warranties or breach by
Thoratec remains uncured on the date which is 10 business days following
written notice of such breach or inaccuracy from TCA to Thoratec (it being
understood that TCA may not terminate this Agreement pursuant to this
paragraph (h) if it shall have materially breached this Agreement and
remains in breach of this agreement as of the date of such termination);
(i) by Thoratec, upon a breach of any representation, warranty,
covenant or agreement on the part of TCA set forth in this Agreement, or if
any representation or warranty of TCA shall have become untrue, in either
case such that the conditions set forth in Section 7.2(a) or Section 7.2(b)
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided that such
inaccuracy in TCA's representations and warranties or breach by TCA remains
uncured on the date which is 10 business days following written notice of
such breach or inaccuracy from Thoratec to TCA (it being understood that
Thoratec may not terminate this Agreement pursuant to this paragraph (i) if
it shall have materially breached this Agreement and remains in breach of
this agreement as of the date of such termination);
(j) by TCA if the average closing price per share of the Thoratec
Common Stock, as reported on Nasdaq for the 20 trading-day period ending
with the fifth full trading day immediately preceding the common date that
the Thoratec Special Meeting and the TCA Special Meeting are initially
scheduled to occur, as set forth in the Joint Proxy Statement/Prospectus
originally mailed to the shareholders of TCA and Thoratec, is less than
$14.00, provided that, in order to avail itself of this right, TCA must
give written notice of termination to Thoratec within 48 hours after that
20-trading day period ends or
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(k) by Thoratec if the average closing price per share of the Thoratec
Common Stock, as reported on Nasdaq for the 20 trading-day period ending
with the fifth full trading day immediately preceding the common date that
the Thoratec Special Meeting and the TCA Special Meeting are initially
scheduled to occur, as set forth in the Joint Proxy Statement/Prospectus
originally mailed to the shareholders of TCA and Thoratec, is less than
$11.00, provided that, in order to avail itself of this right, Thoratec
must give written notice of termination to TCA and TEC within 48 hours
after that 20-trading day period ends.
(l) For the purposes of this Agreement, a "TCA Triggering Event" shall
be deemed to have occurred if: (i) the board of directors of TCA or any
committee thereof shall for any reason have withdrawn or shall have amended
or modified in a manner adverse to Thoratec its recommendation in favor of,
the adoption and approval of the Agreement or the approval of the Merger;
(ii) TCA shall have failed to include in the Joint Proxy
Statement/Prospectus the recommendation of the board of directors of TCA in
favor of the adoption and approval of the Agreement and the approval of the
Merger; (iii) the board of directors of TCA fails to reaffirm its
recommendation in favor of the adoption and approval of the Agreement and
the approval of the Merger within 10 days after Thoratec requests in
writing that such recommendation be reaffirmed; (iv) the board of directors
of TCA or any committee thereof shall have approved or recommended any TCA
Acquisition Proposal or (v) a tender or exchange offer relating to
securities of TCA shall have been commenced by a Person unaffiliated with
Thoratec, and TCA shall not have sent to its security holders pursuant to
Rule 14e-2 promulgated under the Securities Act, within 10 business days
after such tender or exchange offer is first published, sent or given, a
statement disclosing that TCA recommends rejection of such tender or
exchange offer.
(m) For the purposes of this Agreement, a "Thoratec Triggering Event"
shall be deemed to have occurred if: (i) the board of directors of Thoratec
or any committee thereof shall for any reason have withdrawn or shall have
amended or modified in a manner adverse to TCA its recommendation in favor
of the issuance of Thoratec Common Stock in the Merger; (ii) Thoratec shall
have failed to include in the Joint Proxy Statement/Prospectus the
recommendation of the board of directors of Thoratec in favor of the
issuance of Thoratec Common Stock in the Merger; (iii) the board of
directors of Thoratec fails to reaffirm its recommendation in favor of the
adoption and approval of the Agreement and the approval of the Merger
within 10 days after TCA requests in writing that such recommendation be
reaffirmed; (iv) the board of directors of Thoratec or any committee
thereof shall have approved or recommended any Thoratec Acquisition
Proposal or (v) a tender or exchange offer relating to securities of
Thoratec shall have been commenced by a Person unaffiliated with TCA, and
Thoratec shall not have sent to its security holders pursuant to Rule 14e-2
promulgated under the Securities Act, within 10 business days after such
tender or exchange offer is first published, sent or given, a statement
disclosing that Thoratec recommends rejection of such tender or exchange
offer.
8.2 Notice of Termination; Effect of Termination. Any termination of this
Agreement under Section 8.1 will be effective immediately upon the delivery of a
valid written notice of the terminating party to the other parties hereto. In
the event of the termination of this Agreement as provided in Section 8.1, this
Agreement shall be of no further force or effect, except (i) as set forth in
Section 5.3, this Section 8.2, Section 8.3 and Article IX, each of which shall
survive the termination of this Agreement, and (ii) nothing herein shall relieve
any party from liability for any breach of this Agreement. No termination of
this Agreement shall affect the obligations of the parties contained in the
Confidentiality Agreements, all of which obligations shall survive termination
of this Agreement in accordance with their terms.
8.3 Fees and Expenses.
(a) General. Except as set forth in this Section 8.3, all fees and expenses
incurred in connection with the TCA Agreements and the transactions contemplated
hereby (including the fees for filings under the HSR Act) shall be paid by the
party incurring such expenses whether or not the Merger is consummated, provided
that: (i) Thoratec and TCA shall share equally all fees and expenses, other than
attorneys' and accountants fees and expenses, incurred in relation to the
printing and filing (with the SEC) of the Joint Proxy Statement/ Prospectus
(including any preliminary materials related thereto), and the Registration
Statement (including financial statements and exhibits) and any amendments or
supplements thereto and (ii) TEC shall pay all of
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Thoratec's and TCA's fees and expenses incurred in putting in place and
implementing the arrangements contemplated by Section 7.1(e).
(b) TCA Payments. If this Agreement is terminated by Thoratec or TCA, as
applicable, pursuant to Sections 8.1(d) or (f) or TCA breaches Section 5.4(e) or
TEC breaches Section 5.4(k), then TCA and TEC (jointly and severally) shall
promptly, but in no event later than two days after the date of such
termination, pay Thoratec a fee equal to $12 million in immediately available
funds (the "TCA Termination Fee"). TCA and TEC acknowledge that the agreements
contained in this Section 8.3(b) are an integral part of the transactions
contemplated by this Agreement and that, without these agreements, Thoratec
would not have entered into this Agreement. Accordingly, if TCA and TEC fail to
pay in a timely manner the amounts due pursuant to this Section 8.3(b) and, in
order to obtain such payment, Thoratec makes a claim that results in a judgment
against TCA or TEC for the amounts set forth in this Section 8.3(b), TCA and TEC
shall pay to Thoratec its reasonable costs and expenses (including reasonable
attorneys' fees and expenses) in connection with such suit, together with
interest on the amounts set forth in this Section 8.3(b) at the prime rate of
The Chase Manhattan Bank in effect on the date such payment was required to be
made.
(c) Thoratec Payments. If this Agreement is terminated by TCA or Thoratec,
as applicable, pursuant to Sections 8.1(e) or (g) or Thoratec breaches Section
5.4(f), then Thoratec shall promptly, but in no event later than two days after
the date of such termination, pay TCA a fee equal to $12 million (in the case of
a termination under Section 8.1(g) or a breach under Section 5.4(f)) and $3
million (in the case of a termination under Section 8.1(e)) in immediately
available funds (in either such case, the "Thoratec Termination Fee"). Thoratec
acknowledges that the agreements contained in this Section 8.3(c) are an
integral part of the transactions contemplated by this Agreement and that,
without these agreements, TCA and TEC would not have entered into is Agreement.
Accordingly, if Thoratec fails to pay in a timely manner the amounts due
pursuant to this Section 8.3(c) and, in order to obtain such payment, TCA or TEC
makes a claim that results in a judgment against Thoratec for the amounts set
forth in this Section 8.3(c), Thoratec shall pay to TCA and TEC their respective
reasonable costs and expenses (including reasonable attorneys' fees and
expenses) in connection with such suit, together with interest on the amounts
set forth in this Section 8.3(c) at the prime rate of The Chase Manhattan Bank
in effect on the date such payment was required to be made.
ARTICLE IX
MISCELLANEOUS
9.1 Amendment and Modification. Subject to applicable law, this Agreement
may be amended, modified or supplemented only by written agreement of Thoratec,
Merger Sub, TCA and TEC at any time prior to the Effective Time, provided that
after approval of this Agreement by the stockholders of TCA or Thoratec, no such
amendment or modification shall change the amount or form of the consideration
to be received by TCA's stockholders in the Merger.
9.2 Waiver of Compliance; Consents. Any failure of Thoratec or Merger Sub,
on the one hand, or TCA or TEC, on the other hand, to comply with any
obligation, covenant, agreement or condition herein may be waived by TCA or TEC
(with respect to any failure by Thoratec or Merger Sub) or Thoratec or Merger
Sub (with respect to any failure by TCA or TEC), respectively, only by a written
instrument signed by the party granting such waiver, but such waiver or failure
to insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure. Whenever this Agreement requires or permits consent
by or on behalf of any party hereto, such consent shall be given in writing in a
manner consistent with the requirements for a waiver of compliance as set forth
in this Section 9.2.
9.3 Investigations. The respective representations and warranties of
Thoratec, Merger Sub, TCA and TEC contained herein or in any certificates or
other documents delivered prior to or at the Closing shall not be deemed waived
or otherwise affected by any investigation made by any party hereto.
9.4 Notices. All notices and other communications hereunder shall be in
writing and shall be delivered personally by overnight courier or similar means
or sent by facsimile with written confirmation of receipt, to
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the parties at the addresses specified below (or at such other address for a
party as shall be specified by like notice. Any such notice shall be effective
upon receipt, if personally delivered or on the next business day following
transmittal if sent by confirmed facsimile. Notices shall be delivered as
follows:
<TABLE>
<S> <C> <C>
(a) if to TCA or Thermo Electron Corporation
TEC, to: 81 Wyman Street
Waltham, Massachusetts 02454
Telephone: (781) 622-1198
Facsimile: (781) 622-1283
Attention: Seth H. Hoogasian, Esq.
with a copy to: Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Telephone: (617) 526-6000
Facsimile (617) 526-5000
Attention: Jay E. Bothwick, Esq.
(b) if to Thoratec or Thoratec Laboratories Corporation
Merger Sub, to: 6035 Stoneridge Drive
Pleasanton, California 94588
Telephone: (925) 847-8600
Facsimile: (925) 847-8625
Attention: D. Keith Grossman
with a copy to: Heller Ehrman White & McAuliffe LLP
2500 Sand Hill Road, Suite 100
Menlo Park, California 94025
Telephone: (650) 234-4200
Facsimile: (650) 234-4299
Attention: August J. Moretti, Esq.
</TABLE>
9.5 Assignment; Third Party Beneficiaries. Neither this Agreement nor any
right, interest or obligation hereunder shall be assigned by any of the parties
hereto without the prior written consent of the other parties. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. This Agreement is not intended to
confer any rights or remedies upon any Person other than: (i) the parties to
this Agreement and (ii) with respect only to Section 5.8, the Indemnified
Parties.
9.6 Termination of Cross License Agreement. Effective if and when the
Merger closes and without the necessity for any additional documentation or
action by any party: (a) the Intellectual Property Cross License Agreement dated
as of August 19, 1988, between TCA and, by succession, TEC is terminated; (b)
TCA and its Subsidiaries release TEC and its Subsidiaries (other than TCA and
its Subsidiaries) from all obligations and liabilities under that agreement and
(c) TEC and its Subsidiaries (other than TCA and its Subsidiaries) release TCA
and its Subsidiaries from all obligations and liabilities under that agreement.
9.7 Governing Law. This Agreement shall be governed by the laws of the
State of California without reference to principles of conflicts of laws.
9.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.9 Severability. In case any one or more of the provisions contained in
this Agreement should be finally determined to be invalid, illegal or
unenforceable in any respect against a party hereto, it shall be adjusted if
possible to effect the intent of the parties. In any event, the validity,
legality and enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby, and such
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invalidity, illegality or unenforceability shall only apply as to such party in
the specific jurisdiction where such final determination shall have been made.
9.10 Interpretation. The Article and Section headings contained in this
Agreement are solely for the purpose of reference and shall not in any way
affect the meaning or interpretation of this Agreement. The word "including"
shall be deemed to mean "including, without limitation".
9.11 Entire Agreement. This Agreement and the other documents signed and
dated as of the date of this Agreement, including the exhibits hereto and
thereto, and the documents and instruments referred to herein and therein
(including the TCA Disclosure Statement and the Thoratec Disclosure Statement),
embody the entire agreement and understanding of the parties hereto in respect
of the subject matter contained herein and therein. There are no
representations, promises, warranties, covenants, or undertakings, other than
those expressly set forth or referred to herein and therein.
9.12 Definition of "Law". When used in this Agreement "law" refers to any
applicable law (whether civil, criminal or administrative) including, without
limitation, common law, statute, statutory instrument, treaty, regulation,
directive, decision, code, order, decree, injunction, resolution or judgment of
any government, quasi-government, supranational, federal, state or local
government, statutory or regulatory body, court, or agency.
9.13 Rules of Construction. Each party to this Agreement has been
represented by counsel during the preparation and execution of this Agreement,
and therefore waives any rule of construction that would construe ambiguities
against the party drafting the agreement.
IN WITNESS WHEREOF, Thoratec, Merger Sub, TCA and TEC have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first above written.
THORATEC LABORATORIES CORPORATION
By: /s/ D. KEITH GROSSMAN
------------------------------------
Name: D. Keith Grossman
Title: President and Chief Executive
Officer
LIGHTNING ACQUISITION CORP.
By: /s/ D. KEITH GROSSMAN
------------------------------------
Name: D. Keith Grossman
Title: President and Chief Executive
Officer
THERMO ELECTRON CORPORATION
By: /s/ THEO MELAS-KYRIAZI
------------------------------------
Name: Theo Melas-Kyriazi
Title: Chief Financial Officer
THERMO CARDIOSYSTEMS INC.
By: /s/ THEO MELAS-KYRIAZI
------------------------------------
Name: Theo Melas-Kyriazi
Title: Chief Financial Officer
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ANNEX B
[LETTERHEAD OF LEHMAN BROTHERS INC.]
October 3, 2000
Board of Directors
Thoratec Laboratories Corporation
6035 Stoneridge Drive
Pleasanton, CA 94588
Members of the Board:
We understand that Thoratec Laboratories Corporation (the "Company")
intends to enter into an Agreement and Plan of Merger dated October 3, 2000 (the
"Agreement") by and among the Company, Lightning Acquisition Corp., a
newly-formed wholly owned subsidiary of the Company ("Merger Sub"), Thermo
Cardiosystems Inc. ("TCA") and Thermo Electron Corporation, a direct majority
stockholder of TCA, pursuant to which Merger Sub will merge with and into TCA
(the "Merger") and, upon the effectiveness of the Merger, each issued and
outstanding share of TCA's common stock shall be converted into 0.8350 shares
(the "Exchange Ratio") of common stock of the Company (the "Proposed
Transaction"). The terms and conditions of the Proposed Transaction are set
forth in more detail in the Agreement.
We have been requested by the Board of Directors of the Company to render
our opinion with respect to the fairness, from a financial point of view, to the
Company of the Exchange Ratio to be paid to TCA's shareholders in the Proposed
Transaction. We have not been requested to opine as to, and our opinion does not
in any manner address, the Company's underlying business decision to proceed
with or effect the Proposed Transaction.
In arriving at our opinion, we reviewed and analyzed: (1) the Agreement and
the specific terms of the Proposed Transaction, (2) publicly available
information concerning the Company and TCA that we believe to be relevant to our
analysis, including Annual Reports on Form 10-K for the fiscal year ended
January 1, 2000 and Quarterly Reports on Form 10-Q for the quarters ended April
1, 2000 and July 1, 2000, (3) financial and operating information with respect
to the business, operations and prospects of the Company furnished to us by the
Company, including without limitation the results expected by the management of
the Company for the quarter ending September 30, 2000, (4) financial and
operating information with respect to the business, operations and prospects of
TCA furnished to us by TCA, including without limitation the results expected by
the management of TCA for the quarter ending September 30, 2000, (5) the trading
histories of the common stock of the Company and TCA from September 29, 1999 to
the present and a comparison of these trading histories with each other and with
those of other companies that we deemed relevant, (6) a comparison of the
historical financial results and present financial condition of the Company with
those of other companies that we deemed relevant, (7) a comparison of the
historical financial results and present financial condition of TCA with those
of other companies that we deemed relevant, (8) a comparison of the financial
terms of the Proposed Transaction with the financial terms of certain other
transactions that we deemed relevant, (9) the potential pro forma effect of the
Proposed Transaction on the future financial performance of the Company,
including the cost savings, operating synergies and other strategic benefits
which management of the Company has estimated will result from a combination of
the businesses of the Company and TCA (the "Expected Synergies"), (10) the
relative contributions of the Company and TCA to the future financial
performance of the combined company on a pro forma basis, and (11) publicly
available reports prepared by independent research analysts regarding the future
financial performance of the Company and TCA. In addition, we have had
discussions with the managements of the Company and TCA concerning their
respective businesses, operations, assets, financial conditions and prospects
and have undertaken such respective other studies, analyses and investigations
as we deemed appropriate.
In arriving at our opinion, we have assumed and relied upon the accuracy
and completeness of the financial and other information used by us without
assuming any responsibility for independent verification of
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<PAGE> 146
such information and have further relied upon the assurances of management of
the Company and TCA that they are not aware of any facts or circumstances that
would make such information inaccurate or misleading. With respect to the
financial projections of TCA prepared by management of the Company, upon the
advice of the Company we have assumed that such projections have been reasonably
prepared on a basis reflecting the best currently available estimates and
judgments of the management of the Company as to the future financial
performance of TCA and that, on a stand alone basis, TCA would perform
substantially in accordance with such projections. With respect to the future
financial performance of the Company, upon advice of the Company, we have
assumed that such projections have been reasonably prepared on a basis
reflecting the best currently available estimates and judgments of the
management of the Company as to the future financial performance of the Company
and that, on a stand alone basis, the Company would perform substantially in
accordance with such projections. In addition, we have assumed that the Expected
Synergies will be realized substantially in accordance with such estimates. In
arriving at our opinion, we have conducted only a limited physical inspection of
the properties and facilities of the Company and TCA and have not made or
obtained any evaluations or appraisals of the assets or liabilities of the
Company and TCA. Upon advice of the Company and its legal and accounting
advisors, we have assumed that the Merger will qualify as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended, and therefore as a tax-free transaction to the shareholders of the
Company and TCA. Our opinion necessarily is based upon market, economic and
other conditions as they exist on, and can be evaluated as of, the date of this
letter.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the Exchange Ratio to be paid
by the Company in the Proposed Transaction is fair to the Company.
We have acted as financial advisor to the Company in connection with the
Proposed Transaction and will receive a fee for our services. In addition, the
Company has agreed to indemnify us for certain liabilities that may arise out of
the rendering of this opinion. We also have performed various investment banking
services for the Company in the past (including acting as underwriter for an
equity offering of common stock of the Company in April 2000) and have received
customary fees for such services. In the ordinary course of our business, we
actively trade in the equity securities of the Company and the equity and debt
securities of TCA and Thermo Electron Corporation for our own account and for
the accounts of our customers and, accordingly, may at any time hold a long or
short position in such securities.
This opinion is for the use and benefit of the Board of Directors of the
Company and is rendered to the Board of Directors in connection with its
consideration of the Proposed Transaction. This opinion is not intended to be
and does not constitute a recommendation to any stockholder of the Company as to
how such stockholder should vote with respect to the Proposed Transaction.
Very truly yours,
/s/ LEHMAN BROTHERS
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<PAGE> 147
ANNEX C
LETTERHEAD OF JP MORGAN SECURITIES INC.
October 3, 2000
The Board of Directors
Thermo Cardiosystems Inc.
470 Wildwood Street
Woburn, MA 01888
Attention: Mr. R. Michael Kleine
Chief Executive Officer
Ladies and Gentlemen:
You have requested our opinion as to the fairness, from a financial point
of view, to the holders of common stock, $0.10 par value (the "Thermo
Cardiosystems Common Stock"), of Thermo Cardiosystems Inc. (the "Company") of
the consideration proposed to be paid to them in connection with the proposed
merger (the "Merger") of Lightning Acquisition Corp. ("Merger Sub"), a
Massachusetts corporation and wholly-owned subsidiary of Thoratec Laboratories
Corporation ("Thoratec"), into the Company. Pursuant to the Agreement and Plan
of Merger, dated as of October 3, 2000 (the "Agreement"), among the Company,
Thoratec, Merger Sub, and Thermo Electron Corporation ("Thermo Electron"), the
Company will become a wholly-owned subsidiary of Thoratec and each outstanding
share of Thermo Cardiosystems Common Stock will be converted into the right to
receive 0.835 shares (the "Exchange Ratio") of Thoratec Common Stock, no par
value (the "Thoratec Common Shares").
In arriving at our opinion, we have reviewed (i) the Agreement; (ii)
certain publicly available information concerning the business of the Company
and of certain other companies engaged in businesses comparable to that of the
Company, and the reported market prices for certain other companies' securities
deemed comparable; (iii) publicly available terms of certain transactions
involving businesses comparable to that of the Company and the consideration
received for such businesses; (iv) current and historical market prices of the
Thermo Cardiosystems Common Stock and the Thoratec Common Shares; (v) the
audited financial statements of the Company and Thoratec, respectively, for the
fiscal year ended January 1, 2000, and the unaudited financial statements of the
Company and Thoratec, respectively, for the period ended July 1, 2000; (vi)
certain agreements with respect to outstanding indebtedness or obligations of
Thermo Cardio-systems, Thermo Electron and Thoratec; (vii) certain internal
financial analyses and forecasts prepared by the Company and Thoratec and their
respective management; and (viii) the terms of other business combinations that
we deemed relevant.
In addition, we have held discussions with certain members of the
management of the Company and Thoratec with respect to certain aspects of the
Merger, and the past and current business operations of the Company and
Thoratec, the financial condition and future prospects and operations of the
Company and Thoratec, the effects of the Merger on the financial condition and
future prospects of the Company and Thoratec, and certain other matters we
believed necessary or appropriate to our inquiry. We have reviewed such other
financial studies and analyses and considered such other information as we
deemed appropriate for the purposes of this opinion.
In giving our opinion, we have relied upon and assumed, without independent
verification, the accuracy and completeness of all information that was publicly
available or was furnished to us by the Company and Thoratec or otherwise
reviewed by us, and we have not assumed any responsibility or liability
therefor. We have not conducted any valuation or appraisal of any assets or
liabilities, nor have any such valuations or appraisals been provided to us. In
relying on financial analyses and forecasts provided to us, we have assumed that
they have been reasonably prepared based on assumptions reflecting the best
currently available estimates
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and judgments by management as to the expected future results of operations and
financial condition of the Company and Thoratec to which such analyses or
forecasts relate. We have also assumed that the Merger will have the tax and
accounting consequences described in discussions with, and materials furnished
to us by, representatives of the Company, that the other transactions
contemplated by the Agreement will be consummated as described in the Agreement
and that the Exchange Ratio will not be adjusted except pursuant to Section
2.1(e) of the Agreement. We have relied as to all legal matters relevant to
rendering our opinion upon the advice of counsel.
Our opinion is necessarily based on economic, market and other conditions
as in effect on, and the information made available to us as of, the date
hereof. It should be understood that subsequent developments may affect this
opinion and that we do not have any obligation to update, revise, or reaffirm
this opinion. We are expressing no opinion herein as to the price at which the
Thoratec Common Shares will trade at any future time.
We have acted as financial advisor to the Company with respect to the
proposed Merger and will receive a fee from the Company for our services if the
proposed Merger is consummated. Over the past several months, we have also been
acting as financial advisor to Thermo Electron, the Company's majority
shareholder, for the purpose of advising Thermo Electron in connection with its
strategic alternatives, including the proposed reorganization of Thermo Electron
and its subsidiaries, for which we have received and will continue to receive
separate, customary fees from Thermo Electron. These other fees include a
minimum retainer fee and additional compensation if some or all of the elements
of Thermo Electron's reorganization are completed. In the ordinary course of
their businesses, J.P. Morgan and its affiliates may actively trade the debt and
equity securities of the Company, Thermo Electron or Thoratec for their own
account or for the accounts of customers and, accordingly, they may at any time
hold long or short positions in such securities.
On the basis of and subject to the foregoing, it is our opinion as of the
date hereof that the Exchange Ratio in the proposed Merger is fair, from a
financial point of view, to the holders of the Thermo Cardiosystems Common
Stock.
This letter is provided to the Board of Directors of the Company in
connection with and for the purposes of its evaluation of the Merger. This
opinion does not constitute a recommendation to any stockholder of the Company
as to how such stockholder should vote with respect to the Merger. This opinion
may not be disclosed, referred to, or communicated (in whole or in part) to any
third party for any purpose whatsoever except with our prior written consent in
each instance; provided that this opinion may be reproduced in full in any proxy
or information statement mailed to stockholders of the Company and Thoratec but
may not otherwise be disclosed publicly in any manner without our prior written
approval and must be treated as confidential.
Very truly yours,
/s/ J.P. MORGAN SECURITIES INC.
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ANNEX D
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered
into as of October 3, 2000 by and between Thoratec Laboratories Corporation, a
California corporation ("Thoratec"), and Thermo Electron Corporation, a Delaware
corporation ("TEC").
A. Thoratec, Lightning Acquisition Corp., a Massachusetts corporation and
wholly-owned subsidiary of Thoratec ("Merger Sub"), TEC and Thermo Cardiosystems
Inc., a Massachusetts corporation ("TCA"), entered into an Agreement and Plan of
Merger (the "Merger Agreement") under which those parties agreed, upon the terms
and subject to the conditions set forth in the Merger Agreement, to merge Merger
Sub into TCA (the "Merger").
B. By virtue of the Merger, TEC will become the beneficial owner of
Registrable Securities (defined below). Thoratec and TEC desire that Thoratec
grant TEC certain registration rights regarding the Registrable Securities in
order to facilitate TEC's ability to liquidate those securities. The purpose of
this Agreement is to grant those rights.
C. As an inducement and condition to entering into the Merger Agreement,
Thoratec has agreed that TEC will be entitled to the registration rights as set
forth in this Agreement.
ACCORDINGLY, THE PARTIES AGREE AS FOLLOWS:
1. Definitions. For purposes of this Agreement, these terms have these
meanings:
"Business Day" means any Monday, Tuesday, Wednesday, Thursday or
Friday that is not a day on which banking institutions in the City of New
York are authorized by law, regulation or executive order to close.
"Common Stock" means the common stock, no par value, of Thoratec.
"Compulsory Participation Notice" has the meaning set forth in Section
4(b).
"Compulsory Registration" has the meaning set forth in Section 4(a).
"Compulsory Registration Statement" has the meaning set forth in
Section 4(a).
"Delay Notice" has the meaning set forth in Section 7(b).
"Effective Date" means the date of the closing of the Merger.
"Holder" means TEC and any permitted assignee of all or any of TEC's
registration rights under this Agreement.
"Material Development Condition" has the meaning set forth in Section
7(b).
"Merger Agreement" has the meaning set forth in the recitals.
"Other Holders" has the meaning set forth in Section 5.
"Persons" means an individual or entity.
"Prospectus" means the prospectus included in any Registration
Statement, as amended or supplemented.
"Registrable Securities" means the Common Stock issued to TEC in the
Merger and any other securities later issued, as a result of or in
connection with any stock, dividend, stock split or reverse stock split,
combination, recapitalization, reclassification, merger, consolidation,
exchange or distribution in respect of the Common Stock issued to TEC in
the Merger, but only so long as such Common Stock or other securities are
held by TEC or another Holder.
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"Registration Expenses" has the meaning set forth in Section 8.
"Registration Period" has the meaning set forth in Section 4(c).
"Registration Statement" means any registration statement within the
scope of Sections 3,4 or 5 of this Agreement that covers any of the
Registrable Securities, including the Prospectus included therein, all
amendments and supplements to that Registration Statement, including
post-effective amendments, and all exhibits and all materials incorporated
by reference in that Registration Statement.
"Requesting Securityholder" has the meaning set forth in Section 5.
"Restricted Securities" has the meaning set forth in Section 2.
"Rule 144" means Rule 144 adopted under the Securities Act, as amended
from time to time, or any successor rule that may be adopted by the SEC.
"Rule 145" means Rule 145 adopted under the Securities Act, as amended
from time to time, or any successor rule that may be adopted by the SEC.
"Rule 415" means Rule 415 adopted under the Securities Act, as amended
from time to time, or any successor rule that may be adopted by the SEC.
"SEC" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended or any
successor federal statute, and the rules and regulations thereunder, as the
same are in effect from time to time.
"Shareholder Agreement" means the Shareholder Agreement between
Thoratec and TEC dated the same date as the Merger Agreement.
"Shelf Registration Period" has the meaning set forth in Section 3(b).
"Shelf Registration Statements" has the meaning set forth in Section
3(a).
"Underwritten Offering" means a registered offering in which
securities of Thoratec are sold to an underwriter for reoffering to the
public.
Except where expressly indicated otherwise, all references to sections in this
Agreement are to sections of this Agreement.
2. Securities Subject to this Agreement. The securities entitled to the
benefits of this Agreement are the Registrable Securities but, with respect to
any particular Registrable Security, only so long as such securities continue to
be Restricted Securities and only so long as such securities are held by a
Holder. A Registrable Security that has ceased to be a Registrable Security
cannot thereafter become a Registrable Security. A "Restricted Security" is a
Registrable Security (i) which has not been sold pursuant to an effective
Registration Statement in accordance with the intended plan and method of
distribution therefor set forth in the final Prospectus forming part of such
Registration Statement, and (ii) which cannot, at that time, be freely sold by
its Holder publicly without any registration under the Securities Act and
without any restrictions (including, without limitation, restrictions as to
volume or manner of sale) under Rule 144 or Rule 145.
3. Shelf Registrations.
(a) General. Thoratec shall use its reasonable best efforts to cause to
become effective under the Securities Act Registration Statements relating to
the resale, from time to time, of the Registrable Securities in accordance with
the plan and method of distribution set forth in the respective Prospectuses
included in such Registration Statements (the "Shelf Registration Statements")
as follows: (i) on or before four months after the Effective Date a Shelf
Registration Statement relating to the resale of 25% of the Registrable
Securities; (ii) on or before 12 months after the Effective Date a Shelf
Registration Statement relating to an additional 25% of the Registrable
Securities and (iii) on or before 18 months after the Effective Date a Shelf
Registration Statement relating to all previously unregistered Registrable
Securities. The plan and method of
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distribution may include an Underwritten Offering of such Registrable
Securities. Thoratec shall make the initial filing of each Shelf Registration at
least 60 days prior to the date Thoratec is obligated to have such Shelf
Registration effective. Thoratec shall promptly respond to any SEC comments to
such Shelf Registration Statement. Thoratec shall file amendments to the Shelf
Registration Statements to reflect transfers of Registrable Securities to any
Holder.
(b) Effective Period. Thoratec will use its reasonable best efforts to
cause the Shelf Registration Statements to become effective on or before the
dates set forth above and keep the Shelf Registration Statements continuously
effective until the earlier of (i) the fifth anniversary of the Effective Date
(subject to extension as provided in Section 7(b)) and (ii) the date on which
all Registrable Securities covered by the Shelf Registration Statements have
been sold thereunder in accordance with the plan and method of distribution
intended by Holders and disclosed in the respective Prospectuses included in the
Shelf Registration Statements (the "Shelf Registration Period").
(c) Restriction on Transfer. Notwithstanding the effectiveness of the Shelf
Registration Statements, TEC will only distribute Registrable Securities in
compliance with Section 6(c) of the Shareholder Agreement.
4. Compulsory Registration.
(a) Compulsory. Subject to Section 7(b), Thoratec shall file a Registration
Statement on Form S-3 (or any successor form) or any other appropriate form
under the Securities Act for an Underwritten Offering (the "Compulsory
Registration Statement") covering the Registrable Securities that Thoratec has
been requested to register in accordance with Section 4(b) (a "Compulsory
Registration"), provided that no one Compulsory Registration shall include
Registrable Securities constituting more than 10 percent of the total number of
outstanding securities of the class that includes the Registrable Securities and
provided further that (i) no more than one Compulsory Registration Statement
shall be filed during the period commencing four months after the Effective Date
and ending on the first anniversary of the Effective Date; (ii) no more than one
Compulsory Registration shall be filed during the period commencing on the first
anniversary of the Effective Date and ending 18 months after the Effective Date;
(iii) no more than one Compulsory Registration shall be filed during the period
commencing 18 months after the Effective Date and ending on the second
anniversary of the Effective Date; and (iv) commencing 18 months after the
Effective Date no more than one Compulsory Registration Statement filed on or
after 18 months after the Effective Date shall be filed in any twelve month
period. If, at the time of any such registration, there are two or more Holders
and at least two of them wish to register a total of more than that number of
Registrable Securities, they shall allocate the number of Registrable Securities
registered for each of them based on the relative number of Registrable
Securities that each desires to have registered.
(b) Participation Notice. The Holders shall have the right, by giving
written notice (the "Compulsory Participation Notice") to Thoratec not later
than the fifth anniversary of the Effective Date, to elect to have included in
the Compulsory Registration Statement such portion of their Registrable
Securities as is indicated in their Compulsory Participation Notice. A Holder
may, at any time up to five Business Days before the anticipated effective date
of the Compulsory Registration Statement, request that its Registrable
Securities not be included therein by providing a written notice to that effect
to Thoratec. Any such request shall be binding and irrevocable.
(c) Effectiveness of Compulsory Registration Statement. Subject to Section
6(b), Thoratec shall file a Registration Statement relating to any Compulsory
Registration as soon as practicable but no later than 45 calendar days after
receiving the Compulsory Notice and shall use its commercially reasonable
efforts to: (i) cause the Compulsory Registration Statement to become effective
as promptly as practicable and (ii) thereafter keep the Compulsory Registration
Statement effective continuously for the period ending, subject to the second
sentence of Section 6(b) and the second sentence of Section 7(b), on the earlier
of (A) the expiration of six months after the date the Compulsory Registration
Statement is declared effective by the SEC and (B) the date on which all
Registrable Securities covered by such Compulsory Registration Statement have
been sold and the distribution contemplated hereby has been completed (the
"Registration Period").
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(d) Inclusion of Other Securities. Thoratec and any other holder of
Thoratec's securities who has contractual registration rights may include its
securities in the Compulsory Registration effected pursuant to this Section 4,
subject to Section 4(g).
(e) Withdrawal. Subject to Section 7(b), Thoratec will withdraw the
Compulsory Registration Statement upon: (i) the receipt from the SEC of a
written request for withdrawal or (ii) having obtained the written request of
the Holders of a majority of the Registrable Securities covered by that
Registration Statement.
(f) Maximum Number of Compulsory Registrations. Thoratec shall not be
obligated to file and seek effectiveness of more than six Compulsory
Registration Statements. A Compulsory Registration Statement withdrawn at the
request of Thoratec pursuant to Section 4(e) or Section 7(b)(ii), or withdrawn
at the request of Holders if such Holders agree to pay the Registration Expenses
in connection therewith, shall not be counted towards that maximum number of
Compulsory Registration Statements.
(g) Priority on Compulsory Registration. With respect to any Compulsory
Registration, if the managing underwriter or underwriters to which such
Compulsory Registration relates, advise the selling Holders in writing that the
total amount of Registrable Securities and equity securities requested to be
included pursuant to Section 4(d) will in the aggregate materially and adversely
affect the success of such Underwritten Offering, then: (i) first, the amount of
equity securities requested to be included pursuant to Section 4(d) will be
reduced to zero if necessary (pro rata among Thoratec and such other holders on
the basis of the amount of such equity securities to be included therein by
Thoratec and each such holder) and (ii) second, the amount of Registrable
Securities of all Holders who have requested to have Registrable Securities
included in the Compulsory Registration will be reduced, pro rata among such
Holders on the basis of the amount of such Registrable Securities requested to
be included therein by each such Holder, so that, after such reduction, there
will be included in such Underwritten Offering the amount of Registrable
Securities that, in the written opinion of such managing underwriter or
underwriters, can be sold without materially and adversely affecting the success
of the Underwritten Offering.
5. Piggyback Registration. If, on or before the fifth anniversary of the
Effective Date, Thoratec at any time proposes to file a registration statement
with respect to any class of its equity securities, whether for its own account
(other than in connection with the Compulsory Registration Statement
contemplated by Section 4 or a registration statement on Form S-4 or S-8 (or any
successor or substantially similar form), or for the account of a holder of
securities of Thoratec pursuant to demand registration rights granted by
Thoratec to such holder (a "Requesting Securityholder"), or for the registration
of securities for sale by Thoratec on a continuous or delayed basis pursuant to
Rule 415, then Thoratec shall give written notice of such proposed filing to all
Holders at least 20 days before the anticipated filing date of such registration
statement. That notice shall offer to all Holders the opportunity to have any or
all of the Registrable Securities held by the Holders included in that
registration statement. Each Holder desiring to have its Registrable Securities
registered under this Section 4 shall so advise Thoratec in writing within 15
days after the date of receipt of such notice (which request shall set forth the
amount of Registrable Securities for which registration is requested). Thoratec
shall use its commercially reasonable efforts to include in that registration
statement all the Registrable Securities so requested to be included therein.
Notwithstanding the foregoing, if the managing underwriter or underwriters of
any such proposed public offering advises Thoratec in writing that the total
amount or kind of securities which the Holders, Thoratec and any other Persons
(the "Other Holders") intend to be included in such proposed public offering is
sufficiently large to materially and adversely affect the success of such
proposed public offering, then the amount or kind of securities to be offered
for the accounts of Holders and Other Holders shall be reduced as follows: (i)
if such Registration Statement is a primary registration on behalf of Thoratec,
Thoratec will include in such registration (A) first, all securities to be
offered by Thoratec and (B) second, up to the full amount of securities
requested to be included in such registration by the Holders and the Requesting
Securityholders having contractual rights to include securities in such
underwritten offering (allocated pro rata among the Holders and Requesting
Securityholders having contractual rights to include securities in such
underwritten offering on the basis of the amount of securities requested to be
included therein by each such Holder or Requesting Securityholder), so that the
total amount of securities to be included in such offering is the full amount
that, in the written opinion
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of such managing underwriter or underwriters, can be sold without materially and
adversely affecting the success of such offering; and (ii) if such Registration
Statement is an underwritten secondary registration on behalf of such Requesting
Securityholders, Thoratec will include in such registration: (A) first, all
securities of such Requesting Securityholders requested to be included therein
and (B) second, up to the full amount of securities requested to be included in
such registration by the Holders and other persons (allocated pro rata among
such Holders and such other persons on the basis of the amount of securities
requested to be included therein by each such Holder or other person), so that
the total amount of securities to be included in such offering is the full
amount, that in the written opinion of such managing underwriter or
underwriters, can be sold without materially and adversely affecting the success
of the offering. Anything to the contrary in this Agreement notwithstanding,
Thoratec may withdraw or postpone a registration statement referred to in this
Section 5 at any time before it becomes effective or withdraw, postpone or
terminate the offering after it becomes effective without obligation to any
Holder. In addition, this Section 5 is subject to Section 6(c). If an offering
in connection with which a Requesting Securityholder is entitled to registration
under this Section 5 is an underwritten offering, any Requesting Securityholder
whose Registrable Securities are included in the Registration Statement shall,
unless otherwise agreed by Thoratec, offer and sell the Registrable Securities
in an underwritten offering using the same underwriter or underwriters and,
subject to this Agreement, on the same terms and conditions as other shares of
Common Stock included in the underwritten offering.
6. Registration Procedures.
(a) General. Subject to Sections 7(b) and (c), in connection with
Thoratec's registration obligations pursuant to Sections 3 and 4 and, to the
extent applicable, Section 5, Thoratec shall:
(i) prepare and file with the SEC: (A) a new Registration Statement or
such amendments and post-effective amendments to an existing Registration
Statement as may be necessary to keep the Registration Statement effective
for the time period set forth herein, and (B) any amendments and post-
effective amendments to any Shelf Registration Statement, any Prospectus
and any supplements to any Prospectus included in any Shelf Registration
Statement, as may be requested by any Holder of Registrable Securities to
reflect (1) any changes to the plan of distribution contained in the
Prospectus included in such Shelf Registration Statement or (2) the
identity of any transferee of Registrable Securities, provided that, as
soon as practicable, but in no event later than three Business Days before
filing any Registration Statement, any related Prospectus or any amendment
or supplement thereto, other than any amendment or supplement made solely
as a result of incorporation by reference of documents filed with the SEC
subsequent to the filing of such Registration Statement, Thoratec shall
furnish to the Holders of the Registrable Securities covered by the
Registration Statement and the underwriters, if any, copies of all such
documents proposed to be filed;
(ii) notify the selling Holders of Registrable Securities and the
managing underwriters, if any, promptly: (A) when a new Registration
Statement, Prospectus or any Prospectus supplement or post-effective
amendment has been filed and, with respect to any new Registration
Statement or post-effective amendment, when it has become effective, (B) of
any stop order suspending the effectiveness of any Registration Statement
or the initiation of any proceedings for that purpose, (C) of any
suspension of the qualification of the Registrable Securities for sale in
any jurisdiction or the initiation or threatening of any proceeding for
such purpose and (D) if there is a misstatement or omission of a material
fact in any Registration Statement, Prospectus or any document incorporated
therein by reference or if any event occurs that requires the making of any
changes in any Registration Statement, Prospectus or any document
incorporated therein by reference in order to make the statements therein
(in the case of any Prospectus, in the light of the circumstances under
which they were made) not misleading; providedthat upon any occurrence
specified in clauses (B), (C) or (D) Thoratec shall use its reasonable best
efforts to, at the earliest practicable date, obtain a withdrawal of any
stop order, the lifting of any suspension of the qualification or exemption
from qualification or amend the Registration Statement, Prospectus or any
document incorporated therein by reference in order to make the statements
therein (in the case of any Prospectus, in the light of the circumstances
under which they were made) not misleading;
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(iii) if reasonably requested by the managing underwriter or
underwriters or a Holder of Registrable Securities being sold in connection
with an Underwritten Offering, promptly incorporate in a Prospectus
supplement or post-effective amendment such information as the managing
underwriters and the Holders of a majority of the Registrable Securities
being sold in such Underwritten Offering agree should be included therein
relating to the sale of the Registrable Securities including, without
limitation, information with respect to the total number of shares of
Registrable Securities being sold to such underwriters, the purchase price
being paid therefor by such underwriters and with respect to any other
terms of the Underwritten Offering of the Registrable Securities to be sold
in such offering, and promptly make all required filings of such Prospectus
supplement or post-effective amendment;
(iv) furnish to each selling Holder of Registrable Securities and each
managing underwriter, if any, without charge, as many conformed copies as
may reasonably be requested of the then effective Registration Statement
and any post-effective amendments thereto, including financial statements
and schedules, all documents incorporated therein by reference and all
exhibits (including those incorporated by reference);
(v) deliver to each selling Holder of Registrable Securities and the
underwriters, if any, without charge, as many copies of the then effective
Prospectus (including each Prospectus subject to completion) and any
amendments or supplements thereto as such Persons may reasonably request;
(vi) use commercially reasonable efforts to register or qualify or
cooperate with the selling Holders of Registrable Securities, the
underwriters, if any, and their respective counsel in connection with the
registration or qualification of such Registrable Securities for offer and
sale under the securities or blue sky laws of such jurisdictions as any
selling Holder of Registrable Securities or underwriter reasonably requests
in writing, provided that Thoratec will not be required to: (A) qualify to
do business in any jurisdiction where it would not otherwise be required to
qualify, but for this paragraph (vi), (B) subject itself to general
taxation in any such jurisdiction or (C) file a general consent to service
of process in any such jurisdiction;
(vii) otherwise use commercially reasonable efforts to comply in all
material respects with all applicable rules and regulations of the SEC
relating to such registration and the distribution of the securities being
offered and make generally available to its securities holders earnings
statements satisfying Section 11(a) of the Securities Act;
(viii) cooperate and assist in any filings required to be made with
the National Association of Securities Dealers, Inc.;
(ix) subject to the proviso in paragraph (vi) above, cause the
Registrable Securities covered by the Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the selling Holders or the
underwriters, if any, to complete the disposition of such Registrable
Securities (other than as may be required by the governmental agencies or
authorities of any foreign jurisdiction and other than as may be required
by a law applicable to a selling Holder by reason of its own activities or
business other than the sale of Registrable Securities);
(x) cooperate with the selling Holders of Registrable Securities, the
underwriters, if any, and their respective counsel, to facilitate the
timely preparation and delivery of certificates representing Registrable
Securities to be sold, which certificates will not bear any restrictive
legends; and cause such certificates to be in such denominations and
registered in such names as the selling Holders or managing underwriters,
if any, shall request; and
(xi) to the extent requested by the Holders of Registrable Securities
in connection with a proposed Underwritten Offering, but in no event more
than once in any twelve month period commencing on the date of the
immediately preceding request. (A) execute and deliver an underwriting
agreement containing customary terms, including without limitation,
appropriate restrictions on Thoratec's ability to issue or sell any shares
of its Common Stock or securities convertible or exercisable or
exchangeable therefor and any requirement, to the extent permitted by the
applicable Thoratec stock option plans or other agreements, to enforce
available restrictions on the ability of any option holder to exercise
options
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or on any stockholder to sell any shares of Thoratec Common Stock, (B) to
the extent reasonably necessary to facilitate the success of any such
Underwritten Offering, make available the appropriate executive officers of
Thoratec for due diligence and drafting sessions and road show
presentations in connection with such Underwritten Offering and (C) prepare
and file with the SEC a Current Report on Form 8-K with such underwriting
agreement attached as an exhibit thereto. Within 120 days of the execution
of this Agreement, Thoratec will obtain agreements from each of its
executive officers and directors to execute and deliver an agreement
imposing customary restrictions (not exceeding 90 days from the
commencement of the Underwritten Offering) on such executive officer's or
director's ability to sell any shares of Thoratec Common Stock beneficially
owned, if requested by the managing underwriter of any such Underwritten
Offering. Thoratec will require any newly hired or appointed executive
officer or director to enter into a similar agreement upon the commencement
of employment or term as a director. If, in connection with such
Underwritten Offering, Thoratec is not selling any securities, TCA will pay
all out-of-pocket expenses of Thoratec related to any road show
presentation.
As a condition precedent to the participation in any registration
hereunder, Thoratec may require each selling Holder of Registrable
Securities as to which such registration is being effected to furnish to
Thoratec such reasonable information regarding such Person and the
distribution of such securities as Thoratec may from time to time request.
(b) Discontinuance. Each Holder of Registrable Securities shall, upon
receipt of any notice from Thoratec of the happening of any event of the kind
described in Section 6(a)(ii), forthwith discontinue disposition of Registrable
Securities pursuant to the then current Registration Statement until: (A) such
Holder is advised in writing by Thoratec that a new Registration Statement
covering the offer of Registrable Securities has become effective under the
Securities Act or (B) such Holder receives copies of any required supplemented
or amended Prospectus, or until such Holder is advised in writing by Thoratec
that the use of the Registration Statement may be resumed. If Thoratec shall
have given any such notice during a period when a Compulsory Registration is in
effect, Thoratec shall extend the period during which the Registration Statement
shall be maintained effective pursuant to this Agreement by the number of days
during which any such disposition of Registrable Securities is discontinued
pursuant to this Section 6(b). If so directed by Thoratec, on the happening of
such event, each Holder will deliver to Thoratec (at Thoratec's expense) all
copies, other than permanent file copies then in such Holder's possession, of
the Registration Statement covering such Registrable Securities at the time of
receipt of such notice.
(c) Selection of Underwriter. The investment banker or investment bankers
and manager or managers that will manage any Compulsory Registration will be
selected by Thoratec, subject to approval of the selling Holders holding a
majority of the Registrable Securities covered by the Compulsory Registration
Statement that gave the original Compulsory Notice in connection with such
Compulsory Registration, which approval shall not be unreasonably withheld.
7. Certain Limitations on Registration Rights.
(a) Hold-Back Election. In the case of the registration of any underwritten
primary offering initiated by Thoratec (other than any registration by Thoratec
on Form S-4 or Form S-8 (or any successor or substantially similar form, and
other than in connection with (i) an employee stock option, stock purchase or
compensation plan or of securities issued or issuable pursuant to any such plan
or an acquisition of any securities or assets of another entity, or (ii) a
dividend reinvestment plan) or any underwritten secondary offering initiated at
the request of a Requesting Securityholder, each Holder that includes
Registrable Securities therein agrees not to effect any public sale or
distribution of securities of Thoratec, except as part of such underwritten
registration, during the period beginning 15 days prior to the expected date of
execution of an underwriting agreement relating to such underwritten offering
and ending 90 days after such closing date (or such shorter period as may be
agreed to between the underwriters thereof and Thoratec or any other security
holder of Thoratec selling securities in such offering). The parties acknowledge
that the expected date of execution of an underwriting agreement shall be made
in the good faith determination of the managing underwriter of such offering and
communicated in writing to such Holders.
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(b) Material Development Condition. With respect to any Registration
Statement filed or to be filed pursuant to Section 3, if Thoratec determines
that, in its good faith judgment, it would (because of the existence of, or in
anticipation of, any acquisition or corporate reorganization or other
transaction, financing activity, stock repurchase or other development involving
Thoratec or any subsidiary, or the unavailability for reasons substantially
beyond Thoratec's control of any required financial statements) require public
disclosure by Thoratec of material non-public information that is not included
in such Registration Statement and that immediate disclosure of such information
would be seriously detrimental to Thoratec (a "Material Development Condition"),
Thoratec shall, notwithstanding any other provisions of this Agreement, be
entitled, upon the giving of a written notice that a Material Development
Condition has occurred (a "Delay Notice") from Thoratec to any Holder of
Registrable Securities included or to be included in such Registration
Statement: (i) to cause sales of Registrable Securities by such Holder pursuant
to such Registration Statement to cease, or (ii) if no such Registration
Statement has yet been filed or declared effective, to delay the filing or
effectiveness of any such Registration Statement until, in the good faith
judgment of Thoratec, such Material Development Condition no longer exists
(notice of which Thoratec shall promptly deliver to any Holder of Registrable
Securities with respect to which any such Registration Statement has been
filed). Notwithstanding the foregoing: (A) in no event may such cessation or
delay (I) be for a period of more than 60 consecutive days from the giving of
the Delay Notice to a Holder with respect to the Material Development Condition,
as above provided, and (II) exceed 90 days in the aggregate in any 12 month
period and the Shelf Registration Period with respect to such Holder and
Registrable Securities shall be extended by the number of days during the Shelf
Registration Period that such Holder is required to refrain from selling
Registrable Securities.
(c) Limitation on Piggyback Registration Rights. Anything to the contrary
contained in this Agreement notwithstanding, when, in the opinion of reputable
outside securities counsel for Thoratec, the registration of the Registrable
Securities is not required by the Securities Act in connection with a proposed
sale of such Registrable Securities, the Holders shall have no rights pursuant
to Section 5 to request a piggyback registration in connection with such
proposed sale and Thoratec shall promptly provide to the transfer agent and the
Holder's or Holders' broker or brokers in connection with any sale transaction
an opinion to that effect.
8. Registration Expenses. All expenses incident to Thoratec's performance
of or compliance with this Agreement including, without limitation, all
registration and filing fees, fees and expenses of compliance with securities or
blue sky laws (including reasonable fees and disbursements of counsel in
connection with blue sky qualifications or registrations, or the obtaining of
exemptions therefrom, of the Registrable Securities), printing expenses
(including expenses of printing Prospectuses), messenger and delivery expenses,
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), fees and
disbursements of its counsel and its independent certified public accountants,
securities acts liability insurance (if Thoratec elects to obtain such
insurance), fees and expenses of any special experts retained by Thoratec in
connection with any registration fees and expenses of other Persons retained by
Thoratec and reasonable fees and expenses of one counsel for all selling Holders
(all such expenses being referred to as "Registration Expenses") shall be borne
by Thoratec, provided that Registration Expenses shall not include any fees and
expenses of more than one counsel for the Holders, the expenses of any special
audit or accounting review (other than a review or audit of Thoratec's year-end
financial statements), out-of-pocket expenses incurred by the Holders and
underwriting discounts, commissions or fees attributable to the sale of the
Registrable Securities.
9. Indemnification.
(a) Indemnification by Thoratec. Thoratec shall indemnify and hold
harmless, to the full extent permitted by law, but without duplication, each
Holder of Registrable Securities, and each Person who controls such Holder
(within the meaning of the Securities Act), against all losses, claims, damages,
liabilities and expenses (including reasonable costs of investigation and
reasonable legal fees and expenses) resulting from any untrue statement of a
material fact in, or any omission of a material fact required to be stated in,
any Registration Statement or Prospectus or necessary to make the statements
therein (in the case of a Prospectus in light of the circumstances under which
they were made) not misleading, except insofar as the same are caused by or
contained in any information furnished in writing to Thoratec or to any
underwriters by any
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Holder expressly for use therein. Thoratec shall also indemnify underwriters
participating in the distribution, their officers, directors, employees,
partners and agents, and each Person who controls such underwriters (within the
meaning of the Securities Act), to the same extent as provided above with
respect to the indemnification of the Holders of Registrable Securities, if so
requested.
(b) Indemnification by Holders of Registrable Securities. In connection
with any Registration Statement in which a Holder of Registrable Securities is
participating, each such Holder will furnish to Thoratec in writing such
information and affidavits as Thoratec reasonably requests for use in connection
with any such Registration Statement or Prospectus and shall indemnify and hold
harmless, to the full extent permitted by law, but without duplication,
Thoratec, its officers, directors, stockholders, employees, advisors and agents,
and each Person who controls Thoratec (within the meaning of the Securities
Act), against all losses, claims, damages, liabilities and expenses (including
reasonable costs of investigation and reasonable legal fees and expenses)
resulting from any untrue statement of material fact in, or any omission of a
material fact required to be stated in, any Registration Statement or Prospectus
or necessary to make the statements therein (in the case of a Prospectus in
light of the circumstances under which they were made) not misleading, to the
extent, but only to the extent, that such untrue statement or omission is
contained in any information or affidavit so furnished in writing by such Holder
to Thoratec specifically for inclusion therein. In no event will the liability
of any Holder hereunder be greater in amount than the dollar amount of the
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. Any Person entitled to
indemnification hereunder shall (i) give prompt notice to the indemnifying party
of any claim with respect to which it seeks indemnification and (ii) permit such
indemnifying party to assume the defense of such claim with counsel of such
indemnifying party's choice, provided that any Person entitled to
indemnification hereunder shall have the right to employ separate counsel and to
participate in (but not control) the defense of such claim, but the fees and
expenses of such counsel shall be at the expense of such indemnified Person
unless: (A) the indemnifying party shall have failed to assume the defense of
such claim and employ counsel reasonably satisfactory to the indemnified Person
in a timely manner or (B) in the reasonable judgment of any such indemnified
Person, based upon the advice of outside securities counsel, a potential
conflict of interest exists between such indemnified Person and the indemnifying
party with respect to such claim (in which case, if the indemnified Person
notifies the indemnifying party in writing that such indemnified Person elects
to employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such claim
on behalf of such indemnified Person). The indemnifying party will not be
subject to any liability for any settlement made without its written consent. No
indemnified Person will be required to consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term given by the
claimant or plaintiff to such indemnified Person of a release from all liability
in respect of such claim. An indemnifying party who is not entitled to, or
elects not to, assume the defense of the claim will not be obligated to pay the
fees and expenses of more than one counsel for all Persons indemnified by such
indemnifying party with respect to such claim.
(d) Contribution. If for any reason the indemnification provided for in
Section 8(a) or Section 8(b) is unavailable to an indemnified Person or
insufficient to hold it harmless as contemplated by Section 8(a) and 8(b), then
the indemnifying party shall contribute to the amount paid or payable by the
indemnified Person as a result of such loss, claim, damage, liability or expense
in such proportion as is appropriate to reflect not only the relative benefits
received by the indemnifying party and the indemnified Person, but also the
relative fault of the indemnifying party and the indemnified Person, as well as
any other relevant equitable considerations. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement or the omission or alleged omission relates to information
supplied by the indemnifying party or parties on the one hand, or the
indemnified Person or Persons on the other hand, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentations.
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10. Participation in Underwritten Registrations. No Person may participate
in any Underwritten Offering hereunder unless such Person: (i) agrees to sell
such Person's Registrable Securities on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (ii) completes and signs all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements and in form and substance
approved by Thoratec. Nothing in this Section 10 shall be construed to create
any additional rights regarding the registration of Registrable Securities in
any Person otherwise than as set forth herein.
11. Options. The parties acknowledge that TEC has issued options to
purchase 66,700 shares of issued and outstanding Common Stock of TCA owned by
TEC. Upon consummation of the Merger, these options will become exercisable for
shares of Thoratec Common Stock. TEC agrees not to issue any additional
securities exercisable for or convertible into shares of TCA Common Stock.
Thoratec acknowledges that if the options are exercised, the shares of Thoratec
Common Stock issuable upon exercise of the options will not be subject to this
Agreement.
12. Amendments. This Agreement may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions may not
be given, unless Thoratec has obtained the written consent of the Holders of a
majority of the Registrable Securities then outstanding.
13. Waivers. Any failure of TEC or another Holder, on one hand, or
Thoratec, on the other hand, to comply with any provision of this Agreement may
be waived by Thoratec or TEC or that Holder, respectively, only by a written
instrument signed by the party granting the waiver, but that waiver or the
failure to insist upon strict compliance with that provision shall not operate
as a waiver of, or estoppel with respect to, any subsequent or other failure.
14. Notices. All notices and other communications hereunder shall be in
writing and shall be delivered personally, by overnight courier or similar means
or sent by facsimile with written confirmation of receipt, to the parties at the
addresses specified below or at such other address for a party as shall be
specified by like notice, provided that notices of a change of address shall be
effective only upon receipt. Any such notice shall be effective upon receipt, if
personally delivered, or on the next business day following transmittal, if sent
by confirmed facsimile. Notices shall be delivered as follows:
(a) If to a Holder other than TEC, at the most current address given
by that Holder to Thoratec, in accordance with this Section 14.
(b) if to Thoratec, to:
Thoratec Laboratories Corporation
6035 Stoneridge Drive
Pleasanton, California 94588
Telephone: (925) 847-8600
Facsimile: (925) 847-8625
Attention: D. Keith Grossman
with a copy to:
Heller Ehrman White & McAuliffe LLP
2500 Sand Hill Road, Suite 100
Menlo Park, California 94025
Telephone: (650) 234-4200
Facsimile: (650) 234-4299
Attention: August J. Moretti, Esq.
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(c) If to TEC, to:
Thermo Electron Corporation
81 Wyman Street
Waltham, Massachusetts 02454
Telephone: (781) 622-1198
Facsimile: (781) 622-1283
Attention: Seth Hoogasian
with copies to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Telephone: (617) 526-6000
Facsimile: (617) 526-5000
Attention: Jay E. Bothwick, Esq.
15. Successors and Assigns. This Agreement may not be assigned by TEC to
any Person, provided that TEC may assign rights under this Agreement to any
Person to whom it simultaneously sells or otherwise transfers Registrable
Securities then representing more than 5% of the Voting Power of Thoratec.
"Voting Power" for this purpose has the same meaning that it has in the
Shareholder Agreement that was signed with the Merger Agreement. Any such
assignment shall not be effected unless and until the assignee assumes in
writing all the obligations under this Agreement that correspond to the rights
being assigned to that assignee, as determined in good faith by Thoratec. This
Agreement shall be binding upon any successor to Thoratec (including any entity
issuing securities in exchange for the Registrable Securities).
16. Governing Law. This Agreement shall be governed by the laws of the
State of California without reference to its principles of conflicts of law.
17. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
18. Severability. If any provision of this Agreement should be finally
determined to be invalid, illegal or unenforceable in any respect against a
party hereto, it shall be adjusted if possible to effect the intention of the
parties. In any event, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby, and such invalidity, illegality or unenforceability shall only
apply as to such party in the specific jurisdiction where such final
determination shall have been made.
19. Headings. The section headings in this Agreement are solely for the
purpose of reference and shall not in any way affect the meaning or
interpretation of this Agreement. The word "including" shall mean "including
without limitation."
20. Entire Agreement. This Agreement, the Merger Agreement and the
Shareholder Agreement referenced previously embody the entire agreement and
understanding of the parties hereto with respect to the subject matter of this
Agreement.
21. Additional Actions. From time to time, at either party's request and
without further consideration, the other party hereto (and any Holder in
addition to TEC) shall execute and deliver such additional documents and take
such other actions as may be necessary or desirable to effectuate this
Agreement.
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22. Representation of Counsel. Each party to this Agreement has been
represented by counsel during the preparation and negotiation of this Agreement,
and therefore waives any rule of construction that would construe ambiguities
against the party drafting this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
THORATEC LABORATORIES CORPORATION
By: /s/ D. KEITH GROSSMAN
------------------------------------
Name: D. Keith Grossman
Title: President and Chief Executive
Officer
THERMO ELECTRON CORPORATION
By: /s/ THEO MELAS-KYRIAZI
--------------------------------------
Name: Theo Melas-Kyriazi
Title: Chief Financial Officer
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ANNEX E
SHAREHOLDER AGREEMENT
THIS SHAREHOLDER AGREEMENT (the "Agreement") is made and entered into as of
October 3, 2000 by and between Thoratec Laboratories Corporation, a California
corporation ("Thoratec"), and Thermo Electron Corporation, a Delaware
corporation ("TEC"). TEC is a stockholder of Thermo Cardiosystems Inc., a
Massachusetts corporation ("TCA").
A. Concurrently with the execution of this Agreement, Thoratec, Lightning
Acquisition Corp., a Massachusetts corporation and wholly-owned subsidiary of
Thoratec ("Merger Sub"), TEC and TCA are entering into an Agreement and Plan of
Merger (the "Merger Agreement") under which those parties are agreeing, upon the
terms and subject to the conditions set forth in the Merger Agreement, to merge
Merger Sub into TCA (the "Merger").
B. As of the date of this Agreement, TEC is the beneficial owner of
23,129,293 shares of the common stock, par value $0.10 per share, of TCA.
C. As an inducement and condition to entering into the Merger Agreement,
Thoratec and TEC have agreed that TEC will have the right to be represented on
the board of directors of Thoratec and that TEC will agree to certain
restrictions respecting the stock of Thoratec, all as set forth in this
Agreement.
ACCORDINGLY, THE PARTIES AGREE AS FOLLOWS:
1. Certain Definitions. For purposes of this Agreement, these terms have
these meanings:
(a) "Affiliate" has the meaning specified in Rule 1-02(b) of
Regulation S-X under the Securities Act but excluding any person or entity
that would in the absence of this exclusion, be deemed an Affiliate of TEC
solely as a result of a non-employee director serving as a member of the
TEC Board of Directors.
(b) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities means having "beneficial ownership" of such securities as
determined under Rule 13d-3 under the Exchange Act. Without duplicative
counting of the same securities by the same holder, securities Beneficially
Owned by a Person include all securities Beneficially Owned by all
Affiliates of that Person and all other Persons with whom that Person would
constitute a Group.
(c) "Group" has the meaning set forth in Section 13(d) of the Exchange
Act with respect to the securities of Thoratec.
(d) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(e) "Existing Shares" means all issued and outstanding shares of TCA
common stock owned of record or Beneficially Owned by TEC as of the record
date for determining the Persons entitled to receive notice of, and to vote
at, a meeting of the shareholders of TCA called for purpose of voting on
the Merger Agreement and the Merger.
(f) "Person" means any individual or entity.
(g) "Securities Act" means the Securities Act of 1933, as amended.
(h) "Voting Power" means the number of votes that the Voting
Securities are entitled to cast in an election of directors of Thoratec.
(i) "Voting Securities" means the capital stock and any other
securities issued by Thoratec having the power to vote in the election of
directors of Thoratec, other than securities having such power only upon
the happening of a contingency.
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2. Representations and Warranties of TEC. TEC represents and warrants to
Thoratec that, as of the date of this Agreement:
(a) TEC Beneficially Owns 23,129,293 Existing Shares. The Existing
Shares constitute all the shares of TCA common stock Beneficially Owned by
TEC. TEC does not Beneficially Own any options or other rights to purchase
any other shares of TCA common stock, nor does TEC have any put or similar
right or any obligation to sell or transfer any securities of TCA to any
other Person.
(b) TEC has the corporate power and authority to enter into and
perform all of TEC's obligations under this Agreement. This Agreement has
been duly and validly executed and delivered by TEC and constitutes a valid
and binding agreement of TEC, enforceable against TEC in accordance with
its terms, except to the extent that its enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting the enforcement of creditors' rights generally or by general
equitable principles.
(c) Except for any applicable filings under federal and state
securities laws, no filing with, and no permit, authorization, consent or
approval of, any governmental entity is required to be made or obtained by
TEC for the execution of this Agreement by TEC or the compliance by TEC
with its provisions. Neither the execution and delivery of this Agreement
by TEC nor the compliance by TEC with its provisions will: (i) result in a
violation or breach of, or constitute (with or without notice or lapse of
time or both) a default (or give rise to any third party right of
termination, cancellation, acceleration, redemption or purchase) under any
of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, or material license, lease, agreement or other
instrument or obligation to which TEC is a party or by which TEC or any of
TEC's properties or assets is bound or (ii) violate any order, writ,
injunction, decree, judgment, statute, rule or regulation applicable to TEC
or any of TEC's properties or assets.
(d) All the Existing Shares are held by TEC or an Affiliate of TEC, or
by a nominee or custodian for the benefit of TEC, free and clear of all
mortgages, claims, charges, liens, security interests, pledges, options,
proxies, voting trusts or agreements, except for those imposed by this
Agreement and the Merger Agreement.
(e) TEC understands and acknowledges that Thoratec is entering into,
and causing Merger Sub to enter into, the Merger Agreement in reliance upon
TEC's concurrent execution and delivery of this Agreement.
(f) The representations and warranties set forth in this Section 2
shall survive the completion of the Merger.
3. Representations and Warranties of Thoratec. Thoratec hereby represents
and warrants to TEC that, as of the date of this Agreement:
(a) Thoratec has the corporate power and authority to enter into and
perform all of its obligations under this Agreement. This Agreement has
been duly and validly executed and delivered by Thoratec and constitutes a
valid and binding agreement of Thoratec, enforceable against Thoratec in
accordance with its terms, except to the extent that its enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other laws affecting the enforcement of creditors' rights generally or
by general equitable principles.
(b) Except for any applicable filings under federal and state
securities laws, no filing with, and no permit, authorization, consent or
approval of, any governmental entity is necessary for the execution of this
Agreement by Thoratec or the compliance by Thoratec with its provisions.
Neither the execution and delivery of this Agreement by Thoratec nor the
compliance by Thoratec with any of its provisions will: (i) conflict with
or result in any breach of any organizational documents of Thoratec, (ii)
result in a violation or breach of, or constitute (with or without notice
or lapse of time or both) a default (or give rise to any third party right
of termination, cancellation, acceleration, redemption or purchase) under
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, or material
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license, lease, agreement or other instrument or obligation of any kind to
which Thoratec is a party or by which Thoratec or any of its properties or
assets is bound or (iii) violate any order, writ, injunction, decree,
judgment, statute, rule or regulation applicable to Thoratec or any of its
properties or assets.
(c) The representations and warranties set forth in this Section 3
shall survive the completion of the Merger.
4. Thoratec Board Matters.
(a) Effective if and when the Merger closes, Thoratec shall cause
Thoratec's board of directors to take all necessary action to elect a nominee of
TEC to fill one of the vacancies on Thoratec's board of directors.
(b) For meetings of Thoratec's shareholders occurring if and after the
Merger closes at which Thoratec's shareholders are asked to elect the members of
Thoratec's board of directors, if requested by TEC, Thoratec shall nominate, as
a member of the slate of directors to be elected at that meeting, one person
designated by TEC (the "TEC Nominee"). Thoratec shall take any and all actions
reasonably necessary to attempt to cause Thoratec's shareholders to vote for the
TEC Nominee.
(c) Subject to Section 4(e) and for so long as the TEC Nominee is a member
of Thoratec's board of directors, TEC may appoint one observer (who can change
from meeting to meeting) to participate in any and all meetings of Thoratec's
board of directors in which the TEC Nominee does not participate. TEC shall
notify Thoratec of the identity of any observer at least 24 hours in advance of
any meeting that will be attended by that observer. At Thoratec's request, TEC
and any observer shall enter into a confidentiality agreement in form and
substance reasonably acceptable to Thoratec protecting the information provided
to the observer.
(d) The person whom TEC nominates to serve on Thoratec's board of directors
under Section 4(b) (at the record date for the shareholder meeting or vote at
which that nominee will be considered for election) and the person or persons
who serve as observers under Section 4(c) (when they participate in meetings of
Thoratec's board of directors) shall be management employees of TEC. If
requested, those persons shall excuse themselves from those portions of Thoratec
board meetings at which agreements, arrangements or other issues on which
Thoratec or Affiliates of Thoratec, on one hand, and TEC or Affiliates of TEC,
on the other hand, are materially adverse or in conflict.
(e) This Section 4 shall terminate in all respects if and when TEC ceases
to Beneficially Own at least 10% of the Voting Power.
5. Acquisitions of Voting Securities. TEC shall not, directly or
indirectly, without the prior consent of the board of directors of Thoratec
specifically expressed in a resolution, Beneficially Own any Voting Securities
except for: (i) the shares of Thoratec common stock issued to TEC in the Merger,
(ii) any shares of Thoratec common stock issued as a dividend on the shares of
such stock and (iii) any shares of Thoratec common stock issued pursuant to a
stock split or recapitalization (together with the shares referred to in clauses
(i) and (ii), the "Thoratec Shares"). Except as authorized by this Section 5,
TEC shall assure that neither TEC nor any Affiliate of TEC or member of any
Group of which TEC is a member shall acquire Beneficial Ownership of any Voting
Securities.
6. Restrictions on Transfer.
(a) TEC shall not, directly or indirectly, without the prior consent of the
board of directors of Thoratec specifically expressed in a resolution, sell,
transfer, pledge, encumber or otherwise dispose of (collectively "Transfer" and,
as appropriate, "Transferred") any Thoratec Shares except in compliance with
this Section 6.
(b) TEC acknowledges that the Thoratec Shares may be Transferred in the
absence of registration under the Securities Act only pursuant to an exemption
from such registration and in accordance with this Agreement. The Thoratec
Shares will be subject to stop transfer orders. The certificates representing
the Thoratec Shares will bear the following legends:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933 APPLIES.
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IN ADDITION, THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO RESTRICTIONS ON TRANSFER AND THE OTHER PROVISIONS OF A SHAREHOLDER
AGREEMENT DATED AS OF OCTOBER 2, 2000, AS IT MAY BE AMENDED FROM TIME TO
TIME, BETWEEN THORATEC AND TEC, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL EXECUTIVE OFFICE OF THORATEC."
(c) Except as set forth in Section 6(d), TEC agrees that it will not
Transfer any Thoratec Shares prior to four months after the date the Merger
becomes effective; that it will not Transfer more than 25% of the Thoratec
Shares prior to the first anniversary of the date the Merger becomes effective;
and that it will not Transfer more than 50% of the Thoratec Shares prior to 18
months after the date the Merger becomes effective. Thoratec agrees to remove
the legend in Section 6(b) above relating to the restrictions on transfer and
other provisions of this Agreement with respect to certificates representing
that number of Thoratec Shares no longer subject to the restrictions on transfer
pursuant to this Section 6(c).
(d) Notwithstanding the restrictions on Transfers imposed by Sections 6(b)
and 6(c), TEC may Transfer Thoratec Shares in whole or in part if such Transfer
is:
(i) in connection with, or at any time following the consummation of,
a transaction approved by the board of directors of Thoratec resulting in
the sale of substantially all of the consolidated assets of Thoratec or the
merger (other than the Merger) of Thoratec with another entity pursuant to
which the shareholders of Thoratec immediately before that merger will not
possess more than 50% of the Voting Power of Thoratec or the surviving
entity immediately after that merger;
(ii) to a Person in connection with a tender or exchange offer by such
Person which is approved by a majority of Thoratec's board of directors and
reflected in a Schedule 14D-9 filed with the Securities and Exchange
Commission;
(iii) to Thoratec or any Person designated by Thoratec's board of
directors as specifically expressed in a resolution, in exchange for cash,
securities or other consideration specified by Thoratec's board of
directors and subject to whatever other conditions may be specified in that
resolution or
(iv) to any Affiliate of TEC, but only if the transferee, its
Affiliates and the members of any Group of which the transferee is a member
agree in writing to be bound by this Agreement as if they were TEC, with
such modifications thereto as Thoratec deems reasonably necessary to carry
out the purposes of this Agreement (by way of example, if TEC's obligations
under this Agreement shall have terminated because TEC no longer holds the
requisite number of shares under Section 11 of this Agreement, the
agreement with the transferee and its Affiliates and members of that Group
shall make clear that their obligations shall nevertheless continue if,
together, they hold that requisite amount).
(e) No Thoratec Shares shall be Transferred pursuant to any privately
negotiated transaction (except as permitted by Section 6(d) above) if, after
giving effect to that Transfer, the transferee, its Affiliates and members of
any Group of which the transferee is a member would together Beneficially Own
Voting Securities representing more than 10% of the Voting Power.
7. Disclosure. TEC hereby agrees to permit Thoratec to publish and disclose
in the registration statement and joint proxy statement/prospectus (including
all documents and schedules filed with the Securities and Exchange Commission)
contemplated by the Merger Agreement, and in any press release or other
disclosure document that Thoratec reasonably determines to be necessary or
desirable in connection with the Merger and any transactions related thereto,
TEC's identity and ownership of TCA common stock and the nature of TEC's
commitments, arrangements and understandings under this Agreement, provided,
that any such disclosure document filed with the Securities and Exchange
Commission, and to the extent practicable any press releases and similar
disclosures, will be submitted to TEC for comment prior to filing or
dissemination.
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8. Voting of Thoratec Common Stock. TEC hereby irrevocably and
unconditionally agrees that, during the period commencing with the closing of
the Merger and continuing until the termination of this Agreement:
(a) TEC shall, and shall cause its Affiliates and members of any Group
of which TEC is a member to, appear (in person or by proxy) at any meeting
(whether annual or special and whether or not an adjourned or postponed
meeting) of the holders of Thoratec common stock, however called, or
otherwise cause the Voting Securities Beneficially Owned by them to be
counted as present thereat for purposes of establishing and maintaining a
quorum.
(b) TEC shall, and shall cause its Affiliates and members of any Group
of which TEC is a member to, vote or provide a written consent with respect
to the Voting Securities Beneficially Owned by them, but not more than a
number of shares representing 5% of Voting Power of Voting Securities
outstanding upon the Closing of the Merger in the manner directed by
Thoratec management at any such meeting or pursuant to such written
consent, provided, that if and to the extent necessary to assure the
election of the TEC Nominee, TEC may deviate from this principle.
(c) TEC shall not, and shall cause its Affiliates and members of any
Group of which TEC is a member, not to deposit any Voting Securities
Beneficially Owned by them in a voting trust or subject any Voting
Securities Beneficially Owned by them to any arrangements or agreements
with respect to the voting of such Voting Securities; provided that this
restriction shall not apply to any Voting Securities Beneficially Owned by
TEC in excess of a number of shares representing 5% of the Voting Power of
Voting Securities outstanding upon the Closing of the Merger.
(d) Thoratec shall indemnify and hold harmless TEC and each officer,
director, employee, agent, representative or person who controls TEC
(within the meaning of the Securities Act), against all losses, claims,
damages, liabilities and expenses (including reasonable costs of
investigation and reasonable legal fees and expenses) resulting from (x)
the agreement by TEC, pursuant to Section 8(b) above, to vote shares of
Thoratec as directed by Thoratec management or (y) the voting of any such
shares as so directed by Thoratec management, TEC shall (i) give prompt
notice to Thoratec of any claim with respect to which it seeks
indemnification hereunder and (ii) permit Thoratec to assume the defense of
such claims with counsel of Thoratec's choice, provided that TEC shall have
the right to employ separate counsel and to participate in (but not
control) the defense of such claim, but the fees and expenses of such
counsel shall be at the expense of TEC unless: (A) Thoratec shall have
failed to assume the defense of such claim and employ counsel reasonably
satisfactory to TEC in a timely manner or (B) in the reasonable judgment of
TEC, based upon the advice of outside counsel, a material potential
conflict of interest exists between TEC and Thoratec with respect to such
claim (in which case, if TEC notifies Thoratec in writing that TEC elects
to employ separate counsel at the expense of Thoratec, Thoratec shall not
have the right to assume the defense of such claim on behalf of TEC). TEC
will not be required to consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term given by the
claimant or plaintiff to TEC of a release from all liability in respect of
such claim. Thoratec will not be obligated to pay the fees and expenses of
more than one counsel for TEC with respect to any such claim. If for any
reason the foregoing indemnification is unavailable to TEC or insufficient
to hold it harmless, then Thoratec shall contribute to the amount paid or
payable by TEC as a result of such loss, claim, damage, liability or
expense in such proportion as is appropriate to reflect not only the
relative benefits received by Thoratec and TEC, but also the relative fault
of Thoratec and TEC, as well as any other relevant equitable
considerations. Thoratec shall have no obligation of indemnity with respect
to voting on any specific matter pursuant to (y) above, if Thoratec
notifies TEC that it releases TEC's obligations with respect to voting the
shares on such particular matter at least three business days prior to any
vote and Thoratec does not vote the shares on such particular matter.
(e) At the closing of the Merger the parties shall execute a
certificate setting forth the calculation of the number of shares
referenced in (b) and (c) above.
9. Limitations on Ownership. Except as otherwise set forth in this
Agreement, Thoratec shall not impair or otherwise adversely restrict or limit
the exercise of any voting or other rights of the Voting Securities held by TEC,
whether through an amendment to its Articles of Incorporation or its Bylaws,
through any
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agreement or otherwise. Without limiting the foregoing, Thoratec shall exempt
TEC from the provisions of any shareholder rights plan and shall not adopt any
other "anti-takeover" measure (including but not limited to any supermajority
voting requirement, control share provision or acceleration provision) that
treats TEC in any manner different from that treatment accorded each other
holder of Voting Securities.
10. Equitable Remedies. Thoratec and TEC acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their terms or were otherwise
breached. Accordingly, they agree that the non-breaching or potentially
breaching party shall be entitled to an injunction, specific performance or
other equitable relief, without the need to post bond, to prevent or cure any
breaches of this Agreement (including, without limitation, its Section 5) and to
enforce specifically the provisions hereof in any court having jurisdiction,
this being in addition to any other remedy to which that party may be entitled
at law or in equity.
11. Options. The parties acknowledge that TEC has issued options to
purchase 66,700 shares of issued and outstanding TCA Common Stock owned by TEC.
Upon consummation of the Merger, these options will become exercisable for
shares of Thoratec Common Stock. TEC agrees not to issue any additional
securities exercisable for or convertible into shares of TCA Common Stock.
Thoratec acknowledges that if the options are exercised, the shares of Thoratec
Common Stock issuable upon exercise of the options will not be subject to this
Agreement.
12. Termination. This Agreement shall terminate on the earlier to occur of:
(a) the termination of the Merger Agreement in accordance with its Article VIII
and (b) such time as TEC Beneficially Owns less than 5% of the Voting Power.
13. Miscellaneous.
(a) This Agreement may be amended, modified or supplemented only by written
agreement of Thoratec and TEC.
(b) Any failure of TEC, on one hand, or Thoratec, on the other hand, to
comply with any provision of this Agreement may be waived by Thoratec or TEC,
respectively, only by a written instrument signed by the party granting such
waiver, but such waiver or failure to insist upon strict compliance with that
provision shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
(c) All notices and other communications hereunder shall be in writing and
shall be delivered personally, by overnight courier or similar means or sent by
facsimile with written confirmation of receipt, to the parties at the addresses
specified below or at such other address for a party as shall be specified by
like notice, provided that notices of a change of address shall be effective
only upon receipt thereof. Any such notice shall be effective upon receipt, if
personally delivered, or on the next business day following transmittal, if sent
by confirmed facsimile. Notices shall be delivered as follows:
(1) if to Thoratec, to:
Thoratec Laboratories Corporation
6035 Stoneridge Drive
Pleasanton, California 94588
Telephone: (925) 847-8600
Facsimile: (925) 847-8625
Attention: D. Keith Grossman
with a copy to:
Heller Ehrman White & McAuliffe LLP
2500 Sand Hill Road
Suite 100
Menlo Park, California 94025
Telephone: (650) 234-4200
Facsimile: (650) 234-4299
Attention: August J. Moretti, Esq.
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(2) If to TEC, to:
Thermo Electron Corporation
81 Wyman Street
Waltham, Massachusetts 02454
Telephone: (781) 622-1198
Facsimile: (781) 622-1283
Attention: Seth Hoogasian
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Telephone: (617) 526-6000
Facsimile: (617) 526-5000
Attention: Jay E. Bothwick, Esq
(d) Except as provided in the next sentence, neither this Agreement nor any
right, interest or obligation hereunder shall be assigned by either of the
parties hereto without the prior written consent of the other party. Thoratec's
rights set forth in this Agreement shall redound to the benefit of any successor
to Thoratec or any successor to Thoratec's business, including with respect to
any equity securities that replace or are issued in exchange for Thoratec common
stock. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. This
Agreement is not intended to confer any rights or remedies hereunder upon any
other Person except the parties hereto.
(e) This Agreement shall be governed by the laws of the State of California
without reference to its principles of conflicts of law.
(f) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(g) In case any provision of this Agreement should be finally determined to
be invalid, illegal or unenforceable in any respect against a party hereto, it
shall be adjusted if possible to effect the intent of the parties. In any event,
the validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby, and such
invalidity, illegality or unenforceability shall only apply as to such party in
the specific jurisdiction where such final determination shall have been made.
(h) The section headings contained in this Agreement are solely for the
purpose of reference and shall not in any way affect the meaning or
interpretation of this Agreement. The word "including" shall mean "including
without limitation."
(i) This Agreement, the Merger Agreement and the other "TCA Agreements" and
"TEC Agreements" referenced in the Merger Agreement embody the entire agreement
and understanding of the parties hereto with respect to the subject matter of
this Agreement.
(j) If either party hereto seeks to enforce any of its rights under this
Agreement or obtain any remedy in connection with this Agreement, whether by
formal legal proceedings or otherwise, the party that substantially prevails
shall be entitled to recover all of its costs and expenses incurred in
connection with that effort, including its attorneys' fees and costs.
(k) From time to time, at either party's request and without further
consideration, the other party hereto shall execute and deliver such additional
documents and take such other actions as may be necessary or desirable to
effectuate the provisions of this Agreement.
(l) Each party to this Agreement has been represented by counsel during the
preparation and negotiation of this Agreement, and therefore waives any rule of
construction that would construe ambiguities against the party drafting this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first written above.
THORATEC LABORATORIES CORPORATION
By: /s/ D. KEITH GROSSMAN
------------------------------------
Name: D. Keith Grossman
Title: President and Chief Executive
Officer
THERMO ELECTRON CORPORATION
By: /s/ THEO MELAS-KYRIAZI
------------------------------------
Name: Theo Melas-Kyriazi
Title: Chief Financial Officer
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ANNEX F
DISSENTERS RIGHTS PROVISIONS OF THE
CALIFORNIA CORPORATIONS CODE
1300. (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) or (f) 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 (A) listed on any national securities exchange
certified by the Commissioner of Corporations under subdivision (o) of
Section 25100 or (B) listed on the National Market System of the NASDAQ
Stock Market, 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
subparagraph (A) or (B) 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 (A) were not voted
in favor of the reorganization or, (B) if described in subparagraph (A) or
(B) of 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-form merger; provided, however, that subparagraph
(A) rather than subparagraph (B) 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.
1301. (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
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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) of 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.
1302. 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 certificated securities, the shareholder's certificates representing
any shares which the shareholder 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.
1303. (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 therefor,
unless provided otherwise by agreement.
1304. (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 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.
1305. (a) If the court appoints an appraiser or appraisers, they shall
proceed forthwith to determine the fair market value per share. Within the time
fixed by the court, the appraisers, or a majority of them, shall make and file a
report in the office of the clerk of the court. Thereupon, on the motion of any
party, the report
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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 Sections 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).
1306. 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.
1307. 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.
1308. 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.
1309. 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 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.
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1310. If litigation is instituted to test the sufficiency or regularity of
the votes of the shareholders in authorizing a reorganization, any proceedings
under Sections 1304 and 1305 shall be suspended until final determination of
such litigation.
1311. This chapter, except Section 1312, does not apply to classes of
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.
1312. (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 or 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 and
reasonable to the shareholders of any party so controlled.
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ANNEX G
DISSENTERS' RIGHTS PROVISIONS
OF THE
MASSACHUSETTS BUSINESS CORPORATION LAW
85. DISSENTING STOCKHOLDER; RIGHT TO DEMAND PAYMENT FOR STOCK; EXCEPTION.
A stockholder in any corporation organized under the laws of Massachusetts
which shall have duly voted to consolidate or merge with another corporation or
corporations under the provisions of sections seventy-eight or seventy-nine who
objects to such consolidation or merger may demand payment for his stock from
the resulting or surviving corporation and an appraisal in accordance with the
provisions of sections eighty-six to ninety-eight, inclusive, and such
stockholder and the resulting or surviving corporation shall have the rights and
duties and follow the procedure set forth in those sections. This section shall
not apply to the holders of any shares of stock of a constituent corporation
surviving a merger if, as permitted by subsection (c) of section seventy-eight,
the merger did not require for its approval a vote of the stockholders of the
surviving corporation.
86. SECTIONS APPLICABLE TO APPRAISAL; PREREQUISITES.
If a corporation proposes to take a corporate action as to which any
section of this chapter provides that a stockholder who objects to such action
shall have the right to demand payment for his shares and an appraisal thereof,
sections eighty-seven to ninety-eight, inclusive, shall apply except as
otherwise specifically provided in any section of this chapter. Except as
provided in sections eighty-two and eighty-three, no stockholder shall have such
right unless (1) he files with the corporation before the taking of the vote of
the shareholders on such corporate action, written objection to the proposed
action stating that he intends to demand payment for his shares if the action is
taken and (2) his shares are not voted in favor of the proposed action.
87. STATEMENT OF RIGHTS OF OBJECTING STOCKHOLDERS IN NOTICE OF MEETING; FORM.
The notice of the meeting of stockholders at which the approval of such
proposed action is to be considered shall contain a statement of the rights of
objecting stockholders. The giving of such notice shall not be deemed to create
any rights in any stockholder receiving the same to demand payment for his
stock, and the directors may authorize the inclusion in any such notice of a
statement of opinion by the management as to the existence or non-existence of
the right of the stockholders to demand payment for their stock on account of
the proposed corporate action. The notice may be in such form as the directors
or officers calling the meeting deem advisable, but the following form of notice
shall be sufficient to comply with this section:
"If the action proposed is approved by the stockholders at the meeting
and effected by the corporation, any stockholder (1) who files with the
corporation before the taking of the vote on the approval of such action,
written objection to the proposed action stating that he intends to demand
payment for his shares if the action is taken and (2) whose shares are not
voted in favor of such action has or may have the right to demand in
writing from the corporation (or, in the case of a consolidation or merger,
the name of the resulting or surviving corporation shall be inserted),
within twenty days after the date of mailing to him of notice in writing
that the corporate action has become effective, payment for his shares and
an appraisal of the value thereof. Such corporation and any such
stockholder shall in such cases have the rights and duties and shall follow
the procedure set forth in sections 88 to 98, inclusive, of chapter 156B of
the General Laws of Massachusetts."
88. NOTICE OF EFFECTIVENESS OF ACTION OBJECTED TO.
The corporation taking such action, or in the case of a merger or
consolidation the surviving or resulting corporation, shall, within ten days
after the date on which such corporate action became effective, notify each
stockholder who filed a written objection meeting the requirements of section
eighty-six and whose shares were not voted in favor of the approval of such
action, that the action approved at the meeting of the
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<PAGE> 174
corporation of which he is a stockholder has become effective. The giving of
such notice shall not be deemed to create any rights in any stockholder
receiving the same to demand payment for his stock. The notice shall be sent by
registered or certified mail, addressed to the stockholder at his last known
address as it appears in the records of the corporation.
89. DEMAND FOR PAYMENT; TIME FOR PAYMENT.
If within twenty days after the date of mailing of a notice under
subsection (e) of section eighty-two, subsection (f) of section eighty-three, or
section eighty-eight, any stockholder to whom the corporation was required to
give such notice shall demand in writing from the corporation taking such
action, or in the case of a consolidation or merger from the resulting or
surviving corporation, payment for his stock, the corporation upon which such
demand is made shall pay to him the fair value of his stock within thirty days
after the expiration of the period during which such demand may be made.
90. DEMAND FOR DETERMINATION OF VALUE; BILL IN EQUITY; VENUE.
If during the period of thirty days provided for in section eighty-nine the
corporation upon which such demand is made and any such objecting stockholder
fail to agree as to the value of such stock, such corporation or any such
stockholder may within four months after the expiration of such thirty-day
period demand a determination of the value of the stock of all such objecting
stockholders by a bill in equity filed in the superior court in the county where
the corporation in which such objecting stockholder held stock had or has its
principal office in the commonwealth.
91. PARTIES TO SUIT TO DETERMINE VALUE; SERVICE.
If the bill is filed by the corporation, it shall name as parties
respondent all stockholders who have demanded payment for their shares and with
whom the corporation has not reached agreement as to the value thereof. If the
bill is filed by a stockholder, he shall bring the bill in his own behalf and in
behalf of all other stockholders who have demanded payment for their shares and
with whom the corporation has not reached agreement as to the value thereof and
service of the bill shall be made upon the corporation by subpoena with a copy
of the bill annexed. The corporation shall file with its answer a duly verified
list of all such other stockholders, and such stockholders shall thereupon be
deemed to have been added as parties to the bill. The corporation shall give
notice in such form and returnable on such date as the court shall order to each
stockholder party to the bill by registered or certified mail, addressed to the
last known address of such stockholder as shown in the records of the
corporation, and the court may order such additional notice by publication or
otherwise as it deems advisable. Each stockholder who makes demand as provided
in section eighty-nine shall be deemed to have consented to the provisions of
this section relating to notice, and the giving of notice by the corporation to
any such stockholder in compliance with the order of the court shall be a
sufficient service of process on him. Failure to give notice to any stockholder
making demand shall not invalidate the proceedings as to other stockholders to
whom notice was properly given, and the court may at any time before the entry
of a final decree make supplementary orders of notice.
92. DECREE DETERMINING VALUE AND ORDERING PAYMENT; VALUATION DATE.
After hearing the court shall enter a decree determining the fair value of
the stock of those stockholders who have become entitled to the valuation of and
payment for their shares, and shall order the corporation to make payment of
such value, together with interest, if any, as hereinafter provided, to the
stockholders entitled thereto upon the transfer by them to the corporation of
the certificates representing such stock if certificated or, if uncertificated,
upon receipt of an instruction transferring such stock to the corporation. For
this purpose, the value of the shares shall be determined as of the day
preceding the date of the vote approving the proposed corporate action and shall
be exclusive of any element of value arising from the expectation or
accomplishment of the proposed corporate action.
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<PAGE> 175
93. REFERENCE TO SPECIAL MASTER.
The court in its discretion may refer the bill or any question arising
thereunder to a special master to hear the parties, make findings and report the
same to the court, all in accordance with the usual practice in suits in equity
in the superior court.
94. NOTATION ON STOCK CERTIFICATES OF PENDENCY OF BILL.
On motion the court may order stockholder parties to the bill to submit
their certificates of stock to the corporation for the notation thereon of the
pendency of the bill and may order the corporation to note such pendency in its
records with respect to any uncertificated shares held by such stockholder
parties, and may on motion dismiss the bill as to any stockholder who fails to
comply with such order.
95. COSTS; INTEREST.
The costs of the bill, including the reasonable compensation and expenses
of any master appointed by the court, but exclusive of fees of counsel or of
experts retained by any party, shall be determined by the court and taxed upon
the parties to the bill, or any of them, in such manner as appears to be
equitable, except that all costs of giving notice to stockholders as provided in
this chapter shall be paid by the corporation. Interest shall be paid upon any
award from the date of the vote approving the proposed corporate action, and the
court may on application of any interested party determine the amount of
interest to be paid in the case of any stockholder.
96. DIVIDENDS AND VOTING RIGHTS AFTER DEMAND FOR PAYMENT.
Any stockholder who has demanded payment for his stock as provided in this
chapter shall not thereafter be entitled to notice of any meeting of
stockholders or to vote such stock for any purpose and shall not be entitled to
the payment of dividends or other distribution on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the date of the vote approving the proposed corporate action) unless:
(1) A bill shall not be filed within the time provided in section
ninety;
(2) A bill, if filed, shall be dismissed as to such stockholder; or
(3) Such stockholder shall with the written approval of the
corporation, or in the case of a consolidation or merger, the resulting or
surviving corporation, deliver to it a written withdrawal of his objections
to and an acceptance of such corporate action.
Notwithstanding the provisions of clauses (1) to (3), inclusive, said
stockholder shall have only the rights of a stockholder who did not so demand
payment for his stock as provided in this chapter.
97. STATUS OF SHARES PAID FOR.
The shares of the corporation paid for by the corporation pursuant to the
provisions of this chapter shall have the status of treasury stock, or in the
case of a consolidation or merger the shares or the securities of the resulting
or surviving corporation into which the shares of such objecting stockholder
would have been converted had he not objected to such consolidation or merger
shall have the status of treasury stock or securities.
98. EXCLUSIVE REMEDY; EXCEPTION.
The enforcement by a stockholder of his right to receive payment for his
shares in the manner provided in this chapter shall be an exclusive remedy
except that this chapter shall not exclude the right of such stockholder to
bring or maintain an appropriate proceeding to obtain relief on the ground that
such corporate action will be or is illegal or fraudulent as to him.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our certificate of incorporation provides that, to the fullest extent
permitted by California law, none of our directors shall be personally liable to
us or our shareholders for monetary damages for breach of fiduciary duty as a
director, notwithstanding any other provision of law. However, a director shall
be liable to the extent required by law (a) for any breach of the director's
duty of loyalty to us or our shareholders, (b) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law, (c)
in respect of certain unlawful dividend payments or stock redemptions or
repurchases, or (d) for any transaction from which the director derived an
improper personal benefit.
We entered into indemnification agreements with each of our directors and
anticipate that we will enter into similar agreements with any future director.
Generally, these agreements attempt to provide the maximum protection permitted
by California law with respect to indemnification. The indemnification
agreements provide that we will pay certain amounts incurred by a director in
connection with any civil or criminal action or proceeding, specifically
including actions by us or in our name (derivative suits) where the individual's
involvement is by reason of the fact that he is or was a director or officer.
For directors, such amounts include, to the maximum extent permitted by law,
attorney's fees, judgments, civil or criminal fines, settlement amounts and
other expenses customarily incurred in connection with legal proceedings. Under
the indemnification agreements, a director will not receive indemnification if
the director is found not to have acted in good faith and in a manner he
reasonably believed to be in or not opposed to our best interests. We have also
entered into similar agreements with certain of our officers and top management
personnel who are not also directors. Generally, the indemnification agreements
attempt to provide the maximum protection permitted by California law with
respect to indemnification of directors and officers.
The effect of these provisions would be to permit such indemnification by
us for liabilities arising under the Securities Act of 1933, as amended.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits. The following is a list of Exhibits filed as part of this
Registration Statement.
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
2.1 Agreement and Plan of Merger dated as of October 3, 2000, by
and among Thoratec, Lightning Acquisition Corporation,
Thermo Cardiosystems Inc. and Therm Electron Corporation
(attached as Annex A to the joint proxy statement/prospectus
included in this Registration Statement)
5.1* Opinion of Heller Ehrman White McAuliffe LLP regarding the
legality of the shares of Thoratec common stock to be issued
in the merger
8.1* Opinion of Heller Ehrman White & McAuliffe LLP regarding the
tax consequences of the merger
8.2* Opinion of Hale and Dorr LLP regarding the tax consequences
of the merger
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Arthur Andersen LLP
23.3 Consent of Lehman Brothers Inc.
23.4 Consent of J.P. Morgan Inc. (included in their opinion filed
as Exhibit 99.2)
23.5 Consents of Heller Ehrman White & McAuliffe LLP (included in
their Opinions filed in Exhibits 5.1 and 8.1)
23.6 Consent of Hale and Dorr LLP (included in their Opinion
filed in Exhibit 8.2)
24.1 Power of Attorney (appearing on signature page)
</TABLE>
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<PAGE> 177
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
99.1 Opinion of Lehman Brothers Inc. (attached as Annex B to the
joint proxy statement/prospectus included in this
Registration Statement)
99.2 Opinion of J.P. Morgan Inc. (attached as Annex C to the
joint proxy statement/prospectus included in this
Registration Statement)
99.3 Thoratec Form of Proxy for Common Stock
99.4 Thermo Cardiosystems Inc. Form of Proxy for Common Stock
</TABLE>
---------------
* To be filed by amendment
ITEM 22. UNDERTAKINGS
(a) Thoratec hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, as amended, each filing of
Thoratec's annual report pursuant to Section 13(a) or 15(d) of the Exchange Act
of 1934, as amended (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act), that is
incorporated by reference in the Registration Statement 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.
(b) Thoratec hereby undertakes as follows: that prior to any public
reoffering of the securities registered hereunder through 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.
(c) Thoratec undertakes that every prospectus (i) that is filed pursuant to
paragraph (b) immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a) (3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be filed as
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, 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.
(d) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of Thoratec
pursuant to the foregoing provisions, or otherwise, Thoratec has been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by Thoratec of expenses incurred or paid by a director, officer or
controlling person of Thoratec 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, Thoratec 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 Securities
Act and will be governed by the final adjudication of such issue.
(e) Thoratec hereby undertakes to respond to requests for information that
is incorporated by reference into the Statement 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.
(f) Thoratec 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.
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<PAGE> 178
(g) Thoratec hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose 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) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
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<PAGE> 179
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Pleasanton, California, on October
31, 2000.
THORATEC LABORATORIES CORPORATION
By: /s/ D. KEITH GROSSMAN
------------------------------------
D. Keith Grossman
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each individual whose signature
appears below constitutes and appoints D. Keith Grossman and Cheryl Hess, and
each of them, his or her true lawful attorneys-in-fact and agents, with full
power of substitution, for him or her and in his or her name, place and stead,
in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement on Form S-4 and any
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended, in connection therewith, and to file the same, with all
exhibits thereto and all documents in connection therewith, with the Securities
and Exchange Commission, granted 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 intends and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or his, her or their substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities indicated
on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
CHIEF EXECUTIVE OFFICER:
/s/ D. KEITH GROSSMAN President, Chief Executive October 27, 2000
--------------------------------------------------- Officer and Director
D. Keith Grossman
CHIEF FINANCIAL OFFICER AND CHIEF ACCOUNTING
OFFICER:
/s/ CHERYL D. HESS Chief Financial Officer and October 27, 2000
--------------------------------------------------- Secretary
Cheryl D. Hess
DIRECTORS:
/s/ D. KEITH GROSSMAN Chief Executive Officer, October 27, 2000
--------------------------------------------------- President and Director
D. Keith Grossman
/s/ HOWARD E. CHASE Director October 18, 2000
---------------------------------------------------
Howard E. Chase
/s/ J. DANIEL COLE Director October 27, 2000
---------------------------------------------------
J. Daniel Cole
/s/ J. DONALD HILL Director and Chairman of the October 27, 2000
--------------------------------------------------- Board
J. Donald Hill
</TABLE>
II-4
<PAGE> 180
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
/s/ WILLIAM M. HITCHCOCK Director October 27, 2000
---------------------------------------------------
William M. Hitchcock
/s/ GEORGE W. HOLBROOK, JR. Director October 27, 2000
---------------------------------------------------
George W. Holbrook, Jr.
/s/ DANIEL M. MULVENA Director October 27, 2000
---------------------------------------------------
Daniel M. Mulvena
</TABLE>
II-5
<PAGE> 181
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO.
-------
<C> <S>
2.1 Agreement and Plan of Merger dated as of October 3, 2000, by
and among Thoratec, Lightning Acquisition Corporation,
Thermo Cardiosystems Inc. and Therm Electron Corporation
(attached as Annex A to the joint proxy statement/prospectus
included in this Registration Statement)
5.1* Opinion of Heller Ehrman White McAuliffe LLP regarding the
legality of the shares of Thoratec common stock to be issued
in the merger
8.1* Opinion of Heller Ehrman White & McAuliffe LLP regarding the
tax consequences of the merger
8.2* Opinion of Hale and Dorr LLP regarding the tax consequences
of the merger
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of Arthur Andersen LLP
23.3 Consent of Lehman Brothers Inc.
23.4 Consent of J.P. Morgan Inc. (included in their opinion filed
as Exhibit 99.2)
23.5 Consents of Heller Ehrman White & McAuliffe LLP (included in
their Opinions filed in Exhibits 5.1 and 8.1)
23.6 Consent of Hale and Dorr LLP (included in their Opinion
filed in Exhibit 8.2)
24.1 Power of Attorney (appearing on signature page)
99.1 Opinion of Lehman Brothers Inc. (attached as Annex B to the
joint proxy statement/prospectus included in this
Registration Statement)
99.2 Opinion of J.P. Morgan Inc. (attached as Annex C to the
joint proxy statement/prospectus included in this
Registration Statement)
99.3 Thoratec Form of Proxy for Common Stock
99.4 Thermo Cardiosystems Inc. Form of Proxy for Common Stock
</TABLE>
---------------
* To be filed by amendment.
