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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. _______________)*
PHYSIO-CONTROL INTERNATIONAL CORPORATION
(Name of Issuer)
Common Stock, $.01 par value
(Title of Class of Securities)
719431 10 8
(CUSIP Number)
Carol E. Malkinson, Esq.
Medtronic, Inc.
7000 Central Ave. N.E.
Minneapolis, Minnesota 55432
(612)514-4000
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
June 27, 1998
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box |_|.
Note:Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
SCHEDULE 13D
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Medtronic, Inc.
41-0793183
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(SEE INSTRUCTIONS) (a) |_|
(b) |_|
3 SEC USE ONLY
4 SOURCE OF FUNDS (SEE INSTRUCTIONS)
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) |_|
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Minnesota
7 SOLE VOTING POWER
3,526,683 (1)
NUMBER OF
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 700,465 (1)
OWNED BY
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 3,526,683 (1)
PERSON
WITH 10 SHARED DISPOSITIVE POWER
0
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,227,148 (includes 700,465 shares which are subject to
the Agreements to Facilitate Merger)(1)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES |_|
(SEE INSTRUCTIONS)
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
23.85%(1)
14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
HC
1 3,526,683 of the shares of Common Stock of Physio-Control International
Corporation ("PCIC") covered by this Statement are subject to a Stock Option
Agreement dated June 27, 1998 and 700,465 shares covered by this Statement are
subject to Agreements to Facilitate Merger dated on or after such date, and
described in Item 3 of this Statement. Nothing herein shall be deemed to be an
admission by Medtronic, Inc. ("Medtronic") as to the beneficial ownership of any
shares of PCIC, and Medtronic hereby disclaims beneficial ownership of all
shares of PCIC which are subject to the Stock Option Agreement or the Agreements
to Facilitate Merger.
<PAGE>
Item 1. Security and Issuer
The class of equity security to which this statement relates is the Common
Stock, $.01 par value, of Physio-Control International Corporation ("PCIC"). The
name and address of the principal executive offices of the issuer of such
securities are Physio-Control International Corporation, 11811 Willows Road NE,
Redmond, WA 98073-9706.
Item 2. Identity and Background
(a), (b) and (c)
Medtronic, Inc. ("Medtronic"), 7000 Central Ave. N.E., Minneapolis, Minnesota
55432, is a Minnesota corporation, principally engaged in the business of
therapeutic medical technology, specializing in implantable and interventional
therapies. Information is provided below with respect to persons who are
directors and executive officers of the reporting person.
William W. George, Chairman, Chief Executive Officer and Director, Medtronic,
Inc., 7000 Central Avenue N.E., Minneapolis, MN 55432;
Arthur D. Collins, Jr.,
President, Chief Operating Officer and Director, Medtronic, Inc., 7000 Central
Avenue N.E., Minneapolis, MN 55432;
Glen D. Nelson, M.D., Vice Chairman and Director, Medtronic, Inc.,
7000 Central Avenue N.E., Minneapolis, MN 55432;
William R. Brody, M.D., Ph.D., Director, Medtronic, Inc., President, The Johns
Hopkins University, 3400 North St. Charles St., 242 Garland Hall, Baltimore, MD
21218;
Paul W. Chellgren, Director, Medtronic, Inc., Chairman and Chief
Executive Officer, Ashland Inc., 1000 Ashland Drive, Russell, KY 41114;
Antonio M. Gotto, Jr., M.D., Director, Medtronic, Inc., Dean, Cornell University
Medical College, Medical Affairs Provost, Cornell University, Office of the
Dean, 1300 York Avenue, New York, NY 10021;
Bernadine P. Healy, M.D., Director, Medtronic, Inc., Dean, College of Medicine,
Ohio State University, 254 Meiling Hall, 370 W. 9th Avenue, Columbus, OH 43210;
Thomas E. Holloran, Director, Medtronic, Inc., Professor, Graduate School of
Business, University of St. Thomas, 1000 LaSalle Avenue - Suite 343,
Minneapolis, MN 55403-2005;
Richard L. Schall, Director, Medtronic, Inc., Consultant, 4900 IDS Center,
80 South 8th Street, Minneapolis, MN 55402;
Jack W. Schuler, Director, Medtronic, Inc., Chairman, Stericycle, Inc. and
Ventana Medical Systems, Inc., 1419 Lake Cook Road, Suite 410, Deerfield, IL
60015;
Gerald W. Simonson, Director, Medtronic, Inc., President and Chief
Executive Officer, Omnetics Connector Corporation, 7260 Commerce Circle East,
Fridley, MN 55432;
Gordon M. Sprenger, Director, Medtronic, Inc., Executive Officer, Allina
Health System, 5601 Smetana Drive, Minneapolis, MN 55440;
Richard A. Swalin, Ph.D., Director, Medtronic, Inc., Professor Emeritus, The
University of Arizona, 4715 East Fort Lowell Road, Tucson, AZ 85712;
Bobby I. Griffin, Executive Vice President, Medtronic, Inc., 7000 Central
Avenue N.E., Minneapolis, MN 55432;
Bill K. Erickson, Senior Vice President and President, Americas, Medtronic,
Inc., 7000 Central Avenue N.E., Minneapolis, MN 55432;
Janet S. Fiola, Senior Vice President, Human Resources, Medtronic, Inc., 7000
Central Avenue N.E., Minneapolis, MN 55432;
B. Kristine Johnson, Senior Vice President and Chief Administrative Officer,
Medtronic, Inc., 7000 Central Avenue N.E., Minneapolis, MN 55432;
Philip M. Laughlin, Senior Vice President and President, Cardiac Surgery,
Medtronic, Inc., 7000 Central Avenue N.E., Minneapolis, MN 55432;
Ronald E. Lund, Senior Vice President, General Counsel and Secretary,
Medtronic, Inc., 7000 Central Avenue N.E., Minneapolis, MN 55432;
Stephen H. Mahle, Senior Vice President and President, Cardiac Rhythm
Management, Medtronic, Inc., 7000 Central Avenue N.E., Minneapolis, MN 55432;
John A. Meslow, Senior Vice President and President, Neurological, Medtronic,
Inc., 7000 Central Avenue N.E., Minneapolis, MN 55432;
Robert L. Ryan, Senior Vice President and Chief Financial Officer, Medtronic,
Inc., 7000 Central Avenue N.E., Minneapolis, MN 55432;
Barry Wilson, Senior Vice President and President, Europe, Middle East and
Africa, Medtronic, Inc., 7000 Central Avenue N.E., Minneapolis, MN 55432.
(d) and (e)
To the knowledge of the reporting person, neither the reporting person nor any
of the persons listed above has, during the last five years, been convicted in a
criminal proceeding or was, during the last five years, a party to a civil
proceeding as a result of which such person was or is subject to a judgment,
decree or final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
(f) All of the individuals referred to above are United States citizens, except
Mr. Wilson, who is a dual citizen of the United Kingdom and South Africa.
Item 3. Source and Amount of Funds or Other Consideration
This Statement relates to the execution of a certain Stock Option Agreement
dated June 27, 1998, between PCIC and Medtronic (the "Stock Option Agreement")
and to the execution of certain Agreements to Facilitate Merger (the "Agreements
to Facilitate Merger") between Medtronic and each of the following PCIC
shareholders: Ronald W. Dollens, Robert M. Guezuraga, Richard O. Martin, Robert
A. Sandler, Joseph J. Caffarelli and V. Marc Droppert. The Stock Option
Agreement and the Agreements to Facilitate Merger were entered into as an
inducement to Medtronic to enter into the Agreement and Plan of Merger (the
"Merger Agreement"), dated June 27, 1998, among Medtronic, PCIC and PC Merger
Corp. ("Merger Subsidiary"), a wholly owned subsidiary of Medtronic. Pursuant to
the Merger Agreement and subject to the conditions set forth therein, Merger
Subsidiary will merge with and into PCIC (the "Merger"), and each issued and
outstanding share of Common Stock of PCIC will be converted into the right to
receive a fraction of a share of Medtronic Common Stock, par value $.10 per
share, which fraction will equal $27.50 divided by the average of the closing
sale prices for Medtronic Common Stock during the 19 trading days ending on and
including the first trading day immediately preceding the effective time of the
Merger.
Pursuant to the Stock Option Agreement, PCIC granted Medtronic the right to
purchase at an exercise price of $27.50 per share 3,526,683 shares of PCIC
Common Stock, which was represented in the Merger Agreement to reflect
approximately 19.9% of the PCIC Common Stock outstanding on the date of the
Stock Option Agreement's execution. The Stock Option Agreement is not
exercisable until and unless the earlier of certain events specified therein,
including, but not limited to, the termination of the Merger Agreement under
certain circumstances. If the Stock Option Agreement becomes exercisable, any
shares purchased pursuant to the exercise of the Stock Option Agreement would be
made with funds from Medtronic's working capital. If the Stock Option Agreement
becomes exercisable, under certain circumstances, Medtronic can, in lieu of
exercising the Stock Option Agreement, put such Agreement to PCIC and receive a
cancellation payment from PCIC in cash therefor.
Pursuant to the Agreements to Facilitate Merger, each of the persons noted above
has agreed to vote all of such person's PCIC shares in favor of approval of the
Merger Agreement and the Merger and against any other action that would impede
or discourage the Merger. Medtronic may hereafter enter into similar Agreements
to Facilitate Merger with other holders of PCIC Common Stock. Copies of the
Stock Option Agreement, the form of the Agreement to Facilitate Merger and the
Merger Agreement are included as Exhibits to this Statement and are incorporated
herein by reference. The foregoing description of such Agreements is qualified
in its entirety by reference to such Exhibits.
Item 4. Purpose of Transaction
The purpose of the transactions described in Item 3 is to facilitate approval
and consummation of the Merger. Other than in connection with the Merger
described above, Medtronic has no plans or proposals which relate to or would
result in any of the matters listed in paragraphs (a) through (j) of Item 4 of
Schedule 13D.
Item 5. Interest in Securities of the Issuer
(a) and (b) As a result of the Stock Option Agreement, Medtronic may be deemed
to be the beneficial owner of 3,526,683 shares of Common Stock of PCIC and as a
result of the Agreements to Facilitate Merger, Medtronic may be deemed to be the
beneficial owner of 700,465 shares of Common stock of PCIC covered by such
Agreements. Such 4,227,148 shares covered by the Stock Option Agreement and
Agreements to Facilitate Merger would represent approximately 23.85% of the
shares of PCIC (based on the number of shares of PCIC Common Stock outstanding
on June 24, 1998, as represented to Medtronic by PCIC). Nothing herein, however,
shall be deemed to be an admission by Medtronic that it beneficially owns any of
the shares covered by the Stock Option Agreement or the Agreements to Facilitate
Merger, and Medtronic hereby disclaims beneficial ownership of all shares
covered by such Agreements. To the knowledge of the reporting person, no other
person named in Item 2 beneficially owns any PCIC shares.
(c) To the knowledge of the reporting person, the only transactions in the
Common Stock of PCIC by any person named in paragraph (a) above during the past
60 days are the Stock Option Agreement and Agreements to Facilitate Merger
reported in Item 3 above.
(d) No other person (other than the PCIC shareholder who has signed an Agreement
to Facilitate Merger in the case of the shares covered by such shareholder's
Agreement to Facilitate Merger) is known to have the right to receive or the
power to direct the receipt of dividends from, or the proceeds of the sale of,
the subject securities.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
See Item 3 for a description of the Stock Option Agreement, Agreements to
Facilitate Merger and Merger Agreement.
Item 7. Material to Be Filed as Exhibits
Exhibit A - Stock Option Agreement
Exhibit B - Form of Agreement to Facilitate Merger
Exhibit C - Agreement and Plan of Merger
Signature
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: July 7, 1998
MEDTRONIC, INC.
By:/s/ Ronald E. Lund
Its: Senior Vice President, General
Counsel and Secretary
<PAGE>
EXHIBIT INDEX
Exhibit Description
A Stock Option Agreement
B Form of Agreement to Facilitate Merger
C Agreement and Plan of Merger
STOCK OPTION AGREEMENT
THIS AGREEMENT is dated as of June 27, 1998, between Medtronic, Inc.,
a Minnesota corporation ("Grantee"), and Physio-Control International
Corporation, a Washington corporation ("Issuer").
RECITALS
A. Grantee, Issuer, and PC Merger Corp., a Washington corporation and
wholly-owned subsidiary of Grantee ("Merger Subsidiary"), have entered into an
Agreement and Plan of Merger (the "Merger Agreement") which provides, among
other things, that, upon the terms and subject to the conditions thereof, Merger
Subsidiary will be merged with and into Issuer (the "Merger").
B. As a condition to its willingness to enter into the Merger
Agreement, Grantee has required that Issuer enter into this Agreement, which
provides, among other things, that Issuer grant to Grantee an option to purchase
shares of Issuer's Common Stock, par value $.0l per share ("Issuer Common
Stock"), upon the terms and subject to the conditions provided for herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements contained in this Agreement and the Merger Agreement, the parties
agree as follows:
1. Grant of Option. Subject to the terms and conditions of this
Agreement, Issuer hereby grants to Grantee an irrevocable option (the "Option")
to purchase 3,526,683 shares of Issuer Common Stock (the "Option Shares"), in
the manner set forth below, at an exercise price of $27.50 per share of Issuer
Common Stock, subject to adjustment as provided below (the "Option Price").
Issuer represents that the Option Shares represent at least 19.9% of the number
of shares of Issuer Common Stock outstanding on the date hereof. Capitalized
terms used herein but not defined herein shall have the meanings set forth in
the Merger Agreement.
2. Exercise of option.
(a) Subject to the satisfaction or waiver of the conditions
set forth in Section 9 of this Agreement, prior to the termination or
expiration of this Agreement in accordance with its terms, Grantee or
its designee (which shall be a wholly-owned subsidiary of Grantee) may
exercise the option, in whole or in part, at any time or from time to
time on or after the public disclosure of, or the time at which Grantee
shall have learned of, the earliest of (i) or (ii) below to occur:
(i) the Merger Agreement is terminated pursuant to
Section 7.1(e) or 7.1(f) of the Merger Agreement; or
(ii) any third party makes an Alternative Proposal or
acquires 15% or more of the outstanding Issuer Common Stock
prior to the Company Shareholders Meeting, and either (A) the
requisite vote of the shareholders of Issuer to approve the
Merger is not obtained or (B) the number of shares of Issuer
Common Stock for which notice of exercise of dissenters'
rights under the WBCA has been given would prevent the Merger
from qualifying as a pooling of interests for accounting
purposes or (C) the Merger Agreement is terminated (other than
pursuant to Section 7.1(a), (b), (c) or (h) of the Merger
Agreement),
<PAGE>
(b) In the event Grantee wishes to exercise the Option at such
time as the Option is exercisable, Grantee shall deliver written notice
(the "Exercise Notice") to Issuer specifying its intention to exercise
the Option, the total number of Option Shares it wishes to purchase,
and a date and time for the closing of such purchase (a "Closing") not
less than three nor more than 30 business days after the later of (i)
the date such Exercise Notice is given and (ii) the expiration or
termination of any applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"). If prior to the Expiration Date (as defined in Section 11
below) any person or group (other than Grantee or its affiliates) shall
have made a bona fide proposal that becomes publicly disclosed, with
respect to a tender offer or exchange offer for 50% or more of the then
outstanding shares of Issuer Common Stock (a "Share Proposal"), a
merger, consolidation, or other business combination (a "Merger
Proposal"), or any acquisition of a material portion of the assets of
Issuer (an "Asset Proposal"), or shall have acquired 50% or more of the
then outstanding shares of Issuer Common Stock (a "Share Acquisition"),
and this Option is then exercisable, then Grantee, in lieu of
exercising the Option, shall have the right at any time thereafter (for
so long as the option is exercisable under Section 2(a)) to request in
writing that Issuer pay, and promptly (but in any event not more than
five business days) after Grantee makes such request, Issuer shall,
subject to Section 2(c) below, pay to Grantee by certified check,
official bank check or wire transfer pursuant to Grantee's
instructions, in cancellation of the option, an amount in cash (the
"Cancellation Amount") equal to (i) the lesser of
(x) the excess over the Option Price of the greater
of (A) the last sale price of a share of Issuer Common Stock
as reported on the Nasdaq National Market on the last trading
day prior to the date of the Exercise Notice, or (B)(1) the
highest price per share of Issuer Common Stock offered to be
paid or paid by any such person or group pursuant to or in
connection with a Share Proposal, a Share Acquisition, or a
Merger Proposal, or (2) the aggregate consideration offered to
be paid or paid in any transaction or proposed transaction in
connection with an Asset Proposal, divided by the number of
shares of Issuer Common Stock then outstanding, and
(y) $4.25 [$15 million divided by initial number of
Option Shares],
multiplied by (ii) the number of Option Shares then covered by the
Option; provided, however, that if, prior to payment of the
Cancellation Amount, Grantee has been paid or is payable by its terms
by Issuer the termination fee described in Section 7.2 of the Merger
Agreement (the "Termination Fee"), then the Cancellation Amount shall
be reduced (but not below zero) to the extent necessary so that the sum
of the Termination Fee and the Cancellation Amount shall not exceed $20
million. If all or a portion of the price per share of Issuer Common
Stock offered, paid, or payable or the aggregate consideration offered,
paid, or payable for the assets of Issuer, each as contemplated by the
preceding sentence, consists of noncash consideration, such price or
aggregate consideration shall be the cash consideration, if any, plus
the fair market value of the noncash consideration as mutually
determined by the investment bankers of Issuer and the investment
bankers of Grantee.
<PAGE>
(c) Following exercise of the Option by Grantee, in the event
that Grantee sells, pledges, or otherwise disposes of (including,
without limitation, by merger or exchange) any of the Option Shares (a
"Sale"), then any Termination Fee due and payable by Issuer following
such time shall be reduced to the extent necessary so that the sum of
(x) the Termination Fee and
(y) the amount received (whether in cash, loan
proceeds, securities, or otherwise) by Grantee in such Sale
less the exercise price of such Option Shares sold in the Sale
(the "Option Share Profit")
shall not exceed $20 million. If Issuer has paid to Grantee the
Termination Fee prior to the Sale, then Grantee shall immediately remit
to Issuer the excess, if any, of the Option Share Profit over $5
million.
3. Payment of Option Price and Delivery of Certificate. Any Closings
under Section 2 of this Agreement shall be held at the principal executive
offices of Issuer, or at such other place as Issuer and Grantee may agree. At
any Closing hereunder, (a) Grantee or its designee will make payment to Issuer
of the aggregate price for the Option Shares being so purchased by delivery of a
certified check, official bank check, or wire transfer of funds pursuant to
Issuer's instructions payable to Issuer in an amount equal to the product
obtained by multiplying the Option Price by the number of Option Shares to be
purchased, and (b) upon receipt of such payment Issuer will deliver to Grantee
or its designee (which shall be a wholly-owned subsidiary of Grantee) a
certificate or certificates representing the number of validly issued, fully
paid, and nonassessable Option Shares so purchased, in the denominations and
registered in such names (which shall be Grantee or a wholly-owned subsidiary of
Grantee) designated in writing to Issuer by Grantee.
4. Registration and Listing of Option Shares.
(a) Issuer agrees to use its reasonable best efforts to (i)
effect as promptly as possible upon the request of Grantee and (ii)
cause to become and remain effective for a period of not less than six
months (or such shorter period as may be necessary to effect the
distribution of such shares) the registration under the 1933 Act, and
any applicable state securities laws, of all or any part of the Option
Shares as may be specified in such request; provided, however, that (i)
Grantee shall have the right to select the managing underwriter for any
such offering after consultation with Issuer, which managing
underwriter shall be reasonably acceptable to Issuer, and (ii) Grantee
shall not be entitled to more than two effective registration
statements hereunder.
(b) In addition to such demand registrations, if Issuer
proposes to effect a registration of Issuer Common Stock for its own
account or for the account of any other shareholder of Issuer, Issuer
will give prompt written notice to all holders of Options or Option
Shares of its intention to do so and shall use its reasonable best
efforts to include therein all Option Shares requested by Grantee to be
so included. No registration effected under this Section 4(b) shall
relieve Issuer of its obligations to effect demand registrations under
Section 4(a) hereof.
<PAGE>
(c) Registrations effected under this Section 4 shall be
effected at Issuer's expense, including the fees and expenses of
counsel to the holder of Options or Option Shares, but excluding
underwriting discounts and commissions to brokers or dealers. In
connection with each registration under this Section 4, Issuer shall
indemnify and hold each holder of Options or Option Shares
participating in such offering (a "Holder"), its underwriters, and each
of their respective affiliates harmless against any and all losses,
claims, damage, liabilities, and expenses (including, without
limitation, investigation expenses and fees and disbursements of
counsel and accountants), joint or several, to which such Holder, its
underwriters, and each of their respective affiliates may become
subject, under the 1933 Act or otherwise, insofar as such losses,
claims, damages, liabilities, or expenses (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any registration
statement (including any prospectus therein), or any amendment or
supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
other than such losses, claims, damages, liabilities, or expenses (or
actions in respect thereof) that arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact
contained in written information furnished by a Holder to Issuer
expressly for use in such registration statement.
(d) In connection with any registration statement pursuant to
this Section 4, each Holder agrees to furnish Issuer with such
information concerning itself and the proposed sale or distribution as
shall reasonably be required in order to ensure compliance with the
requirements of the 1933 Act. In addition, Grantee shall indemnify and
hold Issuer, its underwriters and each of their respective affiliates
harmless against any and all losses, claims, damages, liabilities, and
expenses (including, without limitation, investigation expenses and
fees and disbursements of counsel and accountants), joint or several,
to which Issuer, its underwriters, and each of their respective
affiliates may become subject under the 1933 Act or otherwise, insofar
as such losses, claims, damages, liabilities, or expenses (or actions
in respect thereof) arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in written
information furnished by any Holder to Issuer expressly for use in such
registration statement.
(e) Upon the issuance of Option Shares hereunder, Issuer will
use its reasonable best efforts promptly to list such Option Shares
with the Nasdaq National Market or on such national or other exchange
on which the shares of Issuer Common Stock are at the time listed.
5. Representations and Warranties of Issuer. Issuer hereby represents
and warrants to Grantee as follows:
(a) Issuer is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Washington and has
requisite power and authority to enter into and perform this Agreement.
<PAGE>
(b) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of Issuer, and no other
corporate proceedings on the part of Issuer are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby.
The Board of Directors of Issuer has duly approved the issuance and
sale of the Option Shares, upon the terms and subject to the conditions
contained in this Agreement, and the consummation of the transactions
contemplated hereby. This Agreement has been duly and validly executed
and delivered by Issuer and, assuming this Agreement has been duly and
validly authorized, executed, and delivered by Grantee, constitutes a
valid and binding obligation of Issuer enforceable against Issuer in
accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium, or other similar laws affecting or relating
to creditors, rights generally; the availability of injunctive relief
and other equitable remedies; and limitations imposed by law on
indemnification for liability under federal securities laws.
(c) Issuer has taken all necessary action to authorize and
reserve for issuance and to permit it to issue, and at all times from
the date of this Agreement through the date of expiration of the Option
will have reserved for issuance upon exercise of the Option, such
number of authorized shares of Issuer Common Stock as is equal to the
number of Option Shares (or such other amount as may be required
pursuant to Section 10 hereof), each of which, upon issuance pursuant
to this Agreement and when paid for as provided herein, will be validly
issued, fully paid, and nonassessable, and shall be delivered free and
clear of all claims, liens, charges, encumbrances, and security
interests and not subject to any preemptive rights.
(d) The execution, delivery, and performance of this Agreement
by Issuer and the consummation by it of the transactions contemplated
hereby except as required by the HSR Act (if applicable), and, with
respect to Section 4, compliance with the provisions of the 1933 Act
and any applicable state securities laws, do not require the consent,
waiver, approval, license, or authorization of or result in the
acceleration of any obligation under, or constitute a default under,
any term, condition, or provision of any charter or bylaw, or any
indenture, mortgage, lien, lease, agreement, contract, instrument,
order, judgment, ordinance, regulation, or decree or any restriction to
which Issuer or any property of Issuer or its subsidiaries is bound,
except where the failure to obtain such consents, waivers, approvals,
licenses, or authorizations or where such acceleration or defaults
could not, individually or in the aggregate, reasonably be expected to
have a Company Material Adverse Effect.
6. Representations and Warranties of Grantee. Grantee hereby represents
and warrants to Issuer that:
(a) Grantee is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Minnesota and has
requisite power and authority to enter into and perform this Agreement.
<PAGE>
(b) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by the Board of Directors of Grantee, and no other
corporate proceedings on the part of Grantee are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by
Grantee and, assuming this Agreement has been duly executed and
delivered by Issuer, constitutes a valid and binding obligation of
Grantee enforceable against Grantee in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, moratorium, or other
similar laws affecting or relating to creditors' rights generally; the
availability of injunctive relief and other equitable remedies; and
limitations imposed by law on indemnification for liability under
federal securities laws.
(c) Grantee or its designee is acquiring the Option and it
will acquire the Option Shares issuable upon the exercise thereof for
its own account and not with a view to the distribution or resale
thereof in any manner not in accordance with applicable law.
7. Covenants of Grantee. Grantee agrees not to transfer or otherwise
dispose of the Option or the Option Shares, or any interest therein, except in
compliance with the 1933 Act and any applicable state securities law. Grantee
further agrees to the placement of the following legend on the certificates)
representing the Option Shares (in addition to any legend required under
applicable state securities laws):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER EITHER (1) THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR (2) ANY APPLICABLE STATE LAW GOVERNING
THE OFFER AND SALE OF SECURITIES. NO TRANSFER OR OTHER
DISPOSITION OF THESE SHARES, OR OF ANY INTEREST THEREIN, MAY
BE MADE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT AND SUCH OTHER STATE LAWS OR PURSUANT TO
EXEMPTIONS FROM REGISTRATION UNDER THE ACT, SUCH OTHER STATE
LAWS, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER."
8. Reasonable Best Efforts. Grantee and Issuer shall take, or cause to
be taken, all reasonable action to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation,
reasonable best efforts to obtain any necessary consents of third parties and
governmental agencies and the filing by Grantee and Issuer promptly after the
date hereof of any required HSR Act notification forms and the documents
required to comply with the HSR Act.
9. Certain Conditions. The obligation of Issuer to issue Option Shares
under this Agreement upon exercise of the Option shall be subject to the
satisfaction or waiver of the following conditions:
(a) any waiting periods applicable to the acquisition of the
Option Shares by Grantee pursuant to this Agreement under the HSR Act
shall have expired or been terminated;
(b) the representations and warranties of Grantee made in
Section 6 of this Agreement shall be true and correct in all material
respects as of the date of the Closing for the issuance of such Option
Shares; and
(c) no order, decree, or injunction entered by any court of
competent jurisdiction or governmental, regulatory, or administrative
agency or commission in the United States shall be in effect that
prohibits the exercise of the option or acquisition of Option Shares
pursuant to this Agreement.
<PAGE>
10. Adjustments Upon Changes in Capitalization. In the event of any
change in the number of issued and outstanding shares of Issuer Common Stock by
reason of any stock dividend, stock split, recapitalization, merger, rights
offering, share exchange, or other change in the corporate or capital structure
of Issuer, Grantee shall receive, upon exercise of the Option, the stock or
other securities, cash, or property to which Grantee would have been entitled if
Grantee had exercised the Option and had been a holder of record of shares of
Issuer Common Stock on the record date fixed for determination of holders of
shares of Issuer Common Stock entitled to receive such stock or other
securities, cash, or property at the same aggregate price as the aggregate
Option Price of the Option Shares.
11. Expiration. The Option shall expire at the earlier of (a) the
Effective Time (as defined in the Merger Agreement) or (b) if exercisable
pursuant to Section 2 hereof, one year after termination of the Merger Agreement
in accordance with the terms thereof (such expiration date is referred to as the
"Expiration Date").
12. General Provisions.
(a) Survival. All of the representations, warranties, and
covenants contained herein shall survive each Closing and shall be
deemed to have been made as of the date hereof and as of the date of
each Closing.
(b) Further Assurances. If Grantee exercises the Option, or
any portion thereof, in accordance with the terms of this Agreement,
Issuer and Grantee will execute and deliver all such further documents
and instruments and use their reasonable best efforts to take all such
further action as may be necessary in order to consummate the
transactions contemplated thereby.
(c) Severability. It is the desire and intent of the parties
that the provisions of this Agreement be enforced to the fullest extent
permissible under the law and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, in the event
that any provision of this Agreement would be held in any jurisdiction
to be invalid, prohibited, or unenforceable for any reason, such
provision, as to such jurisdiction, shall be ineffective, without
invalidating the remaining provisions of this Agreement or affecting
the validity or enforceability of such provision in any other
jurisdiction. Notwithstanding the foregoing, if such provision could be
more narrowly drawn so as not be invalid, prohibited, or unenforceable
in such jurisdiction, it shall, as to such jurisdiction, be so narrowly
drawn, without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any
other jurisdiction.
(d) Assignment. This Agreement shall be binding on and inure
to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that Issuer shall not be entitled to
assign or otherwise transfer any of its rights or obligations
hereunder, and Grantee shall not be entitled to assign or otherwise
transfer any of its rights or obligations hereunder prior to the Option
becoming exercisable pursuant to Section 2 hereof.
<PAGE>
(e) Specific Performance. The parties agree and acknowledge
that in the event of a breach of any provision of this Agreement, the
aggrieved party would be without an adequate remedy at law. The parties
therefore agree that in the event of a breach of any provision of this
Agreement, the aggrieved party may elect to institute and prosecute
proceedings in any court of competent jurisdiction to enforce specific
performance or to enjoin the continuing breach of such provision, as
well as to obtain damages for breach of this Agreement. By seeking or
obtaining any such relief, the aggrieved party will not be precluded
from seeking or obtaining any other relief to which it may be entitled.
(f) Amendments. This Agreement may not be modified, amended,
altered, or supplemented except upon the execution and delivery of a
written agreement executed by Grantee and Issuer.
(g) Notices. All notices, requests, claims, demands, and other
communications hereunder shall be in writing and shall be deemed to be
sufficient if contained in a written instrument and shall be deemed
given if delivered personally, telecopied, sent by
nationally-recognized overnight courier or mailed by registered or
certified mail (return receipt requested), postage prepaid, to the
other party at the following addresses (or such other address for a
party as shall be specified by like notice):
If to Grantee:
Medtronic, Inc.
7000 Central Avenue, N.E.
Minneapolis, MN 55432
with separate copies thereof addressed to
Attention: General Counsel
FAX: (612) 572-5459
and
Attention: Vice President and Chief Development Officer
FAX: (612) 572-5404
If to Issuer:
Physio-Control International Corporation
11811 Willows Road N.E.
Redmond, WA 98073-9706
FAX: (425) 867-4142
Attention: Executive Vice President and
General Counsel
with a copy to:
Preston Gates & Ellis LLP
5000 Columbia Center
701 Fifth Avenue
Seattle, WA 98104-7078
FAX: (206) 623-7022
Attention: C. Kent Carlson
(h) Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
<PAGE>
(i) Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be an original, but all of which
together shall constitute one and the same agreement.
(j) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Washington
applicable to contracts made and to be performed therein.
(k) Jurisdiction and Venue. Each of Issuer and Grantee hereby
agrees that any proceeding relating to this Agreement shall be brought
in a state court of Minnesota. Each of Issuer and Grantee hereby
consents to personal jurisdiction in any such action brought in any
such Minnesota court, consents to service of process by registered mail
made upon such party and such party's agent, and waives any objection
to venue in any such Minnesota court or to any claim that any such
Minnesota court is an inconvenient forum.
(l) Entire Agreement. This Agreement, the Confidentiality
Agreement, and the Merger Agreement and any documents and instruments
referred to herein and therein constitute the entire agreement between
the parties hereto and thereto with respect to the subject matter
hereof and thereof and supersede all other prior agreements and
understandings, both written and oral, between the parties with respect
to the subject matter hereof and thereof. This Agreement shall be
binding upon, inure to the benefit of, and be enforceable by the
successors and permitted assigns of the parties hereto. Nothing in this
Agreement shall be construed to give any person other than the parties
to this Agreement or their respective successors or permitted assigns
any legal or equitable right, remedy, or claim under or in respect of
this Agreement or any provision contained herein.
(m) Expenses. Except as otherwise provided in this Agreement
or the Merger Agreement, each party shall pay its own expenses incurred
in connection with this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
by their respective officers thereunto duly authorized as of the date first
written above.
MEDTRONIC, INC.
By: /s/ Michael D. Ellwein
Its: Vice-President
PHYSIO-CONTROL INTERNATIONAL CORPORATION
By: /s/ Richard O. Martin
Its: Chairman/CEO
AGREEMENT TO FACILITATE MERGER
DATE: ___________, 1998
PARTIES:
Medtronic, Inc., (hereinafter "Parent")
a Minnesota corporation
and
-------------------------,
an individual officer and/or
director of Physio-Control
International Corporation (hereinafter "Shareholder")
RECITALS:
A. Shareholder is the legal or beneficial owner of __________ shares of
Common Stock of Physio-Control International Corporation, a Washington
corporation (the "Company"), and the holder of options, warrants, or other
rights to acquire __________ shares of Company Common Stock.
B. Parent, the Company, and a wholly-owned subsidiary of Parent are
entering, or have entered, into an Agreement and Plan of Merger (the "Merger
Agreement") pursuant to which it is proposed that Parent's subsidiary will merge
with and into the Company (the "Merger") and as a result of which the
outstanding shares of Company Common Stock shall be converted into Parent Common
Stock.
C. Shareholder deems it to be in Shareholder's best interest and in the
best interests of the Company and all other shareholders of the Company that the
Merger Agreement be approved, ratified, and confirmed by the shareholders of the
Company, and it is a condition to Parent's obligations under the Merger
Agreement that Individual enter into this Agreement.
D. It is understood and acknowledged by the Shareholder that Parent's
execution of the Merger Agreement is being done in reliance upon the
contemporaneous or prompt subsequent execution and delivery of this Agreement,
that Parent will incur substantial expenses proceeding toward consummation of
the Merger as contemplated by the Merger Agreement, and that such expenses will
be undertaken in reliance upon and as a result of the agreements and
undertakings of Shareholder set forth herein.
NOW, THEREFORE, in consideration of the foregoing, and in order to
induce Parent to execute the Merger Agreement and to proceed as contemplated by
the Merger Agreement toward the consummation of the Merger, and for other good
and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto agree as follows:
<PAGE>
AGREEMENTS:
1. Vote in Favor of Merger. Shareholder, in his or her capacity as a
shareholder of the Company or as a representative with the authority to vote
shares of Company Common Stock, agrees to vote (or caused to be voted) all
shares of Company Common Stock with respect to which Shareholder presently owns
or controls voting power, and all shares of Company Common Stock with respect to
which Shareholder in the future acquires ownership or voting power, at any
meeting of the shareholders of the Company, and in any action by written consent
of the shareholders of the Company, (i) in favor of the approval, consent, and
ratification of the Merger Agreement and the Merger, and (ii) against any action
that would impede, interfere, or discourage the Merger, would facilitate an
acquisition of the Company, in any manner, by a party (other than Parent), or
would result in any breach of representation, warranty, covenant, or agreement
of the Company under the Merger Agreement. To the extent inconsistent with the
foregoing provisions of this Section 1, Shareholder hereby revokes any and all
previous proxies with respect to any shares of Company Common Stock that
Shareholder owns or has the right to vote. Nothing in this Agreement shall be
deemed to restrict or limit Shareholder's right to act in his capacity as an
officer or director of the Company consistent with his fiduciary obligations in
such capacity.
2. Representations and Warranties of Shareholder. Shareholder
represents and warrants to Parent that Shareholder has the legal capacity to
enter into and perform all of Shareholder's obligations under this Agreement.
The execution, delivery, and performance of this Agreement by Shareholder will
not violate any other agreement to which Shareholder is a party, including,
without limitation, any voting agreement, shareholders agreement, or voting
trust. This Agreement has been duly executed and delivered by Shareholder and
constitutes a legal, valid, and binding agreement of Shareholder, enforceable in
accordance with its terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, and
similar laws, now or hereafter in effect.
3. Successors and Assigns. This Agreement shall be binding upon any
permitted purchasers, donees, pledgees, and other transferees of Company Common
stock legally or beneficially owned by Shareholder. Shareholder agrees not to
make any sales, gifts, transfers, pledges, or other dispositions of Company
Common Stock without first making any such transferee or pledgee fully aware of
the obligations under this Agreement and obtaining such transferee's or
pledgee's written agreement to comply with the terms hereof.
4. Injunctive Relief. Shareholder agrees that in the event of
Shareholder's breach of any provision of this Agreement, Parent may be without
an adequate remedy at law. Shareholder therefore agrees that in the event of
Shareholder's breach of any provision of this Agreement, Parent may elect to
institute and prosecute proceedings in any court of competent jurisdiction to
enforce specific performance or to enjoin the continuing breach of such
provision, as well as to obtain damages for breach of this Agreement. By seeking
or obtaining any such relief, Parent will not be precluded from seeking or
obtaining any other relief to which it may be entitled.
5. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same document.
6. Further Assurances. Shareholder shall execute and deliver such
additional documents and take such further action as may be necessary or
desirable to consummate the transactions contemplated by this Agreement.
<PAGE>
7. Third-Party Beneficiaries. Nothing in this Agreement, expressed or
implied, shall be construed to give any person other than the parties hereto any
legal or equitable right, remedy, or claim under or by reason of this Agreement
or any provision contained herein.
8. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota (regardless of the laws that
might otherwise govern under applicable Minnesota principles of conflicts of
laws).
9. Effectiveness. If this Agreement is executed by Shareholder prior to
the approval of the Merger Agreement by the Company's Board of Directors, then
this Agreement shall be subject to, and shall become effective only upon, the
approval of the Merger Agreement by the Company's Board of Directors. This
Agreement shall terminate upon termination of the Merger Agreement by Parent.
IN WITNESS WHEREOF, Parent has caused this Agreement to Facilitate
Merger to be executed by its duly authorized officer, and Shareholder has
executed this Agreement, as of the date and year first above written.
MEDTRONIC, INC.
By:_________________________________
Its:_____________________________
SHAREHOLDER:
____________________________________
[signature]
____________________________________
[print name]
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MEDTRONIC, INC.,
PC MERGER CORP.,
AND
PHYSIO-CONTROL INTERNATIONAL CORPORATION
JUNE 27, 1998
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 THE MERGER; CONVERSION OF SHARES....................................1
1.1 The Merger..................................................1
1.2 Effective Time..............................................2
1.3 Conversion of Shares........................................2
1.4 Dissenting Shares...........................................3
1.5 Exchange of Company Common Stock............................4
1.6 Exchange of Merger Subsidiary Common Stock..................6
1.7 Stock Options...............................................6
1.8 Capitalization Changes......................................7
1.9 Articles of Incorporation of the Surviving Corporation......7
1.10 Bylaws of the Surviving Corporation.........................7
1.11 Directors and Officers of the Surviving Corporation.........7
ARTICLE 2 CLOSING.............................................................8
2.1 Time and Place..............................................8
2.2 Filings at the Closing......................................8
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................8
3.1 Organization................................................8
3.2 Authorization...............................................9
3.3 Capitalization..............................................9
3.4 Reports and Financial Statements...........................10
3.5 Absence of Undisclosed Liabilities.........................11
3.6 Consents and Approvals.....................................11
3.7 Compliance with Laws.......................................12
3.8 Litigation.................................................12
3.9 Absence of Material Adverse Changes........................13
3.10 Environmental Laws and Regulations.........................13
3.11 Officers, Directors and Employees..........................14
3.12 Taxes......................................................15
3.13 Contracts..................................................16
3.14 Title to Properties; Liens.................................17
3.15 Permits, Licenses, Etc.....................................17
3.16 Intellectual Property Rights...............................17
3.17 Benefit Plans..............................................18
3.18 Minute Books...............................................20
3.19 Insurance Policies.........................................20
3.20 Bank Accounts..............................................20
3.21 Powers of Attorney.........................................21
3.22 Product Liability Claims...................................21
3.23 Warranties.................................................21
3.24 Inventories................................................21
3.25 Relations with Suppliers and Customers.....................22
3.26 No Finders.................................................22
3.27 Proxy Statement............................................22
3.28 Merger Filings.............................................23
3.29 Fairness Opinion...........................................23
3.30 State Takeover Laws........................................23
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY.....23
4.1 Organization...............................................23
4.2 Authorization..............................................24
4.3 Capitalization.............................................24
4.4 Consents and Approvals.....................................24
4.5 Reports; Financial Statements; Absence of Changes;
Litigation................................................25
<PAGE>
4.6 Registration Statement.....................................25
4.7 Merger Filings.............................................26
4.8 No Finders.................................................26
ARTICLE 5 COVENANTS..........................................................26
5.1 Conduct of Business of the Company.........................26
5.2 No Solicitation............................................29
5.3 Access and Information.....................................30
5.4 Approval of Shareholders; Proxy Statement; Registration
Statement.................................................30
5.5 Consents...................................................32
5.6 Affiliates' Letters........................................32
5.7 Expenses...................................................32
5.8 Reasonable Efforts; Further Actions........................33
5.9 Regulatory Approvals.......................................33
5.10 Certain Notifications......................................33
5.11 Voting of Shares...........................................33
5.12 Noncompetition Agreements..................................33
5.13 NYSE Listing Application...................................34
5.14 Indemnification, Exculpation and Insurance.................34
5.15 Letters of the Company's and Parent's Accountants..........35
5.16 Subsidiary Shares..........................................35
5.17 Stock Option Agreement.....................................35
5.18 Conduct of Business by Parent..............................35
5.19 Benefit Plans and Employee Matters.........................36
5.20 Delivery of Specified Documents............................36
ARTICLE 6 CLOSING CONDITIONS.................................................37
6.1 Conditions to Obligations of Parent, Merger Subsidiary,
and the Company...........................................37
6.2 Conditions to Obligations of Parent and Merger Subsidiary..38
6.3 Conditions to Obligations of the Company...................39
ARTICLE 7 TERMINATION AND ABANDONMENT........................................40
7.1 Termination................................................40
7.2 Effect of Termination......................................42
ARTICLE 8 MISCELLANEOUS......................................................43
8.1 Amendment and Modification.................................43
8.2 Waiver of Compliance; Consents.............................43
8.3 Investigation; Survival of Representations and Warranties..43
8.4 Notices....................................................43
8.5 Assignment.................................................44
8.6 Governing Law..............................................44
8.7 Counterparts...............................................45
8.8 Knowledge..................................................45
8.9 Interpretation.............................................45
8.10 Publicity..................................................45
8.11 Entire Agreement...........................................45
<PAGE>
EXHIBITS:
Exhibit A: Form of Plan of Merger
Exhibit B: Form of Affiliate's Letter
Exhibit C: Form of Agreement to Facilitate Merger
Exhibit D: Form of Noncompetition Agreement
Exhibit E: Form of Stock Option Agreement
Exhibit F: Form of Opinion of the Company's Counsel
Exhibit G: Form of Opinion of Parent's Counsel
Exhibit H: Form of Company's Certificate (regarding tax
opinion representations)
Exhibit I: Form of Parent's Certificate (regarding tax
opinion representations)
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT is dated as of June 27, 1998, by and among Medtronic, Inc.,
a Minnesota corporation ("Parent"), PC Merger Corp., a Washington corporation
and wholly-owned subsidiary of Parent ("Merger Subsidiary"), and Physio-Control
International Corporation, a Washington corporation (the "Company").
WHEREAS, the Boards of Directors of Parent, Merger Subsidiary, and the
Company have approved the merger of Merger Subsidiary with and into the Company
(the "Merger") upon the terms and subject to the conditions set forth herein;
and
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a)(1)(A) and
(a)(2)(E) of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for accounting purposes, it is intended that the Merger shall be
recorded as a "pooling of interests" within the meaning of Accounting Principles
Board Opinion No. 16, and the rules and regulations of the Securities and
Exchange Commission (the "SEC"); and
WHEREAS, as a condition to, and upon or immediately following the execution
of, this Agreement, Parent and the Company are entering into the Stock Option
Agreement described in Section 5.17 hereof; and
WHEREAS, the parties hereto desire to make certain representations,
warranties, and agreements in connection with the Merger and also to prescribe
various conditions to the Merger;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
representations, warranties, covenants, and agreements contained herein, the
parties hereto agree as follows:
ARTICLE 1
THE MERGER; CONVERSION OF SHARES
1.1 The Merger. Subject to the terms and conditions of this Agreement, at
the Effective Time (as defined in Section 1.2 hereof), Merger Subsidiary shall
be merged with and into the Company in accordance with the provisions of the
Washington Business Corporation Act (the "WBCA"), whereupon the separate
corporate existence of Merger Subsidiary shall cease, and the Company shall
continue as the surviving corporation (the "Surviving Corporation"). From and
after the Effective Time, the Surviving Corporation shall possess all the
rights, privileges, powers, and franchises and be subject to all the
restrictions, disabilities, and duties of the Company and Merger Subsidiary, all
as more fully described in the WBCA.
1.2 Effective Time. As soon as practicable after each of the
conditions set forth in Article 6 has been satisfied or waived, the Company and
Merger Subsidiary will file, or cause to be filed, with the Secretary of State
of the State of Washington Articles of Merger for the Merger, which Articles
shall be in the form required by and executed in accordance with the applicable
provisions of the WBCA and shall include as a part thereof a plan of merger (the
"Plan of Merger") substantially in the form attached hereto as Exhibit A. The
Merger shall become effective at the time such filing is made or, if agreed to
by Parent and the Company, such later time or date set forth in the Articles of
Merger (the "Effective Time").
1.3 Conversion of Shares. At the Effective Time, by virtue of the Merger
and without any action on the part of any holder of any share of capital stock
of the Company or Merger Subsidiary:
<PAGE>
(a) Each share of common stock of the Company, par value $.01 per
share ("Company Common Stock"), issued and outstanding immediately prior
thereto (except for Dissenting Shares, as defined in Section 1.4 hereof,
and except for shares referred to in Section 1.3(b) hereof) shall be
converted into the right to receive the fraction of a share (subject to
adjustment as provided below, the "Conversion Fraction") of common stock of
Parent, par value $.10 per share ("Parent Common Stock"), equal to $27.50
divided by the Parent Average Stock Price. The "Parent Average Stock Price"
shall mean the average (rounded to the nearest full cent, with the cents
rounded up if the third decimal place is 5 or more) of the daily closing
sale prices of a share of Parent Common Stock as reported on the New York
Stock Exchange ("NYSE") Composite Tape, as reported in The Wall Street
Journal, for the 19 consecutive NYSE trading days ending on and including
the first NYSE trading day immediately preceding the Effective Time.
Notwithstanding the foregoing, if the sum of the number of shares of
Company Common Stock outstanding immediately prior to the Effective Time
plus the number of shares subject to then outstanding options, warrants, or
other rights to acquire shares of Company Common Stock (collectively,
"Company Stock Acquisition Rights") is greater than 20,693,456 shares plus
that number of shares issuable under the Company's Employee Share Purchase
Plan and Team Savings Plan or if the aggregate exercise price of all such
Company Stock Acquisition Rights then outstanding is less than the
aggregate exercise price reflected in Section 3.3 of the Company Disclosure
Schedule, then the $27.50 amount per share of Company Common Stock, as
described above, shall be reduced to an amount equal to (i) [$27.50 times
20,693,456 shares plus that number of shares issuable under the Company's
Employee Share Purchase Plan and Team Savings Plan] minus the aggregate
exercise price reflected in Section 3.3 of the Company Disclosure Schedule
plus the aggregate amount received by the Company as a result of any
issuance of Company Common Stock after the date of this Agreement and prior
to the Effective Time plus the aggregate exercise price of all Company
Stock Acquisition Rights outstanding immediately prior to the Effective
Time divided by (ii) the sum of (A) the number of shares of Company Common
Stock outstanding immediately prior to the Effective Time plus (B) the
number of shares subject to Company Stock Acquisition Rights then
outstanding.
An appropriate adjustment shall similarly be made in the event that,
prior to the Effective Time, the outstanding shares of Company Common
Stock, without new consideration, are changed into or exchanged for a
different kind of shares or securities through a reorganization,
reclassification, stock dividend, stock combination, or other like change
in the Company's capitalization. Notwithstanding the foregoing, nothing in
this section shall be deemed to constitute authorization or permission for
or consent from Parent or Merger Subsidiary to any increase in the number
of shares of Company Common Stock outstanding or subject to outstanding
Company Stock Acquisition Rights, to any decrease in the exercise price of
such Rights, or to any reorganization, reclassification, stock dividend,
stock combination, or other like change in capitalization.
(b) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time that is held in the treasury of the
Company or is then owned beneficially or of record by Parent, Merger
Subsidiary, or any direct or indirect subsidiary of Parent or the Company
shall be cancelled without payment of any consideration therefor and
without any conversion thereof.
(c) Each share of any other class of capital stock of the Company
(other than Company Common Stock) shall be cancelled without payment of any
consideration therefor and without any conversion thereof.
<PAGE>
(d) Each share of common stock of Merger Subsidiary, par value $.01
per share ("Merger Subsidiary Common Stock"), issued and outstanding
immediately prior to the Effective Time shall be converted into one share
of the common stock of the Surviving Corporation, par value $.01 per share
("Surviving Corporation Common Stock").
1.4 Dissenting Shares. Notwithstanding any provision of this Agreement to
the contrary, each outstanding share of Company Common Stock, the holder of
which has demanded and perfected such holder's right to dissent from the Merger
and to be paid the fair value of such shares in accordance with Sections
23B.13.020 et seq. of the WBCA and, as of the Effective Time, has not
effectively withdrawn or lost such dissenters' rights ("Dissenting Shares"),
shall not be converted into or represent a right to receive the Parent Common
Stock into which shares of Company Common Stock are converted pursuant to
Section 1.3 hereof, but the holder thereof shall be entitled only to such rights
as are granted by the WBCA. The Company shall give Parent (i) prompt written
notice of any notice of intent to demand fair value for any shares of Company
Common Stock, withdrawals of such notices, and any other instruments served
pursuant to the WBCA or any other provisions of Washington law and received by
the Company, and (ii) the opportunity to conduct jointly all negotiations and
proceedings with respect to demands for fair value for shares of Company Common
Stock under the WBCA. The Company shall not, except with the prior written
consent of Parent, voluntarily make any payment with respect to any demands for
fair value for shares of Company Common Stock or offer to settle or settle any
such demands.
1.5 Exchange of Company Common Stock.
(a) Promptly after the Effective Time, Parent shall cause Parent's
stock transfer agent or such other person as Parent may appoint to act as
exchange agent (the "Exchange Agent") to mail to each holder of record
(other than Parent, Merger Subsidiary, the Company, or any subsidiary of
Parent or the Company) of a certificate or certificates that immediately
prior to the Effective Time represented outstanding shares of Company
Common Stock ("Company Certificates") a form letter of transmittal (which
shall specify that delivery shall be effective, and risk of loss and title
to the Company Certificate(s) shall pass, only upon delivery of the Company
Certificate(s) to the Exchange Agent) and instructions for such holder's
use in effecting the surrender of the Company Certificates in exchange for
certificates representing shares of Parent Common Stock.
(b) As soon as practicable after the Effective Time, the Exchange
Agent shall distribute to holders of shares of Company Common Stock, upon
surrender to the Exchange Agent of one or more Company Certificates for
cancellation, together with a duly-executed letter of transmittal, (i) one
or more Parent certificates representing the number of whole shares of
Parent Common Stock into which the shares represented by the Company
Certificate(s) shall have been converted pursuant to Section 1.3(a), and
(ii) a bank check in the amount of cash into which the shares represented
by the Company Certificate(s) shall have been converted pursuant to Section
1.5(f) (relating to fractional shares), and the Company Certificate(s) so
surrendered shall be cancelled. In the event of a transfer of ownership of
Company Common Stock that is not registered in the transfer records of the
Company, it shall be a condition to the issuance of shares of Parent Common
Stock that the Company Certificate(s) so surrendered shall be properly
endorsed or be otherwise in proper form for transfer and that such
transferee shall (i) pay to the Exchange Agent any transfer or other taxes
required or (ii) establish to the satisfaction of the Exchange Agent that
such tax has been paid or is not payable.
<PAGE>
(c) Holders of Company Common Stock will be entitled to any dividends
or other distributions pertaining to the Parent Common Stock received in
exchange therefor that become payable to persons who are holders of record
of Parent Common Stock as of a record date that follows the Effective Time,
but only after they have surrendered their Company Certificates for
exchange. Subject to the effect, if any, of applicable law, the Exchange
Agent shall receive, hold, and remit any such dividends or other
distributions to each such record holder entitled thereto, without
interest, at the time that such Company Certificates are surrendered to the
Exchange Agent for exchange. Holders of Company Common Stock will not be
entitled, however, to dividends or other distributions that become payable
before or after the Effective Time to persons who were holders of record of
Parent Common Stock as of a record date that is prior to the Effective
Time.
(d) All shares of Parent Common Stock issued upon the surrender for
exchange of Company Common Stock in accordance with the terms hereof
(including any cash paid for fractional shares pursuant to Section 1.5(f)
hereof) shall be deemed to have been issued in full satisfaction of all
rights pertaining to such shares of Company Common Stock.
(e) After the Effective Time, there shall be no further registration
of transfers on the stock transfer books of the Surviving Corporation of
the shares of Company Common Stock that were outstanding immediately prior
to the Effective Time. If, after the Effective Time, Company Certificates
representing such shares are presented to the Surviving Corporation, they
shall be cancelled and exchanged as provided in this Article 1. As of the
Effective Time, the holders of Company Certificates representing shares of
Company Common Stock shall cease to have any rights as shareholders of the
Company, except such rights, if any, as they may have pursuant to the WBCA.
Except as provided above, until such Company Certificates are surrendered
for exchange, each such Company Certificate shall, after the Effective
Time, represent for all purposes only the right to receive the number of
whole shares of Parent Common Stock into which the shares of Company Common
Stock shall have been converted pursuant to the Merger as provided in
Section 1.3(a) hereof and the right to receive the cash value of any
fraction of a share of Parent Common Stock as provided in Section 1.5(f)
hereof.
(f) No fractional shares of Parent Common Stock and no certificates or
scrip therefor, or other evidence of ownership thereof, shall be issued
upon the surrender for exchange of Company Certificates, no dividend or
other distribution of Parent shall relate to any fractional share, and such
fractional share interests shall not entitle the owner thereof to vote or
to any rights of a shareholder of Parent. All fractional shares of Parent
Common Stock to which a holder of Company Common Stock immediately prior to
the Effective Time would otherwise be entitled, at the Effective Time,
shall be aggregated if and to the extent multiple Company Certificates of
such holder are submitted together to the Exchange Agent. If a fractional
share results from such aggregation, then (in lieu of such fractional
share) the Exchange Agent shall pay to each holder of shares of Company
Common Stock who otherwise would be entitled to receive such fractional
share of Parent Common Stock an amount of cash (without interest)
determined by multiplying (i) the Parent Average Stock Price by (ii) the
fractional share of Parent Common Stock to which such holder would
otherwise be entitled. Parent will make available to the Exchange Agent any
cash necessary for this purpose.
<PAGE>
(g) In the event any Company Certificates shall have been lost,
stolen, or destroyed, the Exchange Agent shall issue in exchange for such
lost, stolen, or destroyed Company Certificates, upon the making of an
affidavit of that fact by the holder thereof, such shares of Parent Common
Stock and cash for fractional shares, if any, as may be required pursuant
to this Article 1; provided, however, that Parent may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of
such lost, stolen, or destroyed Company Certificate to deliver a bond in
such sum as Parent may direct as indemnity against any claim that may be
made against Parent or the Exchange Agent with respect to such Company
Certificate alleged to have been lost, stolen, or destroyed.
(h) Each person entitled to receive shares of Parent Common Stock
pursuant to this Article 1 shall receive together with such shares the
number of Parent preferred share purchase rights (pursuant to the Rights
Agreement dated as of June 27, 1991, between Parent and Norwest Bank
Minnesota, N.A., the "Parent Rights Plan") per share of Parent Common Stock
equal to the number of Parent preferred share purchase rights associated
with one share of Parent Common Stock at the Effective Time.
1.6 Exchange of Merger Subsidiary Common Stock. From and after the
Effective Time, each outstanding certificate previously representing shares of
Merger Subsidiary Common Stock shall be deemed for all purposes to evidence
ownership of and to represent the number of shares of Surviving Corporation
Common Stock into which such shares of Merger Subsidiary Common Stock shall have
been converted. Promptly after the Effective Time, the Surviving Corporation
shall issue to Parent a stock certificate or certificates representing such
shares of Surviving Corporation Common Stock in exchange for the certificate or
certificates that formerly represented shares of Merger Subsidiary Common Stock,
which shall be cancelled.
1.7 Stock Options.
(a) Except as provided below with respect to the Company's Employee
Share Purchase Plan, each option to purchase shares of Company Common Stock
that is outstanding at the Effective Time (a "Company Option") shall, by
virtue of the Merger and without any action on the part of the holder
thereof, be assumed by Parent in such manner that Parent (i) is a
corporation "assuming a stock option in a transaction to which Section
424(a) applies" within the meaning of Section 424 of the Code and the
regulations thereunder or (ii) to the extent that Section 424 of the Code
does not apply to any such Company Option, would be such a corporation were
Section 424 of the Code applicable to such Company Option. From and after
the Effective Time, all references to the Company in the Company Options
shall be deemed to refer to Parent. The Company Options assumed by Parent
shall be exercisable upon the same terms and conditions as under the
Company Options except that (i) such Company Options shall entitle the
holder to purchase from Parent the number of shares of Parent Common Stock
(rounded down to the nearest whole number of such shares) that equals the
product of the Conversion Fraction multiplied by the number of shares of
Company Common Stock subject to such option immediately prior to the
Effective Time, and (ii) the option exercise price per share of Parent
Common Stock shall be an amount (rounded up to the nearest full cent) equal
to the option exercise price per share of Company Common Stock in effect
immediately prior to the Effective Time divided by the Conversion Fraction.
As promptly as practicable after the Effective Time, Parent shall issue to
each holder of a Company Option a written instrument informing such holder
of the assumption by Parent of such Company Option.
<PAGE>
(b) Immediately prior to the Effective Time, the current Plan Period
under the Company's Employee Share Purchase Plan shall be ended, and each
participant shall be deemed to have purchased immediately prior to the
Effective Time, to the extent of payroll deductions accumulated by such
participant as of such Plan Period end, the number of whole shares of
Company Common Stock at a per share price determined pursuant to the
provisions of the Company's Employee Share Purchase Plan, and each
participant shall receive a cash payment equal to the balance, if any, of
such accumulated payroll deductions remaining after such purchase of such
shares. As of the Effective Time, each participant shall receive by virtue
of the Merger, for each share of Company Common Stock such participant has
so purchased under the Employee Share Purchase Plan, a fraction of a share
of Parent Common Stock equal to the Conversion Fraction. The Company's
Employee Share Purchase Plan and all purchase rights thereunder shall
terminate effective as of the Effective Time.
1.8 Capitalization Changes. If, between the date of this Agreement and the
Effective Time, the outstanding shares of Parent Common Stock shall have been
changed into a different number of shares or a different class by reason of any
reclassification, recapitalization, split-up, combination, exchange of shares,
or stock dividend, the Conversion Fraction and all per-share price amounts and
calculations set forth in this Agreement shall be appropriately adjusted.
1.9 Articles of Incorporation of the Surviving Corporation. The Articles of
Incorporation of Merger Subsidiary, as in effect immediately prior to the
Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation until thereafter amended in accordance with applicable law;
provided, however, that upon the Effective Time, Article 1 of the Articles of
Incorporation of the Surviving Corporation shall be amended to read in its
entirety as follows: "The name of the corporation shall be Medtronic
Physio-Control, Inc."
1.10 Bylaws of the Surviving Corporation. The Bylaws of Merger Subsidiary,
as in effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation until thereafter amended in accordance with applicable
law.
1.11 Directors and Officers of the Surviving Corporation. The directors and
officers of Merger Subsidiary immediately prior to the Effective Time shall be
the directors and officers, respectively, of the Surviving Corporation until
their respective successors shall be duly elected and qualified.
ARTICLE 2
CLOSING
2.1 Time and Place. Subject to the satisfaction or waiver of the provisions
of Article 6, the closing of the Merger (the "Closing") shall take place at 3:00
p.m., local time, on the day the Merger is approved by the shareholders of the
Company at the Company Shareholders Meeting (as defined in Section 5.4 hereof),
or as soon thereafter as all conditions to Closing have been satisfied or
waived, or on such other date and/or at such other time as Parent and the
Company may mutually agree. The date on which the Closing actually occurs is
herein referred to as the "Closing Date." The Closing shall take place at the
corporate headquarters offices of the Company, or at such other place or in such
other manner (e.g., by telecopy exchange of signature pages with originals to
follow by overnight delivery) as the parties hereto may agree.
2.2 Filings at the Closing. At the Closing, subject to the provisions of
Article 6, Parent, Merger Subsidiary, and the Company shall cause Articles of
Merger to be filed in accordance with the provisions of Section 23B.11.050 of
the WBCA, and take any and all other lawful actions and do any and all other
lawful things necessary to cause the Merger to become effective.
<PAGE>
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in a document of even date herewith, referring
specifically to the representations and warranties in this Agreement which
identifies by section number to which such disclosure relates (the "Company
Disclosure Schedule"), the Company hereby makes the following representations
and warranties to Parent and Merger Subsidiary:
3.1 Organization. The Company and each subsidiary of the Company (referred
to herein as a "Subsidiary") is a corporation duly organized and validly
existing under the laws of its respective jurisdiction of incorporation and has
all requisite corporate power and authority to own, lease, and operate its
properties and to carry on its business as now being conducted. The Company and
each Subsidiary is duly qualified and in good standing to do business in each
jurisdiction in which the property owned, leased, or operated by it or the
nature of the business conducted by it makes such qualification necessary and
where the failure to qualify could reasonably be expected to have a Company
Material Adverse Effect (as defined below). "Company Material Adverse Effect"
means an effect that, individually or in the aggregate with other effects, is or
would reasonably be expected to be materially adverse: (i) to the present or
specifically planned business, properties, liabilities, results of operation, or
financial condition of the Company and its Subsidiaries, considered as a whole;
(ii) to the ability of Parent or the Surviving Corporation to conduct such
businesses, as presently conducted, following the Effective Time; or (iii) to
the Company's ability to perform any of its obligations under this Agreement or
to consummate the Merger. The jurisdictions in which the Company and each
Subsidiary are qualified are listed on the Company Disclosure Schedule. The
Company has heretofore delivered to Parent complete and accurate copies of the
Articles of Incorporation and Bylaws of the Company and each Subsidiary, as
currently in effect. Except to the extent specifically disclosed on the Company
Disclosure Schedule, neither the Company nor any Subsidiary, directly or
indirectly, owns or controls or has any capital, equity, partnership,
participation, or other ownership interest in any corporation, partnership,
joint venture, or other business association or entity.
3.2 Authorization. The Company has full corporate power and authority to
execute and deliver this Agreement and, subject to obtaining the necessary
approval of its shareholders, to consummate the transactions contemplated
hereby, and to file and distribute the Proxy Statement/Prospectus (as defined in
Section 5.4 hereof). The execution and delivery of this Agreement by the Company
and the consummation of the transactions contemplated hereby have been duly and
validly authorized and approved by the Company's Board of Directors, no other
corporate proceedings on the part of the Company or any Subsidiary are necessary
to recommend and submit this Agreement to the Company's shareholders, and,
subject to obtaining the approval of the Company's shareholders, no other
corporate action on the part of the Company or any Subsidiary is necessary to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by the Company and constitutes the valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, subject to laws of general application relating to bankruptcy,
insolvency, and the relief of debtors and rules of law governing specific
performance, injunctive relief, or other equitable remedies. To the Company's
knowledge, each Agreement to Facilitate Merger and Affiliate's Letter (as
described in Sections 5.11 and 5.6) has been duly and validly executed and
delivered by the Company shareholder who is a party thereto and constitutes the
valid and binding obligation of such shareholder, enforceable in accordance with
its terms, subject to laws of general application relating to bankruptcy,
insolvency, and the relief of debtors and rules of law governing specific
performance, injunctive relief, or other equitable remedies.
<PAGE>
3.3 Capitalization. As of June 24, 1998, the authorized capital stock of
the Company consists of (i) 40,000,000 shares of Company Common Stock, par value
$.01 per share, of which 17,722,021 shares are issued and outstanding and no
shares are held in the Company's treasury, and (ii) 5,000,000 shares of Company
Preferred Stock, par value $.01 per share, none of which are issued or
outstanding. Except as set forth on the Company Disclosure Schedule, all issued
and outstanding shares of capital stock of each Subsidiary are owned,
beneficially and of record, by the Company, free and clear of any Liens (as
defined in Section 3.14). All issued and outstanding shares of Company Common
Stock have been validly issued, are fully paid and nonassessable, and have not
been issued in violation of and are not currently subject to any preemptive
rights. Except for options to purchase an aggregate 2,971,435 shares of Company
Common Stock granted pursuant to the Company 1994 Stock Purchase and Option Plan
and the 1997 Stock and Incentive Plan (collectively, the "Company Option Plans")
listed, together with their respective exercise prices, in Section 3.3 of the
Company Disclosure Schedule, and except for the rights to purchase under the
Company's Team Savings Plan shares of Company Common Stock (estimated to be the
number of shares equal to approximately $105,000 of matching contributions per
quarter divided by the trading price of the Company Common Stock at the end of
any such quarter, based on the current match rates, as listed in Section 3.3 of
the Company Disclosure Schedule) and except for the rights to purchase under the
Company's Employee Share Purchase Plan shares of Company Common Stock (estimated
to be approximately 50,000 shares, at a per share price of $13.4938, based on
the current contribution rates of the participants, as listed in Section 3.3 of
the Company Disclosure Schedule, and assuming the current Plan Period is ended
at the Effective Time (which is assumed to be not later than September 30, 1998
for this purpose)), there are not any outstanding or authorized subscriptions,
options, warrants, calls, rights, convertible securities, commitments,
restrictions, arrangements, or any other agreements of any character to which
the Company or any Subsidiary is a party that, directly or indirectly, (i)
obligate the Company or any Subsidiary to issue any shares of capital stock or
any securities convertible into, or exercisable or exchangeable for, or
evidencing the right to subscribe for, any shares of capital stock, (ii) call
for or relate to the sale, pledge, transfer, or other disposition or encumbrance
by the Company or any Subsidiary of any shares of its capital stock, or (iii) to
the knowledge of the Company, relate to the voting or control of such capital
stock. The Company Disclosure Schedule sets forth a complete and accurate list
of all stock options, warrants, and other rights to acquire Company Common
Stock, including the name of the holder, the date of grant, acquisition price,
expiration date, number of shares, exercisability schedule, and, in the case of
options, the type of option under the Code. The Company Disclosure Schedule also
sets forth the restrictions to which any shares of Company Common Stock issued
pursuant to the Company Option Plans or otherwise are currently subject and also
sets forth the restrictions to which such shares will be subject immediately
after the Effective Time. No consent of holders or participants under the
Company Option Plans or Employee Share Purchase Plan is required to carry out
the provisions of Section 1.7. All actions, if any, required on the part of the
Company under the Company Option Plans or Employee Share Purchase Plan to allow
for the treatment of Company Options and the Employee Share Purchase Plan as is
provided in Section 1.7, has been, or prior to the Closing will be, validly
taken by the Company, and the Company will not from and after the date hereof
allow any increase in the rate of a participant's contributions to the Employee
Share Purchase Plan or any enrollments or re-enrollments in such Plan.
<PAGE>
3.4 Reports and Financial Statements. The Company has filed all forms,
reports, registration statements, and documents required to be filed by it with
the Securities and Exchange Commission ("SEC") since January 1, 1996 (such
forms, reports, registration statements, and documents, together with any
amendments thereto, are referred to as the "Company SEC Filings"). As of their
respective dates, the Company SEC Filings (i) complied as to form in all
material respects with the applicable requirements of the Securities Act of 1933
and the rules and regulations thereunder (the "1933 Act") and the Securities
Exchange Act of 1934 and the rules and regulations thereunder (the "1934 Act"),
as the case may be, and (ii) did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances under which
they were made, not misleading. The audited financial statements and unaudited
interim financial statements included or incorporated by reference in the
Company SEC Filings, including but not limited to the Company's audited
financial statements at and for the year ended December 31, 1997 (the "Company
1997 Financials"), (i) were prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except as may be indicated therein or in the notes thereto), (ii) complied as
of their respective dates in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, and (iii) fairly present the consolidated financial position of the
Company as of the dates thereof and the income, cash flows, and changes in
shareholders' equity for the periods involved. The statements of earnings
included in the audited or unaudited interim financial statements in the Company
SEC Filings do not contain any items of special or nonrecurring income or any
other income not earned in the ordinary course of business, except as expressly
specified in the applicable statement of operations or notes thereto. Prior to
the date hereof, the Company has delivered to Parent complete and accurate
copies of all Company SEC Filings since January 1, 1995. The Company has filed
in a timely manner all reports required to be filed by it pursuant to Sections
13, 14, or 15(d) of the 1934 Act.
3.5 Absence of Undisclosed Liabilities. Except to the extent specifically
disclosed on the Company Disclosure Schedule, neither the Company nor any
Subsidiary has any liabilities or obligations of any nature (whether absolute,
accrued, contingent, or otherwise) except (a) liabilities or obligations
required by generally accepted accounting principles to be recognized or
disclosed on a consolidated balance sheet of Company and its consolidated
subsidiaries or in the notes thereto that are accrued or reserved against in the
audited consolidated balance sheet of the Company as of December 31, 1997
contained in the Company 1997 Financials (the "Company Audited Balance Sheet")
or in the unaudited consolidated balance sheet of the Company as of March 31,
1998 contained in the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1998 (the "Company Interim Balance Sheet"), and (b)
liabilities or obligations arising since March 31, 1998 in the ordinary course
of business and consistent with past practice that would not have a Company
Material Adverse Effect.
<PAGE>
3.6 Consents and Approvals. Except for (i) any applicable requirements of
the 1933 Act, the 1934 Act, state securities laws, the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 and the regulations thereunder (the "HSR
Act"), and the antitrust, competition, foreign investment, or similar laws of
any foreign countries or supranational commissions or boards that require
pre-merger notifications or filings with respect to the Merger (collectively,
"Foreign Merger Laws"), (ii) approval by the Company's shareholders, (iii) the
filing and recordation of appropriate merger documents as required by the WBCA,
(iv) compliance with Chapter 13 of the WBCA regarding dissenters' rights, and
(v) any items disclosed on the Company Disclosure Schedule, the execution and
delivery of this Agreement by the Company, and, to the Company's knowledge, the
execution and delivery of the Agreements to Facilitate Merger, and the
consummation of the transactions contemplated hereby and thereby will not: (a)
violate any provision of the Articles of Incorporation or Bylaws of the Company
or any Subsidiary; (b) violate any statute, rule, regulation, order, or decree
of any federal, state, local, or foreign body or authority (including, but not
limited to, the Food and Drug Administration (the "FDA") or any nongovernmental
self-regulatory agency) by which the Company or any Subsidiary or any of their
respective properties or assets may be bound; (c) require any filing with or
permit, consent, or approval of any federal, state, local, or foreign public
body or authority (including, but not limited to, the FDA or any nongovernmental
self-regulatory agency); or (d) result in any violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default
under, result in the loss of any material benefit under, or give rise to any
right of termination, cancellation, increased payments, or acceleration under,
or result in the creation of any Lien (as defined in Section 3.14) on any of the
properties or assets of the Company or any Subsidiary under, any of the terms,
conditions, or provisions of any note, bond, mortgage, indenture, license,
franchise, permit, authorization, agreement, or other instrument or obligation
to which the Company or any Subsidiary is a party, or by which it or any of its
properties or assets may be bound, except, in the case of clause (d), for any
such violations, breaches, defaults, or other occurrences that would not prevent
or delay consummation of any of the transactions contemplated hereby in any
material respect, or otherwise prevent the Company from performing its
obligations under this Agreement in any material respect, and would not have a
Company Material Adverse Effect.
3.7 Compliance with Laws. Except to the extent specifically described on
the Company Disclosure Schedule, all activities of the Company and each
Subsidiary have been, and are currently being, conducted in compliance with all
applicable federal, state, local, and foreign laws, ordinances, regulations,
interpretations, judgments, decrees, injunctions, permits, licenses,
certificates, governmental requirements, orders, and other similar items of any
court or other governmental entity (including, but not limited to, those of the
FDA or any nongovernmental self-regulatory agency), the failure to comply with
which could reasonably be expected to have a Company Material Adverse Effect.
The Company and each Subsidiary has timely filed or otherwise provided all
registrations, reports, data, and other information and applications with
respect to its medical device, pharmaceutical, consumer, health care, and other
governmentally regulated products (the "Regulated Products") required to be
filed with or otherwise provided to the FDA or any other federal, state, local,
or foreign governmental authorities with jurisdiction over the manufacture, use,
or sale of the Regulated Products, and all regulatory licenses or approvals in
respect thereof are in full force and effect, except where the failure to file
timely such registrations, reports, data, information, and applications or the
failure to have such licenses and approvals in full force and effect would not
have a Company Material Adverse Effect.
<PAGE>
3.8 Litigation. Except to the extent specifically disclosed on the Company
Disclosure Schedule, to the Company's knowledge, no investigation or review by
any federal, state, local, or foreign body or authority (including, but not
limited to, the FDA or any nongovernmental self-regulatory agency) with respect
to the Company or any Subsidiary is pending or threatened, nor has any such body
or authority (including, but not limited to, the FDA or any nongovernmental
self-regulatory agency) indicated to the Company or any Subsidiary an intention
to conduct the same. Except to the extent specifically disclosed on the Company
Disclosure Schedule, there are no claims, actions, suits, or proceedings by any
private party that could reasonably be expected to involve individually an
amount in excess of $50,000 or collectively an aggregate amount in excess of
$200,000, or by any governmental body or authority (including, but not limited
to, the FDA or any nongovernmental self-regulatory agency), against or affecting
the Company or any Subsidiary, pending or, to the knowledge of the Company,
threatened at law or in equity, or before any federal, state, local, foreign, or
other governmental department, commission, board, bureau, agency, or
instrumentality (including, but not limited to, the FDA or any nongovernmental
self-regulatory agency), and, to the knowledge of the Company, there is no basis
for any such investigation, review, claim, action, suit, or proceeding that
could reasonably be expected to have a Company Material Adverse Effect.
3.9 Absence of Material Adverse Changes. Except to the extent specifically
disclosed on the Company Disclosure Schedule, since December 31, 1997 there has
not been any (a) change or circumstance that could reasonably be expected to
have a Company Material Adverse Effect; (b) action by the Company or any
Subsidiary that, if taken on or after the date of this Agreement, would require
the consent or approval of Parent pursuant to Section 5.1 hereof, except for
actions as to which consent or approval has been given as provided therein; (c)
damage, destruction, or loss, whether or not covered by insurance, that could
reasonably be expected to have a Company Material Adverse Effect; (d) change by
the Company or any Subsidiary in accounting methods or principles used for
financial reporting purposes, except as required by a change in generally
accepted accounting principles and concurred with by the Company's independent
public accountants; or (e) agreement, whether in writing or otherwise, to take
any action described or referenced in this Section 3.9.
3.10 Environmental Laws and Regulations. The Company Disclosure Schedule
completely and accurately sets forth the following: (a) a list of all
above-ground storage tanks or underground storage tanks for Hazardous Materials
(as defined below) on the Company's principal facility located at 11811 Willows
Road N.E., Redmond, WA 98052 (the "Principal Facility"); (b) the identity of any
Hazardous Materials (as defined below) used, generated, transported or disposed
of by the Company or any Subsidiary now or at any time in the past, together
with a brief description and location of each activity using such Hazardous
Materials (with respect to sites other than Redmond, only to the extent of
material Hazardous Materials); (c) a summary of the identity of, to the
Company's knowledge, any Hazardous Materials that have been disposed of or found
on, above or below the Principal Facility; and (d) a list of all reports,
studies, and tests in the possession of the Company or any Subsidiary or
initiated by the Company or any Subsidiary pertaining to the existence of
Hazardous Materials on, above, or below real property now or at any time owned,
leased or occupied by the Company or any Subsidiary (such real property referred
to in this Section as the "Real Property") or any property adjoining or which
could reasonably be expected to affect the Real Property, or concerning
compliance with or liability under the Regulations (as defined below). The
Company has heretofore delivered to Parent complete and accurate copies of such
reports, studies, and tests.
<PAGE>
The Company and each Subsidiary have obtained, and maintained in full force
and effect, all required environmental permits and other governmental approvals
and are in compliance with all applicable Regulations (as defined below), except
where the failure to so obtain and maintain or to be in compliance would not
have a Company Material Adverse Effect. Neither the Company nor any Subsidiary
(i) has received a written notice or Claim (as defined below) alleging potential
liability under any of the Regulations or alleging a violation of the
Regulations or (ii) has any knowledge that such a notice or Claim may be issued
in the future. Neither the Company nor any Subsidiary has any knowledge of any
notices to or Claims against any persons, or reasonable basis therefor, alleging
potential liability under any of the Regulations with respect to the Real
Property or any adjoining properties or which could reasonably be expected to
affect the Real Property. Neither the Company nor any Subsidiary (i) has been or
is presently subject to or, to the knowledge of the Company, threatened with any
administrative or judicial proceeding pursuant to the Regulations, or (ii) has
any information that it may be subject to or, to the knowledge of the Company,
threatened with such a proceeding in the future. Neither the Company nor any
Subsidiary has knowledge of any conditions or circumstances that could
reasonably be expected to result in the determination of liability against the
Company or any Subsidiary relating to environmental matters that would have a
Company Material Adverse Effect, including, but not limited to, any Claim
arising from past or present environmental practices with respect to Hazardous
Materials, the Real Property, or any disposal sites. No Hazardous Materials have
been or are threatened to be discharged, emitted, or released into the air,
water, soil, or subsurface at or from the Real Property by the Company or, to
the Company's knowledge, by any other person.
For purposes of this Section 3.10, the following terms shall have the
following meanings: (i) "Hazardous Materials" means asbestos, urea formaldehyde,
polychlorinated biphenyls, nuclear fuel or materials, chemical waste,
radioactive materials, explosives, known human carcinogens, petroleum products
or other substances or materials listed, identified, or designated as toxic or
hazardous or as a pollutant or contaminant in, or the use, release or disposal
of which is regulated by, the Regulations; (ii) "Regulations" means the
Comprehensive Environmental Response Compensation and Liability Act ("CERCLA")
as amended by the Superfund Amendments and Reauthorization Act of 1986 ("SARA"),
42 U.S.C. ss.ss. 9601 et seq.; the Federal Resource Conservation and Recovery
Act of 1976 ("RCRA"), 42 U.S.C. ss.ss. 6901 et seq.; the Clean Water Act, 33
U.S.C. ss.ss. 1321 et seq.; the Clean Air Act, 42 U.S.C. ss.ss. 7401 et seq.,
and any other federal, state, county, local, foreign, or other governmental
statute, regulation, or ordinance, as now in existence, that relates to or deals
with employee safety and human health, pollution, health, or the environment
including, but not limited to, the use, generation, discharge, transportation,
disposal, recordkeeping, notification, and reporting of Hazardous Materials; and
(iii) "Claim" means any and all claims, demands, causes of actions, suits,
proceedings, administrative proceedings, losses, judgments, decrees, debts,
damages, liabilities, court costs, penalties, attorneys' fees, and any other
expenses incurred, assessed, sustained or alleged by or against the Company or
any Subsidiary.
<PAGE>
3.11 Officers, Directors and Employees. Prior to the date hereof, the
Company has provided to Parent a list that completely and accurately sets forth
the name and current annual salary rate of each officer or employee of the
Company or any Subsidiary whose total remuneration for the last fiscal year was,
or for the current fiscal year has been set at, in excess of $50,000, together
with a summary of the bonuses, commissions, additional compensation, and other
like benefits, if any, paid or payable to such persons for the last fiscal year
and proposed for the current fiscal year. The Company Disclosure Schedule
completely and accurately sets forth the names of the officers (with all
positions and titles indicated) and directors of the Company and each
Subsidiary. No unfair labor practice complaint against the Company or any
Subsidiary is pending before the National Labor Relations Board, and there is no
labor strike, slowdown or stoppage pending or, to the knowledge of the Company,
threatened against or involving the Company or any Subsidiary. No unionizing
efforts have, to the knowledge of the Company, been made by employees of the
Company or any Subsidiary, neither the Company nor any Subsidiary is a party to
or subject to any collective bargaining agreement, and no collective bargaining
agreement is currently being negotiated by the Company or any Subsidiary. There
is no labor dispute pending or, to the knowledge of the Company, threatened
between the Company or any Subsidiary and its employees. During the 12-month
period preceding the date of this Agreement there has not been any material
increase in the rate of turnover of employees of the Company or any Subsidiary
over historical rates.
3.12 Taxes. The Company has previously furnished to Parent complete and
accurate copies of all federal income tax returns actually filed by the Company
for each of the fiscal years ended December 31, 1995 and 1996 and has made
available for review by Parent (or, with respect to those that are not available
at the Company's Principal Facility, will make available for review by Parent
within 15 days after execution of this Agreement) complete and accurate copies
of all other tax or assessment reports and tax returns (including any applicable
information returns) required by any law or regulation (whether United States,
foreign, state, local or other jurisdiction) and filed by the Company for the
fiscal years ended December 31, 1995, 1996 or 1997, and of all such returns
filed separately by any Subsidiary for fiscal years ended during or after 1995.
The Company and each Subsidiary has filed, or has obtained extensions to file
(which extensions have not expired without filing), all state, local, United
States, foreign, or other tax reports and returns required to be filed by any of
them. The Company and each Subsidiary has duly paid, or accrued on its books of
account, all taxes (including estimated taxes) shown as due on such reports and
returns (or such extension requests), or assessed against it, or that it is
obligated to withhold from amounts owed by it to any person. The liabilities and
reserves for taxes reflected on the Company Audited Balance Sheet or the Company
Interim Balance Sheet are adequate to cover all taxes payable by the Company and
its Subsidiaries for all taxable periods and portions thereof ending on or
before the dates thereof. There are no Liens (as defined in Section 3.14) for
taxes upon any property or asset of the Company or any Subsidiary. Neither the
Company nor any Subsidiary is delinquent in the payment of any tax assessment
(including, but not limited to, any applicable withholding taxes). None of the
tax returns or reports for the tax periods ended December 31, 1995, 1996, and
1997 have been audited by the Internal Revenue Service (the "IRS") or by any
other taxing authority. Further, to the knowledge of the Company, except to the
extent specifically disclosed on the Company Disclosure Schedule, no state of
facts exists or has existed that would subject the Company or any Subsidiary to
an additional material tax liability for any taxes assessable by either the IRS
or any separate state, local, foreign, or other taxing authority with respect to
any reports or returns filed on or before the date hereof (other than extension
requests for which returns have not been filed as of the date hereof). Neither
the Company nor any Subsidiary has, with regard to any assets or property held,
acquired or to be acquired by any of them, filed a consent to the application of
Section 341(f)(2) of the Code. Except to the extent specifically disclosed on
the Company Disclosure Schedule, neither the Company nor any Subsidiary has (i)
received notification of any pending or proposed examination by either the IRS
or any state, local, foreign, or other taxing authority, (ii) received
notification of any pending or proposed deficiency by either the IRS or any
state, local, foreign, or other taxing authority, or (iii) granted any extension
of the limitations period applicable to any claim for taxes.
<PAGE>
For the purposes of this Section 3.12, "tax" shall mean and include taxes,
additions to tax, penalties, interest, fines, duties, withholdings, assessments,
and charges assessed or imposed by any governmental authority, including but not
limited to all federal, state, county, local, and foreign income, profits, gross
receipts, import, ad valorem, real and personal property, franchise, license,
sales, use, value added, stamp, transfer, withholding, payroll, employment,
excise, custom, duty, and any other taxes, obligations and assessments of any
kind whatsoever; "tax" shall also include any liability arising as a result of
being (or ceasing to be) a member of any affiliated, consolidated, combined, or
unitary group as well as any liability under any tax allocation, tax sharing,
tax indemnity, or similar agreement.
3.13 Contracts. The Company Disclosure Schedule lists, and the Company has
heretofore furnished to Parent complete and accurate copies of (or, if oral, the
Company Disclosure Schedule states all material provisions of), (a) every
independent sales representative, noncompetition (except only for standard
noncompetition agreements entered into with the Company's employees, the forms
of which have been provided to Parent), loan, credit, escrow, security,
mortgage, guaranty, pledge, buy-sell, letter of credit, OEM, supply,
distribution, manufacturers' representative, dealer, agency, lease (except for
immaterial personal property leases), licensing (except for immaterial licenses,
which include, without limitation, licenses for off-the-shelf software),
franchise, development, joint development, joint venture, research and
development, or similar contract, agreement, or understanding material to the
Company and to which the Company or any Subsidiary is a party or may be bound,
(b) every material employment or consulting agreement or arrangement with or for
the benefit of any director, officer, employee, other person or shareholder of
the Company or any Subsidiary or any affiliate thereof, (c) every contract,
agreement, or understanding to which the Company or any Subsidiary is a party
that could reasonably be expected to involve payments by or to the Company or
any Subsidiary in excess of $150,000 during the Company's current 1998 fiscal
year or in excess of $250,000 in the aggregate during the Company's 1998, 1999
and 2000 fiscal years, or would have a Company Material Adverse Effect, or that
was not made in the ordinary course of business, (d) every agreement or contract
between the Company or any Subsidiary and any of the Company's officers,
directors, or more than 5% shareholders or any entity in which any of the
Company's officers, directors, or more than 5% shareholders has a greater than
2% equity interest, and (e) every other contract, plan, agreement, or
understanding to which the Company or any Subsidiary is a party or may be bound
and which would be required to be filed with the SEC in a filing to which
paragraph (b)(10) of Item 601 of Regulation S-K of the Rules and Regulations of
the SEC would be applicable. The Company and each Subsidiary has performed all
obligations required to be performed by it under any listed or material
contract, plan, agreement, understanding, or arrangement made or obligation owed
by or to the Company or any Subsidiary, except where the failure would not have
a Company Material Adverse Effect; to the Company's knowledge, there has not
been any event of default (or any event or condition which with notice or the
lapse of time, both or otherwise, would constitute an event of default)
thereunder on the part of the Company, any Subsidiary, or any other party to any
thereof that would have a Company Material Adverse Effect; the same are in full
force and effect and valid and enforceable by the Company or its Subsidiaries in
accordance with their respective terms subject to laws of general application
relating to bankruptcy, insolvency, and the relief of debtors and rules or law
governing specific performance, injunctive relief, and other equitable remedies;
and the performance of any such contracts, plans, agreements, understandings,
arrangements, or obligations would not have a Company Material Adverse Effect.
<PAGE>
3.14 Title to Properties; Liens. The Company and/or its Subsidiaries have
good and marketable title to all properties and assets reflected on the Company
Audited Balance Sheet or the Company Interim Balance Sheet or acquired after the
dates thereof (except for properties and assets sold or otherwise disposed of in
the ordinary course of business since the dates thereof), which includes each
asset the absence or unavailability of which would have a Company Material
Adverse Effect, subject only to (a) statutory Liens arising or incurred in the
ordinary course of business with respect to which the underlying obligations are
not delinquent, (b) with respect to personal property, the rights of customers
of the Company or any Subsidiary with respect to inventory or work in progress
under orders or contracts entered into by the Company or any Subsidiary in the
ordinary course of business, (c) Liens reflected on the Company Audited Balance
Sheet or the Company Interim Balance Sheet, (d) Liens for taxes not yet
delinquent, and (e) and defects in title that would not have a Company Material
Adverse Effect. The term "Lien" as used in this Agreement means any mortgage,
pledge, security interest, encumbrance, lien, claim, or charge of any kind. All
properties and assets purported to be leased by the Company or any Subsidiary
are subject to valid and effective leases that are in full force and effect, and
there does not exist, and the Merger will not result in, any default or event
that with notice or lapse of time, or both or otherwise, would constitute a
default under any such leases which would have a Company Material Adverse
Effect. The properties and assets of the Company and each Subsidiary have been
kept in good condition and repair in the ordinary course of business.
3.15 Permits, Licenses, Etc.. Except as set forth on the Company Disclosure
Schedule, the Company and each Subsidiary has all rights, permits, certificates,
licenses, consents, franchises, approvals, registrations, and other
authorizations necessary to sell its products and services and otherwise carry
on and conduct its business and to own, lease, use, and operate its properties
and assets at the places and in the manner now conducted and operated, except
those the absence of which would not have a Company Material Adverse Effect.
Neither the Company nor any Subsidiary has received any notice or claim
pertaining to the failure to obtain any permit, certificate, license, franchise,
approval, registration, or other authorization required by any federal, state,
local, or foreign body or authority (including, but not limited to, the FDA or
any nongovernmental self-regulatory agency).
<PAGE>
3.16 Intellectual Property Rights. The Company Disclosure Schedule contains
a complete and accurate list of all material patents, trademarks, trade names,
service marks, copyrights, and all applications for or registrations of any of
the foregoing as to which the Company or any Subsidiary is the owner or a
licensee (indicating whether such license is exclusive or nonexclusive). The
Company and each Subsidiary exclusively owns, free and clear of any Lien (as
defined in Section 3.14), or is exclusively (unless otherwise indicated in the
Company Disclosure Schedule) licensed to use, all patents, trademarks, trade
names, service marks, copyrights, applications for or registrations of any of
the foregoing, processes, inventions, designs, technology, formulas, computer
software programs, know-how, and trade secrets used in or necessary for the
conduct of its respective business as currently conducted or proposed to be
conducted (the "Company Intellectual Property"). Except to the extent
specifically disclosed on the Company Disclosure Schedule, no claim has been
asserted or, to the knowledge of the Company, threatened by any person with
respect to the use of the Company Intellectual Property or challenging or
questioning the validity or effectiveness of any license or agreement with
respect thereto. To the knowledge of the Company, neither the use of the Company
Intellectual Property by the Company or any Subsidiary in the present or planned
conduct of its business nor any product or service of the Company or any
Subsidiary infringes on the intellectual property rights of any person. No
current or former shareholder, employee, or consultant of the Company or any
Subsidiary has any rights in or to any of the Company Intellectual Property. All
Company Intellectual Property listed on the Company Disclosure Schedule has the
status indicated therein and all applications are still pending in good standing
and have not been abandoned. Except to the extent specifically disclosed on the
Company Disclosure Schedule: (i) the Company Intellectual Property is valid and
has not been challenged in any judicial or administrative proceeding; (ii) the
Company and each Subsidiary have made all statutorily required filings, if any,
to record their interests, and taken reasonable actions to protect their rights,
in the Company Intellectual Property; (iii) to the knowledge of the Company, no
person or entity nor such person's or entity's business or products has
infringed, misused, or misappropriated any Company Intellectual Property or
currently is infringing, misusing, or misappropriating any Company Intellectual
Property; and (iv) no other person or entity has any right to receive or any
obligation to pay a royalty with respect to any Company Intellectual Property or
any product or service of the Company or any Subsidiary.
3.17 Benefit Plans. Except as set forth in the Company Disclosure Schedule:
(a) Neither the Company nor any Subsidiary sponsors, maintains,
contributes to, or has sponsored, maintained, or contributed to or been
required to contribute to, any "employee pension benefit plan" ("Pension
Plan"), as such term is defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), including, solely for
the purpose of this subsection, a plan excluded from coverage by Section
4(b)(5) of ERISA. Each such Pension Plan presently maintained by the
Company or any Subsidiary is, in all material respects, in compliance with
applicable provisions of ERISA, the Code, and other applicable law.
(b) Neither the Company nor any Subsidiary sponsors, maintains,
contributes to, or has sponsored, maintained, or contributed to or been
required to contribute to, any Pension Plan that is a "Multiemployer Plan"
within the meaning of Section 4001(a)(3) of ERISA.
<PAGE>
(c) Neither the Company nor any Subsidiary sponsors, maintains,
contributes to, or has sponsored, maintained, contributed to, or been
required to contribute to, any "employee welfare benefit plan" ("Welfare
Plan"), as such term is defined in Section 3(1) of ERISA, whether insured
or otherwise, and any such Welfare Plan presently maintained by the Company
or any Subsidiary is, in all material respects, in compliance with the
provisions of ERISA, the Code, and all other applicable laws, including,
but not limited to, Section 4980B of the Code and the regulations
thereunder, and Part 6 of Title I of ERISA. Neither the Company nor any
Subsidiary has established or contributed to any "voluntary employees'
beneficiary association" within the meaning of Section 501(c)(9) of the
Code.
(d) Neither the Company nor any Subsidiary sponsors, maintains, or
contributes to, or has sponsored, maintained, or contributed to, a
"self-insured medical reimbursement plan" within the meaning of Section
105(h) of the Code and the regulations thereunder.
(e) Neither the Company nor any Subsidiary currently maintains or
contributes to any oral or written bonus, profit-sharing, compensation
(incentive or otherwise), commission, stock option, or other stock-based
compensation, retirement, severance, change of control, vacation, sick or
parental leave, dependent care, deferred compensation, cafeteria,
disability, hospitalization, medical, death, retiree, insurance, or other
benefit or welfare or other similar plan, policy, agreement, trust, fund,
or arrangement providing for the remuneration or benefit of all or any
employees or shareholders or any other person, that is neither a Pension
Plan nor a Welfare Plan (collectively, the "Compensation Plans").
(f) To the knowledge of the Company, neither any Pension Plans or
Welfare Plans nor any trust created or insurance contract issued thereunder
nor any trustee, fiduciary, custodian, or administrator thereof, nor any
officer, director, or employee of the Company or any Subsidiary, custodian,
or any other "disqualified person" within the meaning of Section 4975(e)(2)
of the Code, or "party in interest" within the meaning of Section 3(14) of
ERISA, with respect to any such plan has engaged in any act or omission
that could reasonably be expected to subject the Company or any Subsidiary,
either directly or indirectly, to a liability for breach of fiduciary
duties under ERISA or a tax or penalty imposed by Section 502 of ERISA.
(g) Full and timely payment has been made of all amounts that the
Company or any Subsidiary is required, under applicable law, with respect
to any Pension Plan, Welfare Plan, or Compensation Plan, or any agreement
relating to any Pension Plan, Welfare Plan, or Compensation Plan, to have
paid as a contribution to each Pension Plan, Welfare Plan, or Compensation
Plan. To the extent required by generally accepted accounting principles,
the Company has made adequate provisions for reserves to meet contributions
that have not been made because they are not yet due under the terms of any
Pension Plan, Welfare Plan, or Compensation Plan or related agreements.
There will be no change on or before the Closing Date in the operation of
any Pension Plan, Welfare Plan, or Compensation Plan or documents under
which any such plan is maintained that will result in an increase in the
benefit liabilities under such plan, except as may be required by law. The
IRS has issued favorable determination letters with respect to all Company
and Subsidiary Pension Plans that are intended to be qualified under
Section 401(a) of the Code. The Company has provided to Parent complete and
accurate copies of all Pension Plans, Welfare Plans, Compensation Plans,
and related agreements, annual reports (Form 5500), favorable determination
letters, current summary plan descriptions, and all employee handbooks or
manuals.
<PAGE>
(h) The execution of, and performance of the transactions contemplated
in, this Agreement will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any Pension
Plan, Welfare Plan, Compensation Plan, or other arrangement that will or
may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase
in benefits, or obligation to fund benefits. No amount that could be
received (whether in cash or property or the vesting of property) as a
result of any of the transactions contemplated by this Agreement by any
employee, officer, or director of the Company or any of its affiliates who
is a "disqualified individual" (as such term is defined in proposed
Treasury Regulation Section 1.280G-1) under any Pension Plan, Welfare Plan,
or Compensation Plan currently in effect would be an "excess parachute
payment" (as such term is defined in Section 280G(b)(1) of the Code).
3.18 Minute Books. The minute books of the Company and the Subsidiaries, as
previously made available to Parent and its representatives, contain, in all
material respects, complete and accurate records of all meetings of and
corporate actions or written consents by the shareholders, Boards of Directors,
and committees of the Boards of Directors of the Company and the Subsidiaries.
3.19 Insurance Policies. The Company Disclosure Schedule sets forth a
complete and accurate list, including the term, coverages, premium rates, limits
and deductibles thereof, of all material policies of insurance maintained by the
Company or any Subsidiary with respect to any of its officers, directors,
employees, shareholders, agents, properties, buildings, machinery, equipment,
furniture, fixtures or operations and a description of each claim made by the
Company or any Subsidiary during the three-year period preceding the date hereof
under any such policy of insurance. The Company has previously delivered to
Parent complete and accurate copies of all such policies of insurance and
complete and accurate copies of all documentation regarding claims made
thereunder. All such policies of insurance are in full force and effect, have
been issued for the benefit of the Company, its Subsidiaries, and/or their
respective directors, officers and employees by properly licensed insurance
carriers, and are adequate and customary for the assets, business, and
operations of the Company and its Subsidiaries. The Company has promptly and
properly notified its insurance carriers of any and all claims known to it with
respect to its operations or products for which it is insured.
3.20 Bank Accounts. The Company Disclosure Schedule sets forth a list of
each bank, broker, or other depository with which the Company or any Subsidiary
has an account or safe deposit box (other than those having a balance or value
not exceeding $25,000 individually or $250,000 in the aggregate), the names and
numbers of such accounts or boxes and the names of all persons authorized to
draw thereon or execute transactions.
3.21 Powers of Attorney. The Company Disclosure Schedule sets forth the
names of all persons, if any, holding powers of attorney from the Company or any
Subsidiary relating to authority for actions taken in the United States and a
description of the scope of each such power of attorney. The Company has
delivered to Parent prior to the date hereof complete and accurate copies of all
such powers of attorney. Within 15 days after execution of this Agreement, the
Company shall provide Parent with a list setting forth the names of all persons
holding any other powers of attorney from the Company or any Subsidiary not
included in the Company Disclosure Schedule and a description of the scope of
each such other power of attorney (other than powers of attorney granted in the
ordinary course of business for the prosecution of intellectual property filing
matters).
<PAGE>
3.22 Product Liability Claims. During the three-year period preceding the
date hereof, neither the Company nor any Subsidiary has ever received a claim,
or incurred any uninsured or insured liability, for or based upon breach of
product warranty (other than warranty service, repair claims and MDR's in the
ordinary course of business not material in amount or significance), strict
liability in tort, negligent manufacture of product, negligent provision of
services or any other allegation of liability, including or resulting in, but
not limited to, product recalls, arising from the materials, design, testing,
manufacture, packaging, labeling (including instructions for use), or sale of
its products or from the provision of services (hereafter collectively referred
to as "Product Liability"). To the knowledge of the Company, no basis for any
claim based upon alleged Product Liability exists that would have a Company
Material Adverse Effect.
3.23 Warranties. To the knowledge of the Company, all products manufactured
or sold, and all services provided, by the Company or any Subsidiary have
complied, and are in compliance, in all material respects with all contractual
requirements, warranties or covenants, express or implied, applicable thereto,
and with all applicable governmental, trade association or regulatory
specifications therefor or applicable thereto, including, to the extent
applicable, FDA Good Manufacturing Practices. The terms of all product and
service warranties of the Company and each Subsidiary are specifically set forth
on the Company Disclosure Schedule. The Company has delivered to Parent prior to
the date hereof complete and accurate copies of the forms of all such warranties
and policies used by the Company in the last twenty (20) months, and no
warranties with terms of more than twelve (12) months have been used by the
Company other than those used in the last twenty (20) months.
3.24 Inventories. Except as specifically set forth on the Company
Disclosure Schedule, all inventories owned by the Company and its Subsidiaries
consist of items of merchantable quality and quantity usable or salable in the
ordinary course of business, are salable at prevailing market prices that are
not less than the book value amounts thereof or the price customarily charged by
the Company or the applicable Subsidiary therefor, conform to the specifications
established therefor, and have been manufactured in accordance with applicable
regulatory requirements, except to the extent that the failure of such
inventories so to consist, be saleable, conform, or be manufactured would not
have a Company Material Adverse Effect. Except as specifically set forth on the
Company Disclosure Schedule, the quantities of all inventories, materials, and
supplies of the Company and each Subsidiary (net of the obsolescence reserve
therefor shown on the Company Interim Balance Sheet and determined in the
ordinary course of business consistent with past practice) are not obsolete,
damaged, slow-moving, defective, or excessive, and are reasonable and balanced
in the circumstances of the Company and its Subsidiaries, except to the extent
that the failure of such inventories to be in such conditions would not have a
Company Material Adverse Effect. The Company Disclosure Schedule sets forth a
true and complete list of the addresses of all warehouses or other facilities in
which inventories of the Company or any Subsidiary are located.
<PAGE>
3.25 Relations with Suppliers and Customers. No material current supplier
of the Company or any Subsidiary has cancelled any contract or order for
provision of, and, to the knowledge of the Company, there has been no threat by
or basis for any such supplier not to provide, raw materials, products,
supplies, or services to the businesses of the Company and its Subsidiaries
either prior to or following the Merger. Except as specifically set forth on the
Company Disclosure Schedule, neither the Company nor any Subsidiary has, to the
knowledge of the Company, received any information from any customer that
accounted for more than 5% of the revenues of the Company and its Subsidiaries
during the last full fiscal year to the effect that such customer intends to
materially decrease the amount of business it does with the businesses of the
Company and its Subsidiaries either prior to or following the Merger. The
Company Disclosure Schedule lists each supplier to the Company or any Subsidiary
that is the sole source of a particular raw material, product, supply, or
service.
3.26 No Finders. No act of the Company or any Subsidiary has given or will
give rise to any claim against any of the parties hereto for a brokerage
commission, finder's fee, or other like payment in connection with the
transactions contemplated herein, except payments in the amounts specified on
the Company Disclosure Schedule to those parties identified thereon who have
acted as a finder for the Company or have been retained by the Company as
financial advisors pursuant to the agreements or other documents described in
the Company Disclosure Schedule, copies of which have been provided to Parent
prior to the date of this Agreement.
3.27 Proxy Statement. The Proxy Statement/Prospectus (as defined in Section
5.4 hereof) and any amendments or supplements thereto will comply in all
material respects with all applicable laws, and none of the information relating
to the Company or its affiliates included or incorporated therein or in any
amendments or supplements thereto, or any schedules required to be filed with
the SEC in connection therewith, will, at any time during the period beginning
at the time it is mailed to shareholders and ending at the time of the Company
Shareholders Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that no representation or warranty is
made by the Company with respect to information relating to Parent or any
affiliate of Parent supplied by Parent specifically for inclusion in the Proxy
Statement/Prospectus.
3.28 Merger Filings. The information as to the Company and the Subsidiaries
or any of their affiliates or shareholders included in the Company's filing, or
submitted to Parent for inclusion in its filing, if any, required to be
submitted under the HSR Act or under any Foreign Merger Laws shall be true,
correct, and complete in all material respects and shall comply in all material
respects with the applicable requirements of the HSR Act, the rules and
regulations issued by the Federal Trade Commission pursuant thereto, and the
Foreign Merger Laws.
3.29 Fairness Opinion. The Company has received an opinion from Morgan
Stanley & Co. Incorporated to the effect that, as of the date hereof, the
consideration to be received by the holders of Company Common Stock in the
Merger is fair to such holders from a financial point of view, and the Company
will promptly deliver a copy of such opinion to Parent.
3.30 State Takeover Laws. The Board of Directors of the Company has
approved the transactions contemplated by this Agreement, the Agreements to
Facilitate Merger described in Section 5.11 hereof, and the Stock Option
Agreement described in Section 5.17 hereof such that the provisions of Section
23B.19.040 of the WBCA will not apply to this Agreement or the Agreements to
Facilitate Merger or the Stock Option Agreement or any of the transactions
contemplated hereby or thereby.
<PAGE>
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF PARENT AND MERGER SUBSIDIARY
Except as set forth in a document of even date herewith, referring
specifically to the representations and warranties in this Agreement which
identifies by section number to which such disclosure relates (the "Parent
Disclosure Schedule"), Parent and Merger Subsidiary hereby jointly and severally
make the following representations and warranties to the Company:
4.1 Organization. Parent is a corporation duly organized, validly existing,
and in good standing under the laws of the state of Minnesota. Merger Subsidiary
is a corporation duly organized and validly existing under the laws of the state
of Washington. Each of Parent and Merger Subsidiary has all requisite corporate
power and authority to own, lease, and operate its properties and to carry on
its business as now being conducted. Each of Parent and Merger Subsidiary is
duly qualified and in good standing to do business in each jurisdiction in which
the property owned, leased, or operated by it or the nature of the business
conducted by it makes such qualification necessary and where the failure to
qualify could reasonably be expected to have a Parent Material Adverse Effect
(as defined below). "Parent Material Adverse Effect" means an effect that,
individually or in the aggregate with other effects, is or would reasonably be
expected to be materially adverse: (i) to the present or planned business,
properties, liabilities, results of operation, or financial condition of Parent
and its subsidiaries, considered as a whole, or (ii) to Parent's ability to
perform any of its obligations under this Agreement or to consummate the Merger.
4.2 Authorization. Each of Parent and Merger Subsidiary has full corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby, and Parent has full corporate power and
authority to prepare, file, and distribute the Registration Statement (as
defined in Section 5.4 hereof). The execution and delivery of this Agreement by
Parent and Merger Subsidiary and the consummation of the transactions
contemplated hereby have been duly and validly authorized and approved by the
Boards of Directors of Parent and Merger Subsidiary and by Parent as the sole
shareholder of Merger Subsidiary, and no other corporate proceedings on the part
of Parent and Merger Subsidiary are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by each of Parent and Merger Subsidiary and
constitutes the valid and binding obligation of Parent and Merger Subsidiary,
enforceable against each of them in accordance with its terms, subject to laws
of general application relating to bankruptcy, insolvency, and the relief of
debtors and rules of law governing specific performance, injunctive relief, or
other equitable remedies.
4.3 Capitalization. As of June 12, 1998, the authorized capital stock of
Parent consisted of (a) 800,000,000 shares of Common Stock with a par value of
$.10 per share, of which there were 469,344,895 shares issued and outstanding
and no shares held in Parent's treasury, and (b) 2,500,000 shares of Preferred
Stock with a par value of $1.00 per share, of which there were no shares issued
and outstanding. The authorized capital stock of Merger Subsidiary consists of
2,500 shares of Merger Subsidiary Common Stock, 100 of which are issued and
outstanding and owned by Parent. All issued and outstanding shares of Parent
Common Stock and Merger Subsidiary Common Stock are, and the shares of Parent
Common Stock to be issued and delivered in the Merger pursuant to Article 1
hereof shall be, at the time of issuance and delivery, validly issued, fully
paid, nonassessable, and free of preemptive rights. The shares of Parent Common
Stock to be issued and delivered in the Merger pursuant to Article 1 hereof
shall be registered under the 1933 Act and duly listed for trading on the NYSE,
subject to official notice of issuance.
<PAGE>
4.4 Consents and Approvals. Except for (i) any applicable requirements of
the 1933 Act, the 1934 Act, state securities laws, the NYSE, the HSR Act, and
Foreign Merger Laws, (ii) the filing and recordation of appropriate merger
documents as required by the WBCA, and (iii) compliance with Chapter 13 of the
WBCA regarding dissenters' rights of the Company's shareholders, the execution
and delivery of this Agreement by Parent and Merger Subsidiary and the
consummation of the transactions contemplated hereby will not: (a) violate any
provision of the Articles of Incorporation or Bylaws of Parent or Merger
Subsidiary; (b) violate any statute, rule, regulation, order, or decree of any
public body or authority (including, but not limited to, the FDA or any
nongovernmental self-regulatory agency) by which Parent or any of its
subsidiaries or any of their respective properties or assets may be bound; (c)
require any filing with or permit, consent, or approval of any public body or
authority (including, but not limited to, the FDA or any nongovernmental
self-regulatory agency); or (d) result in any violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default
under, result in the loss of any material benefit under, or give rise to any
right of termination, cancellation, increased payments, or acceleration under,
or result in the creation of any Lien on any of the properties or assets of
Parent or its subsidiaries under, any of the terms, conditions, or provisions of
any note, bond, mortgage, indenture, license, franchise, permit, agreement, or
other instrument or obligation to which Parent or any of its subsidiaries is a
party, or by which any of them or any of their respective properties or assets
may be bound, except, in the case of clause (d), for any such violations,
breaches, defaults, or other occurrences that would not prevent or delay
consummation of any of the transaction contemplated hereby in any material
respect, or otherwise prevent Parent from performing its obligations under this
Agreement in any material respect, and would not have a Parent Material Adverse
Effect.
4.5 Reports; Financial Statements; Absence of Changes; Litigation. Parent
has filed all forms, reports, registration statements, and documents required to
be filed by it with the SEC since May 1, 1995 (such forms, reports, registration
statements and documents, together with any amendments thereto, are referred to
as the "Parent SEC Filings"). As of their respective dates, the Parent SEC
Filings (i) complied as to form in all material respects with the applicable
requirements of the 1933 Act and the 1934 Act, as the case may be, and (ii) did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. The audited financial statements and unaudited interim financial
statements included or incorporated by reference in the Parent SEC Filings (i)
were prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved (except as may be
indicated therein or in the notes thereto), (ii) complied as of their respective
dates in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, and (iii)
fairly present the consolidated financial position of Parent as of the dates
thereof and the income, cash flows, and changes in shareholders' equity for the
periods involved. Except to the extent disclosed in Parent's subsequent filings
with the SEC or specifically disclosed in the Parent Disclosure Schedule, since
April 30, 1997, there has not been any change or circumstance that would have a
Parent Material Adverse Effect. Except to the extent disclosed in the Parent SEC
Filings or in the Parent Disclosure Schedule, to Parent's knowledge, there is no
investigation, review, claim, action, suit or proceeding by any federal, state,
local or foreign body or authority (including, but not limited to, the FDA or
any non-governmental self-regulatory agency) or private party with respect to
Parent that could reasonably be expected to have a Parent Material Adverse
Effect.
<PAGE>
4.6 Registration Statement. The Registration Statement (as defined in
Section 5.4 hereof) and any amendments or supplements thereto will comply in all
material respects with the 1933 Act, and none of the information relating to
Parent or its affiliates included or incorporated therein or in any amendments
or supplements thereto, or any schedules required to be filed with the SEC in
connection therewith, will, at the time the Registration Statement becomes
effective or at the Effective Time, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading; provided, however, that no
representation or warranty is made by Parent with respect to information
supplied by the Company or any affiliate of the Company specifically for
inclusion in the Registration Statement.
4.7 Merger Filings. The information as to Parent and Merger Subsidiary or
any of their affiliates or shareholders included in Parent's filing, or
submitted to the Company for inclusion in its filing, if any, required to be
submitted under the HSR Act or under any Foreign Merger Laws shall be true,
correct, and complete in all material respects and shall comply in all material
respects with the applicable requirements of the HSR Act, the rules and
regulations issued by the Federal Trade Commission pursuant thereto, and Foreign
Merger Laws.
4.8 No Finders. No act of Parent or Merger Subsidiary has given or will
give rise to any claim against any of the parties hereto for a brokerage
commission, finder's fee, or other like payment in connection with the
transactions contemplated herein, except payments to Goldman, Sachs & Co., who
has been retained by Parent as its financial advisor.
ARTICLE 5
COVENANTS
5.1 Conduct of Business of the Company. Except as contemplated by this
Agreement, during the period from the date of this Agreement to the Effective
Time, the Company and each Subsidiary will conduct its respective operations
according to its ordinary and usual course of business and consistent with past
practice, and the Company and each Subsidiary will use all reasonable efforts to
preserve intact its respective business organizations, to maintain its present
and planned business, to keep available the services of its respective officers
and employees and to maintain satisfactory relationships with licensors,
licensees, suppliers, contractors, distributors, physicians, consultants,
customers, and others having business relationships with it. The Company will
promptly advise Parent orally and in writing of any material change in the
management, present or planned business, properties, liabilities, results of
operations, or financial condition of the Company or any Subsidiary. Without
limiting the generality of the foregoing, and except as otherwise expressly
provided in or contemplated by this Agreement, prior to the Effective Time,
neither the Company nor any Subsidiary will, without the prior written consent
of Parent:
(a) amend its Articles of Incorporation or Bylaws;
(b) authorize for issuance, issue, sell, pledge, or deliver (whether
through the issuance or granting of additional options, warrants,
commitments, subscriptions, rights to purchase, or otherwise other than in
the ordinary course of business consistent with past new hire practices)
any stock of any class or any securities convertible into shares of stock
of any class (other than the issuance of the number of shares of Company
Common Stock indicated in Section 3.3 hereof upon the exercise in
accordance with the current terms of the stock options listed in Schedule
3.3 hereof as outstanding on the date of this Agreement);
<PAGE>
(c) split, combine, or reclassify any shares of its capital stock,
declare, set aside, or pay any dividend or other distribution (whether in
cash, stock, or property or any combination thereof) in respect of its
capital stock; or redeem or otherwise acquire any shares of its capital
stock or other securities; or amend or alter any material term of any of
its outstanding securities;
(d) other than in the ordinary course of business and consistent with
past practice, create, incur, or assume any indebtedness for borrowed
money, or assume, guarantee, endorse, or otherwise become liable or
responsible (whether directly, contingently, or otherwise) for the
obligations of any other person; or make any loans, advances or capital
contributions to, or investments in, any other person; or create, incur or
assume any Lien on any material asset;
(e) knowingly take any action that would have the effect of (i)
jeopardizing the treatment of the acquisition of the Company by Parent as a
"pooling of interests" for accounting purposes, or (ii) jeopardizing the
qualification of the Merger as a reorganization within the meaning of
Section 368(a)(2)(E) of the Code;
(f) (i) increase in any manner the compensation of any of its
directors, officers, employees, shareholders, or consultants, except in the
ordinary course of business and consistent with past practice or consistent
with existing contractual commitments, in each case to the extent disclosed
in writing to Parent prior to the date hereof, or accelerate the payment of
any such compensation (whether or not any such acceleration is consistent
with past practice); (ii) pay or accelerate or otherwise modify the
payment, vesting, exercisability, increase in matching amount, or other
feature or requirement of any pension, retirement allowance, severance,
change of control, stock option, or other employee benefit not required by
any existing plan, agreement, or arrangement to any such director, officer,
employee, shareholder, or consultant, whether past or present; or (iii)
except for normal increases in the ordinary course of business in
accordance with its customary past practices or consistent with existing
contractual commitments, in each case to the extent disclosed in writing to
the Parent prior to the date hereof, commit itself to any additional or
increased pension, profit-sharing, bonus, incentive, deferred compensation,
stock purchase, stock option, stock appreciation right, group insurance,
severance, change of control, retirement or other benefit, plan, agreement,
or arrangement, or to any employment or consulting agreement, with or for
the benefit of any person, or amend any of such plans or any of such
agreements in existence on the date hereof;
(g) except in the ordinary course of business and consistent with past
practice, or pursuant to contractual obligations existing on the date
hereof, (i) sell, transfer, mortgage, or otherwise dispose of or encumber
any real or personal property, (ii) pay, discharge, or satisfy claims,
liabilities, or obligations (absolute, accrued, contingent, or otherwise),
or (iii) cancel any debts or waive any claims or rights, which involve
payments or commitments to make payments that individually exceed $50,000
or, in the aggregate, exceed $100,000;
(h) acquire or agree to acquire (i) by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other
manner, any portion of the assets of, or by any other manner, any business
of any corporation, partnership, joint venture, association, or other
business organization or division thereof or (ii) any assets that are
material, individually or in the aggregate, to the Company, except as
provided in subsection (i) below and except purchases of inventory in the
ordinary course of business consistent with past practice or consistent
with the Company's 1998 budget delivered to Parent prior to the execution
of this Agreement (the "1998 Budget");
<PAGE>
(i) make or agree to make any new capital expenditure or expenditures
that, individually, is in excess of $50,000 or, in the aggregate, are in
excess of $100,000 unless in the ordinary course of business consistent
with the Company's 1998 Budget;
(j) enter into, amend, or terminate any joint ventures or any other
agreements, commitments, or contracts that, individually or in the
aggregate, are material to the Company or any Subsidiary (except
agreements, commitments, or contracts expressly provided for or
contemplated by this Agreement or for the purchase, sale, or lease of
goods, services, or properties in the ordinary course of business,
consistent with past practice or capital expenditures or inventory
purchases consistent with the 1998 Budget), or otherwise make any material
change in the conduct of the business or operations of the Company or any
Subsidiary;
(k) enter into or terminate, or amend, extend, renew, or otherwise
modify (including, but not limited to, by default or by failure to act) any
distribution, OEM, independent sales representative, noncompetition,
licensing, franchise, research and development, supply, or similar
contract, agreement, or understanding (except agreements, commitments, or
contracts expressly provided for or contemplated by this Agreement or for
the purchase, sale, or lease of goods, services, or properties in the
ordinary course of business, consistent with past practice or capital
expenditures or inventory purchases consistent with the Company's 1998
Budget);
(l) change in any material respect its credit policy as to sales of
inventories or collection of receivables or its inventory consignment
practices;
(m) remove or permit to be removed from any building, facility, or
real property any machinery, equipment, fixture, vehicle, or other personal
property or parts thereof, except in the ordinary course of business;
(n) alter or revise its accounting principles, procedures, methods, or
practices, except as required by a change in generally accepted accounting
principles and concurred with by the Company's independent public
accountants;
(o) institute, settle, or compromise any claim, action, suit, or
proceeding pending or threatened by or against it involving amounts in
excess of $100,000 (limited to the Company's retention amount, if insured),
at law or in equity or before any federal, state, local, foreign, or other
governmental department, commission, board, bureau, agency, or
instrumentality (including, but not limited to, the FDA or any
nongovernmental self-regulatory agency);
(p) distribute or otherwise circulate any notices, directives, or
other communications directed to all or groups of customers, vendors,
employees, distributors, or others associated with its business relating to
the transactions contemplated hereby or to the operation of business after
consummation of such transactions without consulting with Parent, giving
Parent reasonable opportunity to comment thereon, and obtaining prior to
distribution Parent's approval thereof, which shall not unreasonably be
withheld;
(q) knowingly take any action that would render any representation,
warranty, covenant, or agreement of the Company in this Agreement
inaccurate or breached as of the Closing Date; or
(r) agree, whether in writing or otherwise, to do any of the
foregoing.
<PAGE>
5.2 No Solicitation. Neither the Company nor any Subsidiary, nor any of
their respective officers, directors, employees, representatives, agents, or
affiliates (including, but not limited to any investment banker, attorney, or
accountant retained by the Company or any Subsidiary), shall, directly or
indirectly, solicit, encourage, initiate, or participate in any way in
discussions or negotiations with, or knowingly provide any information to, any
corporation, partnership, person, or other entity or group (other than Parent or
any affiliate or agent of Parent) concerning any merger, sale or licensing of
any significant portion of the assets, sale of shares of capital stock
(including without limitation any proposal or offer to the Company's
shareholders), or similar transactions involving the Company or any Subsidiary
(an "Alternative Proposal"), or otherwise facilitate any effort or attempt to
make or implement an Alternative Proposal; provided, however, that this section
shall not prohibit the Board of Directors of the Company from (i) furnishing
information to or entering into discussions or negotiations with, any person or
entity that makes an unsolicited bona fide Alternative Proposal, if, and only to
the extent that, (a) the Board of Directors of the Company determines in good
faith that such action is so required for the Board of Directors to comply with
its fiduciary duties to shareholders imposed by law, the Board has been so
advised in writing by outside counsel, in its judgment and opinion, as being so
required and the Board so represents to Parent that the Board has been so
advised, (b) prior to furnishing information to, or entering into discussions
and negotiations with, such person or entity, the Company promptly provides
written notice to Parent to the effect that it is furnishing information to, or
entering into discussions or negotiations with, such person or entity, and (c)
the Company keeps Parent informed of all material terms and events with respect
to any such Alternative Proposal; and (ii) to the extent applicable, complying
with Rule 14e-2 promulgated under the 1934 Act with regard to an Alternative
Proposal. Nothing in this section shall (x) permit the Company to terminate this
Agreement (except as specifically provided in Article 7 hereof), (y) permit the
Company to enter into any agreement with respect to an Alternative Proposal for
as long as this Agreement remains in effect (it being agreed that for as long as
this Agreement remains in effect, the Company shall not enter into any agreement
with any person that provides for, or in any way facilitates, an Alternative
Proposal), or (z) affect any other obligation of the Company under this
Agreement.
5.3 Access and Information. The Company shall afford to Parent, and to
Parent's accountants, officers, directors, employees, counsel, and other
representatives, reasonable access during normal business hours, from the date
hereof through the Effective Time, to all of its properties, books, contracts,
commitments, and records, and, during such period, the Company shall furnish
promptly to Parent all information concerning the Company's and its
Subsidiaries' businesses, prospects, properties, liabilities, results of
operations, financial condition, testing, clinicals, officers, employees,
investigators, distributors, customers, suppliers, and others having dealings
with the Company as Parent may reasonably request and reasonable opportunity to
contact and obtain information from such officers, employees, investigators,
distributors, customers, suppliers, and others having dealings with the Company
as Parent may reasonably request; provided, with respect to certain designated
matters subject to existing confidentiality agreements as referenced in separate
disclosure letters dated June 1 and 26, 1998, access for Parent shall be
provided as set forth in such separate disclosure letter. During the period from
the date hereof to the Effective Time, the parties shall in good faith meet and
correspond on a regular basis for mutual consultation concerning the conduct of
the Company's and the Subsidiaries' businesses and, in connection therewith,
Parent shall be entitled to have employees or other representatives present at
the offices of the Company and its Subsidiaries to observe, and be kept informed
concerning, the Company's and the Subsidiaries' operations and business
planning. Parent shall hold in confidence all such nonpublic information as
required and in accordance with the confidentiality agreement dated April 16,
1998, between Parent and the Company (the "Confidentiality Agreement").
<PAGE>
5.4 Approval of Shareholders; Proxy Statement; Registration Statement.
(a) The Company shall promptly take all action necessary in accordance
with Washington law and the Company's Articles of Incorporation and Bylaws
to cause a special meeting of the Company's shareholders (the "Company
Shareholders Meeting") to be duly called and held as soon as reasonably
practicable following the date upon which the Registration Statement (as
defined below) becomes effective for the purpose of voting upon the Merger.
The shareholder vote or consent required for approval of the Plan of Merger
and the Merger shall be no greater than that set forth in the WBCA and the
Company's Articles of Incorporation as previously provided to Parent.
Accordingly, the Company represents and warrants that the affirmative vote
of the holders of record of two-thirds of the outstanding shares of Company
Common Stock is all that is necessary to obtain shareholder approval of the
Plan of Merger and the Merger. The Company shall use all reasonable efforts
to obtain the approval by the Company's shareholders of this Agreement, the
Plan of Merger, and the Merger. In accordance therewith, the Company shall,
with the cooperation of Parent, prepare and file, as soon as reasonably
practicable, a proxy statement/prospectus included as part of the
Registration Statement (such proxy statement/prospectus, together with
notice of meeting, form of proxy, and any letter or other materials to the
Company's shareholders included therein are referred to in this Agreement
as the "Proxy Statement/Prospectus"). The Company shall use all reasonable
efforts to cause the definitive Proxy Statement/Prospectus to be mailed to
the shareholders of the Company, as soon as reasonably practicable
following its effectiveness, with the date of mailing as mutually
determined by the Company and Parent. The Company will, through its Board
of Directors, recommend to its shareholders approval of the Merger in the
definitive Proxy Statement/Prospectus.
(b) Parent shall, with the cooperation of the Company, prepare and
file, as soon as reasonably practicable, a registration statement under the
1933 Act registering the shares of Parent Common Stock to be issued in the
Merger (the "Registration Statement"), which Registration Statement shall
include the Proxy Statement/Prospectus. Parent will use all reasonable
efforts to have the Registration Statement declared effective by the SEC as
promptly thereafter as practicable. Parent shall also take any action
required to be taken under state blue sky or securities laws in connection
with the issuance of Parent Common Stock pursuant to the Merger. The
Company shall furnish to Parent all information concerning the Company and
its Subsidiaries and the holders of its capital stock, and shall take such
other action and otherwise cooperate, as Parent may reasonably request in
connection with any such action.
(c) Parent shall notify the Company promptly of the receipt of the
comments of the SEC and of any request by the SEC for amendments or
supplements to the Registration Statement and shall supply the Company with
copies of all correspondence with the SEC with respect to the Registration
Statement.
<PAGE>
(d) If at any time prior to the Company Shareholders Meeting, any
event should occur relating to the Company, any Subsidiary, or the
Company's officers or directors that is required to be described in an
amendment or supplement to the definitive Proxy Statement/Prospectus or the
Registration Statement, the Company shall promptly inform Parent. If at any
time prior to the Company Shareholders Meeting, any event shall occur
relating to Parent or Merger Subsidiary or their respective officers or
directors that is required to be described in an amendment or supplement to
the definitive Proxy Statement/Prospectus or the Registration Statement,
Parent shall promptly inform the Company. Whenever any event occurs that
should be described in an amendment of, or supplement to, the definitive
Proxy Statement/Prospectus or the Registration Statement, the Company or
Parent, as the case may be, shall, upon learning of such event, promptly
notify the other and consult and cooperate with the other in connection
with the preparation of a mutually acceptable amendment or supplement. The
parties shall promptly file such amendment or supplement with the SEC and
mail such amendment or supplement as soon as practicable after it is
cleared by the SEC.
5.5 Consents. The Company will, at its cost and expense, use all reasonable
efforts to obtain all approvals and consents of all third parties necessary on
the part of the Company or its Subsidiaries to consummate the transactions
contemplated hereby. Parent agrees to cooperate with the Company in connection
with obtaining such approvals and consents. Parent will, at its cost and
expense, use all reasonable efforts to obtain all approvals and consents of all
third parties necessary on the part of Parent to consummate the transactions
contemplated hereby. The Company agrees to cooperate with Parent in connection
with obtaining such approvals and consents.
5.6 Affiliates' Letters.
(a) The Company has delivered to Parent a list of names of those
persons, in the Company's reasonable judgment after consultation with
outside legal counsel, who, as of the date hereof, are affiliates within
the meaning of Rule 145 of the rules and regulations promulgated under the
Securities Act or otherwise applicable SEC accounting releases with respect
to pooling-of-interests accounting treatment (each such person, an
"Affiliate") of the Company. The Company shall provide Parent such
information and documents as Parent shall reasonably request for purposes
of reviewing such list and shall promptly update such list to reflect any
changes thereto. The Company has caused to be delivered to Parent an
affiliate's letter in the form attached hereto as Exhibit B, executed by
each of the Affiliates of the Company identified in the foregoing list, and
shall use all reasonable efforts to deliver or cause to be delivered to
Parent prior to the Effective Time such an affiliate's letter executed by
any additional persons who become Affiliates after the date hereof. Parent
shall be entitled to place legends as specified in such affiliates' letters
on the certificates evidencing any of the Parent Common Stock to be
received by such Affiliates pursuant to the terms of this Agreement, and to
issue appropriate stop transfer instructions to the transfer agent for the
Parent Common Stock, consistent with the terms of such letters.
(b) For so long as resales of shares of Parent Common Stock issued
pursuant to the Merger are subject to the resale restrictions set forth in
Rule 145 under the Securities Act, Parent will use all reasonable efforts
to comply with Rule 144(c)(1) under the Securities Act.
<PAGE>
5.7 Expenses. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement, the transactions
contemplated hereby, the Proxy Statement/Prospectus, and the Registration
Statement will be paid by the party incurring such costs and expenses, except
that the Company and Parent will share equally the cost of printing and filing
with the SEC the Proxy Statement/Prospectus and the Registration Statement, the
filing fees required under the HSR Act or any Foreign Merger Laws, and the fees
charged by Price Waterhouse LLP for the letters described in Section 5.15 (the
"Shared Expenses").
5.8 Reasonable Efforts; Further Actions. Subject to the terms and
conditions herein provided and without being required to waive any conditions
herein (whether absolute, discretionary, or otherwise), each of the parties
hereto agrees to use commercially reasonable efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things necessary, proper,
or advisable to consummate and make effective the transactions contemplated by
this Agreement within 90 days of the date of this Agreement. In case at any time
after the Effective Time any further action is necessary or desirable to carry
out the purposes of this Agreement, the proper officers and directors of each
party to this Agreement shall take all such necessary action.
5.9 Regulatory Approvals. The Company and Parent will take all reasonable
action as may be necessary under federal or state securities laws or the HSR Act
or Foreign Merger Laws applicable to or necessary for, and will file as soon as
reasonably practicable and, if appropriate, use all reasonable efforts to have
declared effective or approved all documents and notifications with the SEC and
other governmental or regulatory bodies (including, without limitation, the FDA
and equivalent foreign regulatory bodies, and other foreign regulatory bodies
that administer Foreign Merger Laws, and any foreign labor councils or bodies as
may be required) that they deem necessary or appropriate for, the consummation
of the Merger and the transactions contemplated hereby, and each party shall
give the other information reasonably requested by such other party pertaining
to it and its subsidiaries and affiliates to enable such other party to take
such actions. Notwithstanding the foregoing or anything herein to the contrary,
neither Parent nor Merger Subsidiary shall be required to make arrangements for
or to effect the cessation, sale, or other disposition of particular assets or
categories of assets or businesses of Parent, Merger Subsidiary, the Company, or
any of their affiliates.
5.10 Certain Notifications. The Company shall promptly notify Parent in
writing of the occurrence of any event that will or could reasonably be expected
to result in the failure by the Company or its affiliates to satisfy any of the
conditions specified in Section 6.1 or 6.2. Parent shall promptly notify the
Company in writing of the occurrence of any event that will or could reasonably
be expected to result in the failure by Parent or its affiliates to satisfy any
of the conditions specified in Section 6.1 or 6.3.
5.11 Voting of Shares. To induce Parent to execute this Agreement, all of
the officers and directors of the Company have executed and delivered as of the
date hereof Agreements to Facilitate Merger in the form attached hereto as
Exhibit C, pursuant to which each such person has agreed to vote his or her
shares of Company Common Stock in favor of the Merger at the Company
Shareholders Meeting.
5.12 Noncompetition Agreements. To induce Parent to execute this Agreement,
the Company has caused the executives who, as of the date hereof, are the
Company's Chief Executive Officer, Chief Operating Officer, Chief Financial
Officer and General Counsel to execute and deliver to Parent as of the date
hereof (but expressly contingent upon the Closing of the Merger) noncompetition
agreements substantially in the form of Exhibit D hereto.
<PAGE>
5.13 NYSE Listing Application. Parent shall prepare and submit to the NYSE
a listing application for the Parent Common Stock to be issued in the Merger
pursuant to Article 1 of this Agreement. The Company shall cooperate with Parent
in such listing application.
5.14 Indemnification, Exculpation and Insurance.
(a) The articles of incorporation and the bylaws of the Surviving
Corporation shall contain the provisions with respect to indemnification
and exculpation from liability set forth in the Company's articles of
incorporation and bylaws on the date of this Agreement, which provisions
shall not be amended, repealed or otherwise modified for a period of six
years from the Effective Time in any manner that would adversely affect the
rights thereunder of individuals who on or prior to the Effective Time were
directors, officers, employees or agents of the Company, unless such
modification is required by law. Parent shall guarantee the obligations of
the Surviving Corporation with respect to the indemnification provisions
contained in the Surviving Corporation's articles of incorporation and
bylaws.
(b) To the extent coverage is reasonably available under the Company's
current directors' and officers' liability insurance policy or otherwise,
Parent will extend the discovery or reporting period under such policy for
up to three years from the Effective Time to maintain in effect directors'
and officers' liability insurance covering pre-acquisition acts for those
persons who are currently covered by the Company's directors' and officers'
liability insurance policy (a copy of which has been heretofore delivered
to Parent) (the "Indemnification Parties") on terms no less favorable than
the terms of such current insurance coverage; provided, however, that in no
event shall Parent be required to expend for such three-year extension an
amount in excess of 150% of the annual premium currently paid by the
Company for such insurance; and provided further that if the cost of such
three-year extension exceeds such 150% amount, Parent shall be obligated to
obtain such extension as is available for a cost not exceeding such amount.
(c) In the event Parent, the Surviving Corporation or any of their
successors or assigns (i) consolidates with or merges into any other person
and shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then and in each such case, proper
provisions shall be made so that the successors and assigns of Parent or
the Surviving Corporation, as the case may be, shall assume the obligations
set forth in this Section 5.14.
(d) This Section 5.14 shall survive the consummation of the Merger at
the Effective Time, is intended to benefit the Company, Parent, the
Surviving Corporation and the Indemnified Parties, and shall be binding on
all successors and assigns of Parent and the Surviving Corporation.
<PAGE>
5.15 Letters of the Company's and Parent's Accountants. (A) The Company
shall cooperate with Parent and use all reasonable efforts to cause to be
delivered to Parent the following letters from Price Waterhouse LLP ("PW")
addressed to the Company and Parent: (i) a letter dated the date of this
Agreement, stating that after appropriate review and based on its familiarity
with the Company, neither the Company nor any of its shareholders who are
affiliates has taken or agreed to take any action that would prevent Parent from
accounting for the Merger as a pooling of interests transaction under Opinion 16
of the Accounting Principles Board and applicable SEC rules and regulations; and
(ii) a letter dated as of the Closing Date stating that after appropriate review
and based on its familiarity with the Company, neither the Company nor any of
its shareholders has taken or agreed to take any action that would prevent
Parent from accounting for the Merger as a pooling of interests under Opinion 16
of the Accounting Principles Board and applicable SEC rules and regulations. (B)
The Company shall cooperate with Parent and Parent shall use all reasonable
means to cause to be delivered to the Company the following letters from PW
addressed to Parent and the Company: (i) a letter dated the date of this
Agreement, stating that after appropriate review of this Agreement and a letter
from the Parent describing the transaction and describing actions to be taken by
Parent with respect to the sale of certain shares of Parent Common Stock, the
Merger will qualify as a pooling of interests transaction under Opinion 16 of
the Accounting Principles Board and applicable SEC rules and regulations; and
(ii) a letter dated as of the Closing Date confirming as of the Closing Date
that the Merger will qualify as a pooling of interests transaction under Opinion
16 of the Accounting Principles Board and applicable SEC rules and regulations.
The fees charged by PW for such letters shall be shared equally by Parent and
the Company.
5.16 Subsidiary Shares. At or prior to the Closing, the Company shall cause
all issued and outstanding Subsidiary shares owned by any person other than the
Company to be transferred for no or nominal consideration to such person or
persons designated by Parent.
5.17 Stock Option Agreement. To induce Parent to execute this Agreement,
the Company has executed and delivered to Parent as of the date hereof a Stock
Option Agreement in the form attached hereto as Exhibit E, pursuant to which the
Company has granted to Parent an option to acquire from the Company such number
of shares of Company Common Stock as equals 19.9% of the aggregate number of
outstanding shares of Company Common Stock, at an exercise price equal to $27.50
per share or such lesser amount as is described in the second paragraph of
Section 1.3(a) hereof. Such option shall become exercisable only in the events
described in the Stock Option Agreement.
5.18 Conduct of Business by Parent. During the period from the date of this
Agreement to the Effective Time, Parent shall, and shall cause its subsidiaries
to, carry on their respective businesses in the ordinary course and use all
reasonable efforts to preserve their relationships with customers, suppliers and
others having business dealings with them; provided that the foregoing shall not
prevent Parent or any of its subsidiaries from discounting or disposing of any
part of its assets or business or from acquiring any assets or businesses or
from entering into any financing transactions if such action is, in the judgment
of Parent, desirable in the conduct of the business of Parent and its
subsidiaries. Without limiting the generality of the foregoing, during the
period from the date of this Agreement to the Effective Time, except as (i)
contemplated by this Agreement or (ii) as set forth in a writing delivered to
the Company prior to the execution hereof, Parent shall not, and shall not
permit any of its subsidiaries to:
<PAGE>
(a) (i) declare, set aside or pay (whether in cash or property) any
dividends on, or make any other distributions in respect of, any capital
stock other than dividends and distributions by any direct or indirect
wholly owned subsidiary of Parent to its parent and except for regular
quarterly cash dividends (in an amount determined in a manner consistent
with Parent's past practice) declared by the Board of Directors of Parent
with customary record and payment dates and except distributions pursuant
to the Parent Rights Plan, (ii) reclassify any of its capital stock or
issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of Parent's capital stock (other than
pursuant to the Parent Rights Plan);
(b) amend its articles of incorporation (except for the purpose of
increasing its authorized capitalization), bylaws or other comparable
charter or organizational documents in a manner which would reasonably be
expected to be materially adverse to the stockholders of the Company; or
(c) authorize, or commit or agree to take any of, the foregoing
actions.
5.19 Benefit Plans and Employee Matters. From and after the Effective Time,
Parent shall to the extent practicable cause the Surviving Corporation to
provide employee benefits and programs to the Company's employees that, in the
aggregate, are substantially comparable or more favorable than those in
existence as of the date hereof and disclosed in writing to Parent prior to the
date hereof.
5.20 Delivery of Specified Documents.
(a) Notwithstanding anything contained in this Agreement to the
contrary, the parties acknowledge that the affiliates' letters described in
Section 5.6, the Agreements to Facilitate Merger described in Section 5.11,
the noncompetition agreements described in Section 5.12, and the letters of
PW dated the date of this Agreement (as opposed to the letter of PW to be
dated as of the Closing Date) described in Section 5.15 have not been
delivered as of the date hereof. The Company agrees that it will use best
efforts to deliver all such documents and agreements within two business
days after the execution of this Agreement on the date hereof.
(b) Notwithstanding anything contained in this Agreement to the
contrary, the parties acknowledge that portions of Sections 3.6, 3.10,
3.13, and 3.17 of the Company Disclosure Schedule have not been delivered
as of the date hereof. The Company agrees that it will use best efforts to
deliver all such portions of the Company Disclosure Schedule within three
business days (or, as to any particular item, such greater number of days
specified in the above-referenced sections of the Company Disclosure
Schedule) after the execution of this Agreement on the date hereof.
Following the Company's delivery of all such portions of the Company
Disclosure Schedule, Parent shall have three business days thereafter to
object in writing to the Company if any of the information set forth
therein is materially different from the information previously provided to
Parent in its due diligence review of the Company. If Parent so objects,
the Company shall have three business days thereafter to resolve with
Parent each of the matters to which Parent so objected. If Parent and the
Company cannot resolve all such matters, the Chairman of each of Parent and
the Company shall have five business days thereafter to resolve all such
matters. If the Chairmen cannot do so, then, if the aggregate impact of
such matters as to which Parent and the Company disagree could reasonably
be expected to be equal in amount to at least one percent of the aggregate
value of the Parent Common Stock delivered to the Company's shareholders in
the Merger (based on the Parent Average Stock Price), then the provisions
of Section 6.2(k) shall apply.
<PAGE>
ARTICLE 6
CLOSING CONDITIONS
6.1 Conditions to Obligations of Parent, Merger Subsidiary, and the
Company. The respective obligations of each party to consummate the Merger shall
be subject to the fulfillment at or prior to the Closing of the following
conditions:
(a) No Injunction. None of Parent, Merger Subsidiary, or the Company
shall be subject to any final order, decree, or injunction of a court of
competent jurisdiction within the United States that (i) prevents or
materially delays the consummation of the Merger, or (ii) would impose any
material limitation on the ability of Parent effectively to exercise full
rights of ownership of the Company or the assets or business of the
Company.
(b) Shareholder Approval. The approval of the shareholders of the
Company referred to in Section 5.4 hereof shall have been obtained, in
accordance with the WBCA and the Company's Articles of Incorporation and
Bylaws.
(c) Registration Statement. The Registration Statement (as amended or
supplemented) shall have become effective under the 1933 Act and shall not
be subject to any "stop order," and no action, suit, proceeding, or
investigation by the SEC to suspend the effectiveness or qualification
thereof shall have been initiated and be continuing or have been threatened
and be unresolved. Parent shall also have received all state securities law
or blue sky authorizations necessary to carry out the transactions
contemplated hereby.
(d) NYSE Listing. The shares of Parent Common Stock to be delivered
pursuant to the Merger shall have been duly listed on the NYSE, subject to
official notice of issuance.
(e) Waiting Periods. The waiting periods applicable to the
consummation of the Merger under the HSR Act and any Foreign Merger Laws
shall have expired or been terminated.
6.2 Conditions to Obligations of Parent and Merger Subsidiary. The
respective obligations of Parent and Merger Subsidiary to consummate the Merger
shall be subject to the fulfillment at or prior to the Closing of the following
additional conditions:
(a) Representations and Warranties True. Each representation and
warranty of the Company contained in this Agreement, without regard to any
qualification or reference to immateriality or "Company Material Adverse
Effect," shall be true and correct on the date hereof and on the Closing
Date as though such representations and warranties were made on such date
(except those representations and warranties that address matters only as
of a particular date shall remain true and correct as of such date), except
for any inaccuracies that, individually or in the aggregate, have not had,
and would not have, a Company Material Adverse Effect.
(b) Performance. The Company shall have performed and complied in all
material respects with all agreements, obligations, and conditions required
by this Agreement to be performed or complied with by it on or prior to the
Closing, and Parent shall have received a certificate to such effect signed
by the Chief Executive Officer of the Company.
<PAGE>
(c) Consents. The Company shall have obtained all permits,
authorizations, consents, and approvals required on its part to perform its
obligations under, and consummate the transactions contemplated by, this
Agreement, in form and substance satisfactory to Parent, and Parent and
Merger Subsidiary shall have received evidence satisfactory to them of the
receipt of such permits, authorizations, consents, and approvals.
(d) Opinion of Counsel for the Company. Parent and Merger Subsidiary
shall have received an opinion of Preston Gates & Ellis LLP, counsel to the
Company, dated the Closing Date, in form and substance reasonably
satisfactory to Parent, to the effect set forth in Exhibit F hereto.
(e) Affiliates' Letters. Parent shall have received a letter from each
of the Affiliates pursuant to Section 5.6 hereof.
(f) Noncompetition Agreements. Parent shall have received executed
agreements from such persons, and in such form satisfactory to Parent, as
described in Section 5.12 hereof.
(g) Resignations. Such officers and directors of the Company or of any
Subsidiary as shall have been specified Parent shall have tendered their
respective resignations effective as of the Effective Time.
(h) Pooling Opinion. Parent shall have received each of the letters
described in Section 5.15; provided, however, if within 10 business days
after the date on which all other closing conditions of Section 6.1 and 6.3
have been satisfied (including, but not limited to, receipt of the letters
described in Section 5.15(A)), Parent has not received the letter described
in Section 5.15(B)(ii) solely because of actions on the part of Parent or
its shareholders who are affiliates which prevent the Merger from
qualifying as a pooling of interests transaction, then the condition that
such letter be received shall be deemed waived by Parent.
(i) Continued Employment of Key Executives. The chief executive
officer and other executive employees of the Company designated in writing
by Parent on or before the date of this Agreement shall have agreed to
continue their employment with the Company following the Merger on such
terms as are mutually satisfactory to Parent and such employees.
(j) Subsidiary Shares. The transfer of Subsidiary shares as provided
in Section 5.16 shall have occurred.
(k) Delivery of Specified Documents. The Company shall have delivered
or caused to be delivered to Parent, within five business days (or, as to
any particular item, such greater number of days specified in Sections 3.6,
3.10, 3.13, and 3.17 of the Company Disclosure Schedule) after the
execution of this Agreement on the date hereof, the above-referenced
sections of the Company Disclosure Schedule described in Article 3, the
affiliates' letters described in Section 5.6, the noncompetition agreements
described in Section 5.12, and the letters of PW dated the date of this
Agreement described in Section 5.15. Further, each of the portions of the
Company Disclosure Schedule as so delivered shall not contain information
as to which Parent shall object and which cannot be resolved between Parent
and the Company in the manner described in Section 5.20(b) and which has an
aggregate impact at least equal to the amount described in Section 5.20(b);
provided, however, that the condition described in this sentence shall
expire unless Parent delivers written notice to the Company, within one
business day after expiration of the final five-business-day period
described in Section 5.20(b) for resolution of the matters in dispute.
<PAGE>
6.3 Conditions to Obligations of the Company. The obligation of the Company
to consummate the Merger shall be subject to the fulfillment at or prior to the
Closing of the following additional conditions:
(a) Representations and Warranties True. Each representation and
warranty of Parent contained in this Agreement, without regard to any
qualification or reference to immateriality or "Parent Material Adverse
Effect," shall be true and correct on the date of this Agreement and on the
Closing Date as though such representations and warranties were made on
such date (except those representations and warranties that address matters
only as of a particular date shall remain true and correct as of such
date), except for any inaccuracies that, individually or in the aggregate,
have not had, and would not have, a Parent Material Adverse Effect.
(b) Performance. Parent and Merger Subsidiary shall have performed and
complied in all material respects with all agreements, obligations, and
conditions required by this Agreement to be performed or complied with by
them on or prior to the Closing.
(c) Consents. Parent and Merger Subsidiary shall have obtained all
permits, authorizations, consents, and approvals required on their part to
perform their obligations under, and consummate the transactions
contemplated by, this Agreement, in form and substance satisfactory to the
Company, and the Company shall have received evidence satisfactory to it of
the receipt of such permits, authorizations, consents, and approvals.
(d) Opinion of Counsel for Parent. The Company shall have received an
opinion of Fredrikson & Byron, P.A., counsel to Parent, dated the Closing
Date, in form and substance reasonably satisfactory to the Company, to the
effect set forth in Exhibit G hereto.
(e) Tax Opinion. The Company shall have received an opinion of Preston
Gates & Ellis LLP, counsel to the Company, to the effect that, subject to
customary conditions and representations, the Merger will be treated for
federal income tax purposes as a reorganization within the meaning of
Section 368(a)(2)(E) of the Code. This condition shall be deemed waived in
the event that such tax opinion is not rendered because the Company or its
shareholders have failed to provide such customary representations. The
Company hereby agrees to provide to Parent a certificate setting forth the
representations set forth in Exhibit H hereto which may be relied upon by
such counsel in rendering such opinion, and Parent hereby agrees to provide
to the Company a certificate setting forth the representations set forth in
Exhibit I hereto which may be relied upon by such counsel in rendering such
opinion.
ARTICLE 7
TERMINATION AND ABANDONMENT
7.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval by the shareholders of the
Company, only:
(a) by mutual written consent duly authorized by the Board of
Directors of Parent and the Board of Directors of the Company;
(b) by either Parent or the Company if the Merger shall not have been
consummated on or before December 1, 1998; provided, however, that the
terminating party shall not have breached in any material respect its
obligations under this Agreement in any manner that shall have been the
proximate cause of, or resulted in, the failure to consummate the Merger by
such date;
<PAGE>
(c) by either Parent or the Company if a court of competent
jurisdiction or an administrative, governmental, or regulatory authority
has issued a final nonappealable order, decree, or ruling, or taken any
other action, having the effect of permanently restraining, enjoining, or
otherwise prohibiting the Merger;
(d) by either Parent or the Company if, at the Company Shareholders
Meeting, the requisite vote of the shareholders of the Company is not
obtained, except that the right to terminate this Agreement under this
Section 7.1(d) will not be available to any party whose failure to perform
any material obligation under this Agreement has been the proximate cause
of, or resulted in, the failure to obtain the requisite vote of the
shareholders of the Company;
(e) by Parent if either (i) the Company has breached its obligations
under Section 5.2 in any material respect, (ii) the Board of Directors of
the Company has recommended, approved, accepted, or entered into an
agreement regarding, an Alternative Proposal, as defined in Section 5.2,
(iii) the Board of Directors of the Company has withdrawn or modified in a
manner adverse to Parent its recommendation of the Merger, or (iv) a tender
offer or exchange offer under Section 14 of the 1934 Act for 15% or more of
the outstanding shares of Company Common Stock is commenced, and the Board
of Directors of the Company, within 10 business days after such tender
offer or exchange offer is so commenced, either fails to recommend against
acceptance of such tender offer or exchange offer by its shareholders or
takes no position with respect to the acceptance of such tender offer or
exchange offer by its shareholders;
(f) by the Company if (i) it is not in material breach of its
obligations under this Agreement, (ii) the Board of Directors of the
Company has authorized acceptance of an Alternative Proposal, and (iii) the
Company has paid to Parent the fee required by Section 7.2 to be paid to
Parent in the manner therein provided;
(g) by Parent if (i) Parent is not in material breach of its
obligations under this Agreement and (ii) there has been a material breach
by the Company of any of its representations, warranties, or obligations
under this Agreement or by an Affiliate of the Company under the
Affiliate's letter described in Section 5.6 such that the conditions in
Section 6.2 will not be satisfied, and the breach is not curable or, if
curable, is not cured by the Company within 30 calendar days after receipt
by the Company of written notice from Parent of such breach;
(h) by the Company if (i) the Company is not in material breach of its
obligations under this Agreement and (ii) there has been a material breach
by Parent of any of its representations, warranties, or obligations under
this Agreement such that the conditions in Section 6.3 will not be
satisfied, and the breach is not curable or, if curable, is not cured by
Parent within 30 calendar days after receipt by Parent of written notice
from the Company of such breach.
7.2 Effect of Termination.
(a) In recognition of the time, efforts, and expenses expended and
incurred by Parent with respect to the Company and the opportunity that the
acquisition of the Company presents to Parent, if:
(i) this Agreement is terminated pursuant to Section 7.1(e) or
7.1(f); or
<PAGE>
(ii) any third party makes an Alternative Proposal or acquires
15% or more of the outstanding Company Common Stock prior to the
Company Shareholders Meeting, and either (A) the requisite vote of the
shareholders of the Company to approve the Merger is not obtained or
(B) the number of shares of Company Common Stock for which notice of
exercise of dissenters' rights under WBCA has been given would prevent
the Merger from qualifying as a pooling of interests for accounting
purposes or (C) this Agreement is terminated (other than pursuant to
Section 7.1(a), (b), (c) or (h)),
then, in any such event, the Company will pay to Parent, upon the
termination date in the event of termination pursuant to Section
7.1(f), within five business days after demand by Parent in the case of
termination pursuant to Section 7.1(e), and immediately upon the first
to occur of the failure to obtain the requisite shareholder vote or the
termination of this Agreement in the case of the events specified in
clause (ii) above (by wire transfer of immediately available funds to
an account designated by Parent for such purpose), a fee equal to $15
million. The Company acknowledges that the agreements contained in this
Section 7.2 are an integral part of the transactions contemplated by
this Agreement and are not a penalty, and that, without these
agreements, Parent would not enter into this Agreement. If the Company
fails to pay promptly the fee due pursuant to this Section 7.2, the
Company shall also pay to Parent Parent's costs and expenses (including
legal fees and expenses) in connection with any action, including the
filing of any lawsuit or other legal action, taken to collect payment,
together with interest on the amount of the unpaid fee under this
section, accruing from its due date, at an interest rate per annum
equal to two percentage points in excess of the prime commercial
lending rate quoted by Norwest Bank Minnesota, N.A. Any change in the
interest rate hereunder resulting from a change in such prime rate
shall be effective at the beginning of the day of such change in such
prime rate.
(b) Except as provided in the next sentence of this paragraph, in the
event of the termination of this Agreement pursuant to any paragraph of
Section 7.1, the obligations of the parties to consummate the Merger will
expire, and none of the parties will have any further obligations under
this Agreement except pursuant to Sections 5.3, 5.7, and 7.2(a) and Article
8. In the event of the termination of this Agreement pursuant to any
paragraph of Section 7.1 that is caused by a breach of a party, the party
whose breach was the basis for the termination will not be relieved from
any liability for its breach or its obligations pursuant to Section 7.2(a),
and the other party will have no further obligations under this Agreement
except as provided in Sections 5.3 and 5.7 and Article 8.
ARTICLE 8
MISCELLANEOUS
8.1 Amendment and Modification. Subject to applicable law, this Agreement
may be amended, modified, or supplemented only by written agreement of Parent,
Merger Subsidiary, and the Company at any time prior to the Effective Time with
respect to any of the terms contained herein. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
<PAGE>
8.2 Waiver of Compliance; Consents. Any failure of Parent or Merger
Subsidiary on the one hand, or the Company on the other hand, to comply with any
obligation, covenant, agreement, or condition herein may be waived by the
Company or Parent, respectively, only by a written instrument signed by an
officer of the party granting such waiver, but such waiver or failure to insist
upon strict compliance with such obligation, covenant, agreement, or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure. Whenever this Agreement requires or permits consent by or on
behalf of any party hereto, such consent shall be given in writing. Merger
Subsidiary agrees that any consent or waiver of compliance given by Parent
hereunder shall be conclusively binding upon Merger Subsidiary, whether or not
given expressly on its behalf.
8.3 Investigation; Survival of Representations and Warranties. The
respective representations and warranties of Parent and the Company contained
herein or in any certificates or other documents delivered prior to or at the
Closing shall not be deemed waived or otherwise affected by any investigation
made by any party hereto. Each and every representation and warranty contained
herein shall be deemed to be conditions to the Merger and shall not survive the
Merger. This Section 8.3 shall have no effect upon any other obligation of the
parties hereto, whether to be performed before or after the Closing.
8.4 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given when delivered personally by commercial
courier service or otherwise, or by telecopier, or three days after such notice
is mailed by registered or certified mail (return receipt requested) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Parent or Merger Subsidiary, to it at:
Medtronic, Inc.
7000 Central Avenue, N.E.
Minneapolis, MN 55432
with separate copies thereof addressed to
Attention: General Counsel
FAX: (612) 572-5459
and
Attention: Vice President and Chief Development Officer
FAX: (612) 572-5404
(b) If to the Company, to it at:
Physio-Control International Corporation
11811 Willows Road N.E.
Redmond, WA 98073-9706
FAX: (425) 867-4142
Attention: Executive Vice President and General Counsel
with a copy to:
Preston Gates & Ellis LLP
5000 Columbia Center
701 Fifth Avenue
Seattle, WA 98104-7078
FAX: (206) 623-7022
Attention: C. Kent Carlson
<PAGE>
8.5 Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests, or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties, nor is
this Agreement intended to confer upon any other person except the parties
hereto any rights or remedies hereunder.
8.6 Governing Law. Except to the extent that Washington law is mandatorily
applicable to the Merger and the rights of the shareholders of the Company and
Merger Subsidiary, this Agreement shall be governed by the laws of the State of
Minnesota (regardless of the laws that might otherwise govern under applicable
Minnesota principles of conflicts of law).
8.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
8.8 Knowledge. As used in this Agreement or the instruments, certificates
or other documents required hereunder, the term "knowledge" shall mean actual
knowledge of a fact or the knowledge that such person or, if such person is a
corporation, its directors, officers, or other key employees could reasonably be
expected to have based on reasonable investigation and inquiry. The knowledge of
an entity shall be deemed to include the knowledge of its subsidiaries.
8.9 Interpretation. The Table of Contents, article and section headings
contained in this Agreement are inserted for reference purposes only and shall
not affect the meaning or interpretation of this Agreement. This Agreement shall
be construed without regard to any presumption or other rule requiring the
resolution of any ambiguity regarding the interpretation or construction hereof
against the party causing this Agreement to be drafted.
8.10 Publicity. Upon execution of this Agreement by Parent, Merger
Subsidiary, and the Company, the parties shall jointly issue a press release, as
agreed upon by them. The parties intend that all future statements or
communications to the public or press regarding this Agreement or the Merger
will be mutually agreed upon by them. Neither party shall, without such mutual
agreement or the prior consent of the other, issue any statement or
communication to the public or to the press regarding this Agreement, or any of
the terms, conditions, or other matters with respect to this Agreement, except
as required by law or the rules of the NYSE or Nasdaq and then only (a) upon the
advice of such party's legal counsel; (b) to the extent required by law or the
rules of the NYSE or Nasdaq; and (c) following prior notice to, and consultation
with, the other party (which notice shall include a copy of the proposed
statement or communication to be issued to the press or public). The foregoing
shall not restrict Parent's or the Company's communications with their employees
or customers in the ordinary course of business.
8.11 Entire Agreement. This Agreement, including the exhibits and schedules
hereto and the Confidentiality Agreement referred to herein, embodies the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. This Agreement and the Confidentiality Agreement
supersede all prior agreements and the understandings between the parties with
respect to such subject matter. Further, the provisions of this Agreement
supersede the provisions of the Confidentiality Agreement relating to the 21-day
exclusivity period described therein.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
MEDTRONIC, INC.
By: /s/ Michael D. Ellwein
Its: Vice-President
PC MERGER CORP.
By: /s/ Michael D. Ellwein
Its: President
PHYSIO-CONTROL INTERNATIONAL CORPORATION
By: /s/ Richard O. Martin
Its: Chairman/CEO
