<PAGE> 1
CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
AEQUITRON MEDICAL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(l)(ii), or 14a-6(i)(l), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Aequitron Medical, Inc. Common Stock, $.01 par value
(2) Aggregate number of securities to which transaction applies:
6,123,242 shares of Common Stock of Aequitron Medical, Inc.
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
Set forth the amount on which the filing fee is calculated and state how
it was determined.
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
LOGO
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders of
Aequitron Medical, Inc., a Minnesota corporation ("Aequitron"), to be held on
December 5, 1996, at The Ramada Plaza Hotel, 12201 Ridgedale Drive, Minnetonka,
Minnesota 55305, commencing at 10:00 a.m., local time, subject to adjournment or
postponement ("the Annual Meeting").
At the Annual Meeting, you will be asked to consider and vote upon a
proposal to approve the Amended and Restated Agreement and Plan of Merger, dated
as of September 9, 1996 (as amended, the "Merger Agreement"), by and between
Aequitron and Nellcor Puritan Bennett Incorporated, a Delaware corporation
("NPB") (the "Merger Proposal"). Pursuant to the Merger Agreement (i) Aequitron
will merge with and into NPB (the "Merger"), (ii) each outstanding share of
common stock, $.01 par value per share, of Aequitron ("Aequitron Common Stock")
will be converted into the right to receive the fraction of one share of the
common stock, $.001 par value per share, of NPB (the "NPB Common Stock") equal
to the Exchange Ratio (as defined below), including the corresponding fraction
of an NPB Preferred Stock Purchase Right (as hereinafter defined), and (iii)
each outstanding option to purchase Aequitron Common Stock will be deemed to
constitute the right to acquire, on the same terms and conditions, a number of
shares of NPB Common Stock and at a price based on the Exchange Ratio.
The fraction of a share of NPB Common Stock to be issued for each share of
Aequitron Common Stock in the Merger (the "Exchange Ratio") will be calculated
as follows: (1) if the Closing Market Value (as defined below) is greater than
or equal to $23.14 and less than or equal to $26.61, the Exchange Ratio will be
.432; (2) if the Closing Market Value is greater than $26.61, the Exchange Ratio
will be the quotient of $11.50 divided by the Closing Market Value; (3) if the
Closing Market Value is less than $23.14 and greater than or equal to $17.00,
the Exchange Ratio will be the quotient of $10.00 divided by the Closing Market
Value; and (4) if the Closing Market Value is less than $17.00, the Exchange
Ratio will be .588, provided that Aequitron may terminate the Merger Agreement
in the event the Closing Market Value is below $17.00 unless NPB elects to
increase the Exchange Ratio to equal the quotient of $10.00 divided by the
Closing Market Value. "Closing Market Value" means the average of the closing
prices of the NPB Common Stock for the ten trading days ending on the fifth
trading day prior to the Annual Meeting. See "Appendix D" for calculations of
the Exchange Ratio assuming a range of possible Closing Market Values.
Assuming the Closing Market Value were to equal the closing price of NPB
Common Stock on October 25, 1996 of $19.875, a holder of Aequitron Common Stock
would receive .503 of one share of NPB Common Stock for each share of Aequitron
Common Stock. Assuming the same Closing Market Value and based on the
capitalization of NPB and Aequitron as of October 21, 1996, the shares of NPB
Common Stock to be issued in the Merger, together with shares of NPB Common
Stock subject to stock options held by Aequitron employees, would represent
approximately 4.4% of the shares of NPB Common Stock outstanding and subject to
options immediately following the Merger.
YOUR BOARD HAS UNANIMOUSLY APPROVED THE TERMS OF THE MERGER AGREEMENT,
BELIEVES THAT THE TERMS OF THE MERGER AGREEMENT ARE FAIR AND REASONABLE TO, AND
IN THE BEST INTERESTS OF, AEQUITRON AND ITS SHAREHOLDERS, AND UNANIMOUSLY
RECOMMENDS THAT HOLDERS OF SHARES OF AEQUITRON COMMON STOCK VOTE "FOR" APPROVAL
OF THE MERGER AGREEMENT.
The accompanying Proxy Statement/Prospectus provides detailed information
concerning the proposed Merger and additional information concerning NPB and
Aequitron that you are urged to read carefully. The complete text of the Merger
Agreement is attached as Appendix A to the Proxy Statement/Prospectus.
As a holder of Aequitron Common Stock you have certain dissenters' rights
of appraisal with respect to the proposed Merger. In order to exercise such
rights, you must vote against approval of the Merger
<PAGE> 3
Agreement. Please note that a signed proxy that does not vote against approval
of the Merger Agreement or abstains with respect to such vote will be voted for
such approval. Your dissenters' rights of appraisal are governed by specific
legal provisions contained in Sections 302A.471 and 302A.473 of the Minnesota
Business Corporation Act (the "MBCA"). A summary of certain provisions of
Sections 302A.471 and 302A.473 of the MBCA pertaining to the rights of
dissenting shareholders in connection with the Merger is included in this Proxy
Statement/Prospectus in the section entitled "Dissenters' Rights of Aequitron
Shareholders." The complete text of Sections 302A.471 and 302A.473 of the MBCA
is set forth as Appendix C to this Proxy Statement/Prospectus.
In addition, the business to be conducted at the Annual Meeting includes
the election of directors and ratification of the selection of the independent
auditors.
It is important that your shares of Aequitron Common Stock be represented
at the Annual Meeting, regardless of the number of shares you hold. The required
vote of Aequitron shareholders on approval of the Merger Agreement is based upon
the number of outstanding shares of Aequitron Common Stock and not the number of
shares which are actually voted. Accordingly, the failure to submit a proxy card
or to vote in person at the Annual Meeting, the abstention from voting by a
shareholder and broker non-votes will each have the same effect as a vote
AGAINST approval of the Merger Agreement. THEREFORE, PLEASE COMPLETE, SIGN, DATE
AND RETURN YOUR PROXY CARD AS SOON AS POSSIBLE, WHETHER OR NOT YOU PLAN TO
ATTEND THE ANNUAL MEETING. You may revoke your proxy at any time prior to its
exercise by filing a written notice of such revocation with the Secretary of
Aequitron or by signing and delivering to such Secretary a proxy bearing a later
date. In addition, you may attend the Annual Meeting and vote your shares in
person if you wish, even though you have previously returned your proxy.
On Behalf of the Board of Directors,
LOGO
JAMES B. HICKEY, JR.
President and Chief Executive Officer
<PAGE> 4
AEQUITRON MEDICAL, INC.
14800 28TH AVENUE NORTH
MINNEAPOLIS, MINNESOTA 55447
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD DECEMBER 5, 1996
------------------------
To the Shareholders of Aequitron Medical, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Aequitron
Medical, Inc., a Minnesota corporation ("Aequitron"), will be held on December
5, 1996, at The Ramada Plaza Hotel, 12201 Ridgedale Drive, Minnetonka, Minnesota
55305, commencing at 10:00 a.m., local time, subject to adjournment or
postponement (the "Annual Meeting"), for the following purpose:
1. To consider and vote upon a proposal to approve the Amended and Restated
Agreement and Plan of Merger, dated as of September 9, 1996 (as amended,
the "Merger Agreement") by and between Aequitron and Nellcor Puritan
Bennett Incorporated, a Delaware corporation ("NPB"). Pursuant to the
Merger Agreement (i) Aequitron will merge with and into NPB (the
"Merger"), (ii) each outstanding share of common stock, $.01 par value
per share, of Aequitron ("Aequitron Common Stock") will be converted
into the right to receive the fraction of one share of the common stock,
$.001 par value per share, of NPB (the "NPB Common Stock") equal to the
Exchange Ratio (as defined below), including the corresponding fraction
of an NPB Preferred Stock Purchase Right (as hereinafter defined), and
(iii) each outstanding option to purchase Aequitron Common Stock will be
deemed to constitute the right to acquire, on the same terms and
conditions, a number of shares of NPB Common Stock and at a price based
on the Exchange Ratio. A copy of the Merger Agreement is attached as
Appendix A to the accompanying Proxy Statement/Prospectus.
2. To elect two (2) directors, each for a three-year term.
3. To consider and act upon the ratification of the selection of Ernst &
Young LLP as Aequitron's independent auditors for the fiscal year ended
April 30, 1997.
The fraction of a share of NPB Common Stock to be issued for each share of
Aequitron Common Stock in the Merger (the "Exchange Ratio") will be calculated
as follows: (1) if the Closing Market Value (as defined below) is greater than
or equal to $23.14 and less than or equal to $26.61, the Exchange Ratio will be
.432; (2) if the Closing Market Value is greater than $26.61, the Exchange Ratio
will be the quotient of $11.50 divided by the Closing Market Value; (3) if the
Closing Market Value is less than $23.14 and greater than or equal to $17.00,
the Exchange Ratio will be the quotient of $10.00 divided by the Closing Market
Value; and (4) if the Closing Market Value is less than $17.00, the Exchange
Ratio will be .588, provided that Aequitron may terminate the Merger Agreement
in the event the Closing Market Value is below $17.00 unless NPB elects to
increase the Exchange Ratio to equal the quotient of $10.00 divided by the
Closing Market Value. "Closing Market Value" means the average of the closing
prices of the NPB Common Stock for the ten trading days ending on the fifth
trading day prior to the Annual Meeting. See "Appendix D" for calculations of
the Exchange Ratio assuming a range of possible Closing Market Values.
Assuming the Closing Market Value were to equal the closing price of NPB
Common Stock on October 25, 1996 of $19.875, a holder of Aequitron Common Stock
would receive .503 of one share of NPB Common Stock for each share of Aequitron
Common Stock. Assuming the same Closing Market Value and based on the
capitalization of NPB and Aequitron as of October 21, 1996, the shares of NPB
Common Stock to be issued in the Merger, together with shares of NPB Common
Stock subject to stock options held by Aequitron employees, would represent
approximately 4.4% of the shares of NPB Common Stock outstanding and subject to
options immediately following the Merger.
<PAGE> 5
The Board of Directors has fixed the close of business on October 21, 1996
as the record date for the determination of the holders of Aequitron Common
Stock entitled to notice of, and to vote at, the Annual Meeting. The affirmative
vote of a majority of the total shares outstanding is necessary for approval of
the Merger Agreement.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. TO
ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, HOWEVER, YOU ARE URGED TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE. A
POSTAGE-PAID ENVELOPE IS ENCLOSED FOR THAT PURPOSE. ANY SHAREHOLDER ATTENDING
THE ANNUAL MEETING MAY VOTE IN PERSON EVEN IF THAT SHAREHOLDER HAS RETURNED A
PROXY.
By Order of the Board of Directors,
LOGO
GERALD E. RHODES
Secretary
Minneapolis, Minnesota
October 30, 1996
<PAGE> 6
AEQUITRON MEDICAL, INC.
PROXY STATEMENT
NELLCOR PURITAN BENNETT INCORPORATED
PROSPECTUS
This Proxy Statement/Prospectus ("Proxy Statement/Prospectus") is being
furnished to the holders of common stock, $.01 par value per share (the
"Aequitron Common Stock"), of Aequitron Medical, Inc., a Minnesota corporation
("Aequitron"), in connection with the solicitation of proxies by the Board of
Directors of Aequitron for use at the Annual Meeting of Shareholders of
Aequitron to be held at The Ramada Plaza Hotel, 12201 Ridgedale Drive,
Minnetonka, Minnesota 55305, on December 5, 1996 at 10:00 a.m., local time, and
at any and all adjournments or postponements thereof (the "Annual Meeting").
This Proxy Statement/Prospectus relates to the Amended and Restated
Agreement and Plan of Merger, dated as of September 9, 1996 (as amended, the
"Merger Agreement"), by and between Nellcor Puritan Bennett Incorporated ("NPB")
and Aequitron, pursuant to which Aequitron will be merged (the "Merger") with
and into NPB and NPB will be the surviving corporation. A copy of the Merger
Agreement is attached as Appendix A to this Proxy Statement/Prospectus. In the
Merger, each outstanding share of Aequitron Common Stock (excluding shares held
by dissenting shareholders who have asserted appraisal rights (the "Excluded
Shares")), will be converted into the right to receive the fraction of a fully
paid and nonassessable share of common stock, $.001 par value per share, of NPB
(the "NPB Common Stock") equal to the Exchange Ratio (as defined below),
including the corresponding fraction of an NPB Preferred Stock Purchase Right
(as hereinafter defined). Cash will be delivered in lieu of fractional shares.
The fraction of a share of NPB Common Stock to be issued for each share of
Aequitron Common Stock in the Merger (the "Exchange Ratio") will be calculated
as follows: (1) if the Closing Market Value (as defined below) is greater than
or equal to $23.14 and less than or equal to $26.61, the Exchange Ratio will be
.432; (2) if the Closing Market Value is greater than $26.61, the Exchange Ratio
will be the quotient of $11.50 divided by the Closing Market Value; (3) if the
Closing Market Value is less than $23.14 and greater than or equal to $17.00,
the Exchange Ratio will be the quotient of $10.00 divided by the Closing Market
Value; and (4) if the Closing Market Value is less than $17.00, the Exchange
Ratio will be .588, provided that Aequitron may terminate the Merger Agreement
in the event the Closing Market Value is below $17.00 unless NPB elects to
increase the Exchange Ratio to equal the quotient of $10.00 divided by the
Closing Market Value. "Closing Market Value" means the average of the closing
prices of the NPB Common Stock for the ten trading days ending on the fifth
trading day prior to the Annual Meeting. See "Appendix D" for calculations of
the Exchange Ratio assuming a range of possible Closing Market Values.
Assuming the Closing Market Value were to equal the closing price of NPB
Common Stock on October 25, 1996 of $19.875, a holder of Aequitron Common Stock
would receive .503 of one share of NPB Common Stock for each share of Aequitron
Common Stock. Assuming the same Closing Market Value and based on the
capitalization of NPB and Aequitron as of October 21, 1996, the shares of NPB
Common Stock to be issued in the Merger, together with shares of NPB Common
Stock subject to stock options held by Aequitron employees, would represent
approximately 4.4% of the shares of NPB Common Stock outstanding and subject to
options immediately following the Merger.
Consummation of the Merger is subject to various conditions, including
adoption at the Annual Meeting of the Merger Agreement by the holders of a
majority of the outstanding shares of Aequitron Common Stock entitled to vote
thereon.
In addition, Aequitron shareholders will be asked to vote on the election of
directors and the ratification of the selection of the independent auditors.
This Proxy Statement/Prospectus also constitutes a prospectus of NPB for the
issuance of up to 3,830,151 shares of NPB Common Stock and associated NPB
Preferred Stock Purchase Rights to be issued in connection with the Merger. NPB
Common Stock is listed and traded on the Nasdaq National Market ("Nasdaq") under
the symbol "NELL." On October 25, 1996, the closing sales price for NPB Common
Stock as reported on Nasdaq was $19.875 per share.
All information contained in this Proxy Statement/Prospectus with respect to
NPB has been provided by NPB. All information contained in this Proxy
Statement/Prospectus with respect to Aequitron has been provided by Aequitron.
This Proxy Statement/Prospectus and the accompanying form of proxy are first
being mailed to shareholders of Aequitron on or about November 1, 1996. A
shareholder who has given a proxy may revoke it at any time prior to its
exercise. See "The Annual Meeting -- Record Date; Voting Rights; Proxies."
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED BY AEQUITRON SHAREHOLDERS.
If you have any questions concerning the Merger, the calculation of the
Closing Market Value or the resulting Exchange Ratio, or if you need assistance
in voting your proxy, please call the proxy solicitor for Aequitron, Corporate
Investor Communications, Inc., at 1-800-986-6596. Banks and brokers please call
(201) 896-1900.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS NOVEMBER 1, 1996.
<PAGE> 7
AVAILABLE INFORMATION
NPB has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-4 (including all amendments,
exhibits, annexes and schedules thereto, the "Registration Statement"), pursuant
to the Securities Act of 1933, as amended (the "Securities Act"), and the rules
and regulations promulgated thereunder, covering the NPB Common Stock and the
associated NPB Preferred Stock Purchase Rights being offered hereby. This Proxy
Statement/Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information, reference
is hereby made to the Registration Statement. Statements made in this Proxy
Statement/Prospectus as to the contents of any contract, agreement or other
document are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement or
incorporated by reference herein, reference is made to the exhibit for a more
complete description of the matters involved, and each such statement shall be
deemed qualified in its entirety by such reference. The Registration Statement,
including exhibits filed as a part thereof, is available at the Commission for
inspection and copying as set forth below.
NPB and Aequitron are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Commission. Such reports, proxy statements and other information may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the following Regional Offices of the Commission: Chicago
Regional Office, Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661; and New York Regional Office, 7 World Trade
Center, Suite 1300, New York, New York 10048. Copies of such materials can be
obtained at prescribed rates from the Public Reference Section of the Commission
at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. In addition,
the Commission maintains a Website (http://www.sec.gov) that contains such
reports, proxy statements and other information filed by NPB and Aequitron. Such
material filed by NPB and Aequitron can also be inspected at the offices of the
National Association of Securities Dealers, Reports Section, 1735 K Street,
N.W., Washington, D.C. 20006.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS
RELATING TO NPB AND TO AEQUITRON THAT ARE NOT PRESENTED HEREIN OR DELIVERED
HEREWITH. NPB WILL PROVIDE WITHOUT CHARGE TO ANY PERSON TO WHOM THIS PROXY
STATEMENT/PROSPECTUS IS DELIVERED, INCLUDING ANY BENEFICIAL OWNER OF AEQUITRON
COMMON STOCK, UPON WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY OF ANY OR ALL
SUCH DOCUMENTS RELATING TO NPB (OTHER THAN EXHIBITS TO SUCH DOCUMENTS THAT ARE
NOT SPECIFICALLY INCORPORATED HEREIN BY REFERENCE). WRITTEN REQUESTS FOR SUCH
DOCUMENTS SHOULD BE DIRECTED TO NELLCOR PURITAN BENNETT INCORPORATED, 4280
HACIENDA DRIVE, PLEASANTON, CALIFORNIA 94588, ATTENTION: INVESTOR RELATIONS; AND
TELEPHONE REQUESTS MAY BE DIRECTED TO NPB'S INVESTOR RELATIONS DEPARTMENT AT
(510) 463-4039. AEQUITRON WILL PROVIDE WITHOUT CHARGE TO ANY PERSON TO WHOM THIS
PROXY STATEMENT/PROSPECTUS IS DELIVERED, INCLUDING ANY BENEFICIAL OWNER OF
AEQUITRON COMMON STOCK, UPON WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY OF
ANY OR ALL SUCH DOCUMENTS RELATING TO AEQUITRON (OTHER THAN EXHIBITS TO SUCH
DOCUMENTS THAT ARE NOT SPECIFICALLY INCORPORATED HEREIN BY REFERENCE). WRITTEN
REQUESTS FOR SUCH DOCUMENTS SHOULD BE DIRECTED TO AEQUITRON MEDICAL, INC., 14800
28TH AVENUE NORTH, MINNEAPOLIS, MINNESOTA 55447, ATTENTION: INVESTOR RELATIONS,
AND TELEPHONE REQUESTS MAY BE DIRECTED TO AEQUITRON'S INVESTOR RELATIONS
DEPARTMENT AT (612) 557-9200. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY REQUESTS SHOULD BE MADE BY NOVEMBER 15, 1996. COPIES OF DOCUMENTS
SO REQUESTED WILL BE SENT BY FIRST CLASS MAIL, POSTAGE PAID, WITHIN ONE BUSINESS
DAY OF THE RECEIPT OF SUCH REQUEST.
i
<PAGE> 8
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents previously filed by NPB with the Commission
pursuant to the Exchange Act are hereby incorporated by reference into this
Proxy Statement/Prospectus.
1. NPB's Annual Report on Form 10-K for the fiscal year ended July 7, 1996;
2. NPB's Quarterly Reports on Form 10-Q for the quarters ended October 1,
1995, December 31, 1995, and March 31, 1996;
3. NPB's Current Reports on Form 8-K dated July 11, 1995, July 27, 1995,
August 25, 1995, March 8, 1996, April 3, 1996, May 31, 1996, July 12,
1996 and September 9, 1996;
4. The description of the NPB Common Stock contained in the Registration
Statement on Form 8-A filed by NPB with the Commission, File No.
0-14980, including any amendments or reports filed for the purpose of
updating such description; and
5. The description of the NPB Preferred Stock Purchase Rights contained in
the Registration Statement on Form 8-A filed by NPB with the Commission,
File No. 0-14980, including any amendments or reports filed for the
purpose of updating such description.
The following documents previously filed by Aequitron with the Commission
pursuant to the Exchange Act are hereby incorporated by reference into this
Proxy Statement/Prospectus:
1. Aequitron's Annual Report on Form 10-K for the fiscal year ended April
30, 1996, as amended.
2. Aequitron's Quarterly Report on Form 10-Q for the quarter ended July 31,
1996.
3. Aequitron's Current Report on Form 8-K dated September 12, 1996.
In addition, all reports and other documents filed by NPB or Aequitron
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date hereof and prior to (a) the effective date of the Registration
Statement on Form S-4 incorporating this Proxy/Prospectus, with respect to such
materials filed by NPB, and (b) the date of the Annual Meeting, with respect to
such materials filed by Aequitron, shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of filing of such reports
and documents. Any statement contained in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement/Prospectus to the extent that a statement
contained herein, or in any other subsequently filed document that also is
incorporated or deemed to be incorporated by reference herein, modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Proxy Statement/Prospectus.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS WITH RESPECT TO THE MATTERS DESCRIBED IN THIS PROXY
STATEMENT/PROSPECTUS OTHER THAN THOSE CONTAINED HEREIN OR IN THE DOCUMENTS
INCORPORATED BY REFERENCE HEREIN. ANY INFORMATION OR REPRESENTATIONS WITH
RESPECT TO SUCH MATTERS NOT CONTAINED HEREIN OR THEREIN MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY NPB OR AEQUITRON. THIS PROXY STATEMENT/PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY,
SECURITIES, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION TO OR FROM ANY
PERSON TO OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER, SOLICITATION OF AN
OFFER OR PROXY SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROXY STATEMENT/PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF NPB OR AEQUITRON SINCE THE DATE HEREOF OR THAT THE INFORMATION IN
THIS PROXY STATEMENT/PROSPECTUS OR IN THE DOCUMENTS INCORPORATED BY REFERENCE
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATES HEREOF OR THEREOF.
------------------------
ii
<PAGE> 9
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
AVAILABLE INFORMATION................................................................. i
INCORPORATION OF DOCUMENTS BY REFERENCE............................................... ii
SUMMARY............................................................................... 1
The Companies....................................................................... 1
The Annual Meeting.................................................................. 2
Surrender of Stock Certificates..................................................... 2
Recommendation of the Aequitron Board of Directors.................................. 3
Risk Factors........................................................................ 3
The Merger.......................................................................... 3
Opinion of Financial Advisor........................................................ 5
Conflicts of Interest............................................................... 5
Certain Federal Income Tax Consequences............................................. 6
Comparative Rights of Stockholders.................................................. 6
Comparative Per Share Prices and Dividend Policies.................................. 6
Selected Historical Financial Data.................................................. 7
Summary Unaudited Pro Forma Combined Condensed Financial Data....................... 9
Comparative Per Share Data.......................................................... 10
RISK FACTORS.......................................................................... 11
Uncertainties Associated with the Integration of Aequitron.......................... 11
Uncertainties Associated with the Integration of Other Acquired Businesses.......... 11
Health Care Reform/Pricing Pressure................................................. 11
Uncertain Impact of Growth of Managed Care Organizations............................ 12
Cost and Uncertainty of Regulatory Compliance....................................... 12
Uncertainty Related to Patents and Proprietary Rights............................... 12
Intense Competition; Rapid Technological and Market Changes......................... 13
Dependence on New Product Development............................................... 13
Product Liability Exposure.......................................................... 13
Impact of Currency Fluctuations; Importance of Foreign Sales........................ 13
Volatility of Stock Price........................................................... 14
Certain Anti-Takeover Provisions.................................................... 14
THE AEQUITRON ANNUAL MEETING.......................................................... 15
Purpose of the Aequitron Annual Meeting............................................. 15
Record Date; Voting Rights; Proxies................................................. 15
Solicitation of Proxies............................................................. 15
Quorum.............................................................................. 15
Required Vote....................................................................... 16
THE MERGER............................................................................ 17
General............................................................................. 17
Effective Time...................................................................... 17
Conversion of Shares; Procedures for Exchange of Certificates....................... 17
Background of the Merger............................................................ 18
Recommendation of the Aequitron Board; Reasons for the Merger....................... 20
Opinion of Dain Bosworth Incorporated............................................... 21
Conflicts of Interest............................................................... 26
Certain Federal Income Tax Consequences............................................. 27
Accounting Treatment................................................................ 28
</TABLE>
iii
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<TABLE>
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Regulatory Approvals................................................................ 29
Resale Restrictions................................................................. 29
DISSENTERS' RIGHTS OF AEQUITRON SHAREHOLDERS.......................................... 30
THE MERGER AGREEMENT.................................................................. 32
The Merger.......................................................................... 32
Effective Time of the Merger........................................................ 32
Conversion of Securities............................................................ 32
Stock Options....................................................................... 33
Exchange of Shares.................................................................. 33
Representations and Warranties...................................................... 34
Certain Covenants................................................................... 35
No Solicitation..................................................................... 37
Certain Employee Benefit Plan Matters............................................... 37
Director and Officer Indemnification................................................ 37
Management After the Merger......................................................... 38
Conditions.......................................................................... 38
Termination......................................................................... 39
Cancellation Fees; Expenses......................................................... 39
Amendment; Waiver................................................................... 40
Expenses............................................................................ 40
COMPARATIVE PER SHARE PRICES AND DIVIDEND POLICIES.................................... 40
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS........................... 42
COMPARISON OF STOCKHOLDER RIGHTS...................................................... 46
General............................................................................. 46
Stockholders Rights Plan............................................................ 46
Election and Number of Directors; Filling Vacancies; Removal........................ 46
Stockholders Meetings............................................................... 47
Stockholders Vote for Business Combinations......................................... 48
Common Stock........................................................................ 51
Preferred Stock..................................................................... 51
Business Combinations............................................................... 51
Limitation of Liability of Directors................................................ 52
Indemnification of Directors and Officers........................................... 53
Dissenters' Rights.................................................................. 54
Dividends........................................................................... 54
Inspection of Stockholder List...................................................... 54
Loans to Officers and Employees..................................................... 54
Dissolution......................................................................... 55
PROPOSAL NO. 1 -- APPROVAL OF THE MERGER AGREEMENT.................................... 55
PROPOSAL NO. 2 -- ELECTION OF AEQUITRON DIRECTORS..................................... 55
Business Experience................................................................. 55
Section 16(a) Beneficial Ownership Compliance....................................... 56
Board and Committee Meetings........................................................ 56
EXECUTIVE COMPENSATION................................................................ 57
Summary Compensation Table.......................................................... 57
OPTION GRANTS DURING 1996 FISCAL YEAR................................................. 58
AGGREGATED OPTION EXERCISES DURING 1996 FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES.............................................................................. 59
</TABLE>
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<TABLE>
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<S> <C>
Employment Contracts and Termination of Employment Arrangements..................... 59
Compensation of Directors........................................................... 59
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT........................ 60
Principal Shareholders.............................................................. 60
Management Shareholdings............................................................ 61
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........................................ 62
COMPENSATION AND STOCK OPTION COMMITTEE REPORT........................................ 62
Philosophy.......................................................................... 62
Base Salary......................................................................... 62
Annual Incentive Compensation....................................................... 62
Long-Term Incentive Compensation.................................................... 62
Benefits............................................................................ 63
Change in Control Compensation...................................................... 63
Chief Executive Officer Compensation................................................ 63
Compensation Committee Interlocks and Insider Participants.......................... 63
STOCK PERFORMANCE GRAPH............................................................... 64
PROPOSAL NO. 3 -- RATIFICATION OF INDEPENDENT AUDITORS................................ 64
OTHER MATTERS......................................................................... 65
LEGAL MATTERS......................................................................... 65
EXPERTS............................................................................... 65
SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING......................................... 65
APPENDIX A -- Agreement and Plan of Merger............................................ A-1
APPENDIX B -- Dain Bosworth Incorporated Opinion...................................... B-1
APPENDIX C -- Sections 302A.471 and 302A.473 of the Minnesota Business Corporation
Act................................................................................. C-1
APPENDIX D -- Illustrative Calculations of Exchange Ratio and Total Shares of NPB
Stock Issuable in Merger............................................................ D-1
</TABLE>
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<PAGE> 12
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement/Prospectus, the Appendices hereto and documents
incorporated by reference herein. This summary does not contain a complete
statement of all material information relating to the Merger Agreement, the
Merger, the Annual Meeting and the other matters discussed herein and is subject
to, and is qualified in its entirety by, the more detailed information and
financial statements contained or incorporated by reference in this Proxy
Statement/Prospectus. Shareholders of Aequitron should read carefully this Proxy
Statement/Prospectus in its entirety. Certain capitalized terms used in this
summary are defined elsewhere in this Proxy Statement/Prospectus.
This Proxy Statement/Prospectus and the documents incorporated herein by
reference contain forward-looking statements about future results that are
subject to risks and uncertainties. NPB's and Aequitron's actual results may
differ significantly from the results discussed in the forward-looking
statements. Factors that might cause such a difference include, but are not
limited to, those discussed in "Risk Factors."
THE COMPANIES
Nellcor Puritan Bennett Incorporated. NPB is the result of the combination
of Nellcor Incorporated and Puritan-Bennett Corporation, which was consummated
on August 25, 1995 in a transaction that was accounted for as a pooling of
interests. NPB, a corporation organized under the laws of the State of Delaware,
together with its subsidiaries, designs, manufactures and markets monitoring,
diagnostic and therapeutic instruments, sensors, airway adapters and detectors
for the safety and management of respiratory-impaired patients wherever they are
treated. NPB's arterial blood oxygen, respiratory gas, blood pressure and apnea
instruments provide intermittent and continuous, real time, non-invasive
monitoring of physiologically unstable patients. NPB's wide variety of oximetry
sensors are used with NPB's own instruments, instruments that incorporate the
NPB oximetry OEM module and instruments produced by manufacturers licensed to
use NPB sensors. NPB manufactures a 7200 Series of critical care ventilators
with several options and upgrades, as well as its CliniVision(R) Respiratory
Care Management Information System in the United States. NPB's portable
ventilator product lines are manufactured and sold outside the United States.
NPB also manufactures and distributes automated systems for the collection, use
and management of patient information. NPB also manufacturers liquid oxygen
systems as well as oxygen concentrators. NPB's products are sold worldwide
principally through a direct sales force, assisted by clinical education
consultants and specialists. NPB's products are also sold through distributors.
As used herein the term "NPB" refers to Nellcor Puritan Bennett
Incorporated and its subsidiaries, unless the context otherwise requires. The
principal executive offices of NPB are located at 4280 Hacienda Drive,
Pleasanton, California 94588, and the telephone number at that address is (510)
463-4000.
Aequitron Medical, Inc. Aequitron, together with its subsidiaries, is
primarily engaged in the development, manufacture and distribution of medical
electronic devices for home health care and hospital use. Aequitron was formed
as a Minnesota corporation on May 8, 1980. Aequitron's medical electronic
products include electronic equipment and related accessories for monitoring and
analyzing respiration and heart rate data for infants considered susceptible to
episodes of apnea, a line of ventilator products used to assist respiration in
patients suffering from chronic obstructive pulmonary disease or other breathing
difficulties, and sleep disorder diagnostic products. Through its Crow River
Industries, Incorporated subsidiary, Aequitron also manufactures and sells
wheelchair lifts, securement systems and automobile hand controls for the
mobility-impaired. Aequitron sells its medical products domestically through
manufacturers representatives, aided by clinicians and specialists. Aequitron
sells internationally through various distributors. Crow River Industries sells
its products through a direct sales force.
As used herein, the term "Aequitron" refers to Aequitron Medical, Inc. and
its subsidiaries, unless the context otherwise requires. The principal executive
offices of Aequitron are located at 14800 28th Avenue North, Minneapolis,
Minnesota 55447, and the telephone number at that address is (612) 557-9200.
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<PAGE> 13
THE ANNUAL MEETING
Time, Place and Date. An Annual Meeting of Shareholders of Aequitron will
be held at The Ramada Plaza Hotel, 12201 Ridgedale Drive, Minnetonka, Minnesota
55305, on December 5, 1996, at 10:00 a.m., local time (including any and all
adjournments or postponements thereof, the "Annual Meeting").
Purpose of the Annual Meeting. At the Annual Meeting, holders of the
common stock, $.01 par value per share, of Aequitron (the "Aequitron Common
Stock") will be asked to consider and vote upon a proposal to approve the Merger
Agreement. See "The Merger," "The Merger Agreement" and "Proposal No. 1 --
Approval of the Merger Agreement." In addition, the Aequitron shareholders will
be asked to consider and vote upon the election of two directors each for a
three-year term and the ratification of the selection of the independent
auditors. See "Proposal No. 2 -- Election of Aequitron Directors" and "Proposal
No. 3 -- Ratification of Independent Auditors."
All shares of Aequitron Common Stock represented by properly executed
proxies will be voted at the Annual Meeting in accordance with the directions on
the proxies, unless such proxies have been previously revoked. If no direction
is indicated, the shares will be voted FOR the Merger Proposal, FOR the election
of the two nominees for director and FOR the ratification of the selection of
Ernst & Young LLP as Aequitron's independent auditors. Any shareholder giving a
proxy may revoke his or her proxy at any time before its exercise at the Annual
Meeting by (1) filing written notice of such revocation with the Secretary of
Aequitron, (2) signing and delivering to such Secretary a proxy bearing a later
date, or (3) attending the Annual Meeting and voting in person. However, the
mere presence at the Annual Meeting of a shareholder who has delivered a valid
proxy will not of itself revoke that proxy. See "The Annual Meeting -- Record
Date; Voting Rights; Proxies."
Votes Required; Record Date. Consummation of the Merger requires approval
of the proposal to adopt the Merger Agreement by the holders of a majority of
the outstanding shares of Aequitron Common Stock entitled to vote thereon at the
Annual Meeting. Approval of Proposal No. 2 and Proposal No. 3 requires the
affirmative vote of the holders of the greater of (1) a majority of the voting
power of the shares present and entitled to vote on that item of business, or
(2) a majority of the voting power of the minimum number of shares entitled to
vote that would constitute a quorum for the transaction of business at the
Annual Meeting. Holders of Aequitron Common Stock are entitled to one vote per
share. Only holders of Aequitron Common Stock at the close of business on
October 21, 1996 (the "Record Date") are entitled to notice of and to vote at
the Annual Meeting. See "The Annual Meeting."
As of October 21, 1996, directors and executive officers of Aequitron and
their affiliates were beneficial owners of an aggregate of 183,244 shares of
Aequitron Common Stock (exclusive of any shares issuable upon the exercise of
stock options remaining unexercised as of such date), or approximately 3.7% of
the 4,955,842 shares of Aequitron Common Stock that were issued and outstanding
as of such date. Each of the directors and executive officers of Aequitron has
indicated an intention to vote all shares of Aequitron Common Stock beneficially
owned by him or her in favor of approval of the Merger Agreement.
SURRENDER OF STOCK CERTIFICATES
NPB has authorized Boston EquiServe to act as Exchange Agent under the
Merger Agreement (the "Exchange Agent"). As soon as reasonably practicable after
the Effective Time (as hereinafter defined) of the Merger, the Exchange Agent
will send a letter of transmittal to each Aequitron shareholder. The letter of
transmittal will contain instructions with respect to the surrender of
certificates representing Aequitron Common Stock to be exchanged for the common
stock, $.001 par value per share, of NPB (the "NPB Common Stock"). See "The
Merger -- Conversion of Shares; Procedures for Exchange of Certificates."
AEQUITRON SHAREHOLDERS SHOULD NOT FORWARD CERTIFICATES FOR AEQUITRON COMMON
STOCK TO THE EXCHANGE AGENT UNTIL THEY HAVE RECEIVED TRANSMITTAL LETTERS.
AEQUITRON SHAREHOLDERS SHOULD NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED
PROXY.
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<PAGE> 14
RECOMMENDATION OF THE AEQUITRON BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF AEQUITRON (THE "AEQUITRON BOARD") HAS UNANIMOUSLY
APPROVED THE MERGER AGREEMENT. THE AEQUITRON BOARD BELIEVES THAT THE TERMS OF
THE MERGER AGREEMENT ARE FAIR TO, AND IN THE BEST INTERESTS OF, AEQUITRON AND
ITS SHAREHOLDERS, AND UNANIMOUSLY RECOMMENDS THAT HOLDERS OF SHARES OF AEQUITRON
COMMON STOCK VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT, "FOR" THE ELECTION OF
THE TWO NOMINEES FOR DIRECTOR AND "FOR" THE RATIFICATION OF THE SELECTION OF
ERNST & YOUNG LLP AS AEQUITRON'S INDEPENDENT AUDITORS. THE APPROVAL OF THE
MERGER AGREEMENT BY THE SHAREHOLDERS OF AEQUITRON SHALL CONSTITUTE ADOPTION OF
THE MERGER AGREEMENT AND EACH OF THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING, WITHOUT LIMITATION, CERTAIN PROVISIONS BENEFITTING DIRECTORS,
EXECUTIVE OFFICERS AND EMPLOYEES OF AEQUITRON, AS MORE FULLY DESCRIBED HEREIN.
See "The Merger -- Background of the Merger"; "-- Recommendation of the
Aequitron Board; Reasons for the Merger"; and "-- Conflicts of Interest."
RISK FACTORS
In addition to the conditions to consummation of the Merger set forth below
under "The Merger Agreement -- Conditions," the Merger and the business of NPB
and Aequitron after the Merger will be subject to a number of risks, including:
the uncertainties associated with the integration of the business of Aequitron
with NPB; uncertainties associated with NPB's integration of other acquired
businesses; the impact of healthcare reform on the companies' operations; the
uncertain impact of the growth of managed care organizations; the costs and
uncertainties caused by the need to obtain regulatory approval of the companies'
products; uncertainties associated with patents and proprietary rights; the
impact of increasingly intense competition and rapid technological and market
changes; the companies' dependence on new product development; the potential
impact of product liability exposure; the impact of currency fluctuations and
the importance of foreign sales; the volatility of the companies' stock prices;
and uncertainties associated with certain anti-takeover provisions in the
charter documents of NPB. IN CONSIDERING WHETHER TO APPROVE THE MERGER
AGREEMENT, AEQUITRON SHAREHOLDERS SHOULD CAREFULLY REVIEW AND CONSIDER THE
INFORMATION CONTAINED BELOW UNDER THE CAPTION "RISK FACTORS."
THE MERGER
Conversion of Securities. Upon consummation of the transactions
contemplated by the Merger Agreement, (i) Aequitron will be merged with and into
NPB, with NPB being the surviving corporation, and (ii) each issued and
outstanding share of Aequitron Common Stock (other than shares held by
dissenting shareholders who have asserted their appraisal rights ("Excluded
Shares")), will be converted into the right to receive the fraction of one fully
paid and non-assessable share of common stock, $.001 par value per share, of NPB
(the "NPB Common Stock") equal to the Exchange Ratio (as defined below),
together with the corresponding fraction of a right ("NPB Preferred Stock
Purchase Right") to purchase one one-hundredth of a share of NPB Series A
Preferred Stock as set forth in the Rights Agreement (the "NPB Rights
Agreement") between NPB and The First National Bank of Boston. The fraction of a
share of NPB Common Stock to be issued for each share of Aequitron Common Stock
in the Merger (the "Exchange Ratio") is calculated as follows: (1) if the
Closing Market Value (as defined below) is greater than or equal to $23.14 and
less than or equal to $26.61, the Exchange Ratio will be .432; (2) if the
Closing Market Value is greater than $26.61, the Exchange Ratio will be the
quotient of $11.50 divided by the Closing Market Value; (3) if the Closing
Market Value is less than $23.14 and greater than or equal to $17.00, the
Exchange Ratio will be the quotient of $10.00 divided by the Closing Market
Value; and (4) if the Closing Market Value is less than $17.00, the Exchange
Ratio will be .588, provided that Aequitron may terminate the Merger Agreement
in the event the Closing Market Value is below $17.00 unless NPB elects to
increase the Exchange Ratio to equal the quotient of $10.00 divided by the
Closing Market Value. "Closing Market Value" means the average of the closing
prices of the NPB Common Stock for the ten trading days ending on the fifth
trading day prior to the Annual Meeting. A table is provided in Appendix D to
this Proxy Statement/Prospectus which sets forth calculations of possible
Exchange Ratios assuming a range of possible Closing Market Values and the
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<PAGE> 15
resulting total number of shares of NPB Common Stock that would be issued in the
Merger based upon the September 9, 1996 capitalization of NPB and Aequitron.
Because the aggregate number of shares of NPB Common Stock to be received in the
Merger is dependent upon the market price of NPB Common Stock during the
Exchange Ratio valuation period, fluctuations in the market value of NPB Common
Stock during that valuation period will impact the number of shares of NPB
Common Stock received in the Merger in exchange for each outstanding share of
Aequitron Common Stock. As a result, the market value of NPB Common Stock that
the shareholders of Aequitron ultimately receive could be more or less than its
market value on the date of this Proxy Statement/Prospectus or on the date of
the Annual Meeting. Aequitron shareholders are advised to obtain current market
quotations for NPB Common Stock and Aequitron Common Stock. No assurance can be
given as to the market price of NPB Common Stock at any time before the
Effective Time or as to the market price of NPB Common Stock at any time
thereafter. If the actual exchange ratio were determined to be materially
outside of the calculations set forth in Appendix D, Aequitron would recirculate
a supplement to this Proxy Statement/Prospectus or an Amended Proxy
Statement/Prospectus containing information concerning the actual exchange ratio
and would offer all holders of Aequitron Common Stock who were entitled to vote
on the Merger as of the Record Date an opportunity to change their votes prior
to the Annual Meeting (in which case, the Annual Meeting would be delayed to
permit such recirculation). Such recirculation, if it occurs, would cause the
effective date of the Merger to be delayed.
Fractional shares of NPB Common Stock and associated NPB Preferred Stock
Purchase Rights will not be issued in connection with the Merger. A holder of
Aequitron Common Stock otherwise entitled to a fractional share of NPB Common
Stock and the associated fractional NPB Preferred Stock Purchase Right will be
paid cash in lieu of such fractional share and associated fractional NPB
Preferred Stock Purchase Right in an amount equal to the product of such
fraction multiplied by the closing sales price per share of NPB Common Stock on
the Nasdaq National Market on the business day immediately preceding the closing
date. See "The Merger -- Conversion of Shares; Procedures for Exchange of
Certificates" and "The Merger Agreement -- Conversion of Securities" and
"-- Exchange of Shares."
Conditions to the Merger; Termination. The obligations of NPB and
Aequitron to effect the Merger are subject to the satisfaction of certain
conditions, including, among others: (i) obtaining the approval of Aequitron
shareholders; (ii) the absence of any injunction prohibiting consummation of the
Merger; (iii) receipt of all necessary government and other consents and
approvals, and the satisfaction of any conditions with respect thereto (other
than the filing of the Certificate of Merger (as hereinafter defined)); (iv) the
absence of any action by any federal or state governmental entity that imposes
any condition upon NPB or Aequitron that would so impact the Merger as to render
the Merger inadvisable; (v) receipt of accountants' letters with respect to the
qualification of the Merger as a "pooling of interests"; (vi) receipt of legal
opinions with respect to the tax consequences of the Merger and other matters;
(vii) the absence of any change, or any event involving a prospective change, in
the other party's business, assets, financial condition or results of operation
which has had, or is reasonably likely to have, in the aggregate a material
adverse effect on such party and its subsidiaries taken as a whole (other than
as a result of changes or proposed changes in federal or state health care
(including health care reimbursement) laws or regulations of general
applicability or interpretations thereof, changes in generally accepted
accounting principles and changes that could, under the circumstances,
reasonably have been anticipated in light of disclosures made in writing by the
other party prior to the execution of the Merger Agreement); and (viii) the
aggregate amount of cash required to be paid on account of all Excluded Shares
and any cash payments for fractional shares does not exceed 10% of the value of
NPB Common Stock issuable in connection with the Merger. See "The Merger
Agreement -- Conditions."
The Merger Agreement is subject to termination by either NPB or Aequitron
if, among other things, the Merger is not consummated by February 28, 1997.
Aequitron may terminate the Merger Agreement if the Closing Market Value of NPB
Common Stock is less than $17.00; provided that NPB may negate such termination
by electing to increase the Exchange Ratio to equal the quotient of $10.00
divided by the Closing Market Value. The Merger Agreement also may be terminated
by either NPB or Aequitron under other circumstances, including the failure of
Aequitron's shareholders to approve the Merger Agreement. Under certain
circumstances leading to termination of the Merger Agreement, NPB or Aequitron,
as the case may
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<PAGE> 16
be, may be entitled to receive a cancellation fee or reimbursement of certain
expenses. See "The Merger Agreement -- Termination" and "-- Cancellation Fees;
Expenses."
Dissenters' Rights. Under Minnesota law, shareholders of Aequitron Common
Stock who do not wish to exchange their shares for shares of NPB Common Stock
pursuant to the Merger Agreement, and who have filed notice of their intention
to demand payment of the fair value of their shares of Aequitron Common Stock in
accordance with Section 302A.473 of the Minnesota Business Corporation Act
("MBCA"), may dissent from the Merger and elect to have the fair value of their
shares of Aequitron Common Stock paid to them in cash. The failure of any
dissenting shareholder to timely and properly comply with the procedures set
forth in Section 302A.473 of the MBCA will result in the loss of appraisal
rights. See "Dissenters' Rights of Aequitron Shareholders."
Governmental Approvals Required. Certain aspects of the Merger will
require notifications to, and/or approvals from, certain United States
authorities. NPB and Aequitron believe that all material notifications, filings
and approvals have been made or obtained, or will be made or obtained prior to
the Effective Date, as the case may be. See "The Merger -- Regulatory
Approvals."
Accounting Treatment. The Merger is expected to be treated by NPB as a
"pooling of interests" transaction for accounting and financial reporting
purposes. Consummation of the Merger is conditioned upon the delivery of letters
from Price Waterhouse LLP, NPB's independent accountants, and Ernst & Young LLP,
Aequitron's independent auditors, concurring with the managements of NPB and
Aequitron, respectively, that the Merger qualifies for "pooling of interests"
treatment for financial reporting purposes and that such accounting treatment is
in accordance with generally accepted accounting principles. See "The Merger --
Accounting Treatment" and "The Merger Agreement -- Conditions."
OPINION OF FINANCIAL ADVISOR
Dain Bosworth Incorporated ("Dain") has acted as financial advisor to
Aequitron in connection with the Merger and has delivered to the Aequitron Board
a written opinion, dated October 21, 1996, that the Exchange Ratio was fair to
the holders of Aequitron Common Stock, from a financial point of view, as of the
date of such opinion.
A copy of the written opinion of Dain, which set forth the assumptions
made, matters considered and limitations on the review undertaken, is attached
as Appendix B, to this Proxy Statement/Prospectus and should be read carefully
in its entirety. See "The Merger -- Opinion of Dain."
CONFLICTS OF INTEREST
In considering the recommendation of the Aequitron Board with respect to
the approval by the Aequitron shareholders of the proposal to adopt the Merger
Agreement and the transactions contemplated thereby, shareholders should be
aware that certain members of Aequitron management and the Aequitron Board have
certain interests in the Merger that are in addition to the interests of
shareholders of Aequitron generally. These interests arise from, among other
things, certain indemnification and insurance arrangements and consulting
agreements among NPB, Aequitron and directors and certain executive officers of
Aequitron.
Under the terms of the Merger Agreement, all stock options of Aequitron
outstanding on September 9, 1996 that have not expired as of the Effective Time
will be assumed by NPB and will not terminate upon the consummation of the
Merger. As of September 9, 1996, there were outstanding options to purchase an
aggregate of 1,172,400 shares of Aequitron Common Stock at a weighted average
exercise price of $4.34 per share (at exercise prices ranging from $2.0625 to
$8.50 per share). Certain of these options provide for automatic vesting under
certain circumstances, including the Merger. See "The Merger -- Conflicts of
Interest -- Stock Option Plans." Upon consummation of the Merger, the outside
directors of Aequitron will enter into Consulting Agreements with NPB pursuant
to which they will each provide up to 120 hours of consulting services to NPB as
requested by NPB in exchange for $27,500 each. See "The Merger -- Conflicts of
Interest -- Consulting Agreements with Directors." In consideration for entering
into affiliates agreements as required by the Merger Agreement, NPB has agreed
that it will not terminate, except for cause, the employment of Aequitron
affiliates entering into such agreements until the stock transfer restrictions
thereunder have lapsed. See "The Merger -- Conflicts of Interest -- Affiliates
Agreements." In addition, certain officers of Aequitron have entered into
agreements with Aequitron providing for payments in the event
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<PAGE> 17
such officers are terminated in connection with a change in control, including
the Merger. See "Executive Compensation -- Employment Contracts and Termination
of Employment Arrangements." Further, for a period of six years from the
Effective Time, (i) all rights of indemnification and reimbursement of expenses
existing on the Effective Date under Aequitron's Restated Articles of
Incorporation, Amended Bylaws and indemnification agreements in favor of
officers and directors of Aequitron will survive; (ii) NPB will indemnify and
advance expenses to such persons to the full extent required or permitted by
Aequitron's Restated Articles of Incorporation, Amended Bylaws and such
indemnification agreements; and (iii) NPB will maintain certain officers' and
directors' liability insurance policies with respect to claims arising from
facts or events occurring before the Merger. See "The Merger -- Conflicts of
Interest -- Indemnification and Insurance."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
It is anticipated that the Merger will constitute a "reorganization" for
federal income tax purposes and, accordingly, that no gain or loss will be
recognized by Aequitron shareholders (except with respect to cash received by
dissenting shareholders or in lieu of fractional shares), NPB stockholders, NPB
or Aequitron as a result of the Merger. Consummation of the Merger is
conditioned upon the delivery of opinions of counsel to this effect. See "The
Merger -- Certain Federal Income Tax Consequences" and "The Merger Agreement --
Conditions."
COMPARATIVE RIGHTS OF STOCKHOLDERS
The rights of Aequitron shareholders are currently governed by the MBCA,
Aequitron's Restated Articles of Incorporation and Aequitron's Amended Bylaws.
Upon consummation of the Merger, Aequitron shareholders will become stockholders
of NPB, which is a Delaware corporation, and their rights as NPB stockholders
will be governed by the Delaware General Corporation Law ("DGCL"), NPB's
Restated Certificate of Incorporation, NPB's Bylaws and the NPB Rights
Agreement. For a discussion of the various differences between the rights of
shareholders of Aequitron and stockholders of NPB, see "Comparison of
Stockholder Rights."
COMPARATIVE PER SHARE PRICES AND DIVIDEND POLICIES
Both the NPB Common Stock and the Aequitron Common Stock are listed and
traded on the Nasdaq National Market. The following table sets forth the high
and low sale prices per share of NPB Common Stock and Aequitron Common Stock for
the calendar quarters indicated, as reported by Nasdaq. The sale prices of NPB
Common Stock have been adjusted to reflect retroactively the two-for-one stock
split of NPB Common Stock effected on June 28, 1996.
<TABLE>
<CAPTION>
NPB AEQUITRON
COMMON STOCK COMMON STOCK
------------------ -----------------
HIGH LOW HIGH LOW
------- -------- -------- ------
<S> <C> <C> <C> <C>
Calendar 1994:
First Quarter.................................. $14.75 $12.125 $ 3.375 $2.25
Second Quarter................................. 14.375 12.1875 3.4375 2.625
Third Quarter.................................. 15.75 13.00 5.75 2.75
Fourth Quarter................................. 17.00 14.125 5.375 3.625
Calendar 1995:
First Quarter.................................. 19.125 15.75 5.375 4.00
Second Quarter................................. 23.875 18.00 6.75 4.75
Third Quarter.................................. 27.875 22.3438 9.25 5.375
Fourth Quarter................................. 31.00 23.6875 9.25 7.25
Calendar 1996:
First Quarter.................................. 36.375 27.75 8.125 6.625
Second Quarter................................. 34.875 24.00 8.75 6.75
Third Quarter.................................. 27.875 19.25 10.375 6.00
Fourth Quarter (through October 25)............ 24.25 17.50 9.875 8.50
</TABLE>
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<PAGE> 18
On September 9, 1996, the last trading day prior to announcement of the
Merger Agreement, the closing sales prices of NPB Common Stock and Aequitron
Common Stock as reported by Nasdaq were $24.875 per share and $8.75 per share,
respectively. Based upon the September 9, 1996 closing price of NPB Common Stock
and an Exchange Ratio of .432, the equivalent per share value of Aequitron
Common Stock as of such date was approximately $10.75. On October 25, 1996, the
closing sales prices of NPB Common Stock and Aequitron Common Stock as reported
by Nasdaq were $19.875 per share and $9.50 per share, respectively. Based upon
the October 23, 1996 closing price of NPB Common Stock and an Exchange Ratio of
.503, the equivalent per share value of Aequitron Common Stock as of such date
was approximately $10.00.
Because the market price of NPB Common Stock is subject to fluctuation, the
market value of the shares of NPB Common Stock that holders of Aequitron Common
Stock will receive in the Merger may increase or decrease prior to and following
the Merger. The Exchange Ratio is subject to adjustment, based on the average of
the closing price of the NPB Common Stock for the ten trading days ending on the
fifth trading day before the Annual Meeting. See "The Merger
Agreement -- Conversion of Securities." STOCKHOLDERS ARE URGED TO OBTAIN CURRENT
MARKET QUOTATIONS FOR NPB COMMON STOCK AND AEQUITRON COMMON STOCK. NO ASSURANCE
CAN BE GIVEN AS TO THE FUTURE PRICES OR MARKETS FOR NPB COMMON STOCK OR
AEQUITRON COMMON STOCK.
No dividends have been declared or paid on NPB Common Stock or Aequitron
Common Stock since their respective dates of incorporation, nor does NPB
anticipate paying cash dividends on NPB Common Stock in the foreseeable future
following of the Merger.
SELECTED HISTORICAL FINANCIAL DATA
The following selected historical financial data of NPB and Aequitron have
been derived from their respective historical financial statements and should be
read in conjunction with such consolidated financial statements and the notes
thereto included or incorporated by reference herein. The Aequitron historical
financial data as of and for the three months ended July 31, 1996 and 1995 have
been derived from unaudited financial statements of Aequitron and have been
prepared on the same basis as the historical information derived from audited
financial statements. In the opinion of the management of Aequitron, the
unaudited financial statements of Aequitron from which such data have been
derived, contain all adjustments, consisting only of normal recurring accruals,
necessary for the fair presentation of the results for, and as of the end of,
such periods. The operating results of Aequitron for the three months ended July
31, 1996, are not necessarily indicative of the results that may be expected for
the year ending April 30, 1997. No cash dividends have been declared or paid on
Aequitron's Common Stock.
7
<PAGE> 19
SELECTED HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------------------------------------
JULY 7, JULY 2, JULY 3, JULY 4, JULY 5,
1996(1) 1995(2) 1994(3) 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
NPB
HISTORICAL STATEMENT OF OPERATIONS
DATA:
Net revenue....................... $706,131 $623,066 $564,132 $536,935 $467,323
Income (loss) from operations..... (47) 73,404 8,441 60,018 32,982
Income (loss) before cumulative
effect of accounting change..... (9,360) 48,112 (5,805) 41,006 23,680
Income (loss) per common share
before cumulative effect of
accounting change............... (0.16) 0.82 (0.10) 0.72 0.43
Common dividends per share(4)..... -- 0.02 0.02 0.02 0.03
Shares used to compute income
(loss) per common share before
cumulative effect of accounting
change.......................... 59,077 58,343 57,210 56,737 55,358
HISTORICAL BALANCE SHEET DATA:
Working capital................... $243,597 $266,959 $228,363 $242,523 $197,146
Total assets...................... 587,838 602,390 527,569 497,610 420,253
Long-term obligations............. 26,054 84,690 66,062 64,351 49,085
Stockholders' equity.............. 405,780 392,265 343,518 352,258 297,214
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
----------------------------------------------------------------- ---------------------
APRIL 30, APRIL 30, APRIL 30, APRIL 30, APRIL 30, JULY 31, JULY 31,
1996 1995 1994 1993 1992 1996 1995
--------- --------- --------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
AEQUITRON
HISTORICAL STATEMENT OF OPERATIONS
DATA:
Total revenues.................... $38,478 $30,802 $26,310 $26,985 $24,573 $10,490 $ 9,562
Income from operations............ 3,654 2,686 545 1,448 671 1,274 1,143
Income before cumulative effect of
accounting change............... 2,411 1,858 376 898 656 831 725
Income per common share before
cumulative effect of accounting
change.......................... 0.45 0.36 0.08 0.19 0.14 0.15 0.14
Common dividends per share........ -- -- -- -- -- -- --
Shares used to compute income per
common share before cumulative
effect of accounting change..... 5,391 5,125 4,777 4,752 4,736 5,418 5,268
HISTORICAL BALANCE SHEET DATA:
Working capital................... $10,517 $ 9,389 $ 6,771 $ 6,520 $ 6,124 $11,514 $ 8,929
Total assets...................... 23,178 17,943 15,318 14,773 14,486 24,137 22,037
Long-term obligations............. 1,901 64 86 140 727 1,807 2,189
Shareholders' equity.............. 16,419 13,957 12,000 11,681 10,739 17,363 14,592
</TABLE>
- ---------------
(1) In connection with the merger of Nellcor Incorporated and Puritan-Bennett
Corporation, and the merger of NPB and Infrasonics, one-time merger and
related costs of $108.9 million were recorded during the fiscal year ended
July 7, 1996.
(2) Includes accrued restructuring charges totaling $2.7 million and unsolicited
takeover offer costs of $5.0 million during the fiscal year ended July 2,
1995.
(3) Includes accrued restructuring charges totaling approximately $43.2 million
and litigation settlements totaling approximately $13.0 million during the
fiscal year ended July 3, 1994.
(4) Common dividends per share relates to cash dividends declared by
Puritan-Bennett Corporation prior to its merger with Nellcor Incorporated.
NPB has no present intention to declare any dividends in the future.
8
<PAGE> 20
SUMMARY UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA
The following summary unaudited pro forma combined condensed financial data
are derived from the unaudited pro forma combined condensed financial statements
and notes thereto appearing elsewhere herein, which give effect to the Merger as
a pooling of interests, and should be read in conjunction with such unaudited
pro forma statements and notes thereto and the separate audited consolidated
financial statements and related notes thereto of NPB and Aequitron,
incorporated by reference in this Proxy Statement/Prospectus. See "Unaudited Pro
Forma Combined Condensed Financial Statements." For the purpose of the unaudited
pro forma combined statement of operations data, NPB's financial data for each
of the three fiscal years in the period ended July 7, 1996 have been combined
with Aequitron's financial data for each of the three fiscal years in the period
ended April 30, 1996. For the purpose of the pro forma combined balance sheet
data, NPB's financial data at July 7, 1996 were combined with Aequitron's
financial data at April 30, 1996.
SUMMARY UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------
JULY 7, JULY 2, JULY 3,
1996(1) 1995(2) 1994(3)
-------- -------- --------
<S> <C> <C> <C>
PRO FORMA COMBINED STATEMENT OF OPERATIONS DATA:
Net revenue............................................ $744,609 $653,868 $590,442
Income from operations................................. 3,608 76,090 8,986
Income (loss) before cumulative effect of accounting
change.............................................. (6,949) 49,970 (5,429)
Income (loss) per common share before cumulative effect
of accounting change................................ (0.11) 0.82 (0.09)
Shares used to compute income (loss) per common share
before cumulative effect of accounting change....... 61,789 60,921 59,613
</TABLE>
<TABLE>
<CAPTION>
JULY 7,
1996
--------
<S> <C>
PRO FORMA COMBINED BALANCE SHEET DATA:
Working capital........................................ $242,114
Total assets........................................... 611,016
Long-term obligations.................................. 27,955
Stockholders' equity................................... 410,199
</TABLE>
- ---------------
(1) In connection with the merger of Nellcor Incorporated and Puritan-Bennett
Corporation, and the merger of NPB and Infrasonics, one-time merger and
related costs of $108.9 million were recorded during the fiscal year ended
July 7, 1996.
(2) Includes accrued restructuring charges totaling $2.7 million and unsolicited
takeover offer costs of $5.0 million during the fiscal year ended July 2,
1995.
(3) Includes accrued restructuring charges totaling approximately $43.2 million
and litigation settlements totaling approximately $13.0 million during the
fiscal year ended July 3, 1994.
9
<PAGE> 21
COMPARATIVE PER SHARE DATA
The following table presents historical, unaudited pro forma combined and
unaudited pro forma equivalent per share data of NPB and Aequitron after giving
effect to the Merger using the pooling of interests method of accounting,
assuming the Merger had been effective during all periods presented. The pro
forma equivalent data for Aequitron have been calculated by multiplying the NPB
pro forma combined amounts by the Exchange Ratio of 0.503. The pro forma data do
not purport to be indicative of the results of future operations or the results
that would have occurred had the Merger been consummated at the beginning of the
periods presented. The information set forth below should be read in conjunction
with the historical financial statements and notes thereto of NPB and Aequitron
incorporated by reference in this Proxy Statement/Prospectus, and the unaudited
pro forma combined condensed financial statements included elsewhere in this
Proxy Statement/Prospectus.
The unaudited pro forma combined and unaudited pro forma equivalent per
share data combine NPB's historical results for each of the three fiscal years
in the period ended July 7, 1996 with Aequitron's results for each of the three
fiscal years in the period ended April 30, 1996 and NPB's financial position at
July 7, 1996 with Aequitron's financial position at April 30, 1996.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
------------------------------ ------------------
JULY 7, JULY 2, JULY 3, JULY 31,
1996 1995 1994 1996
------- ------- ------- ------------------
<S> <C> <C> <C> <C>
NPB COMMON STOCK
Net income (loss) from operations per share:
Historical.................................. $(0.16) $ 0.82 $(0.10) n/a
Pro forma combined.......................... $(0.11) $ 0.82 $(0.09) n/a
Cash dividend per share(1):
Historical.................................. -- $ 0.02 $ 0.02 n/a
Book value per share at period end:
Historical.................................. $ 6.44 n/a n/a n/a
Pro forma combined.......................... $ 6.45 n/a n/a n/a
AEQUITRON COMMON STOCK
Net income (loss) from operations per share:
Historical.................................. $ 0.45 $ 0.36 $ 0.08 $0.15
Pro forma equivalent........................ $(0.06) $ 0.41 $(0.05) n/a
Cash dividend per share:
Historical.................................. -- -- -- --
Pro forma equivalent........................ -- $0.010 $0.010 --
Book value per share at period end:
Historical.................................. $ 3.35 n/a n/a $3.51
Pro forma equivalent........................ $ 3.25 n/a n/a n/a
</TABLE>
- ---------------
(1) Common dividends per share relates to cash dividends declared by
Puritan-Bennett Corporation prior to its merger with Nellcor Incorporated.
NPB has no present intention to declare any dividends in the future.
10
<PAGE> 22
RISK FACTORS
This Proxy Statement/Prospectus contains forward-looking statements which
involve risks and uncertainties. NPB's actual results may differ significantly
from the results discussed in the forward-looking statements. Factors that might
cause such a difference include, but are not limited to, those discussed below.
Such factors, together with the other information in this Proxy
Statement/Prospectus, should be considered carefully.
UNCERTAINTIES ASSOCIATED WITH THE INTEGRATION OF AEQUITRON
The Merger involves the integration of Aequitron into NPB. Among the
factors considered by the Aequitron Board in connection with its approval of the
Merger Agreement was the opportunity for operating efficiencies that it expects
will ultimately result from the Merger. The integration of Aequitron's
operations into NPB following the Merger will require the dedication of
management resources in order to achieve the anticipated operating efficiencies
of the Merger. No assurance can be given that difficulties encountered in
integrating the operations of Aequitron into NPB will be overcome or that the
benefits expected from such integration will be realized. The difficulties of
combining the Aequitron operations into NPB are exacerbated by the necessity of
coordinating geographically separated organizations, integrating personnel with
disparate business backgrounds and combining different corporate cultures. The
process of integrating operations could cause an interruption of, or loss of
momentum in, the activities of NPB's business, including the business acquired
in the Merger. Difficulties encountered in connection with the Merger and the
integration of the operations of Aequitron could have an adverse effect on the
business, results of operations or financial condition of NPB.
Subsequent to the Merger, NPB expects to incur a charge in the quarter
ending January 5, 1997, currently estimated to be in the range of $15 million to
$20 million, to reflect transaction-related expenses, as well as expenses
relating to integration of the two companies, including costs relating to
severance and employee relocation, the elimination of duplicate systems and
facilities and other integration costs. This amount is a preliminary estimate
only and is therefore subject to change. In addition, there can be no assurance
that NPB will not incur additional charges in subsequent quarters to reflect
costs associated with the Merger.
UNCERTAINTIES ASSOCIATED WITH THE INTEGRATION OF OTHER ACQUIRED BUSINESSES
In August 1995 NPB acquired Puritan-Bennett Corporation and in June 1996
acquired Infrasonics, Inc. ("Infrasonics"). In connection with these
transactions, NPB dedicated and will continue to dedicate substantial management
resources in order to achieve the anticipated operating efficiencies from
integrating the two companies. Difficulties encountered in integrating these
companies' operations could adversely impact the business, results of operations
or financial condition of NPB. Also, NPB intends to pursue additional
acquisition opportunities from time to time. The integration of any businesses
that NPB might acquire could require substantial management resources. There can
be no assurance that any such integration will be accomplished without having a
short or potentially long-term adverse impact on the business, results of
operations or financial condition of NPB or that the benefits expected from any
such integration will be fully realized.
HEALTH CARE REFORM/PRICING PRESSURE
The health care industry in the United States is experiencing a period of
extensive change. Changes in the law or new interpretations of existing laws may
have a dramatic effect on the definition of permissible or impermissible
activities, the relative costs associated with doing business and the amount of
reimbursement by both government and third-party payors. In addition, economic
forces, regulatory influences and political initiatives are subjecting the
health care industry to fundamental change. Health care reform proposals have
been formulated by the current administration and by members of Congress. In
addition, state legislatures periodically consider various health care reform
proposals. Federal, state and local government representatives will, in all
likelihood, continue to review and assess alternative health care delivery
systems and payment
11
<PAGE> 23
methodologies, and ongoing public debate of these issues can be expected.
Currently, the health care industry also is experiencing market-driven reforms
from forces within the industry that are exerting pressure on health care
companies to reduce health care costs. These market-driven reforms are resulting
in industry-wide consolidation that is expected to increase the downward
pressure on health care product margins, as larger buyer and supplier groups
exert pricing pressure on providers of medical devices and other health care
products. The ultimate timing or effect of legislative efforts and market-driven
reforms cannot be predicted, and short-term cost containment initiatives may
vary substantially from long-term reforms and may impact the business of NPB. No
assurance can be given that any such efforts or reforms will not have an adverse
effect on the business, results of operations or financial condition of NPB.
UNCERTAIN IMPACT OF GROWTH OF MANAGED CARE ORGANIZATIONS
Managed care organizations have grown substantially in terms of the
percentage of the population in the United States that receives medical benefits
through such organizations and in terms of the influence and control that such
organizations are able to exert over an increasingly large portion of the health
care industry. Managed care organizations are continuing to consolidate, and
such consolidation may increase the ability of such organizations to influence
the practices and pricing involved in the purchase of medical devices, including
those sold by NPB and Aequitron.
COST AND UNCERTAINTY OF REGULATORY COMPLIANCE
There has been a trend in recent years both in the United States and
outside the United States toward more stringent regulation of, and enforcement
of requirements applicable to, medical device manufacturers. The continuing
trend of more stringent regulatory oversight in product clearance and
enforcement activities has caused medical device manufacturers to experience
longer approval cycles, more uncertainty, greater risk and higher expenses. At
the present time, there are no meaningful indications that this trend will
change in the near-term or the long-term either in the United States or abroad.
FDA Enforcement With Respect to NPB. NPB has been subject to significant
FDA enforcement activity with respect to the operations of its subsidiary,
Puritan-Bennett Corporation, in recent years. In January 1994, Puritan-Bennett
entered into a consent decree with the FDA pursuant to which Puritan-Bennett
Corporation agreed to maintain systems and procedures complying with the FDA's
good manufacturing practices regulation and medical device reporting regulation
in all of its device manufacturing facilities.
Impact of Consent Decree. NPB has experienced and will continue to
experience incremental operating costs due to ongoing compliance requirements
and quality assurance programs initiated in part as a result of the
Puritan-Bennett Corporation FDA consent decree. However, the amount of these
incremental costs cannot be completely predicted at this time and will depend
upon a variety of factors, including future changes in statutes and regulations
governing medical device manufacturers and the manner in which the FDA continues
to enforce and interpret the requirements of the consent decree. There can be no
assurance that such compliance requirements and quality assurance programs will
not have an adverse impact on the business, results of operations or financial
condition of NPB or that NPB will not experience problems associated with FDA
regulatory compliance, including increased general costs of ongoing regulatory
compliance and specific costs associated with the consent decree.
UNCERTAINTY RELATED TO PATENTS AND PROPRIETARY RIGHTS
From time to time, NPB and Aequitron have received, and in the future may
receive, notices of claims with respect to possible infringement of the
intellectual property rights of others or notices of challenges to their
intellectual property rights. In some instances such notices have given rise to,
or may give rise to, litigation. Any litigation involving the intellectual
property rights of NPB or Aequitron may be resolved by means of a negotiated
settlement or by contesting the claim through the judicial process. There can be
no assurance that the business, results of operations or the financial condition
of NPB or Aequitron will not suffer an adverse impact as a result of
intellectual property claims that may be commenced against NPB or Aequitron in
the future.
12
<PAGE> 24
INTENSE COMPETITION; RAPID TECHNOLOGICAL AND MARKET CHANGES
The medical device industry is characterized by rapidly evolving technology
and increased competition. Competitors of NPB and Aequitron include large
medical companies, some of which have greater financial and technical resources
and broader product lines than NPB and Aequitron, even on a combined basis. NPB
and Aequitron believe that the principal competitive factors in their respective
markets are product features, price, quality, customer service, performance,
market reputation, breadth of product offerings and effectiveness of sales and
marketing efforts. There are a number of companies that currently offer, or are
in the process of developing, products that compete with products offered by NPB
and Aequitron. Some of these competitors may have greater capital resources,
research and development staffs and experience in the medical device industry,
including with respect to regulatory compliance in the development,
manufacturing and sale of medical products similar to those offered by NPB and
Aequitron. There can be no assurance that some of these competitors will not
succeed in developing technologies and products that are more effective than
those currently used or produced by NPB and Aequitron or that would render some
products offered by NPB and Aequitron obsolete or non-competitive. Competition
based on price is expected to become an increasingly important factor in
customer purchasing patterns as a result of cost containment pressures on, and
consolidation in, the health care industry. Such competition has exerted, and is
likely to continue to exert, downward pressure on the prices NPB and Aequitron
are able to charge for their products. There can be no assurance that after the
Merger NPB will be able to offset such downward price pressure through
corresponding cost reductions. Any failure to offset such pressure could have an
adverse effect on the business, results of operations or financial condition of
NPB.
DEPENDENCE ON NEW PRODUCT DEVELOPMENT
As existing products of NPB and Aequitron become more mature and their
existing markets more saturated, the importance to NPB after the Merger of
developing or acquiring new products will increase. The development of any such
products will entail considerable time and expense, including research and
development costs or acquisition costs and the time and expense required to
obtain necessary regulatory approvals, which could adversely affect the
business, results of operations or financial condition of NPB. There can be no
assurance that such development activities will yield products that can be
commercialized profitably or that any product acquisitions can be consummated on
commercially reasonable terms or at all. Any failure to acquire or develop new
products to supplement more mature products could have an adverse effect on the
business, results of operations or financial condition of NPB.
PRODUCT LIABILITY EXPOSURE
Because the products of both NPB and Aequitron are intended to be used in
health care settings on patients who are physiologically unstable and may also
be seriously or critically ill, both companies have been and will in the future
be exposed to potential product liability claims. Furthermore, NPB faces
potential product liability risk in connection with the operations of Aero
Systems, which principally develops and manufactures emergency oxygen systems
for use on aircraft. From time to time, patients using NPB or Aequitron products
may suffer serious injury or death, which may lead to product liability claims
against both NPB and Aequitron. There can be no assurance that such product
liability claims will not have an adverse effect on the business, results of
operations or financial condition of NPB or Aequitron.
IMPACT OF CURRENCY FLUCTUATIONS; IMPORTANCE OF FOREIGN SALES
Because sales of products by NPB outside the United States typically are
denominated in local currencies and sales outside the United States by both NPB
and Aequitron are growing at a rate that is generally faster than domestic
sales, the results of operations of the combined companies are expected to
continue to be affected by changes in exchange rates between certain foreign
currencies and the United States dollar. There can be no assurance that after
the Merger NPB will not experience currency fluctuation effects in future
periods, which could have an adverse effect on the operating results of the
combined companies. In that regard, neither NPB nor Aequitron currently engages
in any material currency hedging activities. The operations and financial
results of NPB after the Merger also may be significantly affected by other
13
<PAGE> 25
international factors, including changes in governmental regulations or import
and export restrictions, and foreign economic and political conditions
generally.
VOLATILITY OF STOCK PRICE
The market prices of NPB Common Stock and Aequitron Common Stock are, and
are expected to continue to be, subject to significant fluctuations in response
to variations in quarterly operating results, announcements of products and
developments by competitors, trends in the health care industry in general and
the medical device industry in particular, and certain other factors beyond the
control of NPB and Aequitron. In addition, broad market fluctuations, as well as
general economic or political conditions and initiatives such as health care
reform, may adversely affect the market price of NPB Common Stock, regardless of
the operating performance of NPB after the Merger. Since the Exchange Ratio for
the Merger is based upon the average of the closing prices of NPB Common Stock
for the ten trading days preceding the fifth trading day before the Annual
Meeting, the number of shares of NPB Common Stock to be issued in the Merger
could be affected by fluctuations in the market price of NPB Common Stock during
the Exchange Ratio valuation period. See "The Merger Agreement -- Conversion of
Securities."
CERTAIN ANTI-TAKEOVER PROVISIONS
The NPB Rights Agreement and certain provisions of the Restated Certificate
of Incorporation of NPB, including provisions requiring the affirmative vote of
the holders of at least 66 2/3% of the voting power of the then outstanding
shares of NPB capital stock entitled to vote generally in the election of
directors to approve certain business combinations with interested persons, may
make an unsolicited acquisition of control of NPB more difficult or expensive
than would otherwise be the case. See "Comparison of Stockholder Rights."
14
<PAGE> 26
THE AEQUITRON ANNUAL MEETING
PURPOSE OF THE AEQUITRON ANNUAL MEETING
At the Annual Meeting, holders of Aequitron Common Stock will consider and
vote upon (1) a proposal to approve the Merger Agreement, (2) the election of
two nominees for director, and (3) the ratification of the selection of Ernst &
Young LLP as Aequitron's independent auditors. As a result of the Merger,
Aequitron will merge with and into NPB and NPB will be the surviving
corporation.
THE AEQUITRON BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT, BELIEVES
THAT THE TERMS OF THE MERGER AGREEMENT ARE FAIR TO, AND IN THE BEST INTERESTS
OF, AEQUITRON AND ITS SHAREHOLDERS, AND UNANIMOUSLY RECOMMENDS THAT HOLDERS OF
SHARES OF AEQUITRON COMMON STOCK VOTE "FOR" APPROVAL OF THE MERGER AGREEMENT,
"FOR" THE ELECTION OF THE TWO NOMINEES FOR DIRECTOR AND "FOR" THE RATIFICATION
OF THE SELECTION OF ERNST & YOUNG LLP AS AEQUITRON'S INDEPENDENT AUDITORS.
RECORD DATE; VOTING RIGHTS; PROXIES
Only holders of Aequitron Common Stock at the close of business on October
21, 1996 (the "Record Date") are entitled to notice of and to vote at the Annual
Meeting.
As of the Record Date, there were 4,955,842 shares of Aequitron Common
Stock issued and outstanding, each of which entitled the holder thereof to one
vote.
All shares of Aequitron Common Stock represented by properly executed
proxies will, unless such proxies have been previously revoked, be voted in
accordance with the instructions indicated in such proxies. IF NO INSTRUCTIONS
ARE INDICATED, SUCH SHARES OF AEQUITRON COMMON STOCK WILL BE VOTED IN FAVOR OF
APPROVAL OF THE MERGER AGREEMENT, IN FAVOR OF THE ELECTION OF THE TWO NOMINEES
FOR DIRECTOR, AND IN FAVOR OF THE RATIFICATION OF THE SELECTION OF ERNST & YOUNG
LLP AS AEQUITRON'S INDEPENDENT AUDITORS. A shareholder who has given a proxy may
revoke it at any time prior to its exercise by giving written notice thereof to
the Secretary of Aequitron, by signing and returning a later dated proxy, or by
voting in person at the Annual Meeting. However, mere attendance at the Annual
Meeting will not in and of itself have the effect of revoking the proxy. Votes
cast by proxy or in person at the Annual Meeting will be tabulated by the
inspector of election appointed for the meeting.
SOLICITATION OF PROXIES
Proxies are being solicited by and on behalf of the Aequitron Board.
Aequitron will bear all expenses in connection with such solicitation. In
addition to solicitation by use of the mails, proxies may be solicited by
directors, officers and employees of Aequitron in person or by telephone,
telegram or other means of communication. Such directors, officers and employees
will not be additionally compensated for, but may be reimbursed for
out-of-pocket expenses incurred in connection with, such solicitation.
Arrangements have also been made with brokerage firms, banks, custodians,
nominees and fiduciaries for the forwarding of proxy and solicitation material
to owners of Aequitron Common Stock held of record by such persons, and in
connection therewith such firms will be reimbursed for reasonable expenses
incurred in forwarding such materials. Corporate Investor Communications, Inc.
has been retained to aid in the solicitation of proxies from Aequitron's
shareholders. The aggregate fees of such firm for the solicitation of proxies
from the shareholders of Aequitron are estimated to be $5,000 plus reimbursement
of out-of-pocket expenses.
QUORUM
The presence in person or by properly executed proxy of holders of a
majority of all of the issued and outstanding shares of Aequitron Common Stock
entitled to vote is necessary to constitute a quorum at the Annual Meeting. For
purposes of determining whether a quorum is present, the inspector of election
will include shares the holders of which abstain from voting on any particular
matter ("abstentions") and exclude shares that are held of record by brokers and
as to which such brokers indicate that they do not have discretionary authority
to vote on any particular matter ("broker non-votes").
15
<PAGE> 27
REQUIRED VOTE
Approval of the Merger Agreement requires the affirmative vote of a
majority of the outstanding shares of Aequitron entitled to vote thereon. For
purposes of determining whether the Merger Agreement has been approved, the
inspector of election will include abstentions and broker non-votes as a portion
of the number of shares deemed to have voted on such matter at the Annual
Meeting. Accordingly, abstentions and broker non-votes will have the effect of a
"NO" vote on Proposal No. 1.
The election of each director nominee and the ratification of the selection
of the independent auditors requires the affirmative vote of the greater of (i)
a majority of the shares represented at the meeting with authority to vote on
such matter, or (ii) a majority of the voting power of the minimum number of
shares that would constitute a quorum for the transaction of business at the
Annual Meeting. The presence at the Annual Meeting in person or by proxy of the
holders of a majority of the outstanding shares of Aequitron's Common Stock
entitled to vote shall constitute a quorum for the transaction of business. If a
broker returns a "non-vote" proxy, indicating a lack of voting instructions by
the beneficial holder of the shares and a lack of discretionary authority on the
part of the broker to vote on a particular matter, then the shares covered by
such non-vote shall be deemed present at the meeting for purposes of determining
a quorum but shall not be deemed to be represented at the meeting for purposes
of calculating the vote required for approval of such matter. If a shareholder
abstains from voting as to any matter, then the shares held by such shareholder
shall be deemed present at the meeting for purposes of determining a quorum and
for purposes of calculating the vote with respect to such matter, but shall not
be deemed to have been voted in favor of such matter. An abstention as to any
proposal will therefore have the same effect as a vote against the proposal.
Proxies which are signed but which lack any such specification will be voted in
favor of the proposals set forth in the Notice of Annual Meeting.
As of October 21, 1996, directors and executive officers of Aequitron and
their affiliates were beneficial owners of an aggregate of 183,244 shares of
Aequitron Common Stock (exclusive of any shares issuable upon the exercise of
stock options remaining unexercised as of such date), or approximately 3.7% of
the 4,955,842 shares of Aequitron Common Stock that were issued and outstanding
as of such date. Each of the directors and executive officers of Aequitron has
indicated an intention to vote all shares of Aequitron Common Stock beneficially
owned by him or her in favor of approval of the Merger Agreement.
THE MATTERS TO BE CONSIDERED AT THE AEQUITRON ANNUAL MEETING ARE OF GREAT
IMPORTANCE TO THE SHAREHOLDERS OF AEQUITRON. ACCORDINGLY, SHAREHOLDERS ARE URGED
TO READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS PROXY
STATEMENT/PROSPECTUS, AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE
ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
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<PAGE> 28
THE MERGER
This section of the Proxy Statement/Prospectus describes certain aspects of
the proposed Merger. To the extent that it relates to the Merger Agreement and
the terms of the Merger, the following description does not purport to be
complete and is qualified in its entirety by reference to the Merger Agreement
which is attached as Appendix A to this Proxy Statement/Prospectus and is
incorporated herein by reference. All shareholders are urged to read the Merger
Agreement.
GENERAL
The Merger Agreement provides that the Merger will be consummated if the
approval of Aequitron shareholders required therefor is obtained and all other
conditions to the Merger are satisfied or waived as provided in the Merger
Agreement. Upon consummation of the Merger, Aequitron will be merged with and
into NPB, and NPB will be the surviving corporation.
Upon consummation of the Merger, each outstanding share of Aequitron Common
Stock (other than shares held by dissenting shareholders who have asserted
appraisal rights and treasury stock ("Excluded Shares")), will be converted into
the right to receive the fraction of a fully paid and nonassessable share of NPB
Common Stock equal to the Exchange Ratio (as defined below), including the
corresponding fraction of an associated NPB Preferred Stock Purchase Right. The
fraction of a share of NPB Common Stock to be issued for each share of Aequitron
Common Stock in the Merger (the "Exchange Ratio") is calculated as follows: (1)
if the Closing Market Value (as defined below) is greater than or equal to
$23.14 and less than or equal to $26.61, the Exchange Ratio will be .432; (2) if
the Closing Market Value is greater than $26.61, the Exchange Ratio will be the
quotient of $11.50 divided by the Closing Market Value; (3) if the Closing
Market Value is less than $23.14 and greater than or equal to $17.00, the
Exchange Ratio will be the quotient of $10.00 divided by the Closing Market
Value; and (4) if the Closing Market Value is less than $17.00, the Exchange
Ratio will be .588, provided that Aequitron may terminate the Merger Agreement
in the event the Closing Market Value is below $17.00 unless NPB elects to
increase the Exchange Ratio to equal the quotient of $10.00 divided by the
Closing Market Value. "Closing Market Value" means the average of the closing
prices of the NPB Common Stock for the ten trading days ending on the fifth
trading day prior to the Annual Meeting. See "Appendix D" for calculations of
the Exchange Ratio assuming a range of possible Closing Market Values.
Based upon the capitalization of NPB and Aequitron as of October 21, 1996,
the shareholders of Aequitron will own approximately 4.4% of the outstanding NPB
Common Stock following consummation of the Merger (including outstanding options
to acquire NPB Common Stock and Aequitron Common Stock) and assuming an Exchange
Ratio of .503. Such percentage could change depending on whether and to what
extent shares of NPB Common Stock and Aequitron Common Stock issuable upon
exercise of outstanding NPB or Aequitron stock options are issued and whether
any Aequitron shareholders perfect their statutory dissenters' rights.
EFFECTIVE TIME
The effective time of the Merger (the "Effective Time") will occur upon the
filing of a Certificate of Merger (the "Certificate of Merger") with the
Secretary of State of the State of Delaware and the Secretary of State of the
State of Minnesota or at such later time as is specified on such certificate.
The filing of the Certificate of Merger will occur as soon as practicable after
the closing of the transactions contemplated by the Merger Agreement. The Merger
Agreement may be terminated by either party if the Merger has not been
consummated on or before February 28, 1997 and under certain other conditions.
See "The Merger Agreement -- Conditions" and "-- Termination."
CONVERSION OF SHARES; PROCEDURES FOR EXCHANGE OF CERTIFICATES
Except for Excluded Shares, the conversion of Aequitron Common Stock into
the right to receive NPB Common Stock, related NPB Preferred Stock Purchase
Rights, and cash in lieu of fractional shares will occur automatically at the
Effective Time.
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<PAGE> 29
As soon as practicable after the Effective Time, a transmittal letter will
be mailed by the Exchange Agent to each shareholder of Aequitron informing such
shareholder of the procedures to follow in forwarding Aequitron stock
certificates to the Exchange Agent. Upon receipt of the Aequitron stock
certificates, the Exchange Agent will deliver whole shares of NPB Common Stock
to the shareholder and cash in lieu of fractional shares pursuant to the terms
of the Merger Agreement and in accordance with the transmittal letter, together
with any dividends or other distributions to which such shareholder may be
entitled.
If any issuance of shares of NPB Common Stock in exchange for shares of
Aequitron Common Stock is to be made to a person other than the Aequitron
shareholder in whose name the certificate is registered at the Effective Time,
it will be a condition of such exchange that the certificate so surrendered be
properly endorsed or otherwise be in proper form for transfer and that the
Aequitron shareholder requesting such issuance either pay any transfer or other
tax required or establish to the satisfaction of the Exchange Agent that such
tax has been paid or is not payable.
After the Effective Time, there will be no further transfers of Aequitron
Common Stock on the stock transfer books of Aequitron. If a certificate
representing Aequitron Common Stock is presented for transfer, it will be
canceled and a certificate representing the appropriate number of full shares of
NPB Common Stock and cash in lieu of fractional shares and any dividends and
distributions will be issued in exchange therefor.
After the Effective Time and until surrendered, shares of Aequitron Common
Stock (except for shares held by dissenting stockholders who have asserted
appraisal rights) will be deemed for all corporate purposes, other than the
payment of dividends and distributions, to evidence ownership of the number of
full shares of NPB Common Stock into which such shares of Aequitron Common Stock
were converted at the Effective Time. No dividends or other distributions, if
any, payable to holders of NPB Common Stock will be paid to the holders of any
certificates for shares of Aequitron Common Stock until such certificates are
surrendered. Upon surrender of such certificates, all such declared dividends
and distributions which shall have become payable with respect to such NPB
Common Stock in respect of a record date after the Effective Time will be paid
to the holder of record of the full shares of NPB Common Stock represented by
the certificate issued in exchange therefor, without interest.
AEQUITRON SHAREHOLDERS SHOULD NOT FORWARD CERTIFICATES FOR AEQUITRON COMMON
STOCK TO THE EXCHANGE AGENT UNTIL THEY HAVE RECEIVED TRANSMITTAL LETTERS.
AEQUITRON SHAREHOLDERS SHOULD NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED
PROXY.
BACKGROUND OF THE MERGER
Prompted by competitive pressures and consolidation and reform in the
health care industry, and recognizing that its size could be a potential
disadvantage in achieving its long-term growth objectives, Aequitron's Board met
on August 21, 1995 to consider a number of strategic alternatives. At this
meeting, the Aequitron Board determined that it was in the best interests of
Aequitron's shareholders and employees to investigate the sale of Aequitron to a
suitable merger candidate. Subsequently, the Aequitron Board authorized
management to retain Dain to advise Aequitron on valuation issues and to discuss
potential merger candidates. At a meeting held on November 2, 1995, the
Aequitron Board met with Dain to review Dain's valuation analysis and
management's discussions with several merger candidates, including NPB. Dain was
retained to serve as Aequitron's investment banker in connection with any future
merger discussions with potential candidates. Although extensive discussions
were held with several candidates other than NPB, no firm offer was received
from any of such candidates.
On June 24, 1996, the Aequitron Board discussed the possible combination of
Aequitron and NPB. In the course of the meeting, Mr. Hickey responded to the
questions, comments and issues of concern of members of the Aequitron Board with
respect to a possible combination, and after further discussion obtained the
authorization of the Aequitron Board to continue to explore the possibility of a
combination with NPB. The issues of concern expressed by members of the
Aequitron Board at the June 24, 1996 meeting related to protecting the
proprietary and confidential information of Aequitron, receiving fair value for
Aequitron's shareholders, maintaining a presence in Minnesota and retaining key
employees and business relationships through the acquisition process.
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<PAGE> 30
On July 3, 1996, as amended September 5, 1996, NPB and Aequitron executed
and delivered a Confidentiality Agreement, pursuant to which NPB could obtain
certain confidential information relating to Aequitron.
On July 26, 1996, Mr. James B. Hickey, Jr. and Mr. William M. Milne, the
President and Chief Executive Officer and the Chief Financial Officer,
respectively, of Aequitron, met with Mr. Michael Downey and Ms. Laureen DeBuono,
the Chief Financial Officer and the General Counsel, respectively, of NPB, Mr.
David Hetz and Ms. Natalie Nordin of Robertson Stephens, and Messrs. Travis
Winkey and James D'Aquila of Dain Bosworth. In the course of their meeting, the
representatives discussed potential benefits that might result from a
combination of the two companies and the potential structure and general terms
of a merger involving NPB and Aequitron. Thereafter, the senior management teams
of each company began to explore the feasibility of a business combination and
nonpublic information was exchanged by NPB and Aequitron.
On August 12, 1996, the Aequitron Board held a special meeting, which was
continued to August 13, 1996, during which all directors participated from time
to time and at which representatives from Dain Bosworth and outside legal
counsel were present to advise the Aequitron Board. The Aequitron Board formed a
Business Combination Committee composed of outside, disinterested directors to
make decisions and recommendations to the full Board related to the proposed
Merger. Aequitron's management then reviewed the material terms of the proposed
merger agreement as well as the continuing changes in the market place which had
previously been discussed at the June 24th Board meeting. In this connection,
representatives of Aequitron's outside financial advisor, Dain Bosworth,
indicated to the Aequitron Board that, provided the exchange ratio formulation
did not change in final negotiations, Dain Bosworth would be in a position to
render its opinion that the Exchange Ratio was fair, from a financial point of
view, to Aequitron's shareholders upon negotiation of the definitive merger
agreement. In addition to the foregoing and the benefits of the proposed
transaction, the Aequitron Board also considered the financial and strategic
business implications of the Merger, together with the potential risks and
benefits of the transaction and the risks and benefits of remaining an
independent company. These discussions were in the context of changes in the
general marketplace resulting from the consolidation of health care providers,
cost constraints imposed by these providers, and the shift of the site of
delivery of health care services from acute care settings to alternative, less
costly settings, information regarding the market prices and trading activities
in the securities of Aequitron and NPB, and the lack of availability of other
alternatives through which similar or greater long-term value could be achieved
for Aequitron shareholders. Information relating to the accounting treatment of
the Merger was given to the Aequitron Board for their discussion and review.
On August 13, 1996, a meeting of the Business Combination Committee was
held to review the proceedings of the previous Aequitron Board meeting and to
give direction to management. Subsequently, with provisos ensuring fair and
equitable treatment of Aequitron shareholders in the ultimate agreement, the
Committee unanimously voted to direct management to negotiate a definitive
agreement for approval by the full Aequitron Board.
On August 21, 1996, NPB provided to Aequitron a preliminary draft of a form
of merger agreement. Subsequent thereto, a variety of telephonic meetings took
place involving various senior managers of NPB and Aequitron, as well as
financial and legal advisors of both companies. Aequitron's management continued
to negotiate with representatives of NPB, and various representatives of
Aequitron and NPB conducted due diligence investigations on behalf of Aequitron
and NPB, respectively.
On August 30, 1996, Aequitron's counsel circulated a list of open issues
that required further discussion between the parties at their upcoming meetings.
On September 4-5, 1996, representatives of Aequitron and NPB and their
respective counsel and financial advisors met and negotiated the final terms of
the Merger Agreement. A revised Merger Agreement was circulated on September 5,
1996.
On September 9, 1996, the parties agreed upon a pricing structure for the
Merger. On the same day, after completion of its analysis, Dain then rendered
its opinion to the Aequitron Board that, as of the date of such opinion, the
consideration received was fair from a financial point of view to Aequitron's
shareholders.
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<PAGE> 31
Immediately after its meeting with Dain, Aequitron's Board reviewed and
discussed all of the final terms of the Merger Agreement. At this meeting were
Aequitron's outside legal counsel and independent auditors who were present to
advise the Aequitron Board. The Business Combination Committee and then,
subsequently, the full Aequitron Board approved unanimously the Merger and to
recommend to Aequitron shareholders that they vote in favor of the Merger
Agreement.
The Merger Agreement was executed by both parties on September 9, 1996.
The Exchange Ratio formula in the Merger Agreement executed by the parties
on September 9, 1996 provided that, if the Closing Market Value was less than
$23.14 but greater than or equal to $22.75, the Exchange Ratio would be the
quotient of $10.00 divided by the Closing Market Value. The original Merger
Agreement also gave Aequitron the right to terminate the Merger Agreement if the
Closing Market Value was less than $22.75, unless NPB elected to increase the
Exchange Ratio to equal the quotient of $10.00 divided by the Closing Market
Value. On October 18, 1996, in response to a decline in the market price of NPB
Common Stock below $22.75, representatives of Aequitron and NPB held a
telephonic meeting to discuss a possible amendment to the Merger Agreement to
address such decline.
On October 21, 1996, the parties agreed upon the terms of an amendment to
the Merger Agreement (i) revising the Exchange Ratio formula to provide that if
the Closing Market Value is less than $23.14 and greater than or equal to
$17.00, the Exchange Ratio will equal the quotient of $10.00 divided by the
Closing Market Value, and (ii) providing that if the Closing Market Value is
below $17.00, Aequitron may terminate the Merger Agreement unless NPB elects to
increase the Exchange Ratio to equal the quotient of $10.00 divided by the
Closing Market Value. On the same day, the Aequitron Board met to review the
terms of the proposed amendment to the Merger Agreement. After discussing the
implications of the proposed amendment, the Business Combination Committee, and
then the full Aequitron Board, approved unanimously the amendment to the Merger
Agreement and to recommend to Aequitron shareholders that they vote in favor of
the Merger Agreement, as amended. The approval of both the Business Combination
Committee and the full Aequitron Board was given subject to Dain updating
certain of its analyses from the September 9, 1996 presentation and delivering
its written fairness opinion. Subsequently, Dain delivered to the Aequitron
Board its opinion dated October 21, 1996.
The amendment to the Merger Agreement was executed by both parties on
October 21, 1996.
RECOMMENDATION OF THE AEQUITRON BOARD; REASONS FOR THE MERGER
THE AEQUITRON BOARD HAS UNANIMOUSLY APPROVED THE TERMS OF THE MERGER
AGREEMENT, BELIEVES THAT THE TERMS OF THE MERGER AGREEMENT ARE FAIR TO, AND IN
THE BEST INTERESTS OF, AEQUITRON AND ITS SHAREHOLDERS, AND UNANIMOUSLY
RECOMMENDS THAT HOLDERS OF SHARES OF AEQUITRON COMMON STOCK VOTE "FOR" APPROVAL
OF THE MERGER AGREEMENT.
The Aequitron Board concluded that the terms of the proposed Merger are
fair to, and in the best interests of, Aequitron and its shareholders. The
Aequitron Board reviewed the prospects of Aequitron as an independent company
and the potential value for shareholders to be part of a larger, more
diversified company such as NPB, with its greater resources that could be used
in competing in the marketplace.
As part of its consideration of the Merger alternative, the Aequitron Board
discussed the material terms of the proposed merger agreement, which had
previously been circulated to the Aequitron Board, and the range of valuation
issues that were still being addressed. Aequitron's management reviewed for the
Aequitron Board the history of the negotiations and presented management's
recommendations that the Merger be effected. In this connection, the Aequitron
Board also considered the fact that representatives of Dain indicated to the
Aequitron Board that, provided that the exchange formulation did not change in
final negotiations, they believed that once the parties agreed upon a definitive
exchange ratio, Dain would be in a position to render a fairness opinion,
subject to completing its analysis and internal review thereof. In addition to
the foregoing and the benefits of the proposed transaction, the Aequitron Board
also considered the financial and strategic business implications of the Merger,
together with the potential risks and benefits of the transaction and the risks
and benefits of remaining an independent company. The Aequitron Board discussed
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<PAGE> 32
the competitive position of Aequitron and its development strategy, changes in
the general marketplace resulting from the consolidation of health care
providers, cost constraints and the trend toward providing greater amounts of
health care services outside of acute care facilities, information regarding the
market prices and trading activities in the securities of Aequitron and NPB, and
the apparent lack of availability of other alternatives through which similar or
greater long-term value could be achieved for Aequitron shareholders. The
Aequitron Board did not attempt to quantify the synergies or cost savings that
might result from the Merger and the presence or absence of such synergies or
cost savings was not a material factor in the Aequitron Board's decision to
approve the Merger. On the basis of all these factors, the Aequitron Board
concluded that, provided the parties agreed upon an exchange ratio within the
anticipated range, the Merger was fair to and in the best interests of Aequitron
and its shareholders. The Aequitron Board unanimously voted to approve the
Merger, to authorize management to execute, deliver and perform the Merger
Agreement and to recommend to Aequitron shareholders that they vote in favor of
the Merger Agreement.
In view of the variety of factors considered in connection with its
evaluation of the Merger, the Aequitron Board did not find it practicable to,
and did not, quantify or otherwise assign relative weights to the specified
factors considered in reaching this determination. In addition, individual
members of the Aequitron Board may have given different weights to different
factors.
The NPB Board of Directors believes that the Merger is in the best
interests of NPB and its stockholders. The NPB Board has concluded that the
proposed Merger is in the best interests of NPB and its stockholders because,
among other reasons, the Merger would further NPB's strategic objectives of
enhancing its competitive position in the rapidly consolidating health care
industry, primarily through growth through acquisition, expanding its existing
product lines to include complementary new products and obtaining manufacturing
and other synergies, and would enhance NPB's product offerings to respiratory
impaired patients throughout the continuum of care.
OPINION OF DAIN BOSWORTH INCORPORATED
Aequitron Medical, Inc. ("Aequitron") retained Dain Bosworth Incorporated
("Dain") on October 18, 1995 to act as Aequitron's financial advisor in
connection with merger and acquisition transactions such as the Merger with
Nellcor Puritan Bennett Incorporated ("NPB"), including rendering its Opinion to
the Board of Directors of Aequitron as to the fairness, from a financial point
of view, of the consideration to be received by Aequitron's shareholders in
connection with the Merger.
At the September 9, 1996 special meeting of Aequitron's Board of Directors,
Dain delivered an oral Opinion, which was subsequently confirmed in writing,
that, subject to the assumptions set forth below, as of such date and based on
the matters described therein, that the consideration received was fair to the
shareholders of Aequitron from a financial point of view. On October 21, 1996 a
special meeting of the Aequitron Board of Directors approved the amendment of
the Merger Agreement, subject to Dain updating certain of its analyses from the
September 9, 1996 presentation and delivering an opinion. Dain subsequently
delivered its Opinion dated October 21, 1996, subject to the assumptions made,
matters considered and limitations set forth in such opinion and summarized
below, that the consideration received was fair to the shareholders of Aequitron
from a financial point of view. Dain has consented to the use of its name and
the Dain Opinion included in the Proxy Statement/Prospectus. No limitations were
imposed by the Aequitron Board upon Dain with respect to the investigations made
or procedures followed by it in rendering its Opinion.
THE FULL TEXT OF DAIN'S WRITTEN OPINION DATED OCTOBER 21, 1996, WHICH SETS
FORTH AMONG OTHER THINGS, ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS
ON THE REVIEW UNDERTAKEN, IS ATTACHED HERETO AS APPENDIX B AND IS INCORPORATED
HEREIN BY REFERENCE. AEQUITRON SHAREHOLDERS ARE URGED TO READ THE DAIN OPINION
IN ITS ENTIRETY. THE SUMMARY OF THE DAIN OPINION SET FORTH IN THIS PROXY
STATEMENT/PROSPECTUS SETS FORTH THE MATERIAL ANALYSES AND MATTERS PRESENTED BY
DAIN TO THE AEQUITRON BOARD AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
FULL TEXT OF SUCH OPINION. THE DAIN OPINION IS DIRECTED TO THE AEQUITRON BOARD,
ADDRESSES ONLY THE FAIRNESS OF THE CONSIDERATION TO BE RECEIVED BY AEQUITRON'S
SHAREHOLDERS FROM A FINANCIAL POINT OF VIEW AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY AEQUITRON SHAREHOLDER AS TO HOW SUCH A
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<PAGE> 33
SHAREHOLDER SHOULD VOTE AT THE ANNUAL MEETING. THE DAIN OPINION WAS RENDERED TO
THE AEQUITRON BOARD FOR ITS CONSIDERATION IN DETERMINING WHETHER TO APPROVE THE
MERGER AGREEMENT.
In connection with the Dain Opinion, Dain, among other things: (i) reviewed
the terms of the Merger Agreement and draft of Amendment No. 1 to Agreement and
Plan of Merger in the form provided to Dain; (ii) held discussions with senior
members of the management of Aequitron and NPB concerning the business,
operations and prospects of each company and the reasons for completing the
Merger, (iii) reviewed certain business and financial information on Aequitron
and NPB, including certain publicly available documents filed by Aequitron and
NPB with the Commission pursuant to the Exchange Act; (iv) compared certain
financial statistics of Aequitron and NPB with statistics of other publicly
traded companies deemed comparable; (v) reviewed price and trading data of the
common stock of both Aequitron and NPB; and (vi) to the extent publicly
available, compared the financial terms of the Merger with those of other
transactions deemed comparable.
In conducting its review and arriving at its Opinion that the consideration
to be received by the common stock shareholders of Aequitron was fair from a
financial point of view, Dain assumed and relied upon, without independent
verification, the accuracy, completeness and fairness of the information
furnished to or otherwise reviewed by or discussed with it for purposes of
rendering its Opinion. With respect to the financial projections of Aequitron
and other information relating to the prospects of Aequitron provided to Dain by
Aequitron, Dain assumed that such projections and other information were
reasonably prepared and reflected the best currently available judgments and
estimates of the management of Aequitron as to the likely future financial
performances of Aequitron and of the combined entity. In addition, Dain relied
upon estimates and judgments of the Aequitron and NPB managements as to the
potential revenue and cost savings and synergies that could result from the
Merger. Dain assumed, with the consent of Aequitron, that the Merger will
qualify for pooling of interests accounting treatment and as a tax-free
transaction for the stockholders of Aequitron. Dain did not make and it was not
provided with an independent evaluation or appraisal of the assets of Aequitron
and NPB, and has not Dain been furnished with any such evaluations or
appraisals. The Dain Opinion is based on market, economic and other conditions
as they existed and could be evaluated as of the date of the Opinion letter.
The following paragraphs summarize the most significant quantitative and
qualitative analyses performed by Dain in arriving at its Opinion and reviewed
with the Aequitron Board and do not purport to be a complete description of the
analyses performed by Dain. The information presented below is based on the
financial condition of Aequitron and NPB as of a date or dates shortly before
the Merger Agreement was executed on September 9, 1996 and stock price
information through the close of the market on September 6, 1996.
Analysis of Certain Other Publicly Traded Companies. This analysis
examines a company's valuation in the public market as compared to the valuation
in the public market of other selected publicly traded companies. Dain compared
certain financial and stock market information for both Aequitron and NPB with
similar information from comparable publicly traded companies. The valuation
analysis was based on several variables, including sales, earnings before
interest, taxes, depreciation and amortization ("EBITDA"), operating income, net
income for the last twelve months, and projected net income for both the 1996
and 1997 calendar years. The earnings estimates used in this analysis for
Aequitron and NPB for calendar years 1996 and 1997 were as reported by First
Call Corporation.
Dain compared certain financial and stock market information for Aequitron
with similar information from a group of seven comparable, publicly traded
companies consisting of Allied Healthcare Products, Inc., Healthdyne
Technologies, Inc., Nellcor Puritan Bennett Incorporated, Protocol Systems,
Inc., ResMed, Inc., Respironics, Inc. and Sunrise Medical, Inc. (the "Selected
Aequitron Comparables"). Dain noted from this analysis that the multiples for
Aequitron were generally within the range of multiples for the Selected
Aequitron Comparables.
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<TABLE>
<CAPTION>
MARKET VALUE/
ENTERPRISE VALUE/ ------------------------------------
-------------------------------- PROJECTED CALENDAR
LTM LTM -------------------------
LTM OPERATING LTM NET 1996 1997
REVENUE INCOME EBITDA INCOME NET INCOME NET INCOME
------- --------- ------ ------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Aequitron Medical(1).......... 1.3x 13.6x 10.2x 19.7x 17.7x 14.8x
Selected Aequitron
Comparables:
High........................ 3.0x 28.5x 23.1x 48.1x 27.6x 22.2x
Low......................... 0.7x 10.0x 8.4x 14.6x 16.3x 13.4x
Median...................... 1.5x 12.1x 9.6x 19.8x 18.4x 14.5x
</TABLE>
Notes:
(1) Closing price on October 18, 1996 of $9.125.
LTM = last twelve months
Enterprise Value = Market Value + total debt - cash
In order to better evaluate the Common Stock of NPB, Dain compared certain
financial and stock market information for NPB with corresponding information
from a group of eight comparable, publicly traded companies consisting of Boston
Scientific Corporation, Datascope Corporation, Marquette Electronics, Inc.,
Medtronic, Inc., Protocol Systems, Inc., St. Jude Medical, Inc., Spacelabs
Medical, Inc. and Stryker Corporation (the "Selected NPB Comparables"). Dain
noted from this analysis that the multiples for NPB were generally within the
range of multiples for the Selected NPB Comparables.
<TABLE>
<CAPTION>
MARKET VALUE/
ENTERPRISE VALUE/ ----------------------------------
------------------------------ PROJECTED CALENDAR
LTM LTM ------------------------
LTM OPERATING LTM NET 1996 1997
REVENUE INCOME EBITDA INCOME NET INCOME NET INCOME
------- --------- ------ ------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Nellcor Puritan Bennett(1)......... 1.7x 10.7x 8.4x 16.3x 16.5x 13.9x
Selected NPB Comparables:
High............................. 7.9x 25.7x 23.3x 51.2x 35.1x 26.2x
Low.............................. 0.8x 8.1x 6.0x 13.3x 14.1x 12.2x
Median........................... 2.3x 13.9x 10.8x 19.7x 19.2x 16.4x
</TABLE>
Notes:
(1) Closing price on October 18, 1996 of $20.625.
LTM = last twelve months
Enterprise Value = Market Value + total debt - cash
Analysis of Selected Merger and Acquisition Transactions. Dain reviewed
and summarized the financial terms, to the extent publicly available, of seven
recent merger transactions involving respiratory care and monitoring companies,
which were deemed relevant and comparable to the business of Aequitron (the
"Comparable Transactions"). In this analysis, Dain calculated the ratio of the
implied enterprise value (defined as the price paid to the equity holders of the
target company, plus the debt assumed by the other party to the transaction,
less cash on the balance sheet of the target company) to the last twelve months
revenue, operating income and EBITDA prior to the announcement of the
transaction. Also, Dain calculated the ratio of the price paid for the stock to
the last twelve months net income. All multiples for the Comparable Transactions
were based on public information available at the time of announcement of such
transaction, without taking into account differing market and other conditions
present at the time of the Comparable Transactions. The following table
summarizes the results of Dain's analysis comparing the high, low and median
multiples to the expected value that will be received by Aequitron shareholders.
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<PAGE> 35
<TABLE>
<CAPTION>
IMPLIED ENTERPRISE VALUE/ EQUITY VALUE/
-------------------------------- -------------
OPERATING NET
REVENUE INCOME EBITDA INCOME
------- --------- ------ -------------
<S> <C> <C> <C> <C>
Aequitron Medical(1)............................. 1.4x 15.0x 11.3x 22.3x
Comparable Transactions:
High........................................... 2.2x 43.8x 17.2x 44.7x
Low............................................ 0.8x 16.5x 12.0x 22.9x
Median......................................... 1.4x 22.7x 15.6x 35.3x
</TABLE>
Note:
(1) Assumes value equal to $10.00 per share.
Dain also compared the financial analysis of the Comparable Transactions to
an estimated Aequitron valuation on only its respiratory operations (excluding
Aequitron's Crow River Division). Assuming a valuation for Aequitron's Crow
River Division based upon a multiple of Crow River's operating income for the
last twelve months ended July 31, 1996, Dain was able to estimate a value for
Aequitron's respiratory operations (the "Respiratory Value") based upon the
midpoint of the price range proposed in the Merger. Dain then compared the
Respiratory Value to selected operating results for Aequitron without the Crow
River Division in order to estimate the multiples being proposed by the Merger
for Aequitron's respiratory operations. The table below illustrates the
estimated valuation multiples paid for Aequitron's respiratory operation based
on the assumptions above.
<TABLE>
<CAPTION>
IMPLIED ENTERPRISE
VALUE/ EQUITY VALUE/
--------------------- -------------
OPERATING NET
REVENUE INCOME INCOME
------- --------- -------------
<S> <C> <C> <C>
Aequitron Medical -- Respiratory Value................ 1.6x 18.5x 28.0x
Comparable Transactions:
High................................................ 2.2x 43.8x 44.7x
Low................................................. 0.8x 16.5x 22.9x
Median.............................................. 1.4x 22.7x 35.3x
</TABLE>
Discounted Cash Flow Analysis. Dain performed four discounted cash flow
analyses for Aequitron: a management case (the "Management Case"); a management
case adjusted for different revenue growth assumptions (the "Growth Scenario");
a management case adjusted for different operating margin assumptions (the
"Margin Scenario"); and a management case adjusted for potential operating
synergies resulted from the Merger (the "Synergistic Scenario"). The discounted
cash flow approach values a business based on the current value of the future
cash flows that the business will generate. To establish a current value under
the approach, future cash flows must be estimated and an appropriate discount
rate determined. In the Management Case, Dain used estimates of projected
financial performance for Aequitron for the fiscal years 1997 through 2000
prepared by Aequitron's management. Dain aggregated the present value of the
cash flows through fiscal year 2000 with the present value of a range of
terminal values. Dain discounted these cash flows at discount rates ranging from
17.0% to 21.0%. The terminal value was computed based on projected EBITDA in
fiscal year 2000 and a range of terminal multiples from 6.0x to 10.0x. Dain
arrived at such discount rates based upon the consideration of a number of
factors, including cost of capital, required rates of return to investors and
risks attributable to the uncertainty of achieving the projected cash flows.
Based on the foregoing analysis, Aequitron's implied equity values per share
ranged from $7.72 to $12.59.
In the Growth Scenario, Dain prepared estimates of projected financial
performance for Aequitron for the fiscal years 1997 through 2000 which assumed
average annual revenue growth rates ranging from 10.0% to 20.0%, compared with
the Management Case which assumed an average annual revenue growth rate of 16.9%
and Aequitron's historical three year compounded annual growth rate of 12.6%.
All operating margins in the Growth Scenario were identical to those in the
Management Case discussed above. Assuming a terminal multiple of 8.0x projected
EBITDA in fiscal year 2000 and discount rates ranging from 17.0% to 21.0%,
Aequitron's implied equity values per share ranged from $7.24 to $10.75.
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<PAGE> 36
In the Margin Scenario, Dain prepared estimates of projected financial
performance for Aequitron for the fiscal years 1997 through 2000 which assumed
average annual operating margins ranging from 5.0% to 15.0%, compared with the
Management Case which assumed an average annual operating margin of 12.0% and
Aequitron's actual fiscal 1996 operating margin of 9.5%. The projected revenue
for fiscal years 1997 through 2000 in the Margin Scenario were identical to
those in the Management Case discussed above. Assuming a terminal multiple of
8.0x projected EBITDA in fiscal year 2000 and discount rates ranging from 17.0%
to 21.0%, Aequitron's implied equity values per share ranged from $4.10 to
$11.93.
In the Synergistic Scenario, Dain used the Management Case discussed above
and adjusted the future cash flows based upon Aequitron management's estimates
of potential operating synergies resulting from the Merger ranging from zero to
$2.5 million annually. Assuming a terminal multiple of 8.0x projected EBITDA in
fiscal year 2000, and discount rates ranging from 17.0% to 21.0%, Aequitron's
implied equity values per share ranged from $9.58 to $13.29.
Contribution Analysis. Dain analyzed the relative contributions of
Aequitron and NPB to the pro forma income statement of the combined company and
compared such contributions to the pro forma ownership of NPB by the Aequitron
shareholders. The analysis was performed based on the historical financial
results for the twelve months ended June 30, 1996 for Aequitron and NPB and the
projected twelve months ending June 30, 1997 as provided by the management of
Aequitron and NPB. This analysis showed that Aequitron would contribute 5.3% and
5.6% of net revenue, 5.6% and 6.0% of gross income, 3.3% and 3.7% of operating
income and 3.4% and 3.8% of net income of the combined company for fiscal years
1996 and 1997, respectively. These ranges do not give effect to potential cost
savings and synergies that could be achieved in the Merger. Based on NPB's
closing stock price of $20.625 on October 18, 1996, Aequitron shareholders would
own approximately 4.2% of the combined company.
Pro Forma Merger Analysis. Dain analyzed certain pro forma effects on the
combined company resulting from the Merger. Dain computed the resulting
dilution/accretion to the combined company's earnings per share estimate for the
fiscal year ending June 30, 1997, pursuant to the Merger before and after taking
into account any potential cost savings, revenue loss, and other synergies that
Aequitron and NPB could achieve if the Merger were consummated and before
nonrecurring costs relating to the Merger. Dain noted that before taking into
account any potential cost savings, revenue loss, and other synergies and before
certain nonrecurring costs relating to the Merger, the Merger would be
approximately 0.5% dilutive to the combined company's earnings per share for the
fiscal year ending 1997. Dain also noted that assuming (i) an offer price of
$10.00 per Aequitron share, (ii) potential operating synergies ranging from zero
to $2.5 million for fiscal year 1997 that Aequitron and NPB could achieve if the
Merger were consummated, (iii) a potential loss of revenue ranging from zero to
$4.5 million in fiscal 1997 which may result from the Merger, and (iv) no impact
from nonrecurring costs relating to the Merger, the Merger would have a
dilutive/accretive impact on the combined companies earnings per share ranging
from approximately 2.2% dilutive (assuming no operating synergies and $4.5
million of lost revenue) to 1.4% accretive (assuming operating synergies
totaling $2.5 million and no loss of revenue resulting from the Merger). There
can be no assurance that the combined company will be able to eliminate or
minimize the potential revenue loss or realize any potential operating synergies
in the amounts estimated following the Merger.
No company used in the analysis of other publicly traded companies nor any
transaction used in the analysis of selected mergers and acquisitions summarized
above is identical to Aequitron, NPB or the Merger. Accordingly, such analyses
must take into account differences in the financial and operating
characteristics of the Selected Comparables for Aequitron and NPB and the
companies in the Comparable Transactions and other factors that would affect the
public trading value and acquisition value of the Comparable Companies and
Comparable Transactions, respectively.
While the foregoing summary describes all analyses and factors that Dain
deemed material in its presentation to the Aequitron Board, it is not a
comprehensive description of all analyses and factors considered by Dain. The
preparation of a fairness opinion is a complex process that involves various
determinations as to the most appropriate and relevant methods of financial
analysis and the applications of these methods to the particular circumstances
and, therefore, such an opinion is not readily susceptible to
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<PAGE> 37
summary description. Dain believes that its analyses must be considered as a
whole and that selecting portions of its analyses and other factors considered
by it, without considering all analyses and factors, would create an incomplete
view of the evaluation process underlying the Dain Opinion. In performing its
analyses, Dain considered general economic, market and financial conditions and
other matters, many of which are beyond the control of Aequitron and NPB. The
analyses performed by Dain are not necessarily indicative of actual values or
future results which may be significantly more or less favorable than those
suggested by such analyses. Accordingly, such analyses and estimates are
inherently subject to substantial uncertainty. Additionally, analyses relating
to the value of a business do not purport to be appraisals or to reflect the
prices at which the business actually may be sold. Furthermore, no opinion is
being expressed as to the prices at which shares of NPB Common Stock may trade
at any future time.
Pursuant to an agreement dated October 18, 1995 between Aequitron and Dain,
the fees payable to Dain consist of a $25,000 engagement fee, a $50,000 fee
payable upon execution of the letter of intent, a $100,000 fee for rendering its
Opinion to the Aequitron Board on September 9, 1996 in connection with the
transaction contemplated by the Merger Agreement, and $25,000 for each separate
confirmation or reaffirmation of its Opinion, which aggregate amount will be
credited against a transaction fee of 1.0% of the total transaction value (as
defined in the agreement), payable upon consummation of the Merger. In addition,
Aequitron has agreed to reimburse Dain for its reasonable out-of-pocket expenses
and to indemnify Dain against certain expenses and liabilities arising in
connection with its engagement, including liabilities under the Securities Act
and the Exchange Act.
Dain was selected by Aequitron on the basis of its experience in valuing
securities in connection with mergers and acquisitions, knowledge of Aequitron
and other manufacturers of respiratory products and expertise in transactions
involving healthcare companies. Dain is a nationally recognized investment
banking firm and is regularly engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, secondary distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes. Dain
has from time to time issued research reports and recommendations on Aequitron
Common Stock, and, in the ordinary course of business, makes a market in
Aequitron Common Stock. In the course of its market making and other trading
activities, Dain may have, from time to time, a long or short position in, and
buy and sell securities of, Aequitron.
CONFLICTS OF INTEREST
In considering the recommendation of the Aequitron Board with respect to
the Merger Agreement and the transactions contemplated thereby, shareholders
should be aware that certain members of the management of Aequitron have
interests in the Merger that are in addition to the interests of shareholders of
Aequitron generally.
Stock Option Plans. Under the terms of the Merger Agreement, NPB has
agreed that all stock options of Aequitron outstanding on September 9, 1996 that
have not expired as of the Effective Time of the Merger will be assumed by NPB.
Such assumed options shall entitle the holder thereof to purchase that number of
shares of NPB Common Stock (rounded up to the nearest whole share) equal to the
number of shares of Aequitron Common Stock subject to the replaced option
multiplied by the Exchange Ratio, at an exercise price per share of NPB Common
Stock (rounded down to the nearest penny) equal to the former exercise price per
share of Aequitron Common Stock under such option immediately prior to the
Merger divided by the Exchange Ratio. Certain of these options provide for
automatic vesting under certain circumstances, including the Merger. See "The
Merger Agreement -- Stock Options."
The assumption of such options enables participants in Aequitron's 1985
Incentive Stock Option Plan, as amended, and Restated 1988 Stock Option Plan to
hold stock options to acquire NPB Common Stock after the Merger rather than
having their options terminate upon consummation of the Merger. As of September
9, 1996, there were outstanding options to purchase an aggregate of 1,172,400
shares of Aequitron Common Stock at a weighted average exercise price of $4.34
per share (at exercise prices ranging from $2.0625 to $8.50 per share).
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<PAGE> 38
Consulting Agreements with Directors. Messrs. Lawrence Lehmkuhl, David
Morse, Gerald Rhodes and Ervin Kamm, Jr., constituting the outside directors of
Aequitron, will upon consummation of the Merger enter into Consulting Agreements
with NPB. Such individuals will provide up to 120 hours of consulting services
to NPB as requested by NPB in exchange for payment of $27,500 per individual.
Indemnification and Insurance. Under the terms of the Merger Agreement,
NPB has agreed that for a period of six years from the Effective Time, for acts
occurring prior to the Merger (i) all rights to indemnification and advancement
of expenses existing in favor of the directors and officers of Aequitron (the
"Indemnified Parties") under the provisions existing on the date of the Merger
Agreement in the Articles of Incorporation, Bylaws and indemnification
agreements of Aequitron will survive the Merger, and (ii) NPB will indemnify and
advance expenses to the Indemnified Parties to the full extent required or
permitted under the provisions existing on the date of the Merger Agreement in
the Articles of Incorporation, Bylaws and indemnification agreements of
Aequitron.
Affiliates Agreements. In consideration for entering into affiliates
agreements as required by the Merger Agreement, NPB has agreed that it will not
terminate, except for cause, the employment of Aequitron affiliates entering
into such agreements until the stock transfer restrictions thereunder have
lapsed. See "-- Resale Restrictions."
NPB has also agreed to maintain, for a period of six years after the
Effective Time, with respect to claims arising from facts or events which
occurred before the Merger, officers' and directors' liability insurance
covering the Indemnified Parties who are currently covered (in their capacities
as officers and directors) by Aequitron's existing officers' and directors'
liability insurance policies, on terms substantially no less advantageous to
such officers and directors than such existing insurance.
Change-In-Control Employment Agreements. Certain officers of Aequitron
have entered into agreements with Aequitron providing for payments in the event
such officers are terminated in connection with a change in control, including
the Merger. See "Executive Compensation -- Employment Contracts and Termination
of Employment Arrangements."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Best & Flanagan, Professional Limited Liability Partnership, counsel to
Aequitron, is of the opinion that the material federal income tax consequences
of the Merger, insofar as they relate to Aequitron and its shareholders, will be
as follows:
(i) the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code, and NPB and Aequitron will each be a party to
that reorganization within the meaning of Section 368(b) of the Code;
(ii) no gain or loss will be recognized by NPB or Aequitron as a
result of the Merger;
(iii) no gain or loss will be recognized by the shareholders of
Aequitron upon the conversion of their Aequitron Common Stock into shares
of NPB Common Stock pursuant to the Merger except with respect to cash, if
any, received in lieu of fractional shares of NPB Common Stock;
(iv) a shareholder of Aequitron will recognize gain or loss equal to
the difference between the cash received in lieu of a fractional share
interest of NPB Common Stock and such shareholder's tax basis in the
fractional share for which cash is received;
(v) the aggregate tax basis of the shares of NPB Common Stock received
in exchange for shares of Aequitron Common Stock pursuant to the Merger
(including fractional shares for which cash is received) will be the same
as the aggregate tax basis for such shares of Aequitron Common Stock
decreased by the amount of any tax basis allocable to the fractional share
interests for which cash is received;
(vi) the holding period for shares of NPB Common Stock received in
exchange for shares of Aequitron Common Stock pursuant to the Merger will
include the period that such shares of Aequitron
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<PAGE> 39
Common Stock were held by the holder, provided such shares of Aequitron
Common Stock were held as capital assets by the holder at the Effective
Time; and
(vii) a dissenting shareholder of Aequitron who receives payment for
shares in cash will generally recognize capital gain or loss (if the shares
were held as a capital asset at the Effective Time) equal to the difference
between the cash received and the holder's basis in such shares, provided
the payment is neither essentially equivalent to a dividend within the
meaning of Section 302 of the Code nor has the effect of the distribution
of a dividend within the meaning of Section 356(a)(2) of the Code
(collectively, a "Dividend Equivalent Transaction"). A sale of shares
pursuant to an exercise of dissenter or appraisal rights will generally not
be a Dividend Equivalent Transaction if, as a result of such exercise, the
shareholder owns no shares of NPB Common Stock (either actually or
constructively within the meaning of Section 318 of the Code).
Morrison & Foerster, counsel to NPB, is of the opinion that the material
federal income tax consequences of the Merger, insofar as they relate to NPB and
its stockholders, will be as set forth in (i) and (ii) above.
It is a condition to the consummation of the Merger that NPB receive an
opinion from its counsel, Morrison & Foerster LLP, and that Aequitron receive an
opinion from its counsel, Best & Flanagan PLLP, to the effect that the Merger
will constitute a reorganization within the meaning of Section 368(a) of the
Code and NPB and Aequitron will each be a party to that reorganization within
the meaning of Section 368(b) of the Code. The opinions expressed herein are
based, and such opinions to be issued later will be based, upon the Code, its
legislative history, existing and proposed regulations thereunder, published
rulings and court decisions, all as in effect as of the time such opinions were
issued and all of which are subject to change, which change could be
retroactive. In addition, in rendering such opinions, counsel are relying and
will rely upon representations expected to be contained in certificates of NPB,
Aequitron and others, including of those shareholders of Aequitron holding a
substantial amount of Aequitron Common Stock (the "Major Shareholders")
verifying that such Major Shareholders have no plan or intention as of the
Effective Time to sell, exchange or otherwise dispose of the shares of NPB
Common Stock to be distributed to them in the Merger. Such opinions do not apply
to the persons or matters described in the following paragraph. A ruling from
the United States Internal Revenue Service concerning the tax consequences of
the Merger will not be requested. Accordingly, there can be no assurance that
the Internal Revenue Service will not assert a position contrary to the
conclusions expressed herein and in such opinions.
THE DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY. IT
DOES NOT ADDRESS THE STATE, LOCAL OR FOREIGN TAX ASPECTS OF THE MERGER. IN
ADDITION, IT DOES NOT DISCUSS THE FEDERAL INCOME TAX CONSIDERATIONS THAT MAY BE
RELEVANT TO CERTAIN PERSONS, INCLUDING HOLDERS OF OPTIONS, AND MAY NOT APPLY TO
CERTAIN HOLDERS SUBJECT TO SPECIAL TAX RULES, INCLUDING HOLDERS WHO ACQUIRED
AEQUITRON COMMON STOCK PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR
RIGHTS OR OTHERWISE RECEIVED SUCH STOCK AS COMPENSATION, DEALERS IN SECURITIES
AND FOREIGN HOLDERS.
EACH AEQUITRON SHAREHOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR WITH
RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO HIM OR HER, INCLUDING
THE APPLICATION AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS.
ACCOUNTING TREATMENT
The Merger is intended to qualify as a pooling of interests for accounting
and financial reporting purposes. Under this method of accounting, the recorded
historical cost basis of the assets and liabilities of NPB and Aequitron will be
carried forward to the operations of the combined companies at their recorded
amounts, results of operations of the combined companies will include the
results of operations of NPB and Aequitron for the entire fiscal period in which
the combination occurs and the historical results of operations of the
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<PAGE> 40
separate companies for fiscal years prior to the Merger will be combined and
reported as the results of operations of the combined companies.
Consummation of the Merger is conditioned upon receipt, by the parties to
the Merger, of letters from Price Waterhouse LLP and Ernst & Young LLP regarding
those firms' concurrence with NPB management's and Aequitron management's
conclusions, respectively, that the Merger qualifies for "pooling of interests"
treatment for financial reporting purposes and that such accounting treatment is
in accordance with generally accepted accounting principles. See "The Merger
Agreement -- Conditions." Certain events, including certain transactions with
respect to Aequitron Common Stock or NPB Common Stock by affiliates of NPB and
Aequitron, respectively, may prevent the Merger from qualifying as a pooling of
interests for accounting and financial reporting purposes. For information
concerning certain restrictions to be imposed on the transferability of NPB
Common Stock to be received by affiliates in order, among other things, to
ensure the availability of pooling of interests accounting treatment. See
"-- Resale Restrictions."
REGULATORY APPROVALS
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR
Act"), and the rules promulgated thereunder by the Federal Trade Commission (the
"FTC"), the Merger cannot be consummated until notifications have been given and
certain information has been furnished to the FTC and the Antitrust Division of
the Department of Justice (the "Antitrust Division") and specified waiting
period requirements have been satisfied. NPB and Aequitron each filed
notification and report forms under the HSR Act with the FTC and the Antitrust
Division on September 26, 1996.
The waiting period under the HSR Act for NPB and Aequitron expired on
October 26, 1996.
At any time before or after consummation of the Merger, the Antitrust
Division or the FTC, or any state, could take such action under the antitrust
laws as it deems necessary or desirable in the public interest, including
seeking to enjoin the consummation of the Merger or seeking divestiture of
substantial assets of NPB or Aequitron. Private parties may also seek to take
legal action under the antitrust laws under certain circumstances. In addition,
non-United States governmental and regulatory authorities may seek to take
action under applicable antitrust laws. There can be no assurance that a
challenge to the Merger will not be made or, if such challenge is made, that NPB
will prevail.
The obligations of NPB and Aequitron to consummate the Merger are subject
to the condition that there be no preliminary or permanent injunction or other
order by any federal, state or foreign court of competent jurisdiction that
prevents consummation of the Merger, and that there be no statute, rule,
regulation. executive order, stay, decree or judgment by any court or
governmental authority that prohibits or restricts the consummation of the
Merger. See "The Merger Agreement -- Conditions." Either NPB or Aequitron may
terminate the Merger Agreement if any court of competent jurisdiction in the
United States or other United States governmental body shall have issued an
order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or any other
action shall have become final and non-appealable, provided that the party
seeking to terminate the Merger Agreement for such reason shall have used all
reasonable efforts to remove such order, decree or ruling. See "The Merger
Agreement -- Termination."
RESALE RESTRICTIONS
All shares of NPB Common Stock received by Aequitron shareholders in the
Merger will be freely transferable, except that shares of NPB Common Stock
received by persons who are deemed to be "affiliates" (as such term is defined
under the Securities Act) of Aequitron may be resold by them only in
transactions permitted by the resale provisions of Rule 145 promulgated under
the Securities Act (or Rule 144 in the case of such persons who become
affiliates of NPB) or as otherwise permitted under the Securities Act. Persons
who may be deemed to be affiliates of Aequitron or NPB generally include
individuals or entities that control, are controlled by, or are under common
control with, such party and may include certain officers and directors of such
party as well as principal stockholders of such party.
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<PAGE> 41
Commission guidelines regarding qualifying for the pooling of interests
method of accounting also limit sales by affiliates of the acquiring and
acquired companies in a business combination. Commission guidelines indicate
further that the pooling of interests method of accounting generally will not be
challenged on the basis of sales by affiliates of the acquiring or acquired
company if they do not dispose of any of the shares they own or shares they
receive in connection with a merger during the period beginning 30 days before
the merger and ending when financial results covering at least 30 days of
combined operations have been published. See "-- Accounting Treatment."
The Merger Agreement requires each of NPB and Aequitron to use all
reasonable efforts to cause each of its affiliates to execute a written
agreement restricting the disposition by such person of the shares of NPB Common
Stock to be received by such person in the Merger.
DISSENTERS' RIGHTS OF AEQUITRON SHAREHOLDERS
The rights of Aequitron shareholders who dissent in connection with the
Merger are governed by specific legal provisions contained in Sections 302A.471
and 302A.473 of the MBCA, the text of which is attached as Appendix C hereto.
The description of dissenters' rights contained in this Proxy
Statement/Prospectus is qualified in its entirety by reference to those sections
of the MBCA. FAILURE TO FOLLOW THE STEPS REQUIRED BY THE MBCA FOR PERFECTING
DISSENTERS' RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS.
Under Sections 302A.471 and 302A.473 of the MBCA, any shareholder of record
of shares of Aequitron Common Stock who does not wish to exchange such shares
for shares of NPB Common Stock pursuant to the Merger Agreement may dissent from
the Merger and elect to have the fair value of the shareholder's shares (as
determined immediately before the Effective Time of the Merger) paid to the
shareholder in cash, provided that the shareholder complies with the provisions
of Section 302A.473 of the MBCA.
THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF THE LAW PERTAINING
TO APPRAISAL RIGHTS UNDER THE MBCA AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO THE FULL TEXT OF SECTIONS 302A.471 AND 302A.473 OF THE MBCA ATTACHED HERETO,
AND INCORPORATED HEREIN BY REFERENCE, IN APPENDIX C.
Under Section 302A.473 of the MBCA, if a corporation calls a shareholder
meeting at which a plan of merger to which such corporation is a party is to be
voted upon, the notice of the meeting must inform each shareholder of the right
to dissent and must include a copy of Section 302A.471 and Section 302A.473 of
the MBCA and a brief description of the procedure to be followed under such
sections. This Proxy Statement/Prospectus constitutes such notice. ANY
SHAREHOLDER WHO WISHES TO EXERCISE SUCH APPRAISAL RIGHTS OR WHO WISHES TO
PRESERVE HIS OR HER RIGHT TO DO SO SHOULD REVIEW THE MBCA CAREFULLY BECAUSE
FAILURE TO TIMELY AND PROPERLY COMPLY WITH THE PROCEDURES SPECIFIED WILL RESULT
IN THE LOSS OF APPRAISAL RIGHTS UNDER THE MBCA.
The Merger Agreement, and thereby the Merger of Aequitron into NPB, must be
approved by the holders of a majority of the outstanding shares of Aequitron
Common Stock. Therefore, shareholders who elect to exercise dissenters' rights
must satisfy each of the following conditions: (i) such holders must file with
Aequitron, before the taking of the vote with respect to the Merger, notice of
their intention to demand payment of the fair value of their shares (this
written notice must be in addition to and separate from any vote against the
Merger, neither voting against nor a failure to vote for the Merger will
constitute such a notice); and (ii) such holders must not vote in favor of the
Merger (a failure to vote will satisfy this requirement, but a vote in favor of
the Merger will constitute a waiver of such holder's dissenters' rights and will
nullify any previously filed written notice of intent to demand payment).
Shareholders who fail to comply with either of these conditions will have no
dissenters' rights with respect to their shares.
All written notices should be addressed to: Aequitron Medical, Inc., 14800
28th Avenue North, Minneapolis, Minnesota 55447, Attention: Corporate Secretary
and should be executed by, or with the consent of the holder of record. The
notice must identify the shareholder and indicate the intention of such
shareholder to demand payment of the fair value of his or her shares. In the
notice, the shareholder's name should be stated as it appears on his or her
stock certificate. A beneficial owner of shares who is not the
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<PAGE> 42
registered owner may assert dissenters' rights as to shares held on such
person's behalf, provided that such beneficial owner submits a written consent
of the registered owner to Aequitron at or before the time such rights are
asserted.
A shareholder of Aequitron may not assert dissenters' rights as to less
than all of the shares registered in such shareholder's name except in the
situation in which certain shares are beneficially owned by another person but
registered in such shareholder's name. If a shareholder wishes to dissent with
respect to shares beneficially owned by another person, such shareholder must
dissent with respect to all of such shares and disclose the name and address of
the beneficial owner on whose behalf the holder is dissenting.
After a vote approving the Merger, and assuming the Merger is to be
consummated, Aequitron must give written notice that the Merger has been
approved to each shareholder who filed a written notice of intent to demand
payment for such shareholder's shares and who did not vote in favor of the
Merger. Such notice will specify the address to which a demand for payment and
stock certificates must be sent by such shareholder in order to obtain payment
and will include a form for demanding payment to be completed by the
shareholder. In order to receive the fair value of his or her shares, a
dissenting shareholder must, within 30 days after the date of such notice from
Aequitron, send such holder's share certificates, together with certain
information concerning such shareholder's shares, on the form supplied by
Aequitron. After a valid demand for payment and the related certificates are
received, Aequitron must remit to each dissenting shareholder who has complied
with the above-referenced requirements the amount it deems to be the fair value
of that shareholder's shares, plus interest from the fifth day after the
effective date of the Merger up to and including the date of such payment,
together with a brief description of the method used to reach such estimate and
certain updated interim financial data of Aequitron, if available.
If a dissenting shareholder believes that the amount remitted by Aequitron
is less than the fair value of such shareholder's shares, plus interest, the
shareholder may give written notice to Aequitron of the shareholder's own
estimate of the fair value of his or her shares, plus interest, within 30 days
after the mailing date of the remittance and demand payment of the difference.
If the shareholder fails to give written notice of such estimate and demand for
the difference within the 30-day time period, such shareholder will be entitled
only to the amount remitted by Aequitron.
If Aequitron and the dissenting shareholder are unable to settle the
shareholder's demand within 60 days, Aequitron shall file in Hennepin County
District Court, Minneapolis, Minnesota, a petition requesting that the court
determine the fair value of the shares, plus interest. All shareholders whose
demands are not settled within the applicable 60-day settlement period shall be
made parties to this proceeding. The court, after determining that the
shareholder has complied with all statutory requirements, may use any valuation
method or combination of methods it deems appropriate, whether or not used by
Aequitron or the dissenting shareholder, or may appoint appraisers to determine
the fair value of the shares. The court's determination is binding on all
shareholders of Aequitron and the court must enter judgment for any amount by
which the court determines fair value exceeds the amount remitted to the
shareholder by Aequitron.
The costs and expenses of such a proceeding, including the expenses and
compensation of any appraisers appointed by the court, will be assessed against
Aequitron, unless the court, in its discretion, determines that the dissenting
shareholder's action in demanding supplemental payment was arbitrary, vexatious
or not in good faith, in which event the court may assess all or a part of such
costs against the shareholder. Fees and expenses of counsel for the dissenting
shareholder may be awarded by the court out of the amount, if any, awarded to
such shareholder.
Dissenting shareholders are urged to consult legal counsel with respect to
dissenters' rights. Aequitron shareholders considering the exercise of
dissenters' rights should consider the information set forth under "The
Merger -- Certain Federal Income Tax Consequences."
Any demands, notices, certificates or other documents required to be
delivered to Aequitron may be sent to the Corporate Secretary, Aequitron
Medical, Inc., 14800 28th Avenue North, Minneapolis, Minnesota 55447.
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THE MERGER AGREEMENT
The following is a brief summary of certain provisions of the Merger
Agreement, a copy which is attached as Appendix A to this Proxy
Statement/Prospectus and is incorporated herein by reference. This summary is
qualified in its entirety by reference to the full text of the Merger Agreement.
THE MERGER
Pursuant to the Merger Agreement, and subject to the terms and conditions
thereof, at the Effective Time Aequitron will be merged with and into NPB, with
NPB as the Surviving Corporation. The Merger will have the effects specified in
Section 259 of the DGCL.
NPB's Restated Certificate of Incorporation and NPB's Bylaws will be the
Surviving Corporation's Certificate of Incorporation and Bylaws. The directors
of NPB will be the directors of the Surviving Corporation, and the officers of
NPB will be the officers of the Surviving Corporation.
EFFECTIVE TIME OF THE MERGER
The closing of the transactions contemplated by the Merger Agreement (the
"Closing") will take place on the first business day (the "Closing Date")
following the date on which the Annual Meeting has occurred; provided that if
all of the conditions to the Merger are not satisfied or waived at such date,
the Closing Date will be the first business day following the date on which all
such conditions are satisfied or waived, or at such other date as NPB and
Aequitron agree. See "The Merger Agreement -- Conditions."
As soon as practicable after the Closing, a Certificate of Merger (the
"Certificate of Merger") will be filed with the Secretary of State of the State
of Delaware as provided in Section 252 of the DGCL and the Secretary of State of
the State of Minnesota as provided by Section 302A.641 of the MBCA. The time at
which the Certificate of Merger is filed in Delaware and Minnesota is referred
to as the Effective Time.
CONVERSION OF SECURITIES
As a result of the Merger and without any action on the part of the holders
thereof, each share of Aequitron Common Stock issued and outstanding immediately
prior to the Effective Time (other than shares held by dissenting shareholders
who have asserted their appraisal rights and treasury stock ("Excluded Shares"))
will be converted into the right to receive the fraction of one fully paid and
non-assessable share of common stock, $.001 par value per share, of NPB (the
"NPB Common Stock") equal to the Exchange Ratio (as defined below), together
with the corresponding fraction of an NPB Preferred Stock Purchase Right. The
fraction of a share of NPB Common Stock to be issued for each share of Aequitron
Common Stock in the Merger (the "Exchange Ratio") is calculated as follows: (1)
if the Closing Market Value (as defined below) is greater than or equal to
$23.14 and less than or equal to $26.61, the Exchange Ratio will be .432; (2) if
the Closing Market Value is greater than $26.61, the Exchange Ratio will be the
quotient of $11.50 divided by the Closing Market Value; (3) if the Closing
Market Value is less than $23.14 and greater than or equal to $17.00, the
Exchange Ratio will be the quotient of $10.00 divided by the Closing Market
Value; and (4) if the Closing Market Value is less than $17.00, the Exchange
Ratio will be .588, provided that Aequitron may terminate the Merger Agreement
in the event the Closing Market Value is below $17.00 unless NPB elects to
increase the Exchange Ratio to equal the quotient of $10.00 divided by the
Closing Market Value. "Closing Market Value" means the average of the closing
prices of the NPB Common Stock for the ten trading days ending on the fifth
trading day prior to the Annual Meeting. See "Appendix D" for a calculation of
the Exchange Ratio at Certain Closing Market Values.
Appendix D to this Proxy Statement/Prospectus sets forth a calculation of
the Exchange Ratio and the resulting total number of shares of NPB Common Stock
that would be issued in the Merger based on a range of possible Closing Market
Values. Because the aggregate number of shares of NPB Common Stock to be
received in the Merger is dependent upon the market price of NPB Common Stock
during the Exchange Ratio valuation period, fluctuations in the market value of
NPB Common Stock during that valuation period will impact the number of shares
of NPB Common Stock received in the Merger in exchange for each
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outstanding share of Aequitron Common Stock. As a result, the market value of
NPB Common Stock that the shareholders of Aequitron ultimately receive could be
more or less than its market value on the date of this Proxy
Statement/Prospectus or on the date of the Annual Meeting. Aequitron
shareholders are advised to obtain current market quotations for Aequitron and
NPB Common Stock. No assurance can be given as to the market price of NPB Common
Stock at any time before the effective time or as to the market price of NPB
Common Stock at any time thereafter. If the actual exchange ratio were
determined to be materially outside of the range set forth in Appendix D,
Aequitron would recirculate a supplement to this Proxy Statement/Prospectus or
an Amended Proxy Statement/Prospectus containing information concerning the
actual exchange ratio, and would offer all holders of Aequitron Common Stock who
were entitled to vote on the Merger as of the Record Date an opportunity to
change their votes prior to the Annual Meeting (in which case, the Annual
Meeting would be delayed to permit such recirculation). Such recirculation, if
it occurs, would cause the effective date of the Merger to be delayed.
Each holder of a certificate representing any such shares of Aequitron
Common Stock other than Excluded Shares (a "Certificate") will upon consummation
of the Merger cease to have any rights with respect to such Aequitron Common
Stock, except the right to receive, without interest, shares of NPB Common Stock
and cash in lieu of fractional shares (as described in "-- Exchange of Shares")
upon the surrender of such Certificate. If prior to the Effective Time, NPB
should split or combine the shares of NPB Common Stock, or pay a stock dividend
or other stock distribution in, or in exchange of, shares of NPB Common Stock,
or engage in any similar transaction, then the Exchange Ratio will be
appropriately adjusted to reflect such split, combination, dividend, exchange or
other distribution or similar transaction.
All shares of NPB Common Stock owned by Aequitron or any subsidiary of
Aequitron will become treasury stock of NPB.
STOCK OPTIONS
As of the Effective Time, each of the options to acquire Aequitron Common
Stock (each, an "Aequitron Stock Option") outstanding as of the date of the
Merger Agreement will be converted into an option (or a new substitute option
shall be issued) to purchase the number of shares of NPB Common Stock (rounded
up to the nearest whole share) equal to the number of shares of Aequitron Common
Stock subject to such option multiplied by the Exchange Ratio, at an exercise
price per share of NPB Common Stock (rounded down to the nearest penny) equal to
the former exercise price per share of Aequitron immediately prior to the
Effective Time divided by the Exchange Ratio; provided that in the case of any
Aequitron Stock Option to which Section 421 of the Code applies by reason of its
qualification under Section 422 of the Code, the conversion formula shall be
adjusted, if necessary, to comply with Section 424(a) of the Code. Except as
provided above, the converted or substituted Aequitron Stock Options will be
subject to the same terms and conditions as were applicable to Aequitron Stock
Options immediately prior to the Effective Time.
As soon as practicable after the Effective Time, NPB will file one or more
registration statements on Form S-8 under the Securities Act, or amendments to
its existing registration statements on Form S-8 or amendments to such other
registration statements as may be available, in order to register the shares of
NPB Common Stock issuable upon exercise of the aforesaid converted Aequitron
Stock Options. The consummation of the Merger will not be treated as a
termination of employment for purposes of the Option Plans.
EXCHANGE OF SHARES
As soon as reasonably practicable after the Effective Time, the Exchange
Agent will mail to each holder of record of Aequitron Common Stock (i) a letter
of transmittal and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of NPB Common
Stock. Upon surrender of a Certificate to the Exchange Agent together with such
letter of transmittal, duly executed, the holder of such Certificate will be
entitled to receive in exchange therefor (i) a certificate representing that
number of whole shares of NPB Common Stock and (ii) a check representing the
amount of cash in lieu of fractional shares, if any, which such holder has the
right to receive in respect of the Certificate so surrendered. AEQUITRON
SHAREHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE A LETTER
OF TRANSMITTAL.
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No fractional shares of NPB Common Stock will be issued pursuant to the
Merger. In lieu thereof, cash adjustments will be paid in an amount equal to the
product of the fraction of a share of NPB Common Stock that would otherwise be
issuable multiplied by the closing sales price per share of NPB Common Stock on
the Nasdaq National Market on the business day immediately preceding the closing
date.
No dividends on shares of NPB Common Stock will be paid to persons entitled
to receive certificates representing shares of NPB Common Stock until such
persons surrender their Certificates. Upon such surrender, the person in whose
name the certificates representing such shares of NPB Common Stock will be
issued will also receive any dividends that have become payable with respect to
such shares of NPB Common Stock between the Effective Time and the time of such
surrender. In no event will the person entitled to receive such dividends be
entitled to receive interest on such dividends.
If any certificates for shares of NPB Common Stock are to be issued in a
name other than that in which the Certificate surrendered in exchange therefor
is registered, the person requesting such exchange must (i) pay to the Exchange
Agent any transfer or other taxes required by reason thereof, or (ii) establish
that such tax has been paid or is not applicable.
At the Effective Time, the stock transfer books of Aequitron will be closed
and no further transfers of shares of Aequitron Common Stock will be made.
Neither the Exchange Agent nor any party to the Merger Agreement is liable
to a holder of shares of Aequitron Common Stock for any shares of NPB Common
Stock or dividends thereon or the cash payment for fractional interests
delivered to a public official pursuant to applicable escheat laws.
In the event that any Certificate has been lost, stolen or destroyed, upon
(i) the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed, and (ii) if required by NPB, in its
discretion, the posting by such person of a bond in such sum as NPB may direct
as indemnity, or such other form of indemnity as NPB may reasonably direct,
against any claim that may be made against NPB with respect to such Certificate,
NPB will issue or cause to be issued in exchange for such Certificate the number
of whole shares of NPB Common Stock and cash in lieu of fractional shares into
which the shares of Aequitron Common Stock represented by the Certificate are
converted in the Merger.
Holders of Aequitron Common Stock are entitled to dissent from the Merger
and demand appraisal of any such Aequitron Common Stock in accordance with the
provisions of Sections 302A.471 and 302A.473 of the MBCA (each person electing
to exercise such rights, a "Dissenting Holder"). Shares of Aequitron Common
Stock held by a Dissenting Holder will not be converted, but will from and after
the Effective Time represent only the right to receive such consideration as may
be determined to be due to the Dissenting Holder pursuant to the MBCA; provided,
however, that each share of Aequitron Common Stock held by a Dissenting Holder
who, after the Effective Time withdraws his or her demand for appraisal or loses
his or her rights of appraisal with respect to such shares of Aequitron Common
Stock, in either case pursuant to the MBCA, will not be deemed to be an Excluded
Share but will be deemed to be converted, as of the Effective Time, into the
right to receive NPB Common Stock in accordance with the Exchange Ratio.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains certain representations and warranties by
Aequitron relating to, among other things: (a) due organization, power and
standing; (b) capital structure and ownership of subsidiaries; (c) the
authorization, execution, delivery and enforceability of the Merger Agreement;
(d) required consents and approvals and the absence of breaches or violations of
the Restated Articles of Incorporation and Amended Bylaws, agreements and
instruments, and law; (e) the filing of required reports with the Commission;
(f) the absence of certain changes or events; (g) the accuracy of information in
this Proxy Statement/Prospectus; (h) litigation; (i) certain contracts and
agreements (including contracts with physicians, hospitals, HMOs and third party
providers); (j) employee benefit plans; (k) taxes; (l) compliance with
applicable law; (m) subsidiaries; (n) interested party transactions; (o) labor
and employment matters; (p) ownership of shares of NPB's stock; (q) insurance;
(r) environmental matters; (s) intellectual property rights; (t) dealings with
the FDA and other governmental entities concerned with medical products sold by
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Aequitron; (u) real property; (v) the provision of complete copies of all
documents to NPB; (w) ownership of Aequitron shares; (x) receipt of fairness
opinion; (y) pooling of interests; (z) accounts receivable; (aa) customers and
suppliers; (bb) complete representations; (cc) takeover statutes; (dd) voting
arrangements; (ee) inventories; (ff) product liability matters; and (gg) no
undisclosed liabilities.
The Merger Agreement also contains certain representations and warranties
by NPB relating to, among other things: (a) due organization, power and
standing; (b) capital structure and ownership of subsidiaries; (c) the
authorization, execution, delivery and enforceability of the Merger Agreement;
(d) required consents and approvals and the absence of breaches or violations of
the Restated Certificate of Incorporation and Amended Bylaws, agreements and
instruments, and law; (e) the filing of required reports with the Commission and
absence of change; (f) the accuracy of information in this Proxy
Statement/Prospectus; (g) ownership of shares of Aequitron Common Stock; (h) the
provision of complete copies of all documents to Aequitron; (i) pooling of
interests; and (j) complete representations.
CERTAIN COVENANTS
Aequitron agreed that, prior to the Effective Time and except as set forth
in its Disclosure Schedule, it will, among other things: (i) conduct its
business only in the ordinary and usual course, consistent with past practices;
and (ii) use its best efforts to preserve intact its business organization, to
retain its and its subsidiaries' present officers and key employees, and to
preserve the goodwill of those having business relationships with it and its
subsidiaries. NPB and Aequitron also agreed that, among other things: (i)
through the Effective Time, Aequitron will frequently report to NPB the general
status of its ongoing operations, deliver to NPB financial reports and promptly
notify NPB of material changes in its or its subsidiaries' business or
properties; (ii) each will use all reasonable efforts to deliver to the other a
letter from its independent auditors in connection with the Registration
Statement; (iii) each will report to the other on operational matters and
promptly advise the other of any material change or event; (iv) each will file
all required reports with the Commission and deliver to the other copies of all
such reports; (v) except where prohibited by applicable statutes and
regulations, each will promptly provide the other with copies of filings with
any state or federal government entity in connection with the Merger Agreement
or the transactions contemplated thereby; (vi) through the Effective Time, each
will afford the other access to all of its records, and each will furnish to the
other all information concerning its business, properties and personnel as the
other party may reasonably request; and (vii) NPB will not amend its Certificate
of Incorporation in a manner adversely affecting holders of NPB Common Stock.
Aequitron agreed that, prior to the Effective Time, neither it nor any of
its subsidiaries will, among other things: (i) sell any stock owned by it in any
of its subsidiaries; (ii) amend its Restated Articles of Incorporation or
Amended Bylaws; (iii) take any action with respect to its outstanding capital
stock, other than in the ordinary course of business consistent with past
practice; (iv) take any action with respect to Voting Debt (as defined in the
Merger Agreement); (v) acquire, dispose of, transfer, lease, license, mortgage,
pledge or encumber any assets, other than in the ordinary course of business and
consistent with past practices or dispositions of obsolete or worthless assets;
(vi) incur, assume or prepay any indebtedness or other liabilities or issue any
debt securities, other than in the ordinary course of business and consistent
with past practices; (vii) assume, guarantee, endorse or otherwise become liable
or responsible for the obligations of any other person (other than a subsidiary)
other than in the ordinary course of business and consistent with past
practices; (viii) make any loans, advances or capital contributions to, or
investments in, any other person (other than to subsidiaries), other than in the
ordinary course of business and consistent with past practices; (ix) fail to
maintain adequate insurance consistent with past practices for their businesses
and properties; (x) fail to pay debts, taxes and obligations when due, subject
to good faith disputes; (xi) enter into or modify any contract or commitment
other than in the ordinary course of business consistent with past practices;
(xii) transfer to any person or entity any intellectual property rights other
than in the ordinary course of business consistent with past practices; (xiii)
enter into or amend any agreements pursuant to which any other party is granted
exclusive distribution, marketing or other exclusive rights with respect to its
technology; (xiv) enter into any operating lease other than in the ordinary
course of business consistent with past practices and in no event in excess of
$10,000; (xv) pay, discharge, or satisfy in an amount in excess of $10,000 in
any
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one case or $100,000 in the aggregate, any claim, liability or obligation
arising other than in the ordinary course of business, reserved against its
financial statements, or reasonably incurred in connection with the transactions
contemplated by the Merger Agreement; (xvi) make any capital expenditures,
capital additions or capital improvements except in the ordinary course of
business consistent with past practices; (xvii) materially reduce the amount of
material insurance coverage provided by existing insurance policies; (xviii)
hire any new director- or officer-level employee, or, except in the ordinary
course of business and consistent with past practices, pay any special
remuneration to any employee or director other than pursuant to automatic
grants, increase the salaries, wage rates, fringe benefits or other compensation
of its directors, officers or employees or enter into an agreement to do any of
the foregoing; (xix) grant any severance or termination pay to any director or
officer or any employee other than in the ordinary course of business consistent
with past practice or written agreement; (xx) commence lawsuits except for the
routine collection of bills where necessary to avoid impairments or for breach
of the Merger Agreement or related agreements; (xxi) acquire or agree to acquire
any other business or entity or material assets; (xxii) change any material tax
election or take action relating to tax matters other than in the ordinary
course of business; (xxiii) fail to give any required notices or information to
employees; (xxiv) revalue any assets other than in the ordinary course of
business or enter into any agreement with respect to any of the foregoing; or
(xxv) change its methods of accounting in effect at April 30, 1996, except as
contemplated by the Merger Agreement or as required by changes in generally
accepted accounting principles.
NPB and Aequitron also agreed that neither NPB, Aequitron nor any of their
respective subsidiaries will (i) take, or allow to be taken, any action which
would jeopardize the treatment of the Merger as a pooling of interests for
accounting purposes or (ii) take, or allow to be taken or fail to take any
action, which act or failure to act would jeopardize qualification of the Merger
as a reorganization within the meaning of Section 368(a) of the Code.
NPB and Aequitron also agreed that each of them and their subsidiaries will
use all reasonable efforts (i) (a) to take all actions necessary to comply
promptly with all legal requirements which may be imposed on such party or its
subsidiaries with respect to the Merger and the consummation of the transactions
contemplated by the Merger Agreement, subject, in the case of Aequitron to the
appropriate vote or consent of stockholders and (b) to obtain (and to cooperate
with the other party to obtain) any consent, authorization, order or approval
of, or any exemption by, any governmental entity or any other public or private
third party which is required to be obtained or made by such party or any of its
subsidiaries in connection with the Merger and the transactions contemplated by
the Merger Agreement; provided that neither NPB nor Aequitron will be obligated
to take any action that would, in such party's reasonable opinion, be materially
burdensome to such party or impact in such a manner the economic or business
benefits of the transactions contemplated by the Merger Agreement, or would
result in the imposition of a condition or restriction that would so impact such
benefits, in either case so as to render inadvisable the consummation of the
Merger and (ii) not to take or omit to take any action, and not to agree to take
or omit to take any action, the effect of which action or omission would be to
make any representation or warranty of NPB or Aequitron, as applicable, in the
Merger Agreement untrue or incorrect in any material respect.
NPB and Aequitron agreed that NPB will use reasonable efforts to take any
action required by state securities or blue sky laws in connection with the
issuance of the shares of NPB Common Stock pursuant to the Merger Agreement, and
that Aequitron will furnish NPB with all information concerning Aequitron and
the holders of its capital stock and take such other action as NPB may
reasonably request in connection with the Registration Statement and such
issuance of shares of NPB Common Stock.
Aequitron agreed, except to the extent required in the exercise of the
fiduciary duties of the Aequitron Board under applicable law as advised by
independent counsel, to recommend approval and adoption of the Merger Agreement
by its shareholders and to use its best efforts to obtain such approval. NPB has
agreed to vote in favor of approval and adoption of the Merger Agreement at the
Annual Meeting all shares of Aequitron Common Stock which it beneficially owns
at such time, although NPB does not presently beneficially own any such shares.
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NPB and Aequitron have agreed that prior to the date of the mailing of the
Proxy Statement each will deliver to the other letters identifying all persons
who are "affiliates" of such party for purposes of Rule 145 under the Securities
Act. Each of the parties will use all reasonable efforts to cause each person
named in the letter delivered by it to deliver to the other party a written
"affiliates" agreement, in customary form, restricting the disposition by such
person of the shares of NPB Common Stock held by such person or to be received
by such person in the Merger. Certificates surrendered for exchange by any
person constituting an "affiliate" of the parties within the meaning of Rule 145
under the Securities Act will not be exchanged by the Exchange Agent for shares
of NPB Common Stock until the parties have received such agreement described in
the preceding sentence.
NPB has agreed to notify the Nasdaq National Market of the listing of the
shares of NPB Common Stock to be issued pursuant to the Merger and to cause such
additional shares to be approved for listing.
NO SOLICITATION
Until the consummation of the Merger, Aequitron may not, except to the
extent required in the exercise of the fiduciary duties of the Aequitron Board
under applicable laws as advised by independent counsel in connection with an
unsolicited proposal, solicit, encourage or engage or participate in
negotiations concerning any acquisition, tender offer, merger, consolidation,
business combination or similar transaction other than the Merger (such
proposals being referred to as "Acquisition Proposals").
Aequitron has agreed to notify NPB if any such Acquisition Proposals
(including the identity of the persons making such proposals and, subject to the
fiduciary duties of the Aequitron Board, the terms of such proposals) are
received and furnish to NPB a copy of any written proposal.
CERTAIN EMPLOYEE BENEFIT PLAN MATTERS
Aequitron has agreed that it will not, except as required by law, (i) enter
into, adopt or amend any compensation plan, (ii) institute any new employee
benefit, welfare program or compensation plan, (iii) change any compensation
plan or other benefit arrangement, or (iv) enter into any arrangement or
commitment with any director, officer or employee, the terms of which are
materially altered upon consummation of the Merger.
NPB has represented to Aequitron that, to the extent medical and dental
employee benefits are provided following consummation of the Merger, it shall
(i) cause all pre-existing condition exclusions and "actively-at-work"
requirements to be waived, and (ii) provide that any expenses incurred on or
before the consummation of the Merger will be taken into account for purposes of
satisfying deductible, coinsurance and maximum out-of-pocket provisions for such
employees and their covered dependents under NPB employee benefit plans.
Upon consummation of the Merger, all options to purchase Aequitron Common
Stock granted under Aequitron's stock option plans will become options to
acquire NPB Common Stock. The vesting and exercisability of certain options will
be accelerated as a result of the Merger, as set forth in the applicable
agreements.
DIRECTOR AND OFFICER INDEMNIFICATION
NPB and the Surviving Corporation have agreed that for acts occurring prior
to the Effective Time, all rights to indemnification and advancement of expenses
existing in favor of the directors and officers of Aequitron (the "Indemnified
Parties") under the provisions existing on the date of the Merger Agreement, the
Restated Articles of Incorporation, Amended Bylaws and indemnification
agreements of Aequitron shall survive the Effective Time. In addition, NPB and
the Surviving Corporation have agreed to indemnify and advance expenses to the
Indemnified Parties to the full extent required or permitted under the
provisions existing on the date of the Merger Agreement of Aequitron's Restated
Articles of Incorporation and Amended Bylaws and indemnification agreements of
Aequitron. See "The Merger -- Conflicts of Interest."
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For a period of six years after the Effective Time, NPB will maintain, with
respect to claims arising from facts or events which occurred before the
Effective Time, officers' and directors' liability insurance covering the
Indemnified Parties who were covered as of the date of the Merger Agreement by
Aequitron's existing officers' and directors' liability insurance policies, on
terms substantially no less advantageous to such officers and directors than
such existing insurance. See "The Merger -- Conflicts of Interest."
MANAGEMENT AFTER THE MERGER
The existing directors and officers of NPB shall remain in such positions
following consummation of the Merger.
CONDITIONS
The obligations of NPB and Aequitron to effect the Merger are subject to
the satisfaction of certain conditions, including, among others: (i) obtaining
Aequitron shareholders' approval; (ii) the absence of any injunction prohibiting
consummation of the Merger; (iii) receipt of all necessary government and other
consents and approvals, and the satisfaction of any conditions with respect
thereto (other than the filing of the Certificate of Merger (as previously
defined)); (iv) the absence of any action by any federal or state governmental
entity that imposes any condition upon NPB or Aequitron that would so impact the
Merger as to render the Merger inadvisable; (v) the absence of any change, or
any event involving a prospective change, in the other party's business, assets,
financial condition or results of operation which has had, or is reasonably
likely to have, in the aggregate a material adverse effect on such party and its
subsidiaries taken as a whole (other than as a result of changes or proposed
changes in federal or state health care (including health care reimbursement)
laws or regulations of general applicability or interpretations thereof, changes
in generally accepted accounting principles and changes that could, under the
circumstances, reasonably have been anticipated in light of disclosures made in
writing by the other party prior to the execution of the Merger Agreement); (vi)
the aggregate amount of cash required to be paid on account of all Excluded
Shares and any cash payments for fractional shares does not exceed 10% of the
value of NPB Common Stock issuable in connection with the Merger; (vii) the
waiting period applicable to the consummation of the Merger under the HSR Act
shall have expired or been terminated; (viii) other than the filing of the
Certificate of Merger, all authorizations, consents, orders or approvals of, or
declarations or filings with, and all expirations of waiting periods imposed by,
any governmental entity (all of the foregoing, "Consents") that are necessary
for the consummation of the Merger, have been filed, occurred or been obtained
(all such permits, approvals, filings and consents and the lapse of all such
waiting periods being referred to as the "Requisite Regulatory Approvals") and
be in full force and effect; and (ix) NPB and Aequitron will have received (a) a
letter, dated the Closing Date, addressed to NPB from Price Waterhouse LLP,
NPB's independent accountants ("Price Waterhouse") and (b) a letter, dated the
Closing Date, addressed to Aequitron from Ernst & Young LLP, Aequitron's
independent auditors ("Ernst & Young"), regarding those firms' concurrence with
the managements of NPB and Aequitron, respectively, that the Merger qualifies
for "pooling of interests" treatment for financial reporting purposes and that
such accounting treatment is in accordance with generally accepted accounting
principles.
The obligation of each of NPB and Aequitron to effect the Merger is also
subject to the satisfaction of the following additional conditions, among other
things: (i) the other party has performed in its obligations under the Merger
Agreement prior to the Effective Time and the representations and warranties of
the other party contained in the Merger Agreement are true and correct in all
material respects at and as of the Effective Time as if made at and as of such
time, except as contemplated by the Merger Agreement; (ii) each has received an
opinion of its counsel, substantially to the effect that the Merger will be
treated for federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code and that NPB and Aequitron will each be a party to
the reorganization within the meaning of Section 368(b) of the Code; and (iii)
each of NPB and Aequitron has received an opinion of counsel to the other. In
addition, Aequitron's obligation to effect the Merger is subject to the listing
of the NPB Common Stock to be issued in the Merger on the Nasdaq National
Market. NPB's obligation to effect the Merger is subject to Aequitron having
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<PAGE> 50
obtained the consent or approval of each person whose consent or approval shall
be required in connection with the transactions contemplated by the Merger
Agreement.
TERMINATION
The Merger Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time, whether before or after approval by the
shareholders of Aequitron: (i) by mutual written consent of NPB and Aequitron;
(ii) by either NPB or Aequitron, if the Merger has not been consummated on or
before February 28, 1997; (iii) by either NPB or Aequitron, if there has been
any material breach of a representation and warranty or material obligation of
the other under the Merger Agreement and, if such breach is curable, such
default has not been remedied within 10 days (subject to certain extensions)
after receipt by such other party of notice in writing from such party
specifying such breach and requesting that it be remedied; (iv) by NPB, if the
Aequitron Board has (a) withdrawn or modified in a manner adverse to NPB the
Aequitron Board's approval or recommendation (or failed to make such
recommendation) of the Merger Agreement or the Merger, or has resolved to do any
of the foregoing, or (b) recommended an Acquisition Proposal other than the
Merger; (v) by either NPB or Aequitron if any court of competent jurisdiction in
the United States or other United States governmental body has issued an order,
decree or ruling or taken any other action restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or any other action has
become final and non-appealable; (vi) by NPB if any approval of the shareholders
of Aequitron required for the consummation of the Merger submitted for approval
has not been obtained by reason of the failure to obtain the required vote at a
duly held meeting of shareholders or at any adjournment thereof; (vii) by
Aequitron if its Board of Directors, in the exercise of its good faith judgment
as to its fiduciary duties to its shareholders under applicable law as advised
by independent counsel, determines that such termination is required by reason
of another Acquisition Proposal being made with respect to it; or (viii) by
Aequitron if the Closing Market Value of NPB Common Stock is less than $17.00,
provided that NPB may negate such termination by electing to determine the
Exchange Ratio by dividing (a) $10.00 by (b) the Closing Market Value.
In the event of termination, the Merger Agreement is of no further effect
and, except for a termination resulting from a breach by a party of the Merger
Agreement, there is no liability or obligation on the part of either NPB or
Aequitron or their respective officers or directors, except as specifically
provided in the Merger Agreement.
CANCELLATION FEES; EXPENSES
If at any time (i) Aequitron has entered into an agreement with respect to
an Acquisition Proposal, other than the Merger; (ii) Aequitron breaches any of
the provisions of the Merger Agreement relating to Acquisition Proposals or
recommends or approves an Acquisition Proposal pursuant to such provisions; or
(iii) any person, entity or group of persons or entities acting in concert
acquires beneficial ownership of more than fifteen percent (15%) of the voting
securities of Aequitron as a result of an Acquisition Proposal and, in the case
of (i) or (ii), the Merger Agreement is terminated pursuant to clause (iii) (if
terminated by NPB), (iv), (vi) or (vii) of the first paragraph under
"Termination," then NPB shall be entitled to be paid by Aequitron a fee in cash
or immediately available funds of one million eight hundred thousand U.S.
dollars ($1,800,000) (the "Cancellation Fee"). The payment of the Cancellation
Fee is conditioned on there being no material breach of the representations,
warranties or obligations of NPB under the Merger Agreement. Payment of the
Cancellation Fee constitutes full settlement of any and all liabilities and
obligations of under the Merger Agreement, except for liabilities arising from
fraud or intentional misrepresentation with respect to the Merger Agreement by
Aequitron and except as provided in the following paragraph.
In the event that either Aequitron or NPB terminates the Merger Agreement
pursuant to clause (iii) of the first paragraph under "Termination," then the
non-terminating party must pay to the terminating party the terminating party's
reasonable out-of-pocket expenses incurred in connection with the negotiation,
execution and performance of the Merger Agreement ("Expense Reimbursement
Payment"); provided that the terminating party is not entitled to any Expense
Reimbursement Payment if at the time of termination the
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<PAGE> 51
non-terminating party also would have been entitled to terminate the Merger
Agreement pursuant to such clause (iii).
AMENDMENT; WAIVER
The Merger Agreement may be amended by written action taken by NPB and
Aequitron at any time before or after approval thereof by the shareholders of
Aequitron, but, after any such approval, no amendment may be made which alters
the Exchange Ratio or which in any way materially adversely affects the rights
of such shareholders, without the further approval of such shareholders.
At any time prior to the Effective Time, NPB and Aequitron may, by written
instrument, (i) extend the time for the performance of any of the obligations or
other acts of the other parties to the Merger Agreement, (ii) waive any
inaccuracies in the representations and warranties contained in the Merger
Agreement or in any document delivered pursuant to the Merger Agreement, and
(iii) waive compliance with any of the agreements or conditions contained in the
Merger Agreement.
EXPENSES
Except as provided in the Merger Agreement, all costs and expenses incurred
in connection with the Merger Agreement and the transactions contemplated
thereby (whether or not the Merger is consummated) will be paid by the party
incurring such expenses, except that if the Merger is not consummated NPB and
Aequitron will share equally the expenses incurred in connection with filings
under the HSR Act, printing and mailing this Proxy Statement/Prospectus and all
aspects of the Registration Statement.
COMPARATIVE PER SHARE PRICES AND DIVIDEND POLICIES
Both the NPB Common Stock and the Aequitron Common Stock are listed and
traded on the Nasdaq National Market. The following table sets forth the high
and low sale prices per share of NPB Common Stock and Aequitron Common Stock for
the calendar quarters indicated, as reported by Nasdaq. The sale prices of NPB
Common Stock have been adjusted to reflect retroactively the two-for-one stock
split of NPB Common Stock effected on June 28, 1996.
<TABLE>
<CAPTION>
NPB AEQUITRON
COMMON STOCK COMMON STOCK
------------------- ------------------
HIGH LOW HIGH LOW
------- ------- ------- ------
<S> <C> <C> <C> <C>
Calendar 1994:
First Quarter.............................. $14.75 $12.125 $3.375 $2.25
Second Quarter............................. 14.375 12.1875 3.4375 2.625
Third Quarter.............................. 15.75 13.00 5.75 2.75
Fourth Quarter............................. 17.00 14.125 5.375 3.625
Calendar 1995:
First Quarter.............................. 19.125 15.75 5.375 4.00
Second Quarter............................. 23.875 18.00 6.75 4.75
Third Quarter.............................. 27.875 22.3438 9.25 5.375
Fourth Quarter............................. 31.00 23.6875 9.25 7.25
Calendar 1996:
First Quarter.............................. 36.375 27.75 8.125 6.625
Second Quarter............................. 34.875 24.00 8.75 6.75
Third Quarter.............................. 27.875 19.25 10.375 6.00
Fourth Quarter (through October 25)........ 24.25 17.50 9.875 8.50
</TABLE>
On September 9, 1996, the last trading day prior to announcement of the
Merger Agreement, the closing sales prices of NPB Common Stock and Aequitron
Common Stock as reported by Nasdaq were $24.875 per
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<PAGE> 52
share and $8.75 per share, respectively. Based upon the September 9, 1996
closing price of NPB Common Stock and an Exchange Ratio of .432, the equivalent
per share value of Aequitron Common Stock as of such date was approximately
$10.75. On October 25, 1996, the closing sales prices of NPB Common Stock and
Aequitron Common Stock as reported by Nasdaq were $19.875 per share and $9.50
per share, respectively. Based upon the October 25, 1996 closing price of NPB
Common Stock and an Exchange Ratio of .503, the equivalent per share value of
Aequitron Common Stock as of such date was approximately $10.00.
Because the market price of NPB Common Stock is subject to fluctuation, the
market value of the shares of NPB Common Stock that holders of Aequitron Common
Stock will receive in the Merger may increase or decrease prior to and following
the Merger. The Exchange Ratio is subject to adjustment, based on the average of
the closing price of the NPB Common Stock for the ten trading days ending on the
fifth trading day before the Annual Meeting. See "The Merger
Agreement -- Conversion of Securities." SHAREHOLDERS ARE URGED TO OBTAIN CURRENT
MARKET QUOTATIONS FOR NPB COMMON STOCK AND AEQUITRON COMMON STOCK. NO ASSURANCE
CAN BE GIVEN AS TO THE FUTURE PRICES OR MARKETS FOR NPB COMMON STOCK OR
AEQUITRON COMMON STOCK.
No dividends have been declared or paid on NPB Common Stock or Aequitron
Common Stock since their respective dates of incorporation, nor does NPB
anticipate paying cash dividends on NPB Common Stock in the foreseeable future
following of the Merger.
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<PAGE> 53
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements
assume the Merger between NPB and Aequitron is accounted for using the pooling
of interests method of accounting and are based upon the respective historical
financial statements and notes thereto of NPB and Aequitron, which are
incorporated by reference in this Proxy Statement/Prospectus. The unaudited pro
forma combined condensed balance sheet combines NPB's July 7, 1996 consolidated
balance sheet with Aequitron's April 30, 1996 consolidated balance sheet. The
unaudited pro forma combined condensed statements of operations combine NPB's
historical results for each of the three fiscal years in the period ended July
7, 1996 with Aequitron's historical results for each of the three fiscal years
in the period ended April 30, 1996.
The unaudited pro forma combined condensed financial statements are
presented for illustrative purposes only and are not necessarily indicative of
the operating results or financial position that would have occurred if the
Merger had been consummated at the beginning of the earliest period presented,
nor are they necessarily indicative of the future operating results or financial
position.
These unaudited pro forma combined condensed financial statements are based
on, and should be read in conjunction with, the historical consolidated
financial statements and the related notes thereto of NPB and Aequitron
incorporated by reference in this Proxy Statement/Prospectus.
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<PAGE> 54
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
NPB AEQUITRON PRO FORMA COMBINED
JULY 7, 1996 APRIL 30, 1996 ADJ PRO FORMA
------------ -------------- --------- ---------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents.................. $ 68,549 $ 3,143 $ 71,692
Marketable securities...................... 5,825 0 5,825
Accounts receivable........................ 151,461 6,642 158,103
Inventories................................ 128,078 4,314 132,392
Deferred income taxes and other current
assets.................................. 45,688 1,276 46,964
-------- ------- ------- --------
Total current assets............... 399,601 15,375 414,976
Net property and equipment................... 130,891 2,065 132,956
Intangible and other assets.................. 57,346 5,738 63,084
-------- ------- ------- --------
Total assets....................... $587,838 $ 23,178 $ 611,016
======== ======= ======= ========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................... $ 39,198 $ 1,071 $ 40,269
Notes payable.............................. 0 0 0
Accrued liabilities........................ 63,689 3,400 67,089
Accrued merger and related costs........... 32,452 0 $ 12,000(1) 44,452
Income taxes payable....................... 20,522 0 20,522
Other...................................... 143 387 530
-------- ------- ------- --------
Total current liabilities.......... 156,004 4,858 12,000 172,862
Long-term debt, less current maturities...... 6,493 1,901 8,394
Deferred compensation and pensions........... 9,522 0 9,522
Deferred revenue............................. 10,039 0 10,039
Total stockholders' equity................... 405,780 16,419 (12,000) 410,199
-------- ------- ------- --------
Total liabilities and stockholders'
equity........................... $587,838 $ 23,178 $ 0 $ 611,016
======== ======= ======= ========
</TABLE>
- ---------------
(1) Pro forma adjustment as described in Note 3.
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<PAGE> 55
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------------------
JULY 7, 1996(1) JULY 2, 1995(2) JULY 3, 1994(3)
--------------- --------------- ---------------
<S> <C> <C> <C>
Net revenue...................................... $ 744,609 $ 653,868 $ 590,442
Cost of goods sold............................... 363,244 326,853 297,178
--------------- --------------- ---------------
Gross profit........................... 381,365 327,015 293,264
--------------- --------------- ---------------
Operating expenses:
Research and development....................... 57,691 52,136 52,627
Selling, general and administrative............ 211,167 196,135 187,269
Restructured charges........................... 0 2,654 44,382
Merger and related costs....................... 108,899 0 0
--------------- --------------- ---------------
Income from operations................. 3,608 76,090 8,986
--------------- --------------- ---------------
Litigation settlements, net...................... 0 0 (13,000)
Interest income and other........................ 4,762 7,566 4,024
Interest expense................................. (3,257) (5,855) (4,592)
Costs associated with unsolicited offer.......... 0 (5,049) 0
--------------- --------------- ---------------
Total other income (expense)........... 1,505 (3,338) (13,568)
--------------- --------------- ---------------
Income (loss) before income taxes................ 5,113 72,752 (4,582)
Provision for income taxes....................... 12,062 22,782 847
--------------- --------------- ---------------
Income (loss) before cumulative effect of
accounting change.............................. $ (6,949) $ 49,970 $ (5,429)
=========== =========== ===========
Income (loss) per common and common
equivalent shares before cumulative effect of
accounting change.............................. $ (0.11) $ 0.82 $ (0.09)
=========== =========== ===========
Weighted average common and common
equivalent shares used in the calculation of
income (loss) per share before cumulative
effect of
accounting change.............................. 61,789 60,921 59,613
=========== =========== ===========
</TABLE>
- ---------------
(1) In connection with the merger of Nellcor Incorporated ("Nellcor") and
Puritan-Bennett Corporation ("Puritan-Bennett") and the merger of NPB and
Infrasonics, Inc., one-time merger and related costs of $108.9 million were
recorded during the fiscal year ended July 7, 1996.
(2) Includes accrued restructuring charges totaling $2.7 million and unsolicited
takeover offer costs of $5.0 million during the fiscal year ended July 2,
1995.
(3) Includes accrued restructuring charges totaling approximately $43.2 million
and litigation settlements totaling approximately $13.0 million during the
fiscal year ended July 3, 1994.
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<PAGE> 56
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS
1. The unaudited pro forma combined condensed financial statements of NPB
and Aequitron give retroactive effect to the Merger using the pooling of
interests method of accounting and, as a result, the unaudited pro forma
combined condensed balance sheet and statements of operations are presented as
if the combining companies had been combined for all periods presented. The
unaudited pro forma combined condensed financial statements reflect the issuance
of 0.503 of a fully paid and nonassessable share of NPB Common Stock for each
share of Aequitron Common Stock to effect the Merger. The actual number of
shares of NPB Common Stock to be issued will be determined at the effective time
of the Merger based on the Exchange Ratio and the number of shares of Aequitron
Common Stock then outstanding. The unaudited pro forma combined condensed
financial statements, including the notes thereto, should be read in conjunction
with the historical consolidated financial statements of NPB and Aequitron
incorporated by reference in this Proxy Statement/Prospectus.
2. The unaudited pro forma combined condensed balance sheet combines NPB's
July 7, 1996 consolidated balance sheet with Aequitron's April 30, 1996
consolidated balance sheet. The unaudited pro forma statements of operations
combine NPB's historical results for each of the three fiscal years in the
period ended July 7, 1996 with the Aequitron's historical results for each of
the three fiscal years in the period ended April 30, 1996.
3. The unaudited pro forma data are presented for informational purposes
only and do not give effect to any synergies that may occur due to the combining
of NPB's and Aequitron's existing operations. NPB expects to incur charges to
operations currently estimated to be between $15 million and $20 million in the
quarter ending January 5, 1997, the quarter in which the Merger is expected to
be consummated, to reflect costs associated with combining the operations of the
two companies and transaction fees and costs incident to the Merger. An
estimated charge, at the midpoint of the above range, after giving effect for
estimated tax benefits, of $12 million is reflected in the unaudited pro forma
combined condensed balance sheet and is not included in the unaudited pro forma
combined condensed statement of operations. This range is a preliminary estimate
only and, therefore, is subject to change.
4. There were no material differences between the accounting policies of
NPB and Aequitron during the periods presented.
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<PAGE> 57
COMPARISON OF STOCKHOLDER RIGHTS
GENERAL
As a result of the Merger, holders of Aequitron Common Stock will become
stockholders of NPB and the rights of all such former Aequitron shareholders
will thereafter be governed by the NPB Restated Certificate of Incorporation and
Bylaws and the Delaware General Corporation Law ("DGCL"). The rights of the
holders of Aequitron Common Stock are currently governed by the Aequitron
Restated Articles of Incorporation and Amended Bylaws and the Minnesota Business
Corporation Act ("MBCA"). The following summary, which does not purport to be a
complete statement of the general differences between the rights of the
stockholders of NPB and the shareholders of Aequitron, sets forth certain
differences between the NPB Restated Certificate of Incorporation and Bylaws and
the DGCL, and the Aequitron Restated Articles of Incorporation and Amended
Bylaws and the MBCA. Accordingly, Aequitron's shareholders should carefully
review the following summary, which NPB and Aequitron believe addresses all
material differences in the rights of Aequitron shareholders upon consummation
of the Merger, to understand how certain of their rights as shareholders will be
affected upon completion of the Merger. This summary is qualified in its
entirety by reference to the full text of each of such documents, the DGCL and
the MBCA. For information as to how such documents may be obtained, see
"Available Information."
STOCKHOLDERS RIGHTS PLAN
NPB has adopted a stockholder rights plan that is designed to protect NPB
stockholders from coercive or unfair takeover tactics. Aequitron has not adopted
any such rights plan. In general, upon the occurrence of specified triggering
events, such as the acquisition by any person (other than NPB or any of its
subsidiaries) of the beneficial ownership of securities representing 15% or more
of the NPB Common Stock ("Acquiring Persons"), NPB's stockholders other than
Acquiring Persons will have the right to acquire one one-hundredth of a share of
Series A Preferred Stock per share of NPB Common Stock owned at a purchase price
of $320.00, subject to adjustment (an "NPB Preferred Stock Purchase Right"). The
Series A Preferred Stock will not be redeemable and will have certain dividend
and liquidation preferences over NPB Common Stock. Holders of NPB Preferred
Stock Purchase Rights (other than NPB Preferred Stock Purchase Rights
beneficially owned by an Acquiring Person which will have become void) have the
right, under certain circumstances, upon exercise of such NPB Preferred Stock
Purchase Rights and in lieu of Series A Preferred Stock, to receive that number
of Shares of NPB Common Stock (or in certain circumstances, cash, property or
other securities of NPB) having a value equal to two times the purchase price.
The NPB Rights Agreement further provides that if NPB is acquired in a merger or
other business combination which is not approved by the NPB Board, NPB's
stockholders will have the right to receive common stock of the acquiring
company having a value equal to two times the purchase price. Under certain
circumstances, NPB may redeem the Rights at a redemption price of $0.001 per NPB
Preferred Stock Purchase Right, or exchange the NPB Preferred Stock Purchase
Rights at an exchange ratio of one share of NPB Common Stock per NPB Preferred
Stock Purchase Right. The NPB Preferred Stock Purchase Rights otherwise will
expire on March 8, 2006. The effect of the NPB Rights Agreement may be to render
more difficult a change in control of NPB. The foregoing summary of certain
terms of the NPB Rights Plan is qualified in its entirety by reference to the
NPB Rights Agreement, a copy of which is incorporated herein by reference. See
"Incorporation of Documents by Reference."
ELECTION AND NUMBER OF DIRECTORS; FILLING VACANCIES; REMOVAL
Neither the NPB Restated Certificate of Incorporation nor the NPB Bylaws
requires that elections of directors be by written ballot. The NPB Restated
Certificate of Incorporation and Bylaws provide for cumulative voting rights in
elections of directors. The NPB Bylaws also disqualify from nomination to the
NPB Board any person 72 years of age or older, subject to certain exceptions.
The Aequitron Restated Articles of Incorporation and Amended Bylaws require that
election of directors be by written ballot and do not permit cumulative voting
rights in elections for directors.
The NPB Bylaws provide that the number of directors is six or such other
number as may be designated from time to time by the members of the NPB Board
then in office. The Aequitron Amended Bylaws state
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<PAGE> 58
that the number of directors is to be no less than one, with the exact number
being fixed by an amendment to the Bylaws duly adopted by the shareholders or
the Board of Directors. The Aequitron Amended Bylaws, as currently in effect,
set the number of directors at five.
The NPB Bylaws provide that any vacancies (including newly created
directorships) may be filled by a majority of the remaining directors, though
less than a quorum. The Aequitron Amended Bylaws contain a comparable provision.
Under the DGCL, unless otherwise provided in the certificate of
incorporation, any director or the entire board of directors may be removed with
or without cause. The NPB Bylaws explicitly provide that directors may be
removed with or without cause, provided that, if less than the entire NPB Board
is to be removed, no director may be removed without cause if the votes cast
against such director's removal would be sufficient to elect such director if
voted cumulatively at an election of the entire Board of Directors.
Under the MBCA, one or all of the directors generally may be removed at any
time, with or without cause, by the affirmative vote of the holders of the
proportion or number of the voting power of the shares of the classes or series
the director represents sufficient to elect them. Where there is cumulative
voting, unless the entire board is removed simultaneously, a director may not be
removed if there is cast against removal of the director the votes of a
proportion of the voting power sufficient to elect the director. The Aequitron
Restated Articles of Incorporation provide that any director may be removed at
any time, but only for cause and only by the affirmative vote of at least 75% of
the votes entitled to be cast by holders of all the outstanding shares of voting
stock, voting together as a single class. The Aequitron Amended Bylaws provide
that a director may also be removed at any time, with or without cause, by the
affirmative vote of a majority of directors.
Both the NPB Bylaws and the Aequitron Amended Bylaws allow their respective
Boards of Directors to establish committees. The NPB Bylaws require each such
committee to consist of one or more directors, while the Aequitron Amended
Bylaws require only that committees consist of one or more natural persons, who
need not be directors, appointed by the affirmative vote of a majority of the
directors present.
STOCKHOLDERS MEETINGS
Under the DGCL, a special meeting may be called by the board of directors
or such other persons as may be authorized by the certificate of incorporation
or the bylaws. The NPB Bylaws provide that special meetings of NPB stockholders
may be called by NPB's President or Chief Executive Officer or the NPB Board at
any time, and that NPB's Secretary shall call a special meeting upon the request
of any stockholder or stockholders holding in the aggregate 10% of the voting
power of all stockholders.
Under the MBCA, a special meeting may be called by the chief executive
officer, the chief financial officer, two or more directors, any person
authorized by the articles or bylaws or a shareholder or shareholders holding
ten percent or more of the voting power of all shares entitled to vote. The
Aequitron Amended Bylaws provide that special meetings of Aequitron shareholders
may be called by the President, the Vice-President acting in the capacity of the
President, the Treasurer, two (2) or more members of the Board of Directors, or
by one or more shareholders holding not less than 10% of the shares entitled to
vote at the meeting.
The NPB Bylaws provide a procedure for nominating persons to be elected to
the NPB Board including, among other things, the requirement of not less than 30
nor more than 60 days' notice prior to the scheduled meeting and the provision
of certain information about the nominee. The Aequitron Amended Bylaws also
provide a procedure for nominating directors including, among other things, the
requirement of not less than 50 nor more than 75 days' notice prior to the
scheduled meeting and the provision of certain information about the nominee.
The NPB Bylaws provide that any notice requirements for stockholders
meetings may be waived and will be waived by any stockholder by his attendance
thereat, except when the stockholder attends a meeting for the express purpose
of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. The Aequitron
Amended Bylaws contain a similar provision.
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<PAGE> 59
Under the DGCL (unless otherwise provided in the certificate of
incorporation), any action that is required to be taken or may be taken at a
meeting of stockholders may be taken by a written consent signed by the holders
of outstanding stock having not less than the minimum number of votes that would
be necessary to take such action at a meeting. The NPB Restated Certificate of
Incorporation contains no provisions to the contrary. Under the MBCA, any action
which may be taken at a meeting of shareholders may also be taken by the written
consent of the holders of at least the same proportion of outstanding shares.
The Aequitron Restated Articles of Incorporation contain no provision to the
contrary.
STOCKHOLDERS VOTE FOR BUSINESS COMBINATIONS
The NPB Restated Certificate of Incorporation contain a "fair price"
provision, requiring that, in addition to any other vote required by the NPB
Restated Certificate of Incorporation or the DGCL, certain Business Combinations
with an Interested Stockholder or any affiliate thereof (as such terms are
defined below) will be subject to the affirmative vote of the holders of not
less than 66 2/3% of the outstanding stock of NPB entitled to vote generally in
the elections of directors (the "Voting Stock").
For the purpose of the NPB fair price provision, certain terms are defined
as follows:
"Business Combination" means (a) any merger or consolidation of NPB or a
subsidiary of NPB with an Interested Stockholder or any affiliate thereof, (b)
any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in
one transaction or a series of transactions) to or with an Interested
Stockholder or any affiliate thereof of any assets of NPB or a subsidiary of NPB
having an aggregate Fair Market Value (as hereinafter defined) equal to or
greater than 10% of NPB's assets, (c) the adoption of any plan or proposal for
the liquidation or dissolution of NPB proposed by or on behalf of an Interested
Stockholder or any affiliate thereof, or (d) any reclassification of securities
(including any reverse stock split) or recapitalization of NPB, or any merger or
consolidation of NPB with any of its subsidiaries or any other transaction which
has the effect of increasing the proportionate share of the outstanding shares
of any class of equity or convertible securities of NPB or any subsidiary of NPB
which is directly or indirectly owned by any Interested Stockholders or any
affiliate thereof.
"Interested Stockholder" means any individual, firm, corporation or other
entity that is (a) the beneficial owner of more than 20% of the voting power of
the outstanding Voting Stock, (b) an affiliate of NPB and that was at any time
within the two-year period immediately prior to the date in question the
beneficial owner of 20% or more of the voting power of the then outstanding
Voting Stock, or (c) an assignee of or has otherwise succeeded to any shares of
Voting Stock that were at any time within the two-year period immediately prior
to the date in question beneficially owned by any Interested Stockholder if such
assignment or succession shall have occurred in the course of a transaction or
series of transactions not involving a public offering within the meaning of the
Securities Act.
"Fair Market Value" means (a) in the case of stock, the average of the
closing sale prices during the 10-day period immediately preceding the date in
question, or (b) in the case of property other than cash or stock, the fair
market value of such property on the date in question as determined by the NPB
Board in good faith.
"Disinterested Director" means any member of the NPB Board who is
unaffiliated with the Interested Stockholder and was a member of the NPB Board
prior to the time that the Interested Stockholder became an Interested
Stockholder and any successor of a Disinterested Director who is unaffiliated
with the Interested Stockholder and is recommended to succeed a Disinterested
Director by the majority of Disinterested Directors then on the NPB Board.
The 66 2/3% voting requirement will not be applicable to any Business
Combination if either (1) the Business Combination is approved by a majority of
the Disinterested Directors or (2) all of the following conditions are
satisfied:
(a) The aggregate amount of cash and the Fair Market Value as of the
date of consummation of the Business Combination of consideration other
than cash (the "Consideration") to be received per share by holders of NPB
Common Stock in such Business Combination shall be at least equal to the
higher of: (i) (if applicable) the highest per share price paid by the
Interested Stockholder for any shares of NPB Common Stock acquired by it
within the two-year period immediately prior to the first public
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<PAGE> 60
announcement of the proposal of the Business Combination (the "Announcement
Date") or in the transaction in which it became an Interested Stockholder,
whichever is higher; and (ii) the Fair Market Value per share of NPB Common
Stock on the Announcement Date or on the date (the "Determination Date") on
which the Interested Stockholder became an Interested Stockholder,
whichever is higher.
(b) The Consideration to be received per share by holders of shares of
any other class of outstanding Voting Stock shall be at least equal to the
highest of: (i) (if applicable) the highest per share price paid by the
Interested Stockholder for any shares of such class of Voting Stock
acquired by it within the two-year period immediately prior to the
Announcement Date or in the transaction in which it became an Interested
Stockholder, whichever is higher, (ii) (if applicable) the highest
preferential amount per share to which the holders of shares of such class
of Voting Stock are entitled in the event of any voluntary or involuntary
liquidation, dissolution or winding up of NPB, and (iii) the Fair Market
Value per share of such class of Voting Stock on the Announcement Date or
on the Determination Date, whichever is higher.
(c) The consideration to be received by holders of any particular
class of outstanding Voting Stock shall be in cash or in the same form as
the Interested Stockholder previously paid for shares of such class of
Voting Stock.
(d) A proxy or information statement describing the proposed Business
Combination and complying with the Exchange Act shall be mailed to public
stockholders of NPB at least 30 days prior to the consummation of such
Business Combination.
The NPB fair price provision is intended to ensure that all stockholders
receive equal treatment in the event of a tender or exchange offer and to
protect stockholders against coercive or two-tiered takeover bids.
Notwithstanding the foregoing, the provision could also have the effect of
discouraging a third party from making a tender or exchange offer for NPB, even
though such an offer might be beneficial to NPB and its stockholders.
The Aequitron Restated Articles of Incorporation contain a "fair price"
provision, requiring that, in addition to any other vote required by the
Aequitron Restated Articles of Incorporation or the MBCA, certain Business
Combinations with an Interested Shareholder or any affiliate thereof (as such
terms are defined below) will be subject to the affirmative vote of the holders
of not less than 75% of the outstanding stock of Aequitron entitled to vote
generally in the elections of directors (the "Voting Stock").
For the purpose of the Aequitron fair price provision, certain terms are
defined as follows:
"Business Combination" means (a) any merger or consolidation of Aequitron
or a subsidiary of Aequitron with an Interested Shareholders or any affiliate
thereof, (b) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with an
Interested Shareholder or any affiliate thereof of any assets of Aequitron or a
subsidiary of Aequitron having a book value equal to or greater than 10% of
Aequitron assets, (c) the adoption of any plan or proposal for the liquidation
or dissolution of Aequitron proposed by or on behalf of an Interested
Shareholder or any affiliate thereof, or (d) any reclassification of securities
(including any reverse stock split) or recapitalization of Aequitron, or any
merger or consolidation of Aequitron with any of its subsidiaries or any other
transaction which has the effect of increasing the proportionate share of the
outstanding shares of any class of equity or convertible securities of Aequitron
or any subsidiary of Aequitron which is directly or indirectly owned by any
Interested Shareholder or any affiliate thereof.
"Interested Shareholder" means any person, firm, corporation or other
entity that is (a) the beneficial owner of voting stock representing 10% or more
of the voting power of the outstanding Voting Stock, (b) an affiliate of
Aequitron and that was at any time within the two-year period immediately prior
to the date in question the beneficial owner of 10% or more of the voting power
of the then outstanding Voting Stock, or (c) an assignee of or has otherwise
succeeded to any shares of Voting Stock that were at any time within the
two-year period immediately prior to the date in question beneficially owned by
any Interested Shareholder if such assignment or succession shall have occurred
in the course of a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act.
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"Fair Market Value" means (a) in the case of stock, the highest closing bid
quotation during the 30-day period immediately preceding the date in question,
or (b) in the case of property other than cash or stock, the fair market value
of such property on the date in question as determined by the Aequitron Board in
good faith.
"Continuing Director" means any member of the Aequitron Board who is
unaffiliated with the Interested Shareholder and was a member of the Aequitron
Board prior to the time that the Interested Shareholder became an Interested
Shareholder and any member of the Aequitron Board, while such person is a member
of the Board, whose election or nomination for election was approved by a vote
of a majority of the Continuing Directors.
The 75% voting requirement will not be applicable to any Business
Combination if either (1) the Business Combination is approved by a majority of
the Continuing Directors or (2) all of the following conditions are satisfied:
(a) The aggregate amount of cash and the Fair Market Value as of the
date of consummation of the Business Combination of consideration other
than cash (the "Consideration") to be received per share by holders of
Aequitron Common Stock in such Business Combination shall be at least equal
to the higher of: (i) (if applicable) the highest per share price paid by
the Interested Shareholder for any shares of Aequitron Common Stock
acquired by it within the two-year period immediately prior to the first
public announcement of the proposal of the Business Combination (the
"Announcement Date") or in the transaction in which it became an Interested
Shareholder, whichever is higher; and (ii) the Fair Market Value per share
of Aequitron Common Stock on the Announcement Date or on the date (the
"Determination Date") on which the Interested Shareholder became an
Interested Shareholder, whichever is higher.
(b) The Consideration to be received per share by holders of shares of
any other class or series of outstanding capital stock, other than
Aequitron Common Stock shall be at least equal to the highest of: (i) (if
applicable) the highest per share price paid by the Interested Shareholder
for any shares of such class or series of capital stock acquired by it
within the two-year period immediately prior to the Announcement Date or in
the transaction in which it became an Interested Shareholder, whichever is
higher, (ii) (if applicable) the highest preferential amount per share to
which the holders of shares of such class or series of capital stock are
entitled in the event of any voluntary or involuntary liquidation,
dissolution or winding up of Aequitron; and (iii) the Fair Market Value per
share of such class or series of capital stock on the announcement date or
on the determination date, whichever is higher.
(c) The consideration to be received by holders of any particular
class of outstanding capital stock shall be in cash or in the same form as
the Interested Shareholder previously paid for shares of such class of
capital stock.
(d) A proxy or information statement describing the proposed Business
Combination and complying with the Exchange Act shall be mailed to public
shareholders of Aequitron at least 30 days prior to the consummation of
such Business Combination.
(e) The Interested Shareholder has not received the benefit of any
loans, advances, guarantees or financial assistance provided by Aequitron.
(f) The Interested Shareholder has not made or caused to be made any
major change in the business or equity capital structure of Aequitron
without the approval of a majority of the Continuing Directors.
(g) There has been: (i) no failure to declare and pay dividends,
payable in accordance with the terms of any outstanding capital stock; (ii)
no reduction in the annual rate of dividends paid on the Aequitron Common
Stock, except as approved by a majority of the Continuing Directors; (iii)
no increase in the annual rate of dividends paid on the Common Stock
necessary to reflect any reclassification, recapitalization or any similar
transaction, unless approved by a majority of the Continuing Directors;
and, (iv) no increase in the Interested Shareholder's percentage of
beneficial ownership of any class or series of capital stock.
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The Aequitron fair price provision is intended to ensure that all Aequitron
shareholders receive equal treatment in the event of a tender or exchange offer
and to protect such shareholders against coercive or two-tiered takeover bids.
Notwithstanding the foregoing, the provision could also have the effect of
discouraging a third party from making a tender or exchange offer for Aequitron,
even though such an offer might be beneficial to Aequitron and its shareholders.
COMMON STOCK
Except as otherwise described in this "Comparison of Stockholder Rights,"
the terms of the NPB Common Stock are substantially the same as those of the
Aequitron Common Stock.
PREFERRED STOCK
Pursuant to the NPB Restated Certificate of Incorporation, the NPB Board is
authorized, subject to the limitations prescribed by law, to provide for the
issuance of shares of NPB Preferred Stock in one or more series. In addition,
the NPB Board has issued certain rights to purchase, under certain conditions,
shares of Series A Preferred Stock. See "Comparison of Stockholder
Rights -- Stockholders Rights Plan." The Aequitron Restated Articles of
Incorporation likewise provide that the Aequitron Board is authorized, subject
to the limitations prescribed by law, to provide for the issuance of shares of
Aequitron Preferred Stock in one or more series. However, Aequitron has not
issued rights to purchase Aequitron Preferred Stock.
NPB believes that the ability of the NPB Board to issue one or more series
of NPB Preferred Stock provides NPB with flexibility in structuring possible
future financings and acquisitions, and in meeting other corporate needs that
might arise. The authorized shares of NPB Preferred Stock, as well as shares of
NPB Common Stock, are available for issuance without further action by NPB
stockholders, unless such action is required by applicable law or the rules of
any stock exchange or automated quotation system on which NPB securities may be
listed or traded. Nasdaq currently requires stockholder approval in connection
with, among other matters, the sale or issuance of common stock (or securities
or securities convertible into or exercisable for common stock) equal to 20% or
more of the common stock, or 20% or more of the voting power outstanding before
the issuance for less than the greater of book value or market value of the
stock.
Although the NPB Board has no intention at the present time of doing so, it
could issue a series of NPB Preferred Stock that could, depending on the terms
of such series, impede the completion of a merger, tender offer or other
takeover attempt. The NPB Board will make any determination to issue such shares
based on its judgment as to the best interests of NPB and its stockholders. The
NPB Board, in so acting, could issue NPB Preferred Stock having terms that
discourage an acquisition attempt through which an acquiror may be able to
change the composition of the NPB Board, including a tender offer or other
transaction that some, or a majority, of NPB's stockholders might believe to be
in their best interests or in which stockholders might receive a premium for
their stock over the then current market price of such stock.
BUSINESS COMBINATIONS
Section 203 of the DGCL provides that, subject to certain exceptions
specified therein, a corporation may not engage in any business combination with
any "interested stockholder" for a three-year period following the date that
such stockholder becomes an interested stockholder, unless (i) prior to such
date, the board of directors of the corporation approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder, (ii) upon consummation of the transaction which resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding shares held by
directors who are also officers and employee stock purchase plans in which
employee participants do not have the right to determine confidentially whether
plan shares will be tendered in a tender or exchange offer) or (iii) on or
subsequent to such date, the business combination is approved by the board of
directors of the corporation and by the affirmative vote at an annual or special
meeting, and not by written consent, of at least 66 2/3 of the outstanding
voting stock which is not owned by the interested stockholder. Except as
specified in Section 203 of the DGCL, an interested stockholder is defined to
include (a) any person that is the owner of
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15% or more of the outstanding voting stock of the corporation or is an
affiliate or associate of the corporation and was the owner of 15% or more of
the outstanding voting stock of the corporation, at any time within three years
immediately prior to the relevant date, and (b) the affiliates and associates of
any such person.
Under certain circumstances, Section 203 of the DGCL may make it more
difficult for a person who would be an "interested stockholder" to effect
various business combinations with a corporation for a three-year period,
although the corporation's certificate of incorporation or stockholders may
elect to exclude a corporation from the restrictions imposed thereunder. The NPB
Restated Certificate of Incorporation does not exclude NPB from the restrictions
imposed under Section 203 of the DGCL. It is anticipated that the provisions of
Section 203 of the DGCL may encourage companies interested in acquiring NPB to
negotiate in advance with the NPB Board, since the stockholder approval
requirement would be avoided if a majority of the directors then in office
approve either the business combination or the transaction which results in the
stockholder becoming an interested stockholder.
Section 302A.673 of the MBCA provides that, subject to certain exceptions
specified therein, an "issuing public corporation" which is "publicly held"
within the meaning of the MBCA may not engage in any "business combination" with
any "interested shareholder" or affiliate or associate of an interested
shareholder for a period of four years after the interested shareholder's "share
acquisition date" unless the business combination or the acquisition of shares
made by the interested shareholder on his or her share acquisition date is
approved before the interested shareholder's acquisition date, or on the share
acquisition date but prior to the interested shareholder's becoming an
interested shareholder on the share acquisition date, by a disinterested
committee of the board of directors of the corporation.
For purposes of the MBCA, an "interested shareholder" is a 10 percent or
more beneficial owner of voting shares of such corporation who at any time
within the four year period preceding the date in question was a 10 percent or
more beneficial owner of voting shares of such corporation. Under the MBCA, the
"share acquisition date" with respect to an interested shareholder is the date
he or she first becomes an interested shareholder of the corporation. "Business
combinations" under the MBCA generally include, among other transactions,
mergers or exchanges with an interested shareholder, sales or other transfers of
substantial assets to an interested shareholder, loans or other financial
assistance to an interested shareholder, substantial issuances of stock to an
interested shareholder. Plans of liquidation and reincorporation proposed by or
on behalf of an interested shareholder are also included as business
combinations under the MBCA.
Under certain circumstances, Section 302A.673 may make it difficult for a
person who would be an "interested shareholder" to effect various combinations
with a public company for a four year period. The MBCA applies to any business
combination of a corporation with any interested shareholder unless otherwise
expressly provided in such corporation's articles of incorporation or bylaws.
Neither the Restated Articles of Incorporation nor the Amended Bylaws of
Aequitron provide that it will not be subject to the MBCA.
LIMITATION OF LIABILITY OF DIRECTORS
The DGCL permits a corporation to include a provision in its charter
eliminating or limiting the personal liability of a director to the corporation
or its stockholders for damages for a breach of the director's fiduciary duty,
subject to certain limitations. Section 102(b)(7) of the DGCL provides that a
corporation may include in its certificate of incorporation a provision
eliminating or limiting the personal liability of a director to the corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the DGCL, which concerns unlawful payments of
dividends, stock purchases or redemptions or (iv) for any transaction from which
the director derived an improper personal benefit. The NPB Restated Certificate
of Incorporation includes such a provision, to the maximum extent permitted by
Section 102(b)(7) of the DGCL.
Under the MBCA, a corporation may eliminate or limit a director's personal
liability to the corporation or its shareholders for breach of fiduciary duty as
a director, except for liability (a) for any breach of the director's duty of
loyalty to the corporation or its shareholders, (b) for acts or omissions not in
good faith or
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that involve intentional misconduct or a knowing violation of law, (c) for
illegal distributions or for certain violations of the Minnesota Securities Act,
(d) for any transaction from which the director derived an improper personal
benefit, or (e) for any act or omission occurring prior to the date when the
provision in the corporation's articles eliminating or limiting liability
becomes effective. The Aequitron Restated Articles of Incorporation include a
provision which limits the personal liability of directors to the maximum extent
permitted by the MBCA.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The DGCL permits a corporation to indemnify officers, directors, employees
and agents for actions taken in good faith and in a manner they reasonably
believe to be in, or not opposed to, the best interest of the corporation, and
with respect to any criminal action, which they had no reasonable cause to
believe was unlawful. The DGCL provides that a corporation may advance expenses
of defense (upon receipt of a written undertaking to reimburse the corporation
if indemnification is not appropriate) and must reimburse a successful defendant
for expenses, and permits a corporation to purchase and maintain liability
insurance for its directors and officers. The DGCL provides that indemnification
may not be made for any claim, issue or matter as to which a person has been
adjudged to be liable to the corporation, unless and only to the extent a court
determines that the person is entitled to indemnity for such expenses as the
court deems proper.
Under the MBCA, a corporation must indemnify a person made or threatened to
be made a party to a proceeding by reason of the former or present official
capacity of the person against judgments, penalties, fines, including, without
limitation, excise taxes assessed against the person with respect to an employee
benefit plan, settlements, and reasonable expenses, including attorney's fees
and disbursements, incurred by the person in connection with the proceeding, if,
with respect to the acts or omissions of the person complained of in the
proceeding, the person (a) has not been indemnified from another source with
respect to the same acts or omissions, (b) acted in good faith, (c) received no
improper personal benefit (and did not act with an improper conflict of
interest), (d) in the case of a criminal proceeding, had no reasonable cause to
believe the conduct was unlawful, and (e) in the case of acts or omissions
occurring in his or her official capacity, reasonably believed that the conduct
was in the best interests of the corporation, or reasonably believed that the
conduct was not opposed to the best interests of the corporation. The
termination of a proceeding by judgment, order, settlement, conviction or upon a
plea of nolo contendere or its equivalent does not, of itself, establish that
the person did not meet the criteria for indemnification. A corporation may also
purchase and maintain insurance on behalf of a person in that person's official
capacity against any liability asserted against and incurred by the person in or
arising from that capacity, whether or not the corporation would have been
required to indemnify the person against the liability under the MBCA. The
corporation may also indemnify persons by contract or otherwise.
The NPB Bylaws provide that NPB will indemnify its directors to the fullest
extent permitted by the DGCL, as the same exists or may hereafter be amended
(but, in the case of alleged occurrences of actions or omissions preceding any
such amendment, only to the extent that such amendment permits NPB to provide
broader indemnification rights then permitted prior to such amendment) and that
NPB has the power to indemnify its officers, employees and other agents as set
forth in the DGCL.
The indemnification and advancement rights conferred by the NPB Bylaws are
not exclusive of any other right to which persons seeking indemnification may be
entitled under any statute, provision of the NPB Restated Certificate of
Incorporation or Bylaws, agreement, or vote of the stockholders or disinterested
directors. In addition, the NPB Bylaws specifically authorize NPB to enter into
contracts with directors, officers, employees or agents respecting
indemnification and advances, to the fullest extent permitted by the DGCL.
Finally, the NPB Bylaws authorize NPB, upon approval of its Board of Directors,
to purchase insurance on behalf of any person required or permitted to be
indemnified pursuant to such bylaws.
The Aequitron Amended Bylaws provide that Aequitron will indemnify any
person who was or is a party or is threatened to be made a party to any
proceeding by reason of the fact that such person is or was an agent of
Aequitron, against expenses, judgments, fines, settlements and other amounts
incurred in connection with such proceeding. The Aequitron Amended Bylaws
additionally provide that expenses incurred by any agent of
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Aequitron in defending any proceeding may be advanced prior to the final
disposition of such proceeding upon receipt of an undertaking by or on behalf of
the agent to repay such amount unless it shall be determined ultimately that the
agent is entitled to be indemnified. Finally, the Aequitron Amended Bylaws
provide that the Board of Directors may authorize the purchase and maintenance
of insurance on behalf of any agent of Aequitron against any liability asserted
against or incurred by the agent in such capacity or arising out of the agent's
status as such.
DISSENTERS' RIGHTS
Under the DGCL, appraisal rights are generally available for the shares of
any class or series of stock of a corporation in a merger or consolidation;
provided that no appraisal rights are available for the shares of any class or
series of stock which, at the record date for the meeting held to approve such
transaction, were either (i) listed on a national securities exchange, or (ii)
held of record by more than 2,000 holders; and further provided that no
appraisal rights are available to stockholders of the surviving corporation if
the merger did not require their approval. Appraisal rights are, however,
available for such class or series if the holders thereof receive in the merger
or consolidation anything except: (i) shares of stock of the corporation
surviving or resulting from such merger or consolidation or depository receipts
in respect thereof; (ii) shares of stock of any other corporation or depository
receipts in respect thereof which at the effective date of the merger or
consolidation is either listed on a national securities exchange or the Nasdaq
National Market or held of record by more than 2,000 stockholders; (iii) cash in
lieu of fractional shares or fractional depository receipts; or (iv) any
combination of the foregoing.
Under Section 302A.473 of the MBCA, if a corporation calls a shareholder
meeting to approve a merger to which such corporation is a party, the sale of
substantially all of its assets of the corporation or in certain other
circumstances, the notice of the meeting must inform each shareholder of the
right to dissent from such action and must include a copy of Section 302A.471
and Section 302A.473 of the MBCA and a brief description of the procedure to be
followed under such sections. A shareholder who wishes to exercise dissenters'
rights in such circumstances is entitled to demand the fair value of the shares
owned by such shareholder.
DIVIDENDS
Under the DGCL, a corporation may pay dividends out of surplus or out of
its net profits for the fiscal year in which the dividend is declared or its net
profits for the preceding fiscal year, subject to certain limitations for the
benefit of certain preference shares.
Generally, under the MBCA a Minnesota corporation may pay dividends only if
the board determines, in accordance with the provisions of the MBCA, that the
corporation will be able to pay its debts in the ordinary course of business
after making the distribution and the board does not know before the
distribution is made that the determination was or has become erroneous. In
addition, the ability of a Minnesota corporation to pay dividends is restricted
by certain limitations for the benefit of certain preference shares.
INSPECTION OF STOCKHOLDER LIST
Both the MBCA and the DGCL allow any shareholder of a publicly-held
corporation to inspect the shareholder list for a purpose reasonably related to
such person's interest as a shareholder.
LOANS TO OFFICERS AND EMPLOYEES
Under both the MBCA and the DGCL, a corporation may make loans to or
guarantee the obligations of its officers or other employees and those of its
subsidiaries when such action, in the judgment of the directors, may reasonably
be expected to benefit the corporation.
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DISSOLUTION
The DGCL allows a Delaware corporation to include in its certificate of
incorporation a supermajority voting requirement in connection with
dissolutions. The NPB Restated Certificate of Incorporation requires approval of
sixty-six and two-thirds percent (66 2/3%) of the shares entitled to vote
thereon to effect a dissolution under certain circumstances. Under the MBCA,
shareholders holding fifty percent (50%) or more of the total voting power may
authorize a corporation's dissolution, which right may not be modified by the
articles of incorporation. The Aequitron Restated Articles of Incorporation do
not modify this right.
PROPOSAL NO. 1
APPROVAL OF THE MERGER AGREEMENT
THE AEQUITRON BOARD RECOMMENDS THE ADOPTION OF THE FOLLOWING RESOLUTION
THAT WILL BE PRESENTED TO THE ANNUAL MEETING:
RESOLVED, that the shareholders of Aequitron hereby approve the Merger
Agreement and the Merger contemplated thereby.
The persons designated in the enclosed proxy will vote your shares in favor
of approval unless instructions to the contrary are indicated in the enclosed
proxy.
PROPOSAL NO. 2
ELECTION OF AEQUITRON DIRECTORS
Aequitron's Restated Articles of Incorporation provide that the Aequitron
Board be divided into three classes, each class to be as equal in number as
possible. There are currently five persons serving as directors. Aequitron is
proposing that two directors be elected at the Annual Meeting to serve
three-year terms expiring in 1999, or until each respective successor is elected
and qualified. The Board of Directors Nominating Committee has nominated for
election Lawrence A. Lehmkuhl and David B. Morse. Both nominees are currently
directors of Aequitron and have consented to being named as nominees. It is
intended that proxies will be voted for such nominees. Aequitron believes that
Messrs. Lehmkuhl and Morse will be able to serve, but should either of them be
unable to serve as a director, the persons named in the proxies have advised
Aequitron that they will vote for the election of such substitute nominee as the
Aequitron Board may propose.
The names, ages and positions with Aequitron of the nominees and each
person continuing as a director are set forth below.
<TABLE>
<CAPTION>
POSITION WITH DIRECTOR TERM
NAME AGE AEQUITRON SINCE EXPIRES
- ------------------------------------------ --- --------------------------- -------- -------
<S> <C> <C> <C> <C>
James B. Hickey, Jr....................... 43 President, Chief Executive 1993 1998
Officer and Director
Ervin F. Kamm, Jr......................... 56 Director 1991 1998
Lawrence A. Lehmkuhl...................... 59 Director 1986 1996
David B. Morse............................ 53 Director 1983 1996
Gerald E. Rhodes.......................... 54 Director 1984 1997
</TABLE>
BUSINESS EXPERIENCE
JAMES B. HICKEY, JR. has been the President and Chief Executive Officer of
Aequitron since June 1993. From October 1989 to June 1993, Mr. Hickey served as
President of Baxter Healthcare, Inc.'s Respiratory/Anesthesia Systems Division,
and, prior to October 1989, he was President of Baxter's Hospitex Division for
three years.
ERVIN F. KAMM, JR. has been the President and Chief Executive Officer at
Digi International, a data communications company, since December 1994. From
January 1988 to November 1994, Mr. Kamm was
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President of Norstan, Inc., a telecommunications company. Mr. Kamm was President
of Plato/Wicat Systems Co., a developer of educational software, from August
1984 to December 1987. In addition, Mr. Kamm currently serves as a director of
Digi International and Secure Computing Corporation.
LAWRENCE A. LEHMKUHL is currently a director of Fisher Imaging Corp. and
Kera Vision, Inc. From February 1985 until April 1993, Mr. Lehmkuhl served as
the President, Chief Executive Officer and Director of St. Jude Medical, and
from April 1993 to February 1995, he was the Chairman of the Board of St. Jude
Medical. From 1966 to February 1985, Mr. Lehmkuhl was employed by American
Hospital Supply Corporation in various capacities, most recently as President of
the American Converters Division.
DAVID B. MORSE has been a partner with the law firm of Best & Flanagan
PLLP, in Minneapolis, Minnesota since 1990. Mr. Morse has practiced law in
private practice since 1971. Since July 1989, Mr. Morse has served as
Aequitron's Chairman of the Board.
GERALD E. RHODES has been the President of Ring Specialty Company, a
jewelry manufacturer located in Boulder, Colorado, since January 1981. Mr.
Rhodes has also served as the Secretary of Aequitron since July 1989.
SECTION 16(A) BENEFICIAL OWNERSHIP COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Aequitron's
officers and directors, and persons who own more than ten percent of a
registered class of Aequitron's equity securities, to file reports of ownership
and changes in ownership with the Securities and Exchange Commission (the
"SEC"). Officers, directors and greater than ten-percent shareholders are
required by SEC regulation to furnish Aequitron with copies of all Section 16(a)
forms they file.
Based solely of its review of the copies of such forms received by it,
Aequitron believes that, during the period from May 1, 1995 through April 30,
1996, all filing requirements applicable to its officers, directors and greater
than ten-percent beneficial owners were complied with.
BOARD AND COMMITTEE MEETINGS
During fiscal year 1996, the Board of Directors of Aequitron held eight
meetings. Each director attended 75% or more of the meetings of the Board of
Directors and Committees of which he was a member.
The Board of Directors has established a Compensation Committee, Nominating
Committee and Stock Option Committee. The full Board of Directors meets as an
Audit Committee and met one time in fiscal 1996 to review Aequitron's financial
statements, accounting policies and procedures.
The Compensation Committee consists of Messrs. Rhodes, Lehmkuhl and Kamm
and recommends and reviews the compensation for the management directors and
reviews the compensation of all officers. The Committee held two meetings in
fiscal 1996.
The Nominating Committee consists of Messrs. Hickey and Morse and
recommends qualified candidates for election as directors of Aequitron. The
Committee met one time in fiscal 1996.
The Stock Option Committee consists of Messrs. Morse, Rhodes and Lehmkuhl
and has responsibility for approval of all material terms of options granted to
employees and directors. The Committee held one meeting in fiscal 1996.
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<PAGE> 68
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth all cash compensation paid or to be paid by
Aequitron, as well as certain other compensation paid or accrued, during fiscal
years 1994, 1995 and 1996 to the Chief Executive Officer and the four highest
paid executive officers whose total salary and bonus exceeded $100,000 based on
salary and bonus earned during fiscal year 1996.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------------------
AWARDS PAYOUTS
---------------------- ----------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES LTIP
FISCAL ------------------------------- STOCK UNDERLYING PAYOUTS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OTHER($) AWARDS($) OPTIONS ($) COMPENSATION
- -------------------------------- ------ --------- -------- -------- --------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James B. Hickey, Jr............. 1996 $209,231 $57,538 $ -- $ -- 150,000 $ -- $ 17,000(1)
President and Chief Executive 1995 187,615 100,356 -- -- 25,000 -- 18,428
Officer 1994 150,385 275,000 23,996
Jeffrey A. Blair................ 1996 139,423 38,341 -- -- 45,000 -- 3,859(2)
Sr. Vice President Sales & 1995 127,523 47,821 -- -- 16,000 -- 3,388
Marketing 1994 76,154 9,375 20,000 -- 100,000 -- 30,728
William M. Milne................ 1996 115,322 31,159 -- -- 45,000 -- 3,670(2)
Chief Financial Officer 1995 108,436 40,663 -- -- 10,000 --
1994 102,887 -- -- -- 10,000 -- 3,493
3,327
Robert C. Samec................. 1996 100,786 26,677 -- -- 45,000 -- 3,238(2)
Vice President Regulatory 1995 94,282 35,356 -- -- 12,000 --
Affairs 1994 88,800 -- -- -- 10,000 -- 1,568
--
Edson R. Weeks, III............. 1996 97,769 26,887 -- -- 45,000 -- 3,991(2)
Vice President Operations 1995 86,961 32,611 -- -- 12,000 --
1994 79,700 -- -- -- 10,000 -- 3,017
2,946
</TABLE>
- ---------------
(1) Represents forgiveness of a portion ($12,500) of a debt owed by Mr. Hickey
to Aequitron as a result of Aequitron's payment of the closing expenses on
his home, plus $4,500 paid by Aequitron as a matching contribution under the
401(K) Plan.
(2) Represents the amount paid by Aequitron as a matching contribution under the
401(k) Plan.
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<PAGE> 69
OPTION GRANTS DURING 1996 FISCAL YEAR
The following table provides information regarding stock options granted by
Aequitron during fiscal 1996 to the named executive officers in the Summary
Compensation table. Aequitron has not granted any stock appreciation rights.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------------------- ANNUAL RATES OF STOCK
NUMBER OF % OF TOTAL OPTIONS PRICE APPRECIATION FOR
SECURITIES GRANTED TO EXERCISE OR OPTION TERM(1)
UNDERLYING EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME OPTIONS GRANTED FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- -------------------- --------------- ---------------------- ----------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
James B. Hickey,
Jr................ 125,000(2) 25.10% $ 5.50 06/19/05 $432,365 $1,095,698
25,000(3) 5.02% $ 7.125 08/21/05 $112,022 $ 283,885
Jeffrey A. Blair.... 25,000(2) 5.02% $ 5.50 06/19/05 $ 86,472 $ 219,139
20,000(3) 4.02% $ 7.125 08/21/05 $ 89,616 $ 227,107
William M. Milne.... 25,000(2) 5.02% $ 5.50 06/19/05 $ 86,472 $ 219,139
20,000(3) 4.02% $ 7.125 08/21/05 $ 89,616 $ 227,107
Robert C. Samec..... 25,000(2) 5.02% $ 5.50 06/19/05 $ 86,472 $ 219,139
20,000(3) 4.02% $ 7.125 08/21/05 $ 89,616 $ 227,107
Edson R. Weeks,
III............... 25,000(2) 5.02% $ 5.50 06/19/05 $ 86,472 $ 219,139
20,000(3) 4.02% $ 7.125 08/21/05 $ 89,616 $ 227,107
</TABLE>
- ---------------
(1) The potential realizable value portion of the foregoing table illustrates
value that might be realized upon exercise of the options immediately prior
to the expiration of their term, assuming the specified compounded rates of
appreciation on Aequitron's Common Stock over the term of the options. These
numbers do not take into account provisions of certain options providing for
termination of the option following termination of employment,
nontransferability or vesting over periods.
(2) Option becomes exercisable with respect to 20% of the shares covered thereby
on July 1 of each of 1998, 1999, 2000, 2001 and 2002. The exercise price was
equal to 100% of the fair market value on June 19, 1995, the date of grant.
(3) Option becomes exercisable with respect to 20% of the shares covered thereby
on August 21 of each of 1996, 1997, 1998, 1999 and 2000. The exercise price
was equal to 100% of the fair market value of the Aequitron Common Stock on
August 21, 1995, the date of grant.
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<PAGE> 70
AGGREGATED OPTION EXERCISES DURING 1996 FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information related to options exercised by
the named executive officers during fiscal 1996 and the number and value of
options held at fiscal year-end. Aequitron does not have any outstanding stock
appreciation rights.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE OPTIONS AT APRIL 30, 1996 AT APRIL 30, 1996
NAME EXERCISE REALIZED(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(2)
- ---------------------- ----------- ----------- ------------------------- ----------------------------
<S> <C> <C> <C> <C>
James B. Hickey,
Jr.................. -- -- 190,000/260,000 $873,750/$660,624
Jeffrey A. Blair...... 15,000 $45,938 58,200/87,800 $255,662/$213,900
William M. Milne...... 12,000 $40,500 23,625/60,875 $100,093/$100,406
Robert C. Samec....... -- -- 23,025/62,475 $ 97,668/$106,206
Edson R. Weeks, III... 10,000 $33,750 23,025/62,475 $ 97,668/$106,206
</TABLE>
- ---------------
(1) Value is calculated based on the amount, if any, by which the closing price
for the Aequitron Common Stock as quoted on the Nasdaq National Market on
the date of exercise exceeds the option exercise price, multiplied by the
number of shares to which the exercise relates.
(2) Value is calculated on the basis of the difference between the option
exercise price and the closing sale price for Aequitron's Common Stock at
April 30, 1996 as quoted on the Nasdaq National Market, multiplied by the
number of shares of Common Stock underlying the option.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT ARRANGEMENTS
Aequitron has entered into an employment agreement with James B. Hickey,
Jr., which, in addition to the compensation shown in the Summary Compensation
Table, provides for compensation in the event Mr. Hickey's employment with
Aequitron is terminated under certain circumstances. Upon termination of
employment initiated by Aequitron's Board of Directors other than for cause, Mr.
Hickey will receive salary and medical insurance for twelve (12) months. Upon
termination for cause, payment of severance is at the discretion of the Board.
Aequitron also entered into an employment agreement with Jeffrey A. Blair.
In addition to the compensation shown in the Summary Compensation Table, Mr.
Blair has the right to six months of severance pay if the Board terminates his
employment without cause.
As described in the Compensation and Stock Option Committee Report,
Aequitron entered into Change In Control Employment Agreements with each of
James B. Hickey, Jr., William M. Milne, Jeffrey A. Blair, Robert C. Samec, Edson
R. Weeks, III, Patricia A. Hamm and Earl H. Slee. Each such Agreement provides
that, following a change of control of Aequitron, if the executive officer is
subsequently terminated without cause or voluntarily resigns within 12 months of
such change of control, he or she will receive a lump sum amount equal to two
times his or her current base compensation plus two times his or her target
bonus under the Aequitron's Management Incentive Plan. The Merger triggers this
change of control provision. In addition, all options will become fully vested
upon such termination or resignation and will be exercisable for three months.
COMPENSATION OF DIRECTORS
Since 1987, Aequitron has paid each non-employee director an annual fee of
$12,000, payable in twelve monthly installments. In addition, since April 1995,
such directors also receive $1,000 for each Board meeting attended in person or
$500 for attending a meeting by telephone conference. Non-employee directors
also receive an automatic annual grant of a non-qualified stock option pursuant
to the 1988 Stock Option Plan on the date of Aequitron's annual meeting each
year. Each option granted enables that director to purchase 10,000 shares of
Aequitron's Common Stock at an option exercise price equal to the fair market
value of such
59
<PAGE> 71
shares on the date the option is granted. Each option granted to a director is
exercisable beginning one year after the date of grant, and will generally
expire at the earlier of (i) twelve months after the optionee ceases to be a
director and (ii) five years after the date of grant.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL SHAREHOLDERS
To the best of Aequitron's knowledge, the only beneficial owners of more
than five percent (5%) of Aequitron's outstanding shares of Common Stock as of
October 20, 1996 are listed below.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENT
OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
- ------------------------------------------------------------------- ------------------ --------
<S> <C> <C>
Heartland Advisors, Inc............................................ 450,000(1) 9.1%
790 North Milwaukee Street
Milwaukee, WI 53202
Dimensional Fund Advisors Inc...................................... 254,100(2) 5.1%
1299 Ocean Avenue
Santa Monica, CA 90401
First Bank System, Inc............................................. 696,800(3) 14.1%
c/o First Trust National Association
180 East Fifth Street
St. Paul, MN 55101
James B. Hickey, Jr................................................ 469,808(4) 8.7%
c/o Aequitron Medical, Inc.
14800 28th Avenue North
Minneapolis, Minnesota 55447
</TABLE>
- ---------------
(1) All shares are held for the beneficial ownership of various accounts for
which Heartland Advisors, Inc. acts as fiduciary; Heartland Advisors, Inc.
has sole voting and sole investment power over all of the shares. Aequitron
has relied on information contained in a Schedule 13G dated October 10, 1996
from Heartland Advisors, Inc.
(2) Includes 55,700 shares owned by DFA Investment Dimensions Group Inc. and
17,600 shares owned by the DFA Investment Trust Company; the officers of
both companies are also officers of Dimensional Fund Advisors Inc. and in
such capacity have shared voting and dispositive power over such shares.
Aequitron has relied on information contained in a Schedule 13G dated
January 30, 1995 from Dimensional Fund Advisors, Inc. and other information
available to Aequitron.
(3) All shares are held for the beneficial ownership of various accounts for
which First Bank acts as fiduciary; First Bank has sole voting power over
all of the shares, sole investment power over 663,300 shares and no
investment power over 33,500 shares. Aequitron has relied on information in
a Schedule 13G dated February 9, 1996 and subsequent information furnished
by First Bank.
(4) Includes 450,000 shares which may be purchased by Mr. Hickey upon exercise
of currently exercisable options. Under the rules of the SEC, shares not
actually outstanding are deemed to be beneficially owned by an individual if
such individual has the right to acquire the shares within 60 days. Pursuant
to such SEC rules, shares deemed beneficially owned by virtue of an
individual's right to acquire them are also treated as outstanding when
calculating the percent of the class owned by such individual and when
determining the percent owned by any group in which the individual is
included.
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<PAGE> 72
MANAGEMENT SHAREHOLDINGS
The following table provides information as of October 25, 1996 concerning
the beneficial ownership of Aequitron's Common Stock by (i) each director of
Aequitron, (ii) each of the executive officers named in the Summary Compensation
Table, and (iii) all directors and executive officers as a group. Except as
otherwise indicated, the persons named in the table have sole voting and
investment power with respect to all shares of Common Stock owned by them.
<TABLE>
<CAPTION>
NAME OF DIRECTOR, NAMED EXECUTIVE NUMBER OF SHARES PERCENT OF
OFFICER OR IDENTITY OF GROUP BENEFICIALLY OWNED(1) CLASS(1)
- --------------------------------------------------------------- --------------------- ----------
<S> <C> <C>
James B. Hickey, Jr............................................ 469,808(2) 8.7%
Ervin F. Kamm, Jr.............................................. 35,000(3) 0.7%
Lawrence A. Lehmkuhl........................................... 78,000(4) 1.6%
David B. Morse................................................. 51,300(5) 1.0%
Gerald E. Rhodes............................................... 70,000(6) 1.4%
Jeffrey A. Blair............................................... 153,889(7) 3.0%
William M. Milne............................................... 92,195(8) 1.8%
Robert C. Samec................................................ 80,300(9) 1.6%
Edson R. Weeks, III............................................ 102,252(10) 2.0%
All Directors and Executive Officers as a Group (11 persons)... 1,202,744(11) 19.6%
</TABLE>
- ---------------
(1) Under the rules of the SEC, shares not actually outstanding are deemed to
be beneficially owned by an individual if such individual has the right to
acquire the shares within 60 days. Pursuant to such SEC rules, shares
deemed beneficially owned by virtue of an individual's right to acquire
them are also treated as outstanding when calculating the percent of the
class owned by such individual and when determining the percent owned by
any group in which the individual is included.
(2) Includes 450,000 shares which may be purchased by Mr. Hickey upon exercise
of currently exercisable options.
(3) Includes 35,000 shares which may be purchased by Mr. Kamm upon exercise of
currently exercisable options.
(4) Includes 30,000 shares which may be purchased by Mr. Lehmkuhl upon exercise
of currently exercisable options.
(5) Includes 30,000 shares which may be purchased by Mr. Morse upon exercise of
currently exercisable options, 8,000 shares held in trust for Mr. Morse's
benefit and 500 shares held by Mr. Morse's spouse for which he disclaims
having voting or investment power.
(6) Includes 30,000 shares which may be purchased by Mr. Rhodes upon exercise
of currently exercisable options.
(7) Includes 146,000 shares which may be purchased by Mr. Blair upon exercise
of currently exercisable options.
(8) Includes 75,500 shares which may be purchased by Mr. Milne upon exercise of
currently exercisable options.
(9) Includes 76,500 shares which may be purchased by Mr. Samec upon exercise of
currently exercisable options.
(10) Includes 76,500 shares which may be purchased by Mr. Weeks upon exercise of
currently exercisable options.
(11) Includes 1,019,500 shares which may be purchased by the directors and
executive officers of Aequitron upon exercise of currently exercisable
options.
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<PAGE> 73
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
David B. Morse, Chairman and a director of Aequitron, also serves as
general counsel to Aequitron. Mr. Morse has been a partner with the law firm of
Best & Flanagan PLLP in Minneapolis, Minnesota since 1990. During the fiscal
year ended April 30, 1996, Best & Flanagan PLLP billed Aequitron $400,500 for
legal services performed for Aequitron.
COMPENSATION AND STOCK OPTION COMMITTEE REPORT
The Compensation Committee of the Board of Directors (the "Committee") is
responsible for setting and administering policies for the annual compensation
and stock option programs for the Chief Executive Officer and executive officers
of Aequitron. The Committee is composed of independent outside directors who
make recommendations to the full Board of Directors on base salary, the annual
incentive compensation, long-term incentives in the form of stock options and
benefits for the executive officers.
PHILOSOPHY
Aequitron's compensation programs seek to improve its financial performance
by rewarding efforts which enhance shareholder value through achievement of
corporate objectives, business strategies and performance goals for the purpose
of attracting and retaining key management talent for the long-term growth of
Aequitron.
BASE SALARY
Base salaries for executive officers are based on competitive practices of
companies in the same industry and of comparable size, taking into consideration
levels of responsibility, experience and individual performance. Officer salary
ranges are reviewed by the Committee annually in conjunction with the approval
of Aequitron's annual operating and total compensation plans.
ANNUAL INCENTIVE COMPENSATION
Under the Management Incentive Plan ("MIP"), executive officers and certain
other members of management participated in its annual incentive bonus for
fiscal 1996. The MIP is intended to tie cash compensation to corporate
performance and individual performance goals. The MIP has three levels of
participants, each with a different incentive amount as a percentage of their
base salary. Potential payouts are then based on Aequitron's financial plan
performance, and, for certain levels, the individual's performance versus a set
of personal, measurable objectives, approved by senior management. Total
incentive compensation is then a combination of corporate and individual
objective attainment.
LONG-TERM INCENTIVE COMPENSATION
The Stock Option Committee of the Board of Directors is responsible for
developing and administering policies for granting stock options under
Aequitron's Stock Option Program. The Stock Option Committee is comprised of
three outside directors, two of whom are members of the Compensation Committee.
The objectives of the program are to create a direct link between compensation
and the long-term stock performance of Aequitron, and to enable executive
officers to acquire and maintain a long term ownership position in Aequitron
thus retaining key management.
Stock options are granted either annually or bi-annually (typically in
August) depending on job level. Each job level has a corresponding range of
shares to be considered based on an individual's responsibilities, performance,
future potential and previous grants. The option price of each option granted is
the fair market value of Aequitron's Common Stock as determined by the closing
price on the day of grant. Options have ten-year terms and vest in installments,
generally over five years.
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<PAGE> 74
BENEFITS
The same health, life and disability insurance benefits are offered to
executive officers as are available to Aequitron employees generally. Executive
officers also receive prerequisites which did not exceed the levels set by the
Commission for disclosure for fiscal 1996.
CHANGE IN CONTROL COMPENSATION
The Committee believes the ability to recruit and maintain an outstanding
management team is essential to protect and enhance the best interests of
Aequitron and its shareholders. In recent years the medical products industry
has experienced a consolidation of products and services through mergers and
acquisitions. In order to assure the continued services and dedication of its
executive officers in the event of any threatened or actual change in control of
Aequitron, the Committee entered into change in control employment agreements
with its executive officers in December 1994. See "Employment Contracts and
Termination of Employment Arrangements."
CHIEF EXECUTIVE OFFICER COMPENSATION
The Compensation Committee annually reviews and approves the compensation
of James B. Hickey, Jr., the Chief Executive Officer, on the basis of
Aequitron's financial performance and the extent to which strategic and business
plan goals are met. The components of Mr. Hickey's compensation are the same as
described above for all executive officers. With a results-oriented philosophy,
Mr. Hickey's compensation is predominately geared toward increasing shareholder
value through the attainment of long-term and short-term corporate goals.
For fiscal 1996, Mr. Hickey earned a base salary of $209,231, an increase
from $190,000 in fiscal 1995 and Mr. Hickey earned a bonus for fiscal 1996 of
$57,538, in accordance with the Company's MIP. In addition, stock options to
purchase 150,000 shares were granted to Mr. Hickey vesting over five years
beginning in 1996. Accordingly, Mr. Hickey currently holds options to purchase
an aggregate of 450,000 shares.
<TABLE>
<CAPTION>
COMPENSATION STOCK OPTION
COMMITTEE COMMITTEE
- --------------------- ---------------------
<S> <C>
Lawrence A. Lehmkuhl Lawrence A. Lehmkuhl
Ervin F. Kamm, Jr. David B. Morse
Gerald E. Rhodes Gerald E. Rhodes
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPANTS
During fiscal year 1996, the Compensation Committee consisted of Lawrence
A. Lehmkuhl, Ervin P. Kamm, Jr. and Gerald E. Rhodes. None of these persons is
or has been an executive officer or employee of Aequitron or any of its
subsidiaries. In addition, there are no Compensation Committee interlocks
between Aequitron and other entities involving Aequitron executive officers and
Board members who serve as executive officers of such entities.
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<PAGE> 75
STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return on the
Common Stock of Aequitron for the last five fiscal years with the cumulative
total return on the S&P Midcap 400 Index and an index of peer companies selected
by Aequitron. The peer group includes Allied Healthcare Products, Inc.,
Healthdyne Technologies, Inc., Marquest Medical Products, Inc., Medical Graphics
Corp., Nellcor Puritan Bennett Incorporated and Respironics, Inc.
THE REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON
EXECUTIVE COMPENSATION IMMEDIATELY ABOVE AND THE PERFORMANCE GRAPH THAT APPEARS
BELOW SHALL NOT BE DEEMED TO BE SOLICITING MATERIAL OR TO BE FILED UNDER THE
SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934, OR INCORPORATED
BY REFERENCE IN ANY DOCUMENT SO FILED.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD AEQUITRON S&P MIDCAP
(FISCAL YEAR COVERED) MEDICAL INC. 400 INDEX PEER GROUP
--------------------- ------------ ---------- ----------
<S> <C> <C> <C>
APR91 100 100 100
APR92 90.48 120.04 136.17
APR93 85.71 137.44 121.92
APR94 119.05 150.92 151.95
APR95 195.24 165.68 209.98
APR96 261.90 215.07 250.84
</TABLE>
PROPOSAL NO. 3
RATIFICATION OF INDEPENDENT AUDITORS
The Aequitron Board has recommended that the Aequitron shareholders ratify
the selection of Ernst & Young LLP to serve as the independent auditors for
Aequitron for the fiscal year ending April 30, 1997 or until a successor is
appointed.
Ernst & Young LLP has been the principal independent certified public
accounting firm utilized by Aequitron since 1983. During this time, Ernst &
Young LLP has audited Aequitron's financial statements, made limited reviews of
the interim financial reports, reviewed filings with the Securities and Exchange
Commission and provided general advice regarding related accounting matters.
This matter is being submitted to the Aequitron shareholders for approval
by the affirmative vote of the holders of record of a majority of the shares
represented and voting, in person or by proxy, at the Annual Meeting.
THE AEQUITRON BOARD RECOMMENDS THE ADOPTION OF THE FOLLOWING RESOLUTION
THAT WILL BE PRESENTED TO THE ANNUAL MEETING.
RESOLVED, that the shareholders of Aequitron hereby ratify the
selection of Ernst & Young LLP as independent auditors for the fiscal year
ending April 30, 1997.
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<PAGE> 76
The persons designated in the enclosed proxy will vote your shares for
appointment unless instructions to the contrary are indicated in the enclosed
proxy.
Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting to respond to appropriate questions and to make statements should
they desire to do so.
OTHER MATTERS
It is not expected that any matters other than those described in this
Proxy Statement/Prospectus will be brought before the Aequitron Annual Meeting.
If any other matters are presented, however, it is the intention of the persons
named in the Aequitron proxy to vote such proxies in accordance with their
respective discretion.
LEGAL MATTERS
Certain legal matters with respect to the validity of the securities
offered hereby and the federal income tax consequences of the Merger will be
passed upon for NPB by Morrison & Foerster LLP. Certain legal matters with
respect to the federal income tax consequences of the Merger will be passed upon
for Aequitron by Best & Flanagan, PLLP.
EXPERTS
The consolidated financial statements incorporated in this Proxy
Statement/Prospectus by reference to NPB's Annual Report on Form 10-K for the
year ended July 7, 1996, have been so incorporated in reliance on the report of
Price Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
The consolidated financial statements of Aequitron Medical, Inc. at April
30, 1996 and 1995, and for each of the three years in the period ended April 30,
1996, included in the Annual Report on Form 10-K/A, for the year ended April 30,
1996, which is incorporated by reference and made a part of this Proxy
Statement/Prospectus and Registration Statement, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING.
The proxy rules of the SEC permit shareholders, after timely notice to
issuers, to present proposals for shareholder action in issuer proxy statements
where such proposals are consistent with applicable law, pertain to matters
appropriate for shareholder action and are not properly omitted by issuer action
in accordance with the proxy rules. Aequitron's annual meeting for fiscal year
ending April 30, 1997 is expected to be held on or about September 25, 1997, and
proxy materials in connection with that meeting are expected to be mailed on or
about August 13, 1997. Except as indicated below, shareholder proposals prepared
in accordance with the proxy rules must be received by Aequitron on or before
April 9, 1997.
The Amended Bylaws of Aequitron establish an advance notice procedure with
regard to (i) certain business to be brought before an annual meeting of
shareholders of Aequitron and (ii) the nomination by shareholders of candidates
for election as directors.
PROPERLY BROUGHT BUSINESS. The Amended Bylaws provide that at the annual
meeting only such business may be conducted as is of a nature that is
appropriate for consideration at an annual meeting and has been either specified
in the notice of the meeting, otherwise properly brought before the meeting by
or at the direction of the Board of Directors, or otherwise properly brought
before the meeting by a shareholder who has given timely written notice to the
Secretary of Aequitron of such shareholder's intention to bring such business
before the meeting. To be timely, the notice must be given by such shareholder
to the Secretary of Aequitron
65
<PAGE> 77
not less than 50 days and no more than 75 days prior to a meeting date
corresponding to the previous year's annual meeting. Notices relating to the
conduct of such business at an annual meeting must contain certain information
as described in Section 12.2 of Aequitron's Amended Bylaws, which Amended Bylaws
are available for inspection by shareholders at Aequitron's principal executive
offices pursuant to Section 302A.461, subd. 4 of the Minnesota Statutes. Nothing
in the Bylaws precludes discussion by any shareholder of any business properly
brought before the annual meeting in accordance with Aequitron's Amended Bylaws.
SHAREHOLDER NOMINATIONS. The Amended Bylaws provide that a notice of
proposed shareholder nominations for the election of directors must be timely
given in writing to the Secretary of Aequitron prior to the meeting at which
directors are to be elected. To be timely, the notice must be given by such
shareholder to the Secretary of Aequitron not less than 50 days nor more than 75
days prior to a meeting date corresponding to the previous year's annual
meeting. The notice to Aequitron from a shareholder who intends to nominate a
person at the meeting for election as a director must contain certain
information as described in Section 12.3 of Aequitron's Amended Bylaws, which
Amended Bylaws are available for inspection by shareholders at Aequitron's
principal executive offices pursuant to Section 302A.461, subd. 4 of the
Minnesota Statutes. If the presiding officer of a meeting of shareholders
determines that a person was not nominated in accordance with the foregoing
procedure, such person will not be eligible for election as a director.
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<PAGE> 78
APPENDIX A
AMENDED AND RESTATED AGREEMENT
AND PLAN OF MERGER
<PAGE> 79
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
ARTICLE I: THE MERGER......................................................... A-1
1.1 The Merger......................................................... A-1
1.2 Effective Time of the Merger....................................... A-1
ARTICLE II: THE SURVIVING CORPORATION.......................................... A-1
2.1 Certificate of Incorporation....................................... A-1
2.2 By-laws............................................................ A-1
2.3 Directors and Officers of Surviving Corporation.................... A-1
ARTICLE III: CONVERSION OF SHARES............................................... A-2
3.1 Exchange Ratio..................................................... A-2
3.2 Exchange of Shares................................................. A-2
3.3 Dividends; Transfer Taxes.......................................... A-3
3.4 No Fractional Shares............................................... A-3
3.5 Closing of AMI Transfer Books...................................... A-4
3.6 Closing............................................................ A-4
3.7 Supplementary Action............................................... A-4
3.8 Dissenting Shares.................................................. A-4
ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF AMI.............................. A-4
4.1 Organization....................................................... A-5
4.2 Capitalization..................................................... A-5
4.3 Authority Relative to this Agreement............................... A-5
4.4 Consents and Approvals; No Violations.............................. A-6
4.5 Reports and Financial Statements................................... A-6
4.6 Absence of Certain Changes or Events............................... A-6
4.7 Information in Registration Statement and Proxy Statement.......... A-7
4.8 Litigation......................................................... A-7
4.9 Contracts.......................................................... A-7
4.10 Employee Benefit Plans............................................. A-8
4.11 Tax Matters........................................................ A-9
4.12 Compliance with Applicable Law..................................... A-11
4.13 Subsidiaries....................................................... A-11
4.14 Interested Party Transactions...................................... A-11
4.15 Labor and Employment Matters....................................... A-11
4.16 Ownership of Shares of NPB Common Stock............................ A-11
4.17 Insurance.......................................................... A-11
4.18 Contracts with Physicians, Hospitals, HMOs and Third Party
Providers.......................................................... A-12
4.19 Environmental Protection........................................... A-12
4.20 Intellectual Property Rights....................................... A-13
4.21 FDA and Related Matters............................................ A-14
4.22 Real Property...................................................... A-14
4.23 Complete Copies of Requested Reports............................... A-15
4.24 Share Ownership.................................................... A-15
4.25 Opinion of Financial Advisors...................................... A-15
</TABLE>
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<PAGE> 80
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
4.26 Pooling of Interests............................................... A-15
4.27 Accounts Receivable................................................ A-15
4.28 Customers and Suppliers............................................ A-16
4.29 Representations Complete........................................... A-16
4.30 Takeover Statutes.................................................. A-16
4.31 Voting Arrangements................................................ A-16
4.32 Ownership of Shares................................................ A-16
4.33 Inventories........................................................ A-16
4.34 Product Liability Matters.......................................... A-16
4.35 No Undisclosed Liabilities......................................... A-17
ARTICLE V: REPRESENTATIONS AND WARRANTIES OF NPB.............................. A-17
5.1 Organization....................................................... A-17
5.2 Capitalization..................................................... A-17
5.3 Authority Relative to this Agreement............................... A-18
5.4 Consents and Approvals; No Violations.............................. A-18
5.5 Reports and Financial Statements; Absence of Certain Changes....... A-18
5.6 Information in Registration Statement and Proxy Statement.......... A-19
5.7 Share Ownership.................................................... A-19
5.8 Compliance With Applicable Law..................................... A-19
5.9 Ownership of Shares of AMI Common Stock............................ A-19
5.10 Complete Copies of Requested Reports............................... A-19
5.11 Pooling of Interests............................................... A-19
5.12 Representations Complete........................................... A-19
ARTICLE VI: CONDUCT OF BUSINESS PENDING THE MERGER............................. A-20
6.1 Conduct of Business by AMI and NPB Pending the Merger.............. A-20
6.2 Compensation Plans................................................. A-22
6.3 Current Information................................................ A-22
6.4 Letters of AMI's and NPB's Auditors................................ A-22
6.5 Legal Conditions to Merger......................................... A-22
6.6 Affiliates; Pooling of Interests................................... A-23
6.7 Advice of Changes; Government Filings.............................. A-23
6.8 Accounting Methods................................................. A-24
ARTICLE VII: ADDITIONAL AGREEMENTS.............................................. A-24
7.1 Access and Information............................................. A-24
7.2 No Solicitation of Transactions.................................... A-24
7.3 Registration Statement............................................. A-24
7.4 Proxy Statement; Stockholder Approval.............................. A-24
7.5 Nasdaq National Market............................................. A-25
7.6 Antitrust Laws..................................................... A-25
7.7 Certain Employee Benefit Plans Matters............................. A-25
7.8 Stock Options and Warrants......................................... A-26
7.9 Director and Officer Indemnification, Etc.......................... A-26
7.10 Public Announcements............................................... A-26
7.11 Expenses........................................................... A-27
</TABLE>
ii
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<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
7.12 Additional Agreements.............................................. A-27
7.13 AMI Accruals and Reserves.......................................... A-27
7.14 FIRPTA............................................................. A-27
7.15 Takeover Statutes.................................................. A-27
7.16 Management Incentive Plan.......................................... A-28
7.17 Existing Agreements With AMI Officers and Employees................ A-28
7.18 Consulting Agreements.............................................. A-28
ARTICLE VIII: CONDITIONS TO CONSUMMATION OF THE MERGER........................... A-28
8.1 Conditions to Each Party's Obligation to Effect the Merger......... A-28
8.2 Conditions to Obligation of AMI to Effect the Merger............... A-29
8.3 Conditions to Obligations of NPB to Effect the Merger.............. A-30
ARTICLE IX: TERMINATION, AMENDMENT AND WAIVER.................................. A-30
9.1 Termination........................................................ A-30
9.2 Effect of Termination.............................................. A-31
9.3 Cancellation Fees; Expenses........................................ A-31
9.4 Amendment.......................................................... A-32
9.5 Extension; Waiver.................................................. A-32
ARTICLE X: GENERAL PROVISIONS................................................. A-32
10.1 Survival of Representations, Warranties and Agreements............. A-32
10.2 Brokers............................................................ A-32
10.3 Notices............................................................ A-33
10.4 Descriptive Headings............................................... A-33
10.5 Entire Agreement; Assignment....................................... A-33
10.6 Governing Law...................................................... A-33
10.7 Counterparts....................................................... A-33
10.8 Validity........................................................... A-33
10.9 Jurisdiction and Venue............................................. A-34
10.10 Investigation...................................................... A-34
10.11 Consents........................................................... A-34
</TABLE>
iii
<PAGE> 82
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of September 9,
1996, by and among Nellcor Puritan Bennett Incorporated, Delaware corporation
("NPB"), and Aequitron Medical, Inc., a Minnesota corporation ("AMI").
WHEREAS, the Boards of Directors of NPB and AMI each have determined that
the acquisition of AMI by NPB is in the best interests of their respective
companies and stockholders and presents an opportunity for their respective
companies to achieve long-term strategic and financial benefits, and accordingly
have agreed to effect the merger provided for herein upon the terms and subject
to the conditions set forth herein; and
WHEREAS, for federal income tax purposes, it is intended that the merger
contemplated herein shall qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and for financial accounting purposes shall be accounted for as a pooling of
interests.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement, at
the Effective Time (as defined in Section 1.2 hereof), AMI shall be merged with
and into NPB, NPB shall be the surviving corporation (the "Surviving
Corporation") and the separate existence of AMI shall thereupon cease (the
"Merger"). The Merger shall have the effects set forth in Section 259 of the
General Corporation Law of the State of Delaware (the "DGCL") and Section
302A.641 of the Minnesota Business Corporations Act ("MBCA").
1.2 Effective Time of the Merger. The Merger shall become effective when a
properly executed Certificate of Merger is duly filed with the Secretary of
State of the State of Delaware and the Secretary of State of the State of
Minnesota, which filings shall be made as soon as practicable after the closing
of the transactions contemplated by this Agreement in accordance with Section
3.6 hereof upon satisfaction or waiver of the conditions set forth in Article
VIII. When used in this Agreement, the term "Effective Time" shall mean the date
and time at which both such Certificates of Merger have been so filed.
ARTICLE II
THE SURVIVING CORPORATION
2.1 Certificate of Incorporation. The Certificate of Incorporation of NPB
shall be the Certificate of Incorporation of the Surviving Corporation, until
duly amended in accordance with the terms thereof and the DGCL.
2.2 Bylaws. The Bylaws of NPB as in effect at the Effective Time shall be
the Bylaws of the Surviving Corporation, until duly amended in accordance with
the terms thereof and the DGCL.
2.3 Directors and Officers of Surviving Corporation.
(a) The directors of NPB shall be the directors of the Surviving
Corporation and shall hold office from the Effective Time until their respective
successors are duly elected or appointed and qualified or until their earlier
death, resignation or removal in accordance with the Certificate of
Incorporation and Bylaws of the Surviving Corporation, or as otherwise provided
by law.
(b) The officers of NPB at the Effective Time shall be the initial officers
of the Surviving Corporation and shall hold office from the Effective Time until
removed or until their respective successors are duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Certificate of Incorporation and Bylaws of the Surviving Corporation,
or as otherwise provided by law.
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<PAGE> 83
ARTICLE III
CONVERSION OF SHARES
3.1 Exchange Ratio. At the Effective Time, by virtue of the Merger and
without any action on the part of the holder thereof:
(a) Subject to Section 3.4 hereof, each share of common stock, no par value
("AMI Common Stock"), of AMI that is issued and outstanding immediately prior to
the Effective Time (other than shares of AMI Common Stock to be canceled
pursuant to Section 3.1(b)) shall be converted at the Effective Time into the
right to receive that fraction of a share of NPB of common stock, par value
$0.001 per share, of NPB equal to the Exchange Ratio (as defined below) together
with the corresponding preferred stock purchase rights associated with such
shares of NPB common stock in accordance with the NPB Rights Agreement (as
defined in Section 5.2(b)) ("NPB Common Stock"). All references herein to NPB
Common Stock, including the shares issuable in the Merger, shall be deemed to
include the associated preferred stock purchase rights, except where the context
otherwise clearly requires.
The exchange ratio for the Merger ("Exchange Ratio") shall be calculated as
follows:
1. If the Closing Market Value (as defined below) is greater than or equal
to $23.14 and less than or equal to $26.61, the Exchange Ratio will be .432;
2. If the Closing Market Value is greater than $26.61, the Exchange Ratio
will be the quotient of (A) $11.50 divided by (B) the Closing Market Value,
rounded to the nearest one-one thousandth of a share;
3. If the Closing Market Value is less than $23.14 and greater than or
equal to $17.00, the Exchange Ratio will be the quotient of (A) $10.00 divided
by (B) the Closing Market Value, rounded to the nearest one-one thousandth of a
share; and
4. If the Closing Market Value is less than $17.00, the Exchange Ratio will
be .588.
For purposes of this Agreement, the "Closing Market Value" shall mean the
average of the closing prices of NPB Common Stock as reported by the Nasdaq
National Market for the ten trading days ending on the fifth trading day prior
to the AMI shareholders meeting referred to in Section 7.4.
At the Effective Time, all such shares of AMI Common Stock shall no longer
be outstanding and shall automatically be canceled and retired and shall cease
to exist, and each certificate previously representing any such shares of AMI
Common Stock (a "Certificate") shall thereafter represent the right to receive
(i) the number of whole shares of NPB Common Stock and (ii) cash in lieu of
fractional shares into which the shares of AMI Common Stock represented by such
Certificate have been converted pursuant to Section 3.2 and Section 3.4 hereof.
Each Certificate shall be exchanged for (x) certificates representing whole
shares of NPB Common Stock, and (y) cash in lieu of fractional shares, issued in
consideration therefor upon the surrender of such Certificate in accordance with
the provisions hereof, without interest thereon. If prior to the Effective Time
NPB should split or combine the shares of NPB Common Stock, or pay a stock
dividend or other stock distribution, in, or in exchange of, shares of NPB
Common Stock, or engage in any similar transaction, then the Exchange Ratio will
be appropriately adjusted to reflect such split, combination, dividend, exchange
or other distribution or similar transaction.
At the Effective Time, all stock options, warrants and convertible
securities to purchase AMI Common Stock then outstanding shall be assumed by NPB
in accordance with Section 7.8.
(b) Each share of AMI Common Stock held in the treasury of AMI and each
share of AMI Common Stock held by NPB or any subsidiary of NPB immediately prior
to the Effective Time shall be canceled and retired and cease to exist, and no
shares of NPB Common Stock shall be issued in exchange therefor. All shares of
NPB Common Stock owned by AMI or any subsidiary of AMI shall become treasury
stock of NPB.
3.2 Exchange of Shares.
(a) Prior to the Effective Time, NPB shall select, and enter into an
agreement (in form and substance reasonably satisfactory to AMI) with, a bank or
trust company to act as Exchange Agent hereunder (the
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<PAGE> 84
"Exchange Agent"). Within a reasonable period of time after the Effective Time,
NPB shall make available, and each holder of shares of AMI Common Stock (other
than Excluded Shares) will be entitled to receive upon surrender to the Exchange
Agent of one or more Certificates, certificates representing the number of whole
shares of NPB Common Stock and cash in lieu of fractional shares into which such
shares of AMI Common Stock are converted in the Merger. The shares of NPB Common
Stock into which the shares of AMI Common Stock shall be converted in the Merger
shall be deemed to have been issued at the Effective Time.
(b) As soon as reasonably practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of AMI Common Stock (i) a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as NPB may reasonably specify that are not inconsistent with the
terms of this Agreement) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing shares
of NPB Common Stock. Upon surrender of a Certificate for cancellation to the
Exchange Agent together with such letter of transmittal, duly executed, the
holder of such Certificate shall be entitled to receive in exchange therefor (i)
a certificate representing that number of whole shares of NPB Common Stock and
(ii) a check representing the amount of cash in lieu of fractional shares, if
any, which such holder has the right to receive in respect of the Certificate so
surrendered pursuant to the provisions of this Article III.
(c) In the event that any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed, NPB will issue or cause to be
issued in exchange for such lost, stolen or destroyed Certificate the number of
whole shares of NPB Common Stock and cash in lieu of fractional shares into
which the shares of AMI Common Stock represented by the Certificate are
converted in the Merger in accordance with this Article III. When authorizing
such issuance in exchange therefor, NPB may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed Certificate to give NPB a bond in such sum as it may direct
as indemnity, or such other form of indemnity, as it shall direct, against any
claim that may be made against NPB with respect to the Certificate alleged to
have been lost, stolen or destroyed.
3.3 Dividends; Transfer Taxes. No dividends that are declared on shares of
NPB Common Stock after the Effective Time will be paid to persons entitled to
receive certificates representing shares of NPB Common Stock until such persons
surrender their Certificates. Upon such surrender, there shall be paid to the
person in whose name the certificates representing such shares of NPB Common
Stock shall be issued, any dividends which shall have become payable with
respect to such shares of NPB Common Stock between the Effective Time and the
time of such surrender. In no event shall the person entitled to receive such
dividends be entitled to receive interest on such dividends. If any certificates
for any shares of NPB Common Stock are to be issued in a name other than that in
which the Certificate surrendered in exchange therefor is registered, it shall
be a condition of such exchange that the person requesting such exchange shall
(a) pay to the Exchange Agent any transfer or other taxes required by reason of
the issuance of certificates for such shares of NPB Common Stock in a name other
than that of the registered holder of the Certificate surrendered or (b)
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not applicable. Notwithstanding anything in this Agreement to the
contrary, neither the Exchange Agent nor any party hereto shall be liable to a
holder of shares of AMI Common Stock for any shares of NPB Common Stock or
dividends thereon or, in accordance with Section 3.4 hereof, the cash payment
for fractional interests, delivered to a public official pursuant to applicable
escheat laws following the passage of time specified therein.
3.4 No Fractional Shares. No fractional shares of NPB Common Stock shall
be issued pursuant to the Merger. In lieu of the issuance of any such fractional
share of NPB Common Stock pursuant to Section 3.2, cash adjustments will be paid
to holders in respect of any fractional share of NPB Common Stock that would
otherwise be issuable. The amount of such adjustment shall be the product of
such fraction of a share of NPB Common Stock multiplied by the closing sales
price per share of NPB Common Stock on the Nasdaq National Market on the
business day immediately preceding the Closing Date.
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<PAGE> 85
3.5 Closing of AMI Transfer Books. At the Effective Time, the stock
transfer books of AMI shall be closed and no transfer of shares of AMI Common
Stock shall thereafter be made. If, after the Effective Time, Certificates are
presented to the Surviving Corporation, they shall be canceled and exchanged for
certificates representing shares of NPB Common Stock or cash in lieu of
fractional shares in accordance with the terms hereof. At and after the
Effective Time, the holders of shares of AMI Common Stock to be exchanged for
shares of NPB Common Stock pursuant to this Agreement shall cease to have any
rights as stockholders of AMI, except for the right to surrender such
Certificates in exchange for shares of NPB Common Stock as provided hereunder or
such dissenters' rights as are provided under applicable law.
3.6 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Morrison &
Foerster, 19900 MacArthur Boulevard, 12th Floor, Irvine, California 92765 at
9:00 a.m., local time, on the first business day (the "Closing Date") following
the date on which the AMI stockholders' meeting referred to in Section 7.4
hereof shall have occurred; provided that if all of the other conditions set
forth in Article VIII hereof are not satisfied or waived at such date the
Closing Date shall be the business day following the day on which all such
conditions have been satisfied or waived, or at such other date, time and place
as NPB and AMI shall agree.
3.7 Supplementary Action. If at any time after the Effective Time, any
further assignments or assurances in law or any other things are necessary or
desirable to vest or to perfect or confirm of record in the Surviving
Corporation the title to any property or rights of AMI, or otherwise to carry
out the provisions of this Agreement, the officers and directors of the
Surviving Corporation are hereby authorized and empowered on behalf of AMI in
the name of and on behalf of AMI to execute and deliver any and all things
necessary or proper to vest or to perfect or confirm title to such property or
rights in the Surviving Corporation, and otherwise to carry out the purposes and
provisions of this Agreement.
3.8 Dissenting Shares. If holders of AMI Common Stock are entitled to
dissent from the Merger and demand appraisal of any such AMI Common Stock under
applicable law (each person electing to exercise such rights, a "Dissenting
Holder"), any shares of AMI Common Stock held by a Dissenting Holder as to which
appraisal has been so demanded ("Excluded Shares") shall not be converted as
described in Section 3.1, but shall from and after the Effective Time represent
only the right to receive such consideration as may be determined to be due such
Dissenting Holder pursuant to applicable law; provided, however, that each share
of AMI Common Stock held by a Dissenting Holder who shall, after the Effective
Time, withdraw its demand for appraisal or lose its rights of appraisal with
respect to such shares of AMI Common Stock, in either case pursuant to
applicable law, shall not be deemed an Excluded Share, but shall be deemed to be
converted, as of the Effective Time, into the right to receive NPB Common Stock
in accordance with the Exchange Ratio.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF AMI
As used in this Agreement, (a) the term "Material Adverse Effect" means,
with respect to AMI or NPB, as the case may be, a material adverse effect on the
business, assets, operations or results of operation or condition (financial or
otherwise) of AMI or NPB, in each case including its subsidiaries taken as a
whole, or on its ability to perform its obligations hereunder and (b) the word
"subsidiary" when used with respect to any party means any corporation or other
organization, whether incorporated or unincorporated, of which such party or any
other subsidiary of such party is a general partner (excluding partnerships the
general partnership interests of which held by such party or any subsidiary of
such party do not have a majority of the voting interests in such partnership)
or of which at least a majority of the securities or other interests having by
their terms ordinary voting power to elect a majority of the Board of Directors
or others performing similar functions with respect to such corporations or
other organizations is directly or indirectly owned or controlled by such party
and/or by any one or more of the subsidiaries.
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<PAGE> 86
Except as set forth in the disclosure letter delivered to NPB at or prior
to the execution of this Agreement ("AMI Disclosure Schedule"), AMI represents
and warrants to NPB as follows:
4.1 Organization. AMI is a corporation duly organized, validly existing
and in good standing under the laws of the State of Minnesota and has the
corporate power to carry on its business as it is now being conducted. AMI is
duly qualified as a foreign corporation to do business, and is in good standing
in each jurisdiction where the character of its properties owned or held under
lease or the nature of its activities makes such qualification necessary, except
where the failure to be so qualified will not in the aggregate have a Material
Adverse Effect. Each subsidiary of AMI is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has the corporate power to carry on its business
as it is now being conducted and is duly qualified as a foreign corporation to
do business, and is in good standing in each jurisdiction where the character of
its properties owned or held under lease or the nature of its activities makes
such qualification necessary, except where the failure to be so duly organized,
validly existing and in good standing, to have such corporate power or to be so
qualified will not in the aggregate have a Material Adverse Effect. AMI has
delivered to NPB or its counsel complete and correct copies of its and its
subsidiaries' Articles of Incorporation and Bylaws.
4.2 Capitalization.
(a) As of September 1, 1996, the authorized capital stock of AMI consists
of 15,000,000 shares of AMI Common Stock. As of September 1, 1996, 4,950,842
shares of AMI Common Stock were issued and outstanding, stock options to acquire
1,177,400 shares of AMI Common Stock (the "AMI Stock Options") were outstanding
under all stock option plans of AMI, 417,955 additional shares of AMI Common
Stock were reserved for issuance under AMI's stock option plans. No changes have
occurred in such capitalization since September 1, 1996 that, in the aggregate,
would be material to AMI, except for option exercises in the ordinary course of
business. All of the issued and outstanding shares of AMI Common Stock are
validly issued, fully paid, nonassessable and free of preemptive rights or
similar rights created by statute, the Articles of Incorporation or Bylaws of
AMI or any agreement to which AMI or any of its subsidiaries is a party or by
which AMI or any of its subsidiaries is bound. Since September 1, 1996, AMI has
not issued any shares of its capital stock, except upon the exercise of AMI
Stock Options.
(b) Except as set forth in Section 4.2, there are not now, and at the
Effective Time there will not be, any shares of capital stock of AMI issued or
outstanding or any options, warrants, subscriptions, calls, rights, convertible
securities or other agreements or commitments obligating AMI to issue, transfer
or sell any shares of its capital stock. As of the date hereof, no bonds,
debentures, notes or other indebtedness having the right to vote (or convertible
into or exercisable for securities having the right to vote) on any matters on
which stockholders may vote ("Voting Debt") of AMI were issued or outstanding,
nor will there be any issued or outstanding at the Effective Time. All
outstanding shares of the capital stock of AMI's subsidiaries are validly
issued, fully paid, non-assessable and owned by AMI or one of its subsidiaries
free and clear of any liens, security interest, pledges, agreements, claims,
charges or encumbrances of any nature whatsoever. There are no voting trust or
other agreements or understandings to which AMI is a party with respect to the
voting of the capital stock of AMI or any of its subsidiaries. None of AMI or
its subsidiaries is required to redeem, repurchase or otherwise acquire shares
of capital stock of AMI, or any of its subsidiaries, respectively, as a result
of the transactions contemplated by this Agreement. Immediately after the
Effective Time, there will be no option, warrant, call, right or agreement
obligating AMI or any subsidiary of AMI to issue, deliver or sell, or cause to
be issued, delivered or sold, any shares of AMI Common Stock or any Voting Debt,
or obligating AMI or any subsidiary of AMI to grant, extend or enter into any
such option, warrant, call, right or agreement.
4.3 Authority Relative to this Agreement. AMI has the corporate power to
enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement by AMI and the consummation by AMI of
the transactions contemplated hereby have been duly authorized by AMI's Board of
Directors and, except for the favorable vote of a majority of the shares of
outstanding capital stock of AMI entitled to vote thereon in accordance with
applicable law, no other corporate proceedings on the part of AMI are necessary
to approve this Agreement or the transactions contemplated hereby. This
Agreement has been
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<PAGE> 87
duly and validly executed and delivered by AMI and constitutes a valid and
binding agreement of AMI, enforceable against AMI in accordance with its terms.
4.4 Consents and Approvals; No Violations. Except for applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the
"HSR Act"), the Securities Act of 1933, as amended (the "Securities Act"), the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), state or
foreign laws relating to takeovers, if applicable, state securities or blue sky
laws, and the filing and recordation of a Certificate of Merger as required by
the DGCL and MBCA, no filing with, and no permit, authorization, consent or
approval of, any public or governmental body or authority is necessary for the
consummation by AMI of the transactions contemplated by this Agreement, except
where a failure to make such filing or to obtain such permit, registration,
authorization, consent or approval will not in the aggregate have a Material
Adverse Effect. Neither the execution and delivery of this Agreement by AMI, nor
the consummation by AMI of the transactions contemplated hereby, nor compliance
by AMI with any of the provisions hereof, will (a) conflict with or result in
any breach of any provisions of the Articles of Incorporation or Bylaws of AMI
or any of its subsidiaries, (b) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation, acceleration or change in
the award, grant, vesting or determination) under, or give rise to creation of
any lien, charge, security interest or encumbrance upon any of the respective
properties or assets of AMI or any of its subsidiaries under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
license, contract, lease, agreement, arrangement or other instrument or
obligation to which AMI or any of its subsidiaries is a party or by which any of
them or any of their properties or assets may be bound or affected or (c)
violate any order, writ, injunction, decree, statute, rule or regulation of any
court or government authority applicable to AMI, any of its subsidiaries or any
of their properties or assets, except in the case of clauses (b) and (c) for
violations, breaches, defaults (or rights of termination, cancellation,
acceleration or change), liens, charges, security interests or encumbrances
which would not in the aggregate have a Material Adverse Effect.
4.5 Reports and Financial Statements. AMI has filed all reports required
to be filed with the Securities and Exchange Commission (the "SEC") pursuant to
the Exchange Act since May 1980 including, without limitation, Annual Reports on
Form 10-K for the years ended April 30, 1994, April 30, 1995 and April 30, 1996
(all such reports and amendments thereto, collectively, the "AMI SEC Reports"),
and has previously furnished or made available to NPB true and complete copies
of all AMI SEC Reports filed with respect to periods beginning after April 30,
1992 (including any exhibits thereto) and will promptly deliver to NPB any AMI
SEC Reports filed between the date hereof and the Effective Time. None of such
AMI SEC Reports, as of their respective dates (as amended through the date
hereof), contained or, with respect to the AMI SEC Reports filed after the date
hereof, will contain any untrue statement of a material fact or omitted or, with
respect to the AMI SEC Reports filed after the date hereof, will omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Each of the balance sheets (including the related notes) included in
the AMI SEC Reports fairly presents the consolidated financial position of AMI
and its subsidiaries as of the date thereof, and the other related statements
(including the related notes) included therein fairly present the results of
operations and the changes in cash flows of AMI and its subsidiaries for the
respective periods set forth therein, all in conformity with generally accepted
accounting principles consistently applied during the periods involved, except
as otherwise noted therein and subject, in the case of the unaudited interim
financial statements, to (a) normal year end adjustments which would not in the
aggregate be material in amount or effect and (b) the permitted exclusion of all
footnotes that would otherwise be required by generally acceptable accounting
principles.
4.6 Absence of Certain Changes or Events. Except as disclosed in the AMI
SEC Reports filed prior to the date of this Agreement, since April 30, 1996,
neither AMI nor any of its subsidiaries: (a) has taken any of the actions
prohibited in Section 6.1 or Section 6.2 hereof; (b) has incurred any material
liability, except in the ordinary course of its business and consistent with
past practices; (c) has suffered any change, or any event involving a
prospective change, in its business, assets, financial condition or results of
operation which has had, or is reasonably likely to have, in the aggregate a
Material Adverse Effect (other than as a result of changes or proposed changes
in federal or state health care (including health care reimbursement) laws or
regulations of
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general applicability or interpretations thereof, changes in generally accepted
accounting principles and changes that could, under the circumstances,
reasonably have been anticipated in light of disclosures made in writing by AMI
to NPB prior to the execution of this Agreement); or (d) subsequent to the date
hereof, except as permitted by Section 6.1 or Section 6.2 hereof, will conduct
its business and operations other than in the ordinary course of business and
consistent with past practices.
4.7 Information in Registration Statement and Proxy Statement. The
information relating to AMI and its subsidiaries to be contained in (a) the
Registration Statement on Form S-4 to be filed with the SEC by NPB under the
Securities Act for the purpose of registering the shares of NPB Common Stock to
be issued in the Merger or pursuant to this Agreement (the "Registration
Statement") and (b) the proxy statement to be distributed in connection with
AMI's meeting of stockholders to vote upon this Agreement and related matters
(the "Proxy Statement"), will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading.
4.8 Litigation. As of the date of this Agreement, except as disclosed in
the AMI SEC Reports filed prior to the date of this Agreement and except to the
extent that in the aggregate they would not reasonably be expected to have a
Material Adverse Effect: (a) there is no action, suit, judicial or
administrative proceeding, arbitration or investigation pending or, to the best
knowledge of AMI, threatened against or involving AMI or any of its
subsidiaries, or any of their properties or rights, before any court,
arbitrator, or administrative or governmental body; (b) there is no judgment,
decree, injunction, rule or order of any court, governmental department,
commission, agency, instrumentality or arbitrator outstanding against AMI or any
of its subsidiaries; and (c) AMI and its subsidiaries are not in violation of
any term of any judgments, decrees, injunctions or orders outstanding against
them.
4.9 Contracts.
(a) Each of the material contracts, instruments, mortgages, notes, security
agreements, leases, agreements or understandings, whether written or oral, to
which AMI or any of its subsidiaries is a party that relates to or affects the
assets or operations of AMI or any of its subsidiaries or to which AMI or any of
its subsidiaries or their respective assets or operations may be bound or
subject is a valid and binding obligation of AMI and in full force and effect
with respect to AMI or such subsidiary and, to the best knowledge of AMI, with
respect to all other parties thereto. Except to the extent that the consummation
of the transactions contemplated by this Agreement may require the consent of
third parties, there are no existing defaults by AMI or any of its subsidiaries
thereunder or, to the knowledge of AMI, by any other party thereto, and no event
of default has occurred, and no event, condition or occurrence exists, that
(whether with or without notice, lapse of time, the declaration of default or
other similar event) would constitute a default by AMI or any of its
subsidiaries thereunder, other than defaults that would not in the aggregate
have a Material Adverse Effect. Section 4.9(a) of the AMI Disclosure Schedule
lists all consents of third parties required for the consummation of the
transactions contemplated by this Agreement.
(b) Except (i) as set forth in the AMI SEC Reports (including the exhibits
thereto) filed prior to the date of this Agreement, and (ii) for this Agreement,
as of the date of this Agreement neither AMI nor any of its subsidiaries is a
party to any oral or written (v) consulting agreement, (w) joint venture, (x)
noncompetition or similar agreement that restricts AMI or its subsidiaries from
engaging in a line of business, (y) agreement with any executive officer or
other employee of AMI or any subsidiary the benefits of which are contingent, or
the terms of which are altered, upon the occurrence of a transaction involving
AMI of the nature contemplated by this Agreement, or (z) agreement with respect
to any executive officer of AMI or any subsidiary providing any term of
employment or compensation guaranty. AMI has no agreement or plan, including any
stock option plan, stock appreciation rights plan, restricted stock plan or
stock purchase plan, any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
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(c) AMI has no agreements or arrangements to sell or otherwise dispose of,
or lease, acquire or otherwise invest in, any property, lines of business or
other assets that are in the aggregate material to AMI's business.
4.10 Employee Benefit Plans.
(a) Section 4.10(a) of the AMI Disclosure Schedule sets forth a true and
complete list of each written or oral employee benefit plan (including, without
limitation, any "employee benefit plan" as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), policy or
agreement (including, without limitation, any employment agreement or severance
agreement) that is maintained (all of the foregoing, the "AMI Plans"), or is or
was contributed to by AMI or pursuant to which AMI is still potentially liable
for payments, benefits or claims. A copy of each AMI Plan as currently in effect
and, if applicable, the most recent Annual Report, Actuarial Report or
Valuation, Summary Plan Description, Trust Agreement and a Determination Letter
issued by the IRS for each AMI Plan have heretofore been delivered to NPB or its
counsel. Neither AMI nor any trade or business, whether or not incorporated (an
"ERISA Affiliate"), which together with AMI would be deemed a "single employer"
within the meaning of Section 4001 of ERISA, has maintained or contributed to
any plan subject to Title IV of ERISA or Section 412 of the Code (including any
"multiemployer plan," as defined in Section 3(37) of ERISA ("Multiemployer
Plan")) during the six calendar years preceding the date of this Agreement.
(b) Each AMI Plan which is an "employee benefit plan," as defined in
Section 3(3) of ERISA, complies by its terms and in operation with the
requirements provided by any and all statutes, orders or governmental rules or
regulations currently in effect and applicable to AMI Plans, including but not
limited to ERISA and the Code, except for instances of noncompliance that would
not in the aggregate have a Material Adverse Effect.
(c) All reports, forms and other Reports required to be filed with any
government entity with respect to any AMI Plan (including without limitation,
summary plan descriptions, Forms 5500 and summary annual reports) have been
timely filed and are accurate, except for instances of noncompliance that would
not in the aggregate have a Material Adverse Effect.
(d) Each AMI Plan intended to qualify under Section 401(a) of the Code has
been determined by the Internal Revenue Service to so qualify after January 1,
1985, and each trust maintained pursuant thereto has been determined by the
Internal Revenue Service to be exempt from taxation under Section 501 of the
Code. Nothing has occurred since the date of the Internal Revenue Service's
favorable determination letter that could adversely affect the qualification of
the AMI Plan and its related trust, except such adverse effects as would not in
the aggregate constitute a Material Adverse Effect. AMI and each ERISA Affiliate
of AMI have timely and properly applied for a written determination by the
Internal Revenue Service on the qualification of each such AMI Plan and its
related trust under Section 401(a) of the Code, as amended by the Tax Reform Act
of 1986 and subsequent legislation enacted through the date hereof, and Section
501 of the Code.
(e) All contributions or other amounts payable by AMI or its subsidiaries
as of the Effective Time with respect to each AMI Plan and in respect of current
or prior plan years have been or will be (prior to the Effective Time) either
paid or accrued on the Financial Statements of AMI in accordance with past
practice and the recommended contribution in any actuarial report.
(f) No AMI Plan provides benefits, including without limitation death or
medical benefits (whether or not insured), with respect to current or former
employees for periods extending beyond their retirement or other termination of
service (other than (i) continuation group health coverage pursuant to Section
4980B of the Code, (ii) death benefits or retirement benefits under any
"employee pension plan," as that term is defined in Section 3(2) of ERISA, (iii)
deferred compensation benefits with respect to which there is an accrual of
liability on the books of AMI or its ERISA Affiliates, or (iv) benefits the full
cost of which is borne by the current or former employee (or his or her
beneficiary)).
(g) All insurance premiums (including premiums to the Pension Benefit
Guaranty Corporation) have been paid in full, subject only to normal
retrospective adjustments in the ordinary course, with regard to AMI Plans for
plan years ending on or before the date hereof.
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(h) As of the date hereof, no AMI Plan subject to Title IV of ERISA, and no
employee benefit plan maintained by an ERISA Affiliate of AMI and subject to
Title IV of ERISA, has benefit liabilities (as defined in Section 4001(a)(16) of
ERISA) exceeding the assets of such plan or has been completely or partially
terminated.
(i) With respect to each AMI Plan:
(i) no prohibited transactions (as defined in Section 406 or 407 of
ERISA or Section 4975 of the Code) have occurred for which a statutory
exemption is not available;
(ii) no reportable event (as defined in Section 4043 of ERISA) has
occurred as to which a notice would be required to be filed with the
Pension Benefit Guaranty Corporation;
(iii) no action or claims (other than routine claims for benefits made
in the ordinary course of Plan administration for which Plan administrative
review procedures have not been exhausted) are pending or, to the knowledge
of AMI, threatened or imminent against or with respect to AMI Plan, any
employer who is participating (or who has participated) in any Plan or any
fiduciary (as defined in Section 3(21) of ERISA), of the AMI Plan; and
(iv) neither AMI nor any fiduciary has any knowledge of any facts
which could give rise to any such action or claim.
(j) Neither AMI nor any ERISA Affiliate of AMI has any liability or is
threatened with any liability (whether joint or several) (i) for the termination
of any single employer plan under Sections 4062 or 4064 of ERISA or any multiple
employer plan under Section 4063 of ERISA, (ii) for any lien imposed under
Section 302(f) of ERISA or Section 412(n) of the Code, (iii) for any interest
payments required under Section 302(e) of ERISA or Section 412(m) of the Code,
(iv) for any excise tax imposed by Sections 4971, 4975, 4976, 4977 or 4979 of
the Code, (v) for any minimum funding contributions under Section 302(c)(11) of
ERISA or Section 412(c)(11) of the Code, (vi) to a fine under Section 502 of
ERISA, or (vii) for any transaction within the meaning of Section 4069 of ERISA.
(k) AMI has not incurred any withdrawal liability with respect to any
Multiemployer Plan within the meaning of Sections 4201 and 4204 of ERISA, and no
liabilities exist with respect to withdrawals from any Multiemployer Plans which
could subject AMI to any controlled group liability under Section 4001(b) of
ERISA.
(l) All of the AMI Plans, to the extent applicable, are in compliance with
the continuation of group health coverage provisions contained in Section 4980B
of the Code and Section 601 through 608 of ERISA, except for such instances of
noncompliance which would not in the aggregate have a Material Adverse Effect.
4.11 Tax Matters. AMI makes the following representations and warranties
with respect to tax matters.
(a) Definitions. For purposes of this Section 4.11, the following
definitions shall apply:
(i) The term "AMI Group" shall mean, individually and collectively,
(A) AMI and (B) any individual, trust, corporation, partnership or any
other entity as to which AMI is liable for Taxes incurred by such
individual or entity either as a transferee, or pursuant to Treasury
Regulations Section 1.1502-6, or pursuant to any other provision of
federal, territorial, state, local or foreign law or regulations.
(ii) The term "Taxes" shall mean all taxes, however denominated,
including any interest, penalties or other additions to tax that may become
payable in respect thereof, imposed by any federal, territorial, state,
local or foreign government or any agency or political subdivision of any
such government, which taxes shall include, without limiting the generality
of the foregoing, all income or profits taxes (including, but not limited
to, federal income taxes and state income taxes), payroll and employee
withholding taxes, unemployment insurance, social security taxes, sales and
use taxes, ad valorem taxes, excise taxes, franchise taxes, gross receipts
taxes, business license taxes, occupation taxes, real and personal property
taxes, stamp taxes, transfer taxes, workers' compensation, Pension Benefit
Guaranty Corporation premiums and other governmental charges, and other
obligations of the same or of a similar nature to any of the foregoing,
which the AMI Group is required to pay, withhold or collect.
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(iii) The term "Returns" shall mean all reports, estimates,
declarations of estimated tax, information statements and returns relating
to, or required to be filed in connection with, any Taxes, including
information returns or reports with respect to backup withholding and other
payments to third parties.
(b) Returns Filed and Taxes Paid. (i) All Returns required to be filed by
or on behalf of members of the AMI Group have been duly filed on a timely basis
and such Returns are true, complete and correct in all material respects, (ii)
all Taxes shown to be payable on the Returns or on subsequent assessments with
respect thereto have been paid in full on a timely basis, and (iii) no other
Taxes are payable by the AMI Group with respect to items or periods covered by
such Returns (whether or not shown on or reportable on such Returns) or with
respect to any period prior to the date of this Agreement. Each member of the
AMI Group has withheld and paid over all Taxes required to have been withheld
and paid over, and complied with all information reporting and backup
withholding requirements, including maintenance of required records with respect
thereto, in connection with amounts paid or owing to any employee, creditor,
independent contractor, or other third party. There are no liens on any of the
assets of any member of the AMI Group with respect to Taxes, other than liens
for Taxes not yet due and payable or for Taxes that a member of the AMI Group is
contesting in good faith through appropriate proceedings and for which
appropriate reserves have been established.
(c) Tax Reserves. The amount of AMI's liability for unpaid Taxes for all
periods ending on or before the date of this Agreement does not in the aggregate
exceed the amount of the current liability accruals for Taxes (excluding
reserves for deferred Taxes) reflected on the consolidated balance sheet of AMI
included in the AMI SEC Report for the quarter ending closest to the date of
this Agreement, and the amount of AMI's liability for unpaid Taxes for all
periods ending on or before the Effective Time shall not in the aggregate
materially exceed the amount of the current liability accruals for Taxes
(excluding reserves for deferred Taxes), as such accruals are reflected on the
consolidated balance sheet of AMI included in the AMI SEC Report for the quarter
ending closest to the Effective Time, plus additions thereto accrued through the
Effective Time that are consistent with past practice and in the ordinary course
of business.
(d) Consolidated Returns Furnished. NPB has been furnished by AMI true and
complete copies of (i) income tax audit reports, statements of deficiencies,
closing or other agreements received by AMI Group or on behalf of the AMI Group
relating to federal income taxes, and (ii) all federal income tax returns for
the AMI Group, in each case for all periods ending on and after April 30, 1992.
AMI has never been a member of an affiliated group filing consolidated returns
other than a group of which AMI was the common parent.
(e) Tax Deficiencies; Audits; Statutes of Limitations. No deficiencies
exist or have been asserted (either in writing or verbally, formally or
informally) or are expected to be asserted with respect to Taxes of the AMI
Group that would cause AMI's reserves for taxes to be understated by an amount
material to AMI. No federal income tax returns of the AMI Group are currently
under audit, and no waiver or extension of the statute of limitations is in
effect with respect to any federal income tax returns.
(f) Tax Sharing Agreements. AMI is not (nor has it ever been) a party to
any tax sharing agreement.
(g) Tax Elections and Special Tax Status. NPB is not required to withhold
tax on the acquisition of the stock of AMI by reason of Section 1445 of the
Code. No member of the AMI Group is a "consenting corporation" under Section
341(f) of the Code.
(h) Section 6038A Compliance. (i) AMI has filed all reports and has
created and/or retained all records required under Section 6038A of the Code
with respect to its ownership by and transactions with related parties; (ii)
each related foreign person required to maintain records under Section 6038A
with respect to transactions between AMI and the related foreign person has
maintained such records; (iii) all material Reports that are required to be
created and/or preserved by the related foreign person with respect to
transactions with AMI are either maintained in the United States, or AMI is
exempt from the record maintenance requirements of Section 6038A with respect to
such transactions under Treasury Regulation section 1.6038A-1; (iv) AMI is not a
party to any record maintenance agreement with the Internal Revenue Service with
respect to Section 6038A; and (v) each related foreign person that has engaged
in transactions with AMI has authorized AMI to act as its limited agent solely
for purposes of Sections 7602, 7603, and 7604
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of the Code with respect to any request by the Internal Revenue Service to
examine records or produce testimony related to any transaction with AMI, and
each such authorization remains in full force and effect.
4.12 Compliance With Applicable Law. AMI and each of its subsidiaries
holds all licenses, franchises, permits, variances, exemptions, orders,
approvals and authorizations necessary for the lawful conduct of its business
under and pursuant to, and the business of each of AMI and its subsidiaries is
not being conducted in violation of, any provision of any federal, state, local
or foreign statute, law, ordinance, rule, regulation, judgment, decree, order,
concession, grant, franchise, permit or license or other governmental
authorization or approval applicable to AMI or any of its subsidiaries, except
to the extent that the failure or violation would not in the aggregate have a
Material Adverse Effect.
4.13 Subsidiaries. Exhibit 21 to AMI's most recent Form 10-K included in
the AMI SEC Reports lists all the subsidiaries of AMI as of the date of this
Agreement and indicates for each such subsidiary as of such date the
jurisdiction of incorporation or organization.
4.14 Interested Party Transactions. Except as disclosed in the AMI SEC
Reports, neither AMI nor any of its subsidiaries is indebted to any director,
officer, employee or agent of AMI or any of its subsidiaries (except for amounts
due as normal salaries and bonuses and in reimbursement of ordinary expenses),
and no such person is indebted to AMI or any of its subsidiaries, and there have
been no other transactions of the type required to be disclosed pursuant to
Items 402 and 404 of Regulation S-K promulgated under the Securities Act and
Exchange Act since April 30, 1992.
4.15 Labor and Employment Matters.
(a) (i) Except for such matters that would not in the aggregate have a
Material Adverse Effect, AMI and its subsidiaries are and have been in
compliance with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, including,
without limitation, the Immigration Reform and Control Act, the Worker
Adjustment and Retraining Notification Act, and such laws respecting employment
discrimination, equal opportunity, affirmative action, worker's compensation,
occupational safety and health requirements and unemployment insurance and
related matters, and are not engaged in and have not engaged in any unfair labor
practice. (ii) No investigation or review by or before any governmental entity
concerning any violations of any such applicable laws is pending or, to the
knowledge of AMI, threatened, nor has any such investigation occurred during the
last seven years, and no governmental entity has provided any notice to AMI or
any of its subsidiaries asserting an intention to conduct any such
investigation. (iii) There is no labor strike, dispute, slowdown or stoppage
actually pending or, to the knowledge of AMI, threatened against AMI or any of
its subsidiaries. (iv) No union representation question or union organizational
activity exists respecting the employees of AMI or any of its subsidiaries. (v)
Neither AMI nor any of its subsidiaries has experienced any work stoppage or
other labor difficulty. (vi) No collective bargaining agreement exists which is
binding on AMI or any of its subsidiaries.
(b) In the event of termination of the employment of any officers,
directors, employees or agents of AMI or any of its subsidiaries, neither AMI,
any of its subsidiaries, NPB, the Surviving Corporation, nor any other
subsidiaries of NPB, will pursuant to any agreement or by reason of anything
done prior to the Effective Time by AMI or any of its subsidiaries be liable to
any of said officers, directors, employees or agents for so-called "severance
pay" or any other similar payments or benefits, including, without limitation,
post-employment healthcare (other than pursuant to COBRA) or insurance benefits.
4.16 Ownership of Shares of NPB Common Stock. As of the date hereof,
neither AMI nor, to its knowledge, any of its affiliates or associates (as such
terms are defined under the Exchange Act), (a) beneficially owns, directly or
indirectly, or (b) is party to any agreement, arrangement or understanding for
the purpose of acquiring, holding, voting or disposing of, in each case, shares
of NPB Common Stock, except for shares of NPB Common Stock in the aggregate
representing less than 1% of the outstanding shares of NPB Common Stock.
4.17 Insurance. As of the date hereof, AMI and each of its subsidiaries
are insured by insurers reasonably believed by AMI to be of recognized financial
responsibility against such losses and risks and in such amounts as are
customary in the businesses in which they are engaged. All material policies of
insurance
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and fidelity or surety bonds insuring AMI or any of its subsidiaries or their
respective businesses, assets, employees, officers and directors are in full
force and effect. As of the date hereof, there are no material claims by AMI or
any of its subsidiaries under any such policy or instrument as to which any
insurance company is denying liability or defending under a reservation of
rights clause.
4.18 Contracts with Physicians, Hospitals, HMOs and Third Party
Providers. AMI has made available to representatives of NPB a list and copies
of all outstanding contracts, partnerships, joint ventures and other
arrangements or understandings (written or oral) that are material to AMI's
business and that are between (a) AMI or any of its subsidiaries and (b) any
physician, hospital, HMO, other managed care organization, home care or other
third-party provider relating to the sale or supply of medical devices, the
provision of medical or consulting services, treatments or patient referrals or
any other similar activities.
4.19 Environmental Protection.
(a) None of AMI, AMI's subsidiaries, or any AMI Property (as defined in
subsection (d) below) is or has been in violation of any federal, state or local
law, ordinance or regulation concerning industrial hygiene or environmental
conditions, including, but not limited to, soil and groundwater conditions
("Environmental Laws").
(b) Neither AMI nor any of its subsidiaries has reported any, or has had
knowledge of any circumstances giving rise to any reporting requirement under
applicable Environmental Laws as to any, spills or releases of any Hazardous
Materials on, under or about any AMI Property, nor has AMI or any of its
subsidiaries received any notices of spills or releases of Hazardous Materials
on, under or about any AMI Property. "Hazardous Material" shall mean any
substance, chemical, waste or other material which is listed, defined or
otherwise identified as hazardous, toxic or dangerous under any applicable law;
as well as any petroleum, petroleum product or by-product, crude oil, natural
gas, natural gas liquids, liquefied natural gas, or synthetic gas useable for
fuel, and "source," "special nuclear," and "by-product" material as defined in
the Atomic Energy Act of 1954, 42 U.S.C. sec.sec. 2011 et seq.
(c) There is no proceeding or investigation pending or, to the knowledge of
AMI, threatened by any governmental entity or other person with respect to the
presence of Hazardous Material on, under or about AMI Properties or the
migration thereof from or to other property. Neither AMI nor any of its
subsidiaries has ever been required by any governmental entity to treat, clean
up, or otherwise dispose of, remove or neutralize any Hazardous Material on,
under or about any AMI Property.
(d) Neither AMI, any current or former subsidiary of AMI, nor to AMI's
knowledge, any other person has engaged in any activity that might reasonably be
expected to involve the generation, use, manufacture, treatment, transportation,
storage in tanks or otherwise, or disposal of Hazardous Material on or from any
property that AMI or any of its current or former subsidiaries now owns or
leases or has previously owned or leased or in which AMI or any such subsidiary
now holds or has previously held any security interest, mortgage, or other lien
or interest ("AMI Property") which generation, use, manufacture, treatment,
transportation, storage or disposal would in the aggregate have a Material
Adverse Effect, and no (i) presence, release, threatened release, discharge,
spillage or migration of Hazardous Material, (ii) condition that has resulted or
could result in any use, ownership or transfer restriction, or (iii) to the
knowledge of AMI, condition of actual or potential nuisance has occurred on or
from such AMI Property, and to the knowledge of AMI, no condition exists that
could give rise to any suit, claim, action, proceeding or investigation by any
person or governmental entity against AMI, any of its subsidiaries or any other
person or such AMI Property as a result of or in connection with (a) any of the
foregoing events, (b) any failure to obtain any required permits or approvals of
any governmental entity, (c) the violation of any terms or conditions of such
permits, or (d) any other violation of Environmental Laws.
(e) To the knowledge of AMI, there are no substances or conditions in or on
AMI Property which may support claims or causes of action under any applicable
Environmental Law.
(f) For purposes of this Section 4.19, the term "Material Adverse Effect"
includes (i) any material injunction or criminal action or proceeding against or
involving AMI and (ii) any requirement that executive
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officers of NPB or AMI be subjected to a consent decree or become individually
involved in any proceeding in clause (i) above.
4.20 Intellectual Property Rights.
(a) Section 4.20(a) of the AMI Disclosure Schedule sets forth an accurate
and complete list of all (i) patents, applications for patents, registrations of
trademarks (including service marks) and applications therefor and registrations
of copyrights and applications therefor that are owned by AMI or any of AMI's
subsidiaries; (ii) other Intellectual Property Rights (as defined below) that
are owned by AMI or AMI's subsidiaries; (iii) unexpired licenses relating to AMI
Intellectual Property Rights (as defined in (i) below) that have been granted to
or by AMI or any of AMI's subsidiaries; and (iv) other agreements relating to
Intellectual Property Rights.
(b) AMI and AMI's subsidiaries collectively own and have the right to use,
and to license others to use, all AMI Intellectual Property Rights. Such
ownership and right to use, and to license others to use, are free and clear of,
and without liability under, all liens and security interests of third parties.
Such ownership and right to use, and to license others to use, are free and
clear of, and without liability under, all claims and rights of third parties.
(c) AMI has taken reasonable steps sufficient to safeguard and maintain the
secrecy and confidentiality of, or AMI's proprietary rights in, the unpatented
know-how, technology, proprietary processes, formulae and other information that
is utilized in the conduct of AMI's business, including, without limitation, the
know-how, technology, proprietary processes, formulae, and other information
listed as trade secrets in Section 4.20(c) of the AMI Disclosure Schedule.
Without limitation of the generality of the foregoing, AMI and AMI's
subsidiaries have obtained confidentiality and inventions assignment agreements
from all AMI's and such subsidiaries' past and present employees and independent
contractors involved in the creation or development of AMI Intellectual Property
Rights (including, without limitation, from all employees and contractors who
are inventors, authors, creators or developers of AMI Intellectual Property
Rights).
(d) There are no royalties, honoraria, fees or other payments payable by
AMI or AMI subsidiaries to any person by reason of the ownership, use, license,
sale or disposition of any of AMI Intellectual Property Rights.
(e) Neither AMI nor any of AMI's subsidiaries (i) knows of any infringement
in the conduct of AMI's business the right or claimed right of any other party
with respect to any Intellectual Property Rights known to AMI, or (ii) has
knowledge of any alleged or claimed infringement by any product or process
manufactured, used, sold or under development by or for AMI or AMI's
subsidiaries in the conduct of AMI's business.
(f) No independent contractors who have performed services related to AMI's
business have any right, title or interest in AMI Intellectual Property Rights.
(g) The execution, delivery and performance of this Agreement by AMI, and
the consummation by AMI of the transactions contemplated hereby, will not
breach, violate or conflict with any agreement governing AMI Intellectual
Property Rights, will not cause the forfeiture or termination or give rise to a
right of forfeiture or termination of AMI's Intellectual Property Right or in
any way impair the right of AMI to use, sell, license or dispose of, or bring
any action for the infringement of, AMI Intellectual Property Rights or any
portion thereof.
(h) For purposes of this Section 4.20, "use," with respect to Intellectual
Property Rights, includes make, reproduce, display or perform (publicly or
otherwise), prepare derivative works based on, sell, distribute, disclose and
otherwise exploit such Intellectual Property Rights and products incorporating
or subject to such Intellectual Property Rights.
(i) As used in this Agreement, the term "Intellectual Property Rights"
means intellectual property rights, including, without limitation, patents,
patent applications, patent rights, trademarks, trademark applications, trade
names, service marks, service mark applications, copyrights, copyright
applications, publication rights, computer programs and other computer software
(including source codes and object codes), inventions, know-how, trade secrets,
technology, proprietary processes and formulae. As used in this
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Agreement, the term "AMI Intellectual Property Rights" means all Intellectual
Property Rights that are part of the conduct of the business of AMI.
4.21 FDA and Related Matters.
(a) AMI has made and will continue to make available to NPB (i) all
Regulatory or Warning Letters, Notices of Adverse Findings and Section 305
notices and similar letters or notices issued by the Food and Drug
Administration ("FDA") or any other governmental entity that is concerned with
the safety, efficacy, reliability or manufacturing of the medical products sold
by AMI or its subsidiaries (hereafter in this Section 4.21 "Medical Device
Regulatory Agency") to AMI or any of its subsidiaries; (ii) all United States
Pharmacopoeia product problem reporting program complaints or reports, MedWatch
FDA forms 3500 and device experience network complaints received by AMI or any
of its subsidiaries and all Medical Device Reports filed by AMI or any of its
subsidiaries, which complaints or reports pertain to any incident involving
death or serious injury, and for which incident there has been (x) a notice or
followup inquiry to AMI by the FDA, (y) a litigation or arbitration claim or
cause of action commenced, or (z) a notice to any insurance carrier of AMI
tendering the defense or giving any notice of a possible or actual claim against
AMI; (iii) all product recalls and safety alerts conducted by or issued to AMI
or any of its subsidiaries and any requests from the FDA or any Medical Device
Regulatory Agency requesting AMI or any of its subsidiaries to cease to
investigate, test or market any product; (iv) any civil penalty actions begun by
FDA or any Medical Device Regulatory Agency against AMI or any of its
subsidiaries and known about by AMI or any of its subsidiaries and all consent
decrees entered into by the FDA and AMI or AMI's subsidiaries; and (v) any other
written communications between AMI or any of its subsidiaries, on the one hand,
and the FDA or any Medical Device Regulatory Agency, on the other hand.
(b) Except to the extent that such items would not, individually or in the
aggregate, have a Material Adverse Effect: (i) AMI (or, if applicable, a
subsidiary of AMI) has obtained all consents, approvals, certifications,
authorizations and permits of, and has made all filings with, or notifications
to, all Medical Device Regulatory Agencies pursuant to applicable requirements
of all FDA laws, rules and regulations, and all corresponding state and foreign
laws, rules and regulations applicable to AMI or any of its subsidiaries and
relating to its medical device business or otherwise applicable to AMI's or its
subsidiaries' business; (ii) all representations made by AMI or any of its
subsidiaries in connection with any such consents, approvals, certifications,
authorizations, permits, filings and notifications were true and correct in all
material respects at the time such representations and warranties were made, and
AMI's products, and the products of AMI's subsidiaries, comply with, and perform
in accordance with the specifications described in, such representation; (iii)
AMI and AMI's subsidiaries are in compliance with all applicable FDA laws, rules
and regulations, (including Good Manufacturing Practices and Medical Device
Reporting requirements) and all corresponding applicable state and foreign laws,
rules and regulations relating to medical device manufacturers and distributors
or otherwise applicable to AMI's or AMI's subsidiaries' business; (iv) AMI has
no reason to believe that any of the consents, approvals, authorizations,
registrations, certifications, permits, filings or notifications that it or any
of its subsidiaries has received or made to operate their respective businesses
have been or are being revoked or challenged; and (v) there are no
investigations or inquiries pending or threatened relating to the operation of
AMI's or its subsidiaries' businesses or AMI's or its subsidiaries' compliance
with applicable laws relating to its medical device business or otherwise
applicable to AMI's or its subsidiaries' businesses.
4.22 Real Property.
(a) Section 4.22(a) of the AMI Disclosure Schedule lists all of the real
property owned, leased or currently used by AMI or its subsidiaries in the
course of their businesses (the "AMI Real Property"). Section 4.22(a)of the AMI
Disclosure Schedule also lists all material real property owned or used by AMI
or its subsidiaries in the course of their businesses at any time since April
30, 1992, other than AMI Real Property.
(b) All AMI Real Property is in all material respects suitable and adequate
for the uses for which it is currently devoted. AMI or its subsidiaries has good
and marketable title in fee simple absolute to AMI Real Property indicated on
Section 4.22(a) of the AMI Disclosure Schedule to be owned by it, and to the
buildings,
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structures and improvements thereon, and a valid leasehold interest in all other
AMI Real Property, in each case free and clear of all Material Encumbrances.
"Material Encumbrance" means any mortgage, lien, pledge, encumbrance, security
interest, deed of trust, option, encroachment, reservation, order, decree,
judgment, condition, restriction, charge, Other Agreement, claim or equity of
any kind, except for any of the foregoing which (i) secures a liability which is
accurately reflected in the financial statements of the party whose interest in
property is affected thereby; (ii) liens for taxes not yet due; (iii) easements
or other similar rights which do not in the aggregate materially interfere with
the present use of the property affected thereby; and (iv) other encumbrances.
"Other Agreements" means any agreement or arrangement between two or more
persons (or entities) with respect to their relative rights and/or obligations
or with respect to a thing done or to be done (whether or not conditional,
executory, express, implied, in writing or meeting the requirements of
contract), including, without limitation, contracts, leases, promissory notes,
covenants, easements, rights of way, commitments or understanding.
(c) All buildings, structures, fixtures and other improvements on AMI Real
Property are in good repair, to the knowledge of AMI free of defects (latent or
patent), and fit for the uses to which they are currently devoted. To the
knowledge of AMI, all such buildings, structures, fixtures and improvements on
AMI's Real Property conform to all applicable laws. To the knowledge of AMI, the
buildings, structures, fixtures and improvements on each parcel of AMI Real
Property lie entirely within the boundaries of such parcel of AMI Real Property,
and no structures of any kind encroach on AMI Real Property.
(d) To the knowledge of AMI, none of the AMI Real Property is subject to
any Other Agreement or other restriction of any nature whatsoever (recorded or
unrecorded) preventing or limiting AMI's right to use it in the manner that such
property is currently being used or that it is contemplated to be used.
(e) No portion of the AMI Real Property or any building, structure, fixture
or improvement thereon is the subject of, or affected by, any condemnation,
eminent domain or inverse condemnation proceeding currently instituted or
pending, and AMI has no knowledge that any of the foregoing are, or will be, the
subject of, or affected by, any such proceeding.
(f) The AMI Real Property has direct and unobstructed access to adequate
electric, gas, water, sewer and telephone lines, and public streets, all of
which are adequate for the uses to which the AMI Real Property is currently
devoted.
4.23 Complete Copies of Requested Reports. AMI has delivered or made
available true and complete copies of each document that has been requested by
NPB or its counsel in connection with their legal and accounting review of AMI
and its subsidiaries. The minute books of AMI and its subsidiaries made
available to NPB contain a complete and accurate summary of all meetings of
directors and stockholders or actions by written consent since the time of
incorporation of AMI and its subsidiaries through the date of this Agreement,
and reflect all transactions referred to in such minutes accurately.
4.24 Share Ownership. Except as reflected in the AMI SEC Reports as of the
date hereof, to AMI's knowledge there are no stockholders with beneficial
ownership (as defined in the Exchange Act) of more than 5% of AMI Common Stock.
4.25 Opinion of Financial Advisors. AMI has received the opinion of Dain
Bosworth Incorporated to the effect that, as of the date hereof, the Exchange
Ratio is fair to the holders of AMI Common Stock from a financial point of view.
4.26 Pooling of Interests. Based upon consultation with its independent
accountants, neither AMI nor any of its subsidiaries, nor any of their
respective directors, officers or, to the knowledge of AMI, stockholders, has
taken any action that would interfere with NPB's ability to account for the
Merger as a pooling of interests.
4.27 Accounts Receivable. The accounts receivable disclosed in the AMI SEC
Reports as of April 30, 1996, and, with respect to accounts receivable created
since such date, disclosed in any subsequently filed AMI SEC Reports, or as
accrued on the books of AMI in the ordinary course of business consistent with
past practices in accordance with generally accepted accounting principles since
the last filed AMI SEC Reports
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represent and will represent bona fide claims against debtors for sales and
other charges, are not subject to discount except for normal cash and immaterial
trade discounts, and the amount reserved for doubtful accounts and allowances
disclosed in lieu of such AMI SEC Reports or accrued on such books is sufficient
to provide for any losses that may be sustained or realized of tax receivables.
4.28 Customers and Suppliers. As of the date hereof, no customers that
individually accounted for more than 5% of AMI's gross revenues during the
12-month period preceding the date hereof has indicated to AMI that it will
stop, or decrease the rate of, buying services or products of AMI, or has at any
time on or after April 30, 1996 decreased materially its purchase of the
products of AMI. As of the date hereof, no material supplier of AMI has
indicated that it will stop, or decrease the rate of, supplying materials,
products or services to AMI. AMI has not knowingly breached, so as to provide a
benefit to AMI that was not intended by the parties, any agreement with, or
engaged in any fraudulent conduct with respect to, any customer or supplier of
AMI.
4.29 Representations Complete. None of the representations or warranties
made by AMI herein or in any schedule hereto, including the AMI Disclosure
Schedule, or certificate furnished by AMI pursuant to this Agreement, or the AMI
SEC Reports, contain or will contain at the Effective Time any untrue statement
of a material fact or omits or will omit at the Effective Time to state any
material fact necessary in order to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading. To the extent such representations permit omissions of items
otherwise required to be discussed because they are not material or do not or
would not have a Material Adverse Effect on AMI, such omissions in the aggregate
would not and do not have a Material Adverse Effect on AMI.
4.30 Takeover Statutes. No "fair price," "moratorium," "control share
acquisition" or other similar antitakeover statute (each, a "Takeover Statute")
is applicable to the Merger, except for such statutes or regulations as to which
all necessary action has been taken by AMI and its Board of Directors to permit
the consummation of the Merger in accordance with the terms hereof.
4.31 Voting Arrangements. To the knowledge of AMI, there are no
outstanding stockholder agreements, voting trusts, proxies or other arrangements
or understandings among the stockholders of AMI relating to the voting of their
respective shares.
4.32 Ownership of Shares. As of the date hereof, neither AMI nor its
affiliates and associates (as such terms are defined under the Exchange Act) (a)
beneficially own, directly or indirectly, or (b) are parties to any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing in each case, shares of capital stock of another company that in the
aggregate represents 10% or more of the outstanding shares of capital stock of
such other company.
4.33 Inventories. The inventories of AMI reflected in the April 30, 1996
balance sheet consist of items that are usable or salable in the ordinary course
of business and do not include below-standard quality, damaged, defective or
obsolete items the value of which has not been fully written down or with
respect to which adequate reserves have not been provided, adjusted for
operations and transactions through the Effective Time in accordance with the
past custom and practice of AMI. The AMI Disclosure Schedule discloses the
addresses of all warehouses or other facilities and customers, if any, in which
or with whom any material amounts of the inventories of AMI are located.
4.34 Product Liability Matters. As of the date of this Agreement, neither
AMI nor any of its subsidiaries has submitted to its product liability insurance
carriers any claims with respect to potential product liability of AMI nor knows
of any such claims which should have been submitted to its product liability
insurance carriers. NPB has previously been afforded access to all files
containing, or been furnished with copies of, all pleadings, claims complaints
and relevant Reports in connection with the foregoing. Neither AMI, nor any of
its subsidiaries, nor to AMI's knowledge, any employee or agent of AMI or any of
its subsidiaries, has made any untrue statement of a material fact or omitted to
state a material fact in connection with obtaining or renewing any insurance
policy providing product liability coverage in respect of the products of AMI or
any of its subsidiaries which could reasonably result in the loss of any
material portion of such coverage and AMI has not received any written notice
from any insurance company stating that any insurance
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policy of AMI or any of its subsidiaries may not provide coverage up to the
limits of such policy for any liability, loss or damage which may be incurred or
suffered by AMI in connection with product liability claims other than the
possible lack of coverage for punitive damages and claims for deductible
amounts.
4.35 No Undisclosed Liabilities. Except to the extent specifically
reflected or reserved against in the Balance Sheet of AMI as of April 30, 1996,
or as otherwise set forth on the AMI Disclosure Schedule, AMI does not have any
material liabilities or obligations of any nature, whether absolute, accrued,
contingent or otherwise and obligations arising after April 30, 1996 in the
ordinary course of business.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF NPB
Except as set forth in the disclosure letter delivered to AMI at or prior
to the execution of this Agreement ("NPB Disclosure Schedule"), NPB represents
and warrants to AMI as follows:
5.1 Organization. NPB is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has the
corporate power to carry on its business as it is now being conducted. NPB is
duly qualified as a foreign corporation to do business, and is in good standing,
in each jurisdiction where the character of its properties owned or held under
lease or the nature of its activities makes such qualification necessary, except
where the failure to be so qualified will not in the aggregate have a Material
Adverse Effect. Each subsidiary of NPB is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has the corporate power to carry on its business
as it is now being conducted and is duly qualified to do business, and is in
good standing in each jurisdiction where the character of its properties owned
or held under lease or the nature of its activities makes such qualification
necessary, except where the failure to be so duly organized, validly existing
and in good standing, to have such corporate power or to be so qualified will
not in the aggregate have a Material Adverse Effect. NPB has delivered to AMI or
its counsel complete and correct copies of its Certificate of Incorporation and
Bylaws.
5.2 Capitalization.
(a) As of September 1, 1996, the authorized capital stock of NPB consists
of 150,000,000 shares of NPB Common Stock, and 5,000,000 shares of Preferred
Stock, par value $0.001 per share (the "NPB Preferred Stock"). As of September
1, 1996, 59,915,374 shares of NPB Common Stock were issued and outstanding,
stock options to acquire 7,313,881 shares of NPB Common Stock were outstanding
under all stock option plans of NPB, no warrants to acquire shares of NPB Common
Stock were outstanding, no shares of NPB Preferred Stock were issued and
outstanding, and 3,623,772 additional shares of NPB Common Stock (under NPB's
stock option plans) and 500,000 shares of NPB Preferred Stock were reserved for
issuance. No changes in such capitalization have occurred since September 1,
1996 that, in the aggregate, would be material to NPB, except for option
exercises in the ordinary course of business. All of the issued and outstanding
shares of NPB Common Stock are validly issued, fully paid, nonassessable and
free of preemptive rights or similar rights created by statute, the Certificate
of Incorporation or Bylaws of NPB or any agreement to which NPB or any of its
subsidiaries is a party or by which NPB or any of its subsidiaries is bound.
Since September 1, 1996, NPB has not issued any shares of its capital stock,
except upon the exercise of stock options to acquire shares of NPB Common Stock
to employees under employee benefit plans. All of the shares of NPB Common Stock
issuable in exchange for shares of Common Stock at the Effective Time in
accordance with this Agreement will be, when so issued, duly authorized, validly
issued, fully paid and nonassessable.
(b) Except pursuant to NPB's employee benefit plans and as otherwise
provided in this Agreement and that certain Rights Agreement dated September 1,
1992, as amended, between NPB and The First National Bank of Boston as Rights
Agent (the "NPB Rights Agreement"), there are not now, and at the Effective Time
there will not be, any shares of capital stock of NPB issued or outstanding or
any options, warrants, subscriptions, calls, rights, convertible securities or
other agreements or commitments obligating NPB to issue, transfer or sell any
shares of its capital stock. As of the date hereof, no Voting Debt of NPB was
issued and outstanding and none will be outstanding as of the Effective Time.
All outstanding shares of the capital stock
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of NPB's subsidiaries are validly issued, fully paid, non-assessable and owned
by NPB or one of its subsidiaries free and clear of any liens, security
interest, pledges, agreements, claims, charges, or encumbrances of any nature
whatsoever. There are no voting trust or other agreements or understandings to
which NPB is a party with respect to the voting of the capital stock of NPB or
any of its subsidiaries. None of NPB or its subsidiaries is required to redeem,
repurchase or otherwise acquire shares of capital stock of NPB, or any of its
subsidiaries, respectively, as a result of the transactions contemplated by this
Agreement. Except for options and warrants described above or as contemplated by
Section 7.8 below, immediately after the Effective Time, there will be no
option, warrant, call, right or agreement obligating NPB or any subsidiary of
NPB to issue, deliver or sell, or cause to be issued, delivered or sold, any
shares of NPB Common Stock or any Voting Debt, or obligating NPB or any
subsidiary of NPB to grant, extend, or enter into any such option, warrant,
call, right or agreement.
5.3 Authority Relative to this Agreement. NPB has the corporate power to
enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement by NPB and the consummation by NPB of
the transactions contemplated hereby have been duly authorized by the Board of
Directors of NPB and no other corporate proceedings on the part of NPB are
necessary to approve this Agreement or the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by NPB and
constitutes a valid and binding agreement of NPB, enforceable against NPB in
accordance with its terms.
5.4 Consents and Approvals; No Violations. Except for applicable
requirements of the HSR Act, Securities Act, Exchange Act, state or foreign laws
relating to takeovers, if applicable, state securities or blue sky laws, and the
filing and recordation of a Certificate of Merger as required by the DGCL and
MBCA, no filing with, and no permit, authorization, consent or approval of, any
public or governmental body or authority is necessary for the consummation by
NPB of the transactions contemplated by this Agreement, except where a failure
to make such filing or to obtain such permit, registration, authorization,
consent or approval will not in the aggregate have a Material Adverse Effect.
Neither the execution and delivery of this Agreement by NPB, nor the
consummation by NPB of the transactions contemplated hereby, nor compliance by
NPB with any of the provisions hereof, will (a) result in any breach of the
Certificate of Incorporation or Bylaws of NPB or any of its subsidiaries, (b)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation, acceleration or change in the award, grant, vesting or
determination) under, or give rise to creation of any lien, charge, security
interest or encumbrance upon, any of the respective properties or assets of NPB
or any of its subsidiaries under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, license, contract, lease,
agreement, arrangement, or other instrument or obligation to which NPB or any of
its subsidiaries is a party or by which any of them or any of their properties
or assets may be bound or affected, or (c) violate any order, writ, injunction,
decree, statute, rule or regulation of any court or government authority
applicable to NPB, any of its subsidiaries, or any of their properties or
assets, except in the case of clauses (b) and (c) for violations, breaches,
defaults (or rights of termination, cancellation, acceleration or change),
liens, charges, security interests or encumbrances that would not in the
aggregate have a Material Adverse Effect.
5.5 Reports and Financial Statements; Absence of Certain Changes. NPB has
filed all reports required to be filed with the SEC pursuant to the Exchange Act
since July 7, 1984 including, without limitation, an Annual Report on Form 10-K
for the fiscal year ended July 3, 1995 and Quarterly Reports on Form 10-Q dated
November 15, 1995, February 14, 1996 and May 15, 1996 (all such reports,
collectively, the "NPB SEC Reports"), and has previously furnished or made
available to AMI true and complete copies of all NPB SEC Reports filed with
respect to periods beginning after December 31, 1992 (including any exhibits
thereto) and will promptly deliver to AMI any NPB SEC Reports filed between the
date hereof and the Effective Time. None of such NPB SEC Reports, as of their
respective dates (as amended through the date hereof), contained or, with
respect to the NPB SEC Reports filed after the date hereof, will contain any
untrue statement of a material fact or omitted or, with respect to the NPB SEC
Reports filed after the date hereof, will omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. Each of the
balance sheets (including the related notes) included in the NPB SEC Reports
fairly presents the consolidated financial position of NPB
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and its subsidiaries as of the date thereof, and the other related statements
(including the related notes) included therein fairly present the results of
operations and the changes in cash flows of NPB and its subsidiaries for the
respective periods set forth therein, all in conformity with generally accepted
accounting principles consistently applied during the periods involved, except
as otherwise noted therein and subject, in the case of the unaudited interim
financial statements, to normal year-end adjustments which would not in the
aggregate be material in amount or effect. Except as specifically contemplated
by this Agreement or reflected in the NPB SEC Reports, since May 15, 1996 there
has not been (a) any change or event having a Material Adverse Effect on NPB,
(b) any declaration setting aside or payment of any dividend or distribution
with respect to the NPB Common Stock other than consistent with past practices,
or (c) any material change in NPB's accounting principles, procedures or
methods.
5.6 Information in Registration Statement and Proxy Statement. The
information relating to NPB and its subsidiaries to be contained in the
Registration Statement and the Proxy Statement will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
5.7 Share Ownership. Except as reflected in the NPB SEC Reports, as of the
date hereof, to NPB's knowledge there are no stockholders with beneficial
ownership (as defined in the Exchange Act) of more than 5% of the NPB Common
Stock.
5.8 Compliance With Applicable Law. Except as disclosed in the NPB SEC
Reports filed prior to the date of this Agreement, NPB and each of its
subsidiaries holds all licenses, franchises, permits, variances, exemptions,
orders, approvals and authorizations necessary for the lawful conduct of its
business under and pursuant to, and the business of each of NPB and its
subsidiaries is not being conducted in violation of, any provision of any
federal, state, local or foreign statute, law, ordinance, rule, regulation,
judgment, decree, order, concession, grant, franchise, permit or license or
other governmental authorization or approval applicable to NPB or any of its
subsidiaries, except to the extent that the failure or violation would not in
the aggregate have a Material Adverse Effect.
5.9 Ownership of Shares of AMI Common Stock. As of the date hereof,
neither NPB nor, to its knowledge, any of its affiliates or associates (as such
terms are defined under the Exchange Act), (a) beneficially owns, directly or
indirectly, or (b) is party to any agreement, arrangement or understanding for
the purpose of acquiring, holding, voting or disposing of, in each case, shares
of AMI Common Stock, except for (i) shares of AMI Common Stock in the aggregate
representing less than 1% of the outstanding shares of AMI Common Stock and (ii)
the "standstill" provisions of the Confidentiality Agreement, dated July 3,
1996, as amended September 5, 1996 (the "Confidentiality Agreement") relating to
the acquisition of AMI Common Stock.
5.10 Complete Copies of Requested Reports. NPB has delivered or made
available (through public sources or directly) true and complete copies of each
document that has been requested by AMI or its counsel in connection with their
legal and accounting review of NPB and its subsidiaries.
5.11 Pooling of Interests. Based upon consultation with its independent
accountants, neither NPB nor any of its subsidiaries, nor any of their
respective directors, officers or, to the knowledge of NPB, stockholders, has
taken any action that would interfere with NPB's ability to account for the
Merger as a pooling of interests.
5.12 Representations Complete. None of the representations or warranties
made by NPB herein or in any Schedule hereto, including the NPB Disclosure
Schedule, or certificate furnished by NPB pursuant to this Agreement, or the NPB
SEC Reports, contain or will contain at the Effective Time any untrue statement
of a material fact or omits or will omit at the Effective Time to state any
material fact necessary in order to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading. To the extent such representations permit omissions of items
otherwise required to be disclosed because they are not material or do not or
would not have a Material Adverse Effect on NPB, such omissions in the aggregate
would not and do not have a Material Adverse Effect on NPB.
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ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
6.1 Conduct of Business by AMI and NPB Pending the Merger. During the
period from the date of this Agreement and continuing until the Effective Time,
except as agreed to in writing by the other party or as set forth in Section 6.1
of the AMI Disclosure Schedule or NPB Disclosure Schedule:
(a) the respective businesses of AMI and its subsidiaries shall be
conducted only in the ordinary and usual course of business and consistent with
past practices;
(b) neither AMI nor its subsidiaries shall (i) sell or pledge or agree to
sell or pledge any stock owned by it in any of its subsidiaries; (ii) amend its
Articles of Incorporation or Bylaws; or (iii) split, combine or reclassify any
shares of its outstanding capital stock or declare, set aside or pay any
dividend or other distribution payable in cash, stock or property in respect of
its capital stock, or directly or indirectly redeem, purchase or otherwise
acquire any shares of its capital stock or other securities or shares of the
capital stock or other securities of any of its subsidiaries, other than in
connection with the use of shares of capital stock to pay the exercise price or
tax withholdings in connection with its stock-based employee benefit plans in
the ordinary course of business in accordance with past practice;
(c) neither AMI nor any of its subsidiaries shall (i) authorize for
issuance, issue, sell, pledge, dispose of, encumber, deliver or agree or commit
to issue, sell, pledge, or deliver any additional shares of, or rights of any
kind to acquire any shares of, its capital stock of any class or exchangeable
into shares of stock of any class or any Voting Debt (whether through the
issuance or granting of options, warrants, commitments, subscriptions, rights to
purchase or otherwise), except for unissued shares of AMI Common Stock reserved
for issuance upon the exercise of the stock options or warrants described in the
AMI Disclosure Schedule pursuant to AMI's employee stock plans; (ii) acquire,
dispose of, transfer, lease, license, mortgage, pledge or encumber any fixed or
other assets, other than in the ordinary course of business and consistent with
past practices; (iii) incur, assume or prepay any indebtedness, liability or
obligation or any other liabilities or issue any debt securities, other than in
the ordinary course of business and consistent with past practices; (iv) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person (other than a
wholly-owned subsidiary), other than in the ordinary course of business and
consistent with past practices; (v) make any loans, advances or capital
contributions to, or investments in, any other person (other than to
wholly-owned subsidiaries), other than in the ordinary course of business and
consistent with past practices; or (vi) fail to maintain adequate insurance
consistent with past practices for their businesses and properties;
(d) AMI shall use its best efforts to preserve intact the business
organization of AMI and its subsidiaries to keep available the services of its
and its subsidiaries' present officers and key employees, and to preserve the
goodwill of those having business relationships with it and its subsidiaries;
provided, however, that no breach of this representation shall be deemed to have
occurred if a failure to comply with this Section 6.1(d) occurs as a result of
any matter arising out of the transactions contemplated by this Agreement or any
acquisition proposals made to AMI or the public announcement thereof;
(e) neither AMI nor any of its subsidiaries, nor NPB nor any of its
subsidiaries shall (i) take, or allow to be taken, any action which would
jeopardize the treatment of the Merger as a pooling of interests for accounting
purposes or (ii) take, or allow to be taken or fail to take any action which act
or omission would jeopardize qualification of the Merger as a reorganization
within the meaning of Section 368(a) of the Code;
(f) AMI shall pay and cause its subsidiaries to pay debts and taxes when
due subject to good faith disputes thereof, and pay or perform other obligations
when due;
(g) neither AMI nor any of its subsidiaries, nor NPB nor any of its
subsidiaries shall fail to use all reasonable efforts to take or omit to take
any action nor shall they agree, in writing or otherwise, to take or omit to
take any action, which would make any representation or warranty of AMI or NPB,
respectively, herein untrue or incorrect;
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(h) AMI and its subsidiaries shall not enter into any contract or
commitment, or violate, amend or otherwise modify or waive any of the terms of
any contract or commitment, other than in the ordinary course of business
consistent with past practice;
(i) AMI and its subsidiaries shall not transfer to any person or entity any
AMI Intellectual Property Rights other than in the ordinary course of business
consistent with past practice;
(j) AMI and its subsidiaries shall not enter into or amend any agreements
pursuant to which any other party is granted distribution, marketing or other
rights of any type or scope with respect to any of its products or technology;
(k) AMI and its subsidiaries shall not enter into any operating lease other
than in the ordinary course of business consistent with past practices and in no
event in excess of an aggregate of $10,000 over the term of such lease;
(l) AMI and its subsidiaries shall not pay, discharge or satisfy in an
amount in excess of $10,000 in any one case or $100,000 in the aggregate, any
claim, liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise) arising other than in the ordinary course of business,
other than the payment, discharge or satisfaction of liabilities reflected or
reserved against in the AMI Financial Statements or reasonably incurred in
connection with the transactions contemplated by this Agreement;
(m) AMI and its subsidiaries shall not make any capital expenditures,
capital additions or capital improvements except in the ordinary course of
business and consistent with past practice;
(n) AMI and its subsidiaries shall not materially reduce the amount of any
material insurance coverage provided by existing insurance policies;
(o) AMI and its subsidiaries shall not (i) hire any new director level or
officer level employee, (ii) pay any special bonus or special remuneration to
any employee or member of the Board of Directors other than automatic grants, or
(iii) increase the salaries, wage rates, fringe benefits or other compensation
of its members of the Board of Directors, officers or employees, except in the
case of (ii) and (iii) with respect to non-officer employees in the ordinary
course of business and consistent with past practices;
(p) AMI and its subsidiaries shall not grant any severance or termination
pay (i) to any director or officer or (ii) to any other employee except (A)
payments made pursuant to standard written agreements outstanding on the date
hereof or (B) grants which are made in the ordinary course of business in
accordance with its standard past practice;
(q) AMI and its subsidiaries shall not commence a lawsuit other than (i)
for the routine collection of bills, (ii) in such cases where it in good faith
determines that failure to commence suit would result in the material impairment
of a valuable aspect of its business, provided that it consults with NPB prior
to the filing of such a suit, or (iii) for a breach of this Agreement or related
agreements (e.g., the Confidentiality Agreement);
(r) AMI and its subsidiaries shall not acquire or agree to acquire by
merging or consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or otherwise
acquire or agree to acquire any assets which are material, individually or in
the aggregate, to its and its subsidiaries' business, taken as a whole;
(s) AMI and its subsidiaries shall not other than in the ordinary course of
business, make or change any material election in respect of Taxes, adopt or
change any accounting method in respect of Taxes, file any material Return or
any amendment to a material Return, enter into any closing agreement, settle any
claim or assessment in respect of Taxes, or consent to any extension or waiver
of the limitation period applicable to any claim or assessment in respect to
Taxes;
(t) AMI and its subsidiaries shall give all notices and other information
required prior to the Effective Time to be given to the employees of AMI, any
collective bargaining unit representing any group of employees of AMI, and any
applicable government authority under the WARN Act, the National Labor Relations
Act,
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the Internal Revenue Code, the Consolidated Omnibus Budget Reconciliation Act,
and other applicable law in connection with the transactions provided for in
this Agreement and NPB shall cooperate with AMI to give such notices and
information;
(u) AMI and its subsidiaries shall not revalue any of its assets, including
without limitation, writing down the value of inventory or writing off notes or
accounts receivable, except as required under generally accepted accounting
practices and in the ordinary course of business; and
(v) AMI and its subsidiaries shall not enter into any contract, agreement,
commitment or arrangement with respect to any of the items prohibited by this
Section 6.1.
(w) NPB shall not amend its Certificate of Incorporation in any manner that
would adversely affect the rights, preferences, or privileges of the holders of
Common Stock.
6.2 Compensation Plans. During the period from the date of this Agreement
and continuing until the Effective Time, AMI agrees as to itself and its
subsidiaries that it will not, without the prior written consent of NPB (except
as required by applicable law or pursuant to existing contractual arrangements
or solely to the extent necessary to make compensation increases in the ordinary
course of business consistent with past practices or make available existing
benefit arrangements to new or promoted employees in the ordinary course of
business in accordance with past practice): (a) enter into, adopt or amend any
bonus, profit sharing, compensation, stock option, pension, retirement, deferred
compensation, employment, severance or other employee benefit plan, agreement,
trust, plan, fund or other arrangement between AMI and one or more of its
officers, directors or employees (collectively, "Compensation Plans"), (b)
institute any new employee benefit, welfare program or Compensation Plan, (c)
make any change in any Compensation Plan or other employee welfare or benefit
arrangement or enter into any employment or similar agreement or arrangement
with any employee, or (d) enter into or renew any contract, agreement,
commitment or arrangement providing for the payment to any director, officer or
employee of compensation or benefits contingent, or the terms of which are
materially altered in favor of such individual, upon the occurrence of any of
the transactions contemplated by this Agreement.
6.3 Current Information. From the date of this Agreement to the Effective
Time, AMI will cause one or more of its designated representatives to confer on
a regular and frequent basis (not less than semi-monthly) with representatives
of NPB and to report the general status of its ongoing operations and to deliver
to NPB (not less than quarterly) unaudited consolidated balance sheets and
related consolidated statements of income, changes in stockholders equity and
changes in financial position for the period since the last such report. AMI
will promptly notify the other of any material change in the normal course of
its or its subsidiaries' business or in its or its subsidiaries' properties.
6.4 Letters of AMI's and NPB's Auditors. AMI shall use all reasonable
efforts to cause to be delivered to NPB a letter of Ernst & Young LLP ("Ernst &
Young"), AMI's independent auditors, and NPB shall use all reasonable efforts to
cause to be delivered to AMI a letter of Price Waterhouse LLP ("Price
Waterhouse"), NPB's independent accountants, each such letter dated a date
within two business days before the date on which the Registration Statement
shall become effective and addressed to NPB or AMI, as applicable, in form and
substance reasonably satisfactory to such recipient, and in scope and substance
consistent with applicable professional standards for letters delivered by
independent public accountants in connection with registration statements
similar to the Registration Statement. Each of AMI and NPB shall use reasonable
efforts to cause to be delivered to the other an update, dated the Closing Date,
of the letter of its independent auditors described in the preceding sentence.
6.5 Legal Conditions to Merger. Each of AMI and NPB shall, and shall cause
its subsidiaries to, use all reasonable efforts (a) to take, or cause to be
taken, all actions necessary to comply promptly with all legal requirements that
may be imposed on such party or its subsidiaries with respect to the Merger and
the consummation of the transactions contemplated by this Agreement, subject to
the appropriate vote or consent of stockholders and (b) to obtain (and to
cooperate with the other party to obtain) any consent, authorization, order or
approval of, or any exemption by, any governmental entity or any other public or
private third party that is required to be obtained or made by such party or any
of its subsidiaries in connection with the Merger
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and the transactions contemplated by this Agreement; provided, however, that a
party shall not be obligated to take any action pursuant to the foregoing if the
taking of such action or such compliance or the obtaining of such consent,
authorization, order, approval or exemption would, in such party's reasonable
opinion, (i) be materially burdensome to such party and its subsidiaries taken
as a whole or impact in such a materially adverse manner the economic or
business benefits of the transactions contemplated by this Agreement as to
render inadvisable the consummation of the Merger or (ii) to result in the
imposition of a condition or restriction on such party or on the Surviving
Corporation of the type referred to in Section 8.1(e). Each of AMI and NPB will
promptly cooperate with and furnish information to the other in connection with
any such burden suffered by, or requirement imposed upon, any of them or any of
their subsidiaries in connection with the foregoing.
6.6 Affiliates; Pooling of Interests. Neither NPB nor AMI shall take or
case to be taken any action, whether before or after the Closing Date, which
would disqualify the transaction contemplated herein as a pooling of interests
for accounting purposes. NPB and AMI shall use their best efforts to prevent
their stockholders from taking any action prohibited under the Affiliate
Agreements that would disqualify the transaction contemplated herein as a
pooling of interests for accounting purposes.
(a) The parties shall deliver to one another a list identifying all
persons, if any, who at the time the Merger is submitted for approval to the
stockholders of AMI ("Affiliates"), may be deemed "affiliates" of AMI and NPB
for purposes of Rule 145 under the Securities Act and for purposes of qualifying
for pooling of interests accounting treatment. AMI and NPB shall use their best
efforts to cause each Affiliate to deliver to the other party, on or prior to
October 1, 1996, a written agreement ("Affiliate Agreement"), in the form of
Exhibit 6.6 hereto, that such Affiliate will not sell, pledge, transfer or
otherwise dispose of any shares of NPB Common Stock issued to such Affiliate
pursuant to the Merger, except pursuant to an effective registration statement
or in compliance with Rule 145 or an exemption from the registration
requirements of the Securities Act. The parties shall promptly advise one
another if any person becomes or ceases to be an Affiliate.
(b) The parties shall use their best efforts to cause each person who is
identified as an Affiliate to deliver to the other party, on or prior to the
mailing of the Proxy Statement referred to in Section 7.4, a written agreement
in the form of Exhibit 6.6, providing that such Affiliate will not thereafter
sell or in any way reduce such Affiliate's risk relative to any shares of AMI
Common Stock during the period commencing 30 days prior to the AMI stockholders
meeting and will not sell or otherwise reduce such person's risk relative to any
shares of NPB Common Stock acquired under this Agreement until publication of
financial results covering at least 30 days of combined operations of NPB and
AMI within the meaning of the Securities and Exchange Commission's Financial
Reporting Release No. 1, "Codification of Financial Reporting Policies,"
sec.201.01 47 F.R. 21039 (April 15, 1982), except as permitted by Staff
Accounting Bulletin No. 76 issued by the Securities Exchange Commission, or such
later time as notified by NPB so as to ensure that the transactions contemplated
by this Agreement qualify as a pooling of interests. During the period between
the date of this Agreement and the thirtieth day prior to the AMI stockholders
meeting, AMI shall use its best efforts to cause each person who is identified
as an Affiliate to formally notify AMI of any and all proposed sales or
acquisitions of AMI or NPB Common Stock in advance of any such acquisition or
sale. Such notification will permit NPB to review the circumstances of the
proposed transaction with its advisors to ensure that pooling of interests
accounting is not compromised by such sales or purchases.
6.7 Advice of Changes; Government Filings. Each party shall confer on a
regular and frequent basis with the other, report on operational matters and
shall promptly advise the other both orally and in writing of any change or
event having, or which, insofar as can reasonably be foreseen, could have, a
Material Adverse Effect on such party or which would cause or constitute a
material breach of any of the representations, warranties or covenants of such
party contained herein. NPB and AMI shall file all reports required to be filed
by each of them with the SEC between the date of this Agreement and the
Effective Time and shall deliver to the other party copies of all such reports
promptly after the same are filed. Except where prohibited by applicable
statutes and regulations, and subject to Section 7.1 hereof, each party shall
promptly provide the other (or its counsel) with copies of all other filings
made by such party with any state or federal government entity in connection
with this Agreement or the transactions contemplated hereby.
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6.8 Accounting Methods. Except as otherwise contemplated by Section 7.13,
AMI shall not change its methods of accounting in effect at April 30, 1996,
except as required by changes in generally accepted accounting principles as
concurred in by such party's independent auditors. AMI will not change its
fiscal year.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Access and Information.
(a) AMI and NPB and their respective subsidiaries shall each afford to the
other and to the other's financial advisors, legal counsel, accountants,
consultants and other representatives access during normal business hours
throughout the period from the date hereof to the Effective Time to all of its
books, records, properties, facilities, personnel commitments and records
(including but not limited to Returns) and, during such period, each shall
furnish promptly to the other all information concerning its business,
properties and personnel as such other party may reasonably request. No
investigation pursuant to this Section 7.1 shall affect any representations or
warranties made herein or the conditions to the obligations of the respective
parties to consummate the Merger.
(b) All information furnished by AMI to NPB or furnished by NPB to AMI
pursuant hereto shall be treated as the sole property of the party furnishing
the information until consummation of the Merger contemplated hereby. The
parties will hold any such information which is nonpublic in confidence to the
extent required by, and in accordance with the Confidentiality Agreement, and
such Confidentiality Agreement shall survive the termination of this Agreement.
7.2 No Solicitation of Transactions. From the date hereof until the
earlier of termination of this Agreement or consummation of the Merger, neither
AMI nor any of its subsidiaries will, directly or indirectly, whether through
any director, officer, employee, financial advisor, legal counsel, accountant,
other agent or representative (as used in this Section 7.2, "affiliates") or
otherwise, (a) initiate, solicit or encourage, or take any other action to
facilitate any inquiries or the making of any proposal with respect to, or (b)
except to the extent required in the exercise of the fiduciary duties of the
Board of Directors of AMI under applicable law as advised by independent counsel
in connection with an unsolicited proposal, engage or participate in
negotiations concerning, provide any nonpublic information or data to, or have
any discussions with, any person other than a party hereto or their affiliates
relating to, any (i) acquisition, (ii) tender offer (including a self-tender
offer), (iii) exchange offer, (iv) merger, (v) consolidation, (vi) acquisition
of beneficial ownership of (or the right to vote securities representing) 10% or
more of the total voting power of such entity or any of its subsidiaries, (vii)
dissolution, (viii) business combination, (ix) purchase of all or any
significant portion of the assets or any division of (or any equity interest in)
such entity or any subsidiary, or (x) any similar transaction other than the
Merger (such proposals, announcements, or transactions being referred to as
"Acquisition Proposals"). AMI will notify NPB orally (within one business day)
and in writing (as promptly as practicable) if any such Acquisition Proposals
(including the identity of the persons making such proposals and, subject to the
fiduciary duties of the Board of Directors of AMI, the terms of such proposals)
are received and furnish to NPB a copy of any written proposal relating thereto.
7.3 Registration Statement. As promptly as practicable, NPB and AMI shall
cooperate and prepare and NPB shall file with the SEC the Registration Statement
and use reasonable efforts to have the Registration Statement declared
effective. NPB shall also use reasonable efforts to take any action required to
be taken under state securities or blue sky laws in connection with the issuance
of the shares of NPB Common Stock pursuant hereto. AMI shall furnish NPB with
all information concerning AMI and the holders of its capital stock and shall
take such other action as NPB may reasonably request in connection with such
Registration Statement and issuance of shares of NPB Common Stock.
7.4 Proxy Statement; Stockholder Approval. AMI, acting through its Board
of Directors, shall, in accordance with applicable law and its Articles of
Incorporation and Bylaws:
(a) promptly and duly call, give notice of, convene and hold as soon as
practicable following the date upon which the Registration Statement becomes
effective a meeting of its stockholders for the purpose of
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voting to approve and adopt this Agreement and shall use its best efforts,
except to the extent required in the exercise of the fiduciary duties of the
Board of Directors of AMI under applicable law as advised by independent
counsel, to obtain such stockholders' approval; and
(b) except to the extent required in the exercise of the fiduciary duties
of the Board of Directors of AMI under applicable law as advised by independent
counsel, recommend approval and adoption of this Agreement by the stockholders
of AMI, and include in the Proxy Statement such recommendation, and take all
lawful action to solicit such approval.
(c) As promptly as practicable, the parties shall prepare and file with the
SEC a preliminary Proxy Statement and, after consultation with each other,
respond to any comments of the SEC with respect to the preliminary Proxy
Statement and cause the definitive Proxy Statement to be mailed to AMI
stockholders. At the stockholders' meeting of AMI, NPB shall vote or cause to be
voted in favor of approval and adoption of this Agreement all shares of AMI
Common Stock which it beneficially owns at such time, if any. Whenever any event
occurs which should be set forth in an amendment or a supplement to the Proxy
Statement or any filing required to be made with the SEC, each party will
promptly inform the other and will cooperate in filing with the SEC and/or
mailing to AMI's stockholders such amendment or supplement. The Proxy Statement,
and all amendments and supplements thereto, shall comply with applicable law and
be in form and substance satisfactory to NPB and AMI.
7.5 Nasdaq National Market. NPB shall notify the Nasdaq National Market of
the listing of the shares of NPB Common Stock to be issued pursuant to the
Merger.
7.6 Antitrust Laws. As promptly as practicable, AMI and NPB shall make all
filings and submissions under the HSR Act as may be reasonably required to be
made in connection with this Agreement and the transactions contemplated hereby.
Subject to Section 7.1 hereof, AMI will furnish to NPB, and NPB will furnish to
AMI, such information and assistance as the other may reasonably request in
connection with the preparation of any such filings or submissions. Subject to
Section 7.1 hereof, AMI will provide NPB, and NPB will provide AMI, with copies
of all correspondence, filings or communications (or memoranda setting forth the
substance thereof) between such party or any of its representatives, on the one
hand, and any governmental agency or authority or members of their respective
staffs, on the other hand, with respect to this Agreement and the transactions
contemplated hereby, except to the extent that NPB or AMI is advised by
independent counsel that the provision of such information would be inadvisable
under applicable antitrust laws.
7.7 Certain Employee Benefit Plans Matters.
(a) NPB confirms to AMI that it is NPB's present intent to provide after
the Effective Time to continuing employees of AMI and its subsidiaries employee
benefit programs that in the aggregate are generally not less favorable to such
employees than those being provided to NPB's employees on the date of this
Agreement, except as otherwise provided in Schedule 7.7(a). To the extent the
NPB employee benefit programs provide medical or dental welfare benefits after
the Closing Date, NPB shall cause all pre-existing condition exclusions and
actively at work requirements to be waived, and NPB shall provide that any
expenses incurred on or before the Closing Date shall be taken into account
under the NPB employee benefit programs for purposes of satisfying the
applicable deductible, coinsurance and maximum out-of-pocket provisions for such
employees and their covered dependents.
(b) AMI hereby confirms to NPB that (i) all AMI Stock Options under the AMI
1985 Incentive Stock Option Plan and Amended and Restated 1988 Stock Option Plan
shall carry over and become options to acquire NPB Common Stock, and (ii) AMI's
Board of Directors shall not cause such options vesting or exercisability to be
accelerated unless and except to the extent that such acceleration is automatic
under the terms of the applicable agreement.
(c) AMI shall take no action from and after the date hereof to deposit into
any trust (including any "rabbi trust") amounts in respect of any employee
benefit obligations.
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7.8 Stock Options and Warrants.
(a) As of the Effective Time, any stock options, warrants or convertible
securities, which are outstanding as of the date hereof and have not expired as
of the Effective Time shall be assumed by NPB and converted into options,
warrants or convertible securities, as the case may be to purchase the number of
shares of NPB Common Stock (rounded up to the nearest whole share) equal to the
number of shares of AMI Common Stock subject to such options, warrants or
convertible security, as the case may be, multiplied by the Exchange Ratio, at
an exercise price per share of NPB Common Stock (rounded down to the nearest
penny) equal to the former exercise price per share of AMI Common Stock under
such options, warrants or convertible securities, as the case may be,
immediately prior to the Effective Time divided by the Exchange Ratio; provided,
however, that in the case of any AMI stock option to which Section 421 of the
Code applies by reason of its qualification under Section 422 of the Code, the
conversion formula shall be adjusted, if necessary, to comply with Section
424(a) of the Code to the effect that the number of shares shall be rounded down
to the nearest whole share and the exercise price shall be rounded up to the
nearest penny. Except as provided above, the converted stock options, warrants
or convertible securities, as the case may be, shall be subject to the same
terms and conditions (including, without limitation, expiration date, vesting
and exercise provisions) as were applicable to stock options, warrants or
convertible securities, as the case may be, immediately prior to the Effective
Time.
(b) No such option, warrant or convertible security shall be converted into
a stock option, warrant or convertible security to purchase a partial share of
NPB Common Stock.
(c) The consummation of the Merger shall not be treated as a termination of
employment for purposes of such stock options, warrants or convertible
securities.
(d) NPB agrees that as soon as practicable after the Effective Time it will
cause to be filed one or more registration statements on Form S-8 under the
Securities Act, or amendments to its existing registration statements on Form
S-8 or amendments to the Registration Statement, in order to register the shares
of NPB Common Stock issuable upon exercise of the aforesaid converted AMI Stock
Options.
7.9 Director and Officer Indemnification, Etc.
(a) For a period of six (6) years from the Effective Time, NPB and the
Surviving Corporation each agrees that for acts occurring prior to the Effective
Time, all rights to indemnification and advancement of expenses existing in
favor of the directors and officers of AMI (the "Indemnified Parties") under the
provisions existing on the date hereof of the Articles of Incorporation, Bylaws
and indemnification agreements of AMI shall survive the Effective Time, and NPB
and the Surviving Corporation each agrees to indemnify and advance expenses to
the Indemnified Parties to the full extent required or permitted under the
provisions existing on the date hereof of AMI's Articles of Incorporation and
Bylaws and indemnification agreements of AMI. The provisions of this Section 7.9
shall be binding on NPB's successors and assigns.
(b) For a period of six (6) years after the Effective Time, NPB shall
maintain, with respect to claims arising from facts or events which occurred
before the Effective Time, officers' and directors' liability insurance covering
the Indemnified Parties who are currently covered (in their capacities as
officers and directors) by AMI's existing officers' and directors' liability
insurance policies, on terms substantially no less advantageous to such officers
and directors than such existing insurance.
7.10 Public Announcements. The initial press release relating to this
Agreement shall be a joint press release and thereafter, so long as this
Agreement is in effect, NPB and AMI agree that they will each obtain the
approval of the other party prior to issuing any press release or any other
written communication (including any written communication to employees) and
that they will use their best efforts to consult with one another before
otherwise making any public statement or responding to any press inquiry with
respect to this Agreement or the transactions contemplated hereby, except as may
be required by law or any governmental agency if required by such agency or the
rules of the National Association of Securities Dealers, Inc.
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7.11 Expenses. Except as provided in Section 9.3, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby (whether or not the Merger is consummated) shall be paid by the party
incurring such expenses, except that if the Merger is not consummated NPB and
AMI shall share equally the expenses incurred in connection with filings under
the HSR Act, printing and mailing the Proxy Statement and all aspects of the
Registration Statement.
7.12 Additional Agreements.
(a) Subject to the terms and conditions herein provided, each of the
parties hereto agrees to use all 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 under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement, including using all
reasonable efforts to obtain all necessary waivers, consents and approvals, and
to effect all necessary registrations and filings and to obtain from each
natural person who owns of record any shares of the capital stock of any
subsidiary of AMI a power of attorney, in form acceptable to NPB and its
counsel, appointing one or more representatives of NPB as attorney in fact for
such person, effective as of the Effective Time, for purposes of executing any
Reports and taking any other actions required to transfer record ownership of
such shares to such entity as NPB shall determine. 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/or directors of NPB and AMI
shall take all such necessary action.
(b) NPB and AMI each will cooperate with one another and use all reasonable
efforts to prepare all necessary documentation to effect promptly all necessary
filings and to obtain all necessary permits, consents, approvals, orders and
authorizations of or any exemptions by, all third parties and governmental
bodies necessary to consummate the transactions contemplated by this Agreement.
(c) Each party will keep the other party apprised of the status of any
inquiries made of such party by the Department of Justice, the SEC, or any other
governmental agency or authority or members of their respective staffs with
respect to this Agreement or the transactions contemplated herein.
7.13 AMI Accruals and Reserves. Prior to the Closing Date, AMI shall
review and, to the extent determined necessary or advisable, consistent with
generally accepted accounting principles and the accounting rules, regulations
and interpretations of the SEC and its staff, modify and change its accrual,
reserve and provision policies and practices to (a) reflect the Surviving
Corporation's plans with respect to the conduct of AMI's business following the
Merger and (b) make adequate provision (for the costs and expenses relating
thereto) so as to be applied consistently on a mutually satisfactory basis with
those of NPB. The parties agree to cooperate in preparing for the implementation
of the adjustments contemplated by this Section 7.13. Notwithstanding the
foregoing, AMI shall not be obligated to take in any respect any such action
pursuant to this Section 7.13 (other than pursuant to the preceding sentence)
unless and until NPB acknowledges that all conditions to its obligation to
consummate the Merger have been satisfied.
7.14 FIRPTA. AMI shall, prior to the Closing Date, provide NPB with a
properly executed Foreign Investment and Real Property Tax Act of 1980
("FIRPTA") Notification Letter which states that shares of capital stock of AMI
do not constitute "United States real property interests" under Section 897(c)
of the Code, for purposes of satisfying NPB's obligations under Treasury
Regulation Section 1.1445-2(c)(3). In addition, simultaneously with delivery of
such Notification Letter, AMI shall have provided NPB, as agent for AMI, a form
of notice to the Internal Revenue Service in accordance with the requirements of
Treasury Regulation Section 1.897-2(h)(2) along with written authorization for
Acquiror to deliver such notice form to the Internal Revenue Service on behalf
of AMI upon the Closing of the Merger.
7.15 Takeover Statutes. If any Takeover Statute shall become applicable to
the transaction contemplated hereby, AMI and the members of the Board of
Directors of AMI shall grant such approvals and take such actions as are
necessary so that the Merger and the transactions contemplated hereby may be
commenced as promptly as practicable in the terms contemplated hereby and
otherwise act to eliminate or minimize the effects of such statute or regulation
in the transaction contemplated hereby, except, in each such case, to the extent
required in the exercise of the fiduciary duties of the Board of Directors of
AMI under applicable law as advised by independent counsel.
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7.16 Management Incentive Plan. AMI shall cause its current Management
Incentive Plan ("MIC Plan") to terminate effective as of the Closing Date. Each
of the participants in the MIC Plan on the Closing Date shall be entitled to
receive a pro rata amount equal to the amounts accrued with respect to such
participant under the MIC Plan as of such date.
7.17 Existing Agreements With AMI Officers and Employees. NPB confirms
that upon consummation of the Merger, it shall assume the obligations of AMI
under those certain agreements with AMI officers and employees set forth on
Schedule 7.17.
7.18 Consulting Agreements. NPB shall enter into consulting agreements on
the terms and conditions set forth on Schedule 7.18 with the individuals
indicated on such schedule.
ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER
8.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following conditions,
any one of which may be waived by both AMI and NPB:
(a) Any waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated.
(b) The Registration Statement shall have become effective in
accordance with the provisions of the Securities Act, and shall be
effective at the Effective Time, and no stop order suspending effectiveness
of the Registration Statement shall have been issued, no action, suit,
proceedings or investigation by the SEC to suspend the effectiveness
thereof shall have been initiated and be continuing, and all necessary
approvals under state securities laws relating to the issuance or trading
of the NPB Common Stock to be issued to AMI stockholders in connection with
the Merger shall have been received.
(c) This Agreement and the transactions contemplated hereby shall have
been approved and adopted by the favorable vote of a majority of the shares
of outstanding capital stock of AMI entitled to vote thereon at a
stockholders meeting at which a quorum is present in accordance with
applicable law.
(d) No preliminary or permanent injunction or other order by any
federal, state or foreign court of competent jurisdiction which prohibits
the consummation of the Merger shall have been issued and remain in effect.
No statute, rule, regulation, executive order, stay, decree, or judgment
shall have been enacted, entered, issued, promulgated or enforced by any
court or governmental authority which prohibits or restricts the
consummation of the Merger. Other than the filing of the Certificate of
Merger with the Secretary of State of Delaware and the Secretary of State
of Minnesota, all authorizations, consents, orders or approvals of, or
declarations or filings with, and all expirations of waiting periods
imposed by, any governmental entity (all of the foregoing, "Consents")
which are necessary for the consummation of the Merger, other than Consents
the failure to obtain which would not materially, adversely affect the
consummation of the Merger or in the aggregate have a Material Adverse
Effect on the Surviving Corporation and its subsidiaries, taken as a whole,
shall have been filed, occurred or been obtained (all such permits,
approvals, filings and consents and the lapse of all such waiting periods
being referred to as the "Requisite Regulatory Approvals") and all such
Requisite Regulatory Approvals shall be in full force and effect. NPB shall
have received all state securities or blue sky permits and other
authorizations necessary to issue the shares of NPB Common Stock in
exchange for the shares of AMI Common Stock and to consummate the Merger.
(e) There shall not be any action taken, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
Merger, by any federal or state governmental entity which, in connection
with the grant of a Requisite Regulatory Approval, imposes any condition or
restriction upon the Surviving Corporation or its subsidiaries (or, in the
case of any disposition of assets required in connection with such
Requisite Regulatory Approval, upon NPB or its subsidiaries or AMI or its
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subsidiaries), including, without limitation, requirements relating to the
disposition of assets, which in any such case would so materially adversely
impact the economic or business benefits of the transactions contemplated
by this Agreement as to render inadvisable the consummation of the Merger.
(f) NPB and AMI shall have received (i) a letter, dated the Closing
Date, addressed to NPB from Price Waterhouse, in response to a letter from
NPB summarizing the relevant facts and in form and substance reasonably
satisfactory to NPB, a copy of which shall be provided to AMI, and (ii) a
letter, dated the Closing Date, addressed AMI from Ernst & Young LLP, in
response to a letter from AMI summarizing the relevant facts and in form
and substance reasonably satisfactory to AMI, a copy of which shall be
given to NPB, in each case to the effect that Price Waterhouse and Ernst &
Young LLP concur with NPB management's and AMI management's conclusion,
respectively, that the Merger qualifies for "pooling of interests"
treatment for financial reporting purposes and that such accounting
treatment is in accordance with generally accepted accounting principles.
Price Waterhouse shall also have received from Ernst & Young, a letter in
form and substance satisfactory to Price Waterhouse, that Ernst & Young is
not aware of any fact concerning AMI or any of its affiliates that would
preclude NPB from accounting for the Merger by the "pooling of interests"
method for financial reporting purposes.
(g) The aggregate amount of cash required to paid on account of all
Excluded Shares and with respect to any cash payments for fractional shares
pursuant to Section 3.4 shall not exceed ten percent (10%) of the value
(determined in accordance with APB Opinion No. 16) of the shares of NPB
Common Stock issuable in exchange for shares of AMI Common Stock at the
Effective Time.
8.2 Conditions to Obligation of AMI to Effect the Merger. The obligation
of AMI to effect the Merger shall be further subject to the satisfaction at or
prior to the Effective Time of the following additional conditions, which may be
waived by AMI:
(a) NPB shall have performed in all material respects its obligations
under this Agreement required to be performed by it at or prior to the
Effective Time and the representations and warranties of NPB contained in
this Agreement shall be true and correct in all material respects at and as
of the Effective Time as if made at and as of such time, except as
contemplated by this Agreement, and AMI shall have received a certificate
of the President or an Executive Vice President of NPB as to the
satisfaction of this condition.
(b) AMI shall have received an opinion of Best & Flanagan, PLLP,
counsel to AMI, dated the Closing Date, substantially to the effect that,
on the basis of facts, representations, and assumptions set forth in such
opinion which are consistent with the state of facts existing at the
Closing Date, the Merger will be treated for federal income tax purposes as
a reorganization within the meaning of Section 368(a) of the Code and that
NPB and AMI will each be a party to the reorganization within the meaning
of Section 368(b) of the Code. In rendering any such opinion, such counsel
may require and, to the extent they deem necessary and appropriate, may
rely upon representations made in certificates of officers of NPB, AMI,
affiliates of the foregoing and others. In addition, AMI shall have
received the opinion, dated the Closing Date, of Morrison & Foerster,
counsel for NPB, covering the matters set forth in Exhibit 8.2(b).
(c) There shall not have occurred following the date of this Agreement
and prior to the Closing Date any change, or any event involving a
prospective change, in NPB's business, assets, financial condition or
results of operation which has had, or is reasonably likely to have, in the
aggregate a Material Adverse Effect (other than as a result of changes or
proposed changes in federal or state health care (including health care
reimbursement) laws or regulations of general applicability or
interpretations thereof, changes in generally accepted accounting
principles and changes that could, under the circumstances, reasonably have
been anticipated in light of disclosures made in writing by NPB to AMI
prior to the execution of this Agreement).
(d) The shares of NPB Common Stock to be issued in connection with the
Merger shall have been approved for listing on the Nasdaq National Market.
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8.3 Conditions to Obligations of NPB to Effect the Merger. The obligations
of NPB to effect the Merger shall be further subject to the satisfaction at or
prior to the Effective Time of the following additional conditions, which may be
waived by NPB:
(a) AMI shall have performed in all material respects its obligations
under this Agreement required to be performed and complied with by it at or
prior to the Effective Time and the representations and warranties of AMI
contained in this Agreement shall be true and correct in all material
respects at and as of the Effective Time as if made at and as of such time,
except as contemplated by this Agreement, and NPB shall have received a
Certificate of the President or an Executive Vice President of AMI as to
the satisfaction of this condition.
(b) AMI shall have obtained the consent or approval of each person
whose consent or approval shall be required in order to permit the
succession by the Surviving Corporation pursuant to the Merger to any
obligation, right or interest of AMI or any subsidiary under any loan or
credit agreement, note, mortgage, indenture, lease, license or other
agreement or instrument, except those for which failure to obtain such
consents and approvals would not materially adversely affect the
consummation of the transactions contemplated hereby or in the aggregate
have a Material Adverse Effect on the Surviving Corporation and its
subsidiaries taken as a whole.
(c) NPB shall have received the opinion of Morrison & Foerster,
counsel to NPB, dated the Closing Date and addressed to NPB, to the effect
that, on the basis of facts, representations, and assumptions set forth in
such opinion which are consistent with the state of facts existing at the
Effective Time, the Merger will be treated for federal income tax purposes
as a reorganization within the meaning of Section 368(a) of the Code, and
that NPB and AMI will each be a party to that reorganization within the
meaning of Section 368(b) of the Code. In rendering any such opinion, such
counsel may require and, to the extent they deem necessary and appropriate,
may rely upon representations made in certificates of officers of AMI, NPB,
affiliates of the foregoing and others. In addition, NPB shall have
received the opinion, dated the Closing Date, of Best & Flanagan, PLLP,
counsel for AMI, covering the matters set forth in Exhibit 8.3(c).
(d) There shall not have occurred following the date of this Agreement
and prior to the Closing Date any change, or any event involving a
prospective change, in AMI's business, assets, financial condition or
results of operation which has had, or is reasonably likely to have, in the
aggregate a Material Adverse Effect (other than as a result of changes or
proposed changes in federal or state health care (including health care
reimbursement) laws or regulations of general applicability or
interpretations thereof, changes in generally accepted accounting
principles and changes that could, under the circumstances, reasonably have
been anticipated in light of disclosures made in writing by AMI to NPB
prior to the execution of this Agreement).
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated and the Merger
contemplated hereby abandoned at any time prior to the Effective Time, whether
before or after approval by the stockholders of AMI or NPB:
(a) by mutual written consent of NPB and AMI;
(b) by either NPB or AMI if the Merger shall not have been consummated
on or before February 28, 1997
(c) by AMI if there shall have been any material breach of a
representation and warranty or material obligation of NPB hereunder and, if
such breach is curable, such default shall have not been remedied within 10
days after receipt by NPB of notice in writing from AMI specifying such
breach and requesting that it be remedied; provided, that such 10 day
period shall be extended for so long as NPB shall be making all reasonable
attempts to cure such breach, unless the breach is not susceptible of a
cure;
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(d) by NPB if there shall have been any material breach of a
representation and warranty or material obligation of AMI hereunder and, if
such breach is curable, such default shall not have been remedied within 10
days after receipt by AMI of notice in writing from NPB specifying such
breach and requesting that it be remedied; provided, that such 10 day
period shall be extended for so long as AMI shall be making all reasonable
attempts to cure such breach, unless the breach is not susceptible of a
cure;
(e) by NPB if the Board of Directors of AMI shall have (i) withdrawn
or modified in a manner adverse to NPB its approval or recommendation (or
failed to make such recommendation) of this Agreement or the Merger, or
shall have resolved to do any of the foregoing, or (ii) recommended an
Acquisition Proposal other than the Merger;
(f) by either NPB or AMI if any court of competent jurisdiction in the
United States or other United States governmental body shall have issued an
order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or any
other action shall have become final and non-appealable; provided, that the
party seeking to terminate this Agreement pursuant to this clause (f) shall
have used all reasonable efforts to remove such order, decree or ruling;
(g) by NPB, upon written notice to AMI, if any approval of the
stockholders of AMI required for the consummation of the Merger submitted
for approval shall not have been obtained by reason of the failure to
obtain the required vote at a duly held meeting of stockholders or at any
adjournment thereof;
(h) by AMI, if its Board of Directors, in the exercise of its good
faith judgment as to its fiduciary duties to its stockholders under
applicable law as advised by independent counsel, determines that such
termination is required by reason of another Acquisition Proposal being
made with respect to AMI; or
(i) by AMI, if the Closing Market Value of NPB Common Stock is less
than $17.00; provided that NPB may negate such termination by notifying
AMI, within 24 hours of receiving AMI's termination notice (both of which
notices may be given orally), of NPB's election to determine the Exchange
Ratio by dividing (A) $10.00 by (B) the Closing Market Value, rounded to
the nearest one-one thousandth of a share.
9.2 Effect of Termination. In the event of termination of this Agreement
as provided above, this Agreement shall forthwith become of no further effect
and, except for a termination resulting from a breach by a party of this
Agreement, there shall be no liability or obligation on the part of either NPB
or AMI or their respective officers or directors (except as set forth in Section
7.1(b) hereof and except for Sections 7.11, 9.3, and 10.2 hereof which shall
survive the termination). Moreover, in the event of termination of this
Agreement pursuant to Section 9.1(c) or 9.1(d), nothing herein shall prejudice
the ability of the non-breaching party from seeking damages from any other party
for any breach of this Agreement, including, without limitation, attorneys' fees
and the right to pursue any remedy at law or in equity. Upon request therefor,
each party will redeliver or, at the option of the party receiving such request,
destroy all Reports, work papers and other material of any other party relating
to the transactions contemplated hereby, whether obtained before or after the
execution hereof, to the party furnishing same.
9.3 Cancellation Fees; Expenses.
(a) If at any time (i) AMI shall have entered into an agreement, including
without limitation an agreement in principle, with respect to an Acquisition
Proposal, other than the Merger contemplated by this Agreement; (ii) AMI shall
breach any of the provisions of Section 7.2 above or shall recommend or approve
an Acquisition Proposal pursuant to Section 7.2; or (iii) any person, entity or
group of persons or entities acting in concert shall acquire beneficial
ownership of more than fifteen percent (15%) of the voting securities of AMI as
a result of an Acquisition Proposal and, in the case of (i) or (ii), this
Agreement is terminated pursuant to Section 9.1(d), Section 9.1(e), Section
9.1(g) or Section 9.1(h); then NPB shall be entitled to be paid by AMI a fee in
cash or immediately available funds of One Million Eight Hundred Thousand U.S.
Dollars ($1,800,000) (the "Cancellation Fee").
(b) AMI shall pay to NPB the Cancellation Fee provided in Section 9.3(a)
above within ten (10) days of written demand therefor by the NPB. The payment of
the Cancellation Fee shall be conditioned on there
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being no material breach of the obligations of NPB hereunder. If AMI fails to
pay any amount due NPB pursuant to this Section 9.3 when due, AMI shall pay
interest thereon, from the date due until the date paid in full, at the Prime
Rate as announced from time to time by Bank of America or any successor thereto
(the "Prime Rate") and shall reimburse NPB for all reasonable attorneys' fees
and other costs and expenses incurred by NPB in collecting such amount from AMI.
(c) In the event that either AMI or NPB terminates this Agreement pursuant
to, respectively, Section 9.1(c) or Section 9.1(d) hereof, then the
nonterminating party shall pay to the terminating party the terminating party's
reasonable out-of-pocket expenses incurred in connection with the negotiation,
execution and performance of this Agreement and the transactions contemplated
hereby (including, without limitation, the fees and expenses of its advisors,
accountants and legal advisors) ("Expense Reimbursement Payment"); provided,
however, that the terminating party shall not be entitled to any Expense
Reimbursement Payment pursuant to this Section 9.3(c) if at the time of
termination the nonterminating party also would have been entitled to terminate
this Agreement pursuant to Section 9.1(c) or Section 9.1(d), as applicable.
(d) In the event that this Agreement is terminated pursuant to Section
9.1(a), (b), or (f), then NPB shall pay to AMI a reimbursement fee equal to the
lesser of $500,000 or all of AMI's documented out-of-pocket expenses with
respect to the matters set forth in Schedule 9.3(d).
9.4 Amendment. This Agreement may be amended by action taken by NPB and
AMI at any time before or after approval hereof by the stockholders of AMI, but,
after any such approval, no amendment shall be made which alters the Exchange
Ratio or which in any way materially adversely affects the rights of such
stockholders, without the further approval of such stockholders. This Agreement
may not be amended except by an instrument in writing signed on behalf of each
of the parties hereto.
9.5 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto, and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party. Such waiver shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
ARTICLE X
GENERAL PROVISIONS
10.1 Survival of Representations, Warranties and Agreements. No
representations, warranties or agreements contained herein shall survive beyond
the Effective Time except that the agreements contained in Sections 3.1, 3.2,
3.3, 3.4, 3.5, 3.7, 7.7, 7.8, 7.9, 7.11, 7.12(a), 7.16, 7.17, 7.18, 9.3, 10.1,
10.6 and 10.7 hereof shall survive beyond the Effective Time, and the agreements
of the Affiliates delivered pursuant to Section 6.6 shall survive beyond the
Effective Time.
10.2 Brokers.
(a) AMI represents and warrants to NPB that, (i) except for its financial
advisor, Dain Bosworth Incorporated, no broker, finder or financial advisor is
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of AMI and (ii) a true and complete copy of
all engagement letters or agreements between AMI and Dain Bosworth Incorporated
and between AMI and any third party for whom any amounts payable contingent upon
consummation of the Merger, have previously been delivered to NPB.
(b) NPB represents and warrants to AMI that, (i) except for its financial
advisors, Robertson, Stephens & Company, L.P., no broker, finder or financial
advisor is entitled to any brokerage, finder's or other fee or commission in
connection with the Merger or the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of NPB and (ii) a true and complete
copy of engagement letter or agreement between NPB and Robertson, Stephens &
Company, L.P. and between NPB and any third party
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for whom any amounts payable are contingent upon consummation of the Merger,
have previously been delivered to AMI.
10.3 Notices. All notices, claims, demands and other communications
hereunder shall be in writing and shall be deemed given if delivered personally
or by telex or telecopy or mailed by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) If to NPB, to:
Nellcor Puritan Bennett Incorporated
4280 Hacienda Drive
Pleasanton, California 94588
Attention:Laureen DeBuono
Executive Vice President, Human Resources,
General Counsel and Corporate Secretary
with a copy to:
Morrison & Foerster LLP
Twelfth Floor
19900 MacArthur Boulevard
Irvine, California 92612
Attention: Robert M. Mattson, Jr., Esq.
(b) If to AMI, to:
Aequitron Medical, Inc.
14800 -- 28th Avenue North
Minneapolis, Minnesota 55447
Attention:Bill Milne
Chief Financial Officer
with a copy to:
Best & Flanagan, PLLP
4000 First Bank Place
601 Second Avenue South
Minneapolis, Minnesota 55402-4331
Attention: Robert J. Christianson, Esq.
10.4 Descriptive 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.
10.5 Entire Agreement; Assignment. This Agreement (including the Exhibits,
Disclosure Schedules and other Reports and instruments referred to herein) and
the Confidentiality Agreement (a) constitute the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, among the
parties or any of them, with respect to the subject matter hereof; (b) except
for Sections 7.7, 7.8, 7.9, 7.16, 7.17, and 7.18, is not intended to confer upon
any other person any rights or remedies hereunder; and (c) shall not be assigned
by operation of law or otherwise, provided that NPB may assign its rights and
obligations hereunder to a direct or indirect subsidiary of NPB, but no such
assignment shall relieve NPB of its obligations hereunder.
10.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to the
provisions thereof relating to conflicts of law.
10.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
10.8 Validity. The invalidity or unenforceability of any provision of this
Agreement shall not effect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
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10.9 Jurisdiction and Venue. Each party hereto hereby agrees that any
proceeding relating to this Agreement and the Merger shall be brought in a state
court of Delaware. Each party hereto hereby consents to personal jurisdiction in
any such action brought in any such Delaware 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 Delaware court or to any claim that
such Delaware court is an inconvenient forum.
10.10 Investigation. The respective representations of warranty of NPB and
AMI contained herein or in the certificates or other Reports delivered prior to
the Closing shall not be deemed waived or otherwise affected by any
investigation made by any party hereto.
10.11 Consents. For purposes of any provision of this Agreement requiring,
permitting or providing for the consent of NPB or AMI, the written consent of
the Chief Executive Officer of NPB or AMI, as the case may be shall be
sufficient to constitute such consent.
IN WITNESS WHEREOF, each of NPB and AMI has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
Nellcor Puritan Bennett Incorporated
By: /s/ C. RAYMOND LARKIN, JR.
-----------------------------------
Name: C. Raymond Larkin, Jr.
Title: President and Chief
Executive Officer
Aequitron Medical, Inc.
By: /s/ JAMES B. HICKEY, JR.
-----------------------------------
Name: James B. Hickey
Title: Chief Executive Officer and
President
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APPENDIX B
DAIN BOSWORTH INCORPORATED OPINION
<PAGE> 117
[DAIN BOSWORTH INCORPORATED LETTERHEAD]
CORPORATE FINANCE DEPARTMENT
October 21, 1996
The Board of Directors
Aequitron Medical, Inc.
14800 - 28th Avenue North
Minneapolis, MN 55447
Gentlemen:
You have requested our opinion, as of the date hereof, as to the fairness of the
consideration to be received by the common stock shareholders of Aequitron
Medical, Inc., a Minnesota corporation ("AMI" or the "Company"), from a
financial point of view, pursuant to the terms of the proposed merger (the
"Merger") of the Company with and into Nellcor Puritan Bennett Incorporated
("NPB"). The terms of the Merger are set forth in the Agreement and Plan of
Merger dated September 9, 1996, as amended by Amendment No. 1 to the Agreement
and Plan of Merger (as so amended, the "Agreement") and include the subsequent
conversion of each share of AMI common stock into .485 shares of fully
registered and tradable NPB common stock, subject to adjustment as provided in
the Agreement (the "Exchange Ratio"). Outstanding options to acquire shares of
AMI common stock will be converted into options to acquire shares of NPB common
stock, adjusted for the Exchange Ratio. Based upon the closing price indicated
for NPB common stock as of October 18, 1996 of $20.625 per share, and an
Exchange Ratio of .485 shares, each shareholder of AMI common stock would
receive $10.00 in NPB common stock for each share of AMI common stock held.
Pursuant to the Agreement, each share of the Company common stock shall be
converted into the right to receive that fraction of a share of NPB common stock
equal to the Exchange Ratio which shall be calculated as follows: 1) if the
Closing Market Value (as defined in the Agreement) is greater than or equal to
$23.14 and less than or equal to $26.61, the Exchange Ratio will be .432; 2) if
the Closing Market Value is greater than $26.61, the Exchange Ratio will be the
quotient of A) $11.50 divided by B) the Closing Market Value, rounded to the
nearest one-one thousandth of a share; 3) if the Closing Market Value is less
than $23.14 and greater than or equal to $17.00, the Exchange Ratio will be the
quotient of A) $10.00 divided by B) the Closing Market Value, rounded to the
nearest one-one thousandth of a share; and 4) if the Closing Market Value is
less than $17.00, the Exchange Ratio will be .588. We have assumed, with your
consent, that the Merger will qualify for pooling-of-interests accounting
treatment and as a tax free transaction for the shareholders of the Company.
Dain Bosworth Incorporated ("Dain Bosworth"), as part of its investment banking
business, is continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive bids, secondary distributions of listed and unlisted
securities, private placements, and valuations for estate, corporate, and other
purposes. Dain Bosworth is familiar with the Company having provided certain
investment banking services to the Company from time to time including providing
a fairness opinion to the Board of Directors of AMI related to the Company's
acquisition of CNS, Inc.'s sleep diagnostic business in June 1995. Also, Dain
Bosworth has from time to time issued research reports and recommendations on
the common stock of AMI and, in the ordinary course of business, Dain Bosworth
may periodically have positions in the common stock of the Company and NPB.
DAIN BOSWORTH PLAZA / 60 SOUTH SIXTH STREET / P.O. BOX 1160 / MINNEAPOLIS,
MINNESOTA 55440-1160
612-371-2800 / FAX: 612-371-2763
Member New York Stock Exchange, Inc.
<PAGE> 118
The Board of Directors
Aequitron Medical, Inc.
Page 2
In connection with this opinion, we have, among other things, reviewed certain
publicly available information regarding the Company and NPB and other financial
and operating information supplied to us by the Company, including certain
historical audited financial statements, certain interim unaudited financial
statements, and certain financial projections relating to the Company and NPB.
We have visited the corporate offices of the Company and have held discussions
with members of the senior management of both companies. In addition, we made
inquiries of the management of AMI and NPB regarding the past and current
business operations, financial condition, future prospects for the companies,
and the joint prospects of the combined company. We have reviewed the Agreement
and Plan of Merger dated September 9, 1996 and a draft of Amendment No. 1 to
Agreement and Plan of Merger in the form provided to us and selected other
documents connected with the Merger. We have analyzed the historical reported
market prices and trading activity of the common stock of AMI and NPB, as well
as the Company's historical and projected revenue, earnings, and capitalization.
We have compared financial and stock market information on AMI and NPB to
similar information for certain publicly traded companies. We have also
reviewed, to the extent publicly available, the terms of selected relevant
mergers and acquisitions and performed other studies and analyses as we
considered appropriate.
In conducting our review and in rendering our opinion, we have assumed and
relied upon the accuracy and completeness of the financial and other information
provided to us or publicly available and we have not assumed any responsibility
for independent verification of such information, and we have further relied
upon the assurances of management of AMI and NPB that they are not aware of any
facts that would make such information inaccurate or misleading. It is
understood that we were retained by the Board of Directors of AMI, and that the
Board of Directors has not looked to us for independent verification with
respect to the financial and other information provided to us or publicly
available, including the projections provided to us by AMI and NPB. With respect
to the financial projections for AMI and NPB, we have assumed that such
projections have been reasonably prepared on a basis reflecting the best
currently available estimates and judgments of the respective management teams
as to the future financial performance of AMI and NPB, and that AMI and NPB will
perform substantially in accordance with such projections. Also, we did not make
an independent appraisal of the assets or liabilities of AMI or NPB, and we do
not express an opinion regarding the liquidation values or solvency of either
company separately or the combined companies following the Merger. Our opinion
as expressed herein is limited to the fairness to AMI, from a financial point of
view, of the consideration to be received by the Company in connection with the
Merger, and it does not address the Company's underlying business decision to
proceed with the Merger. Our opinion is based upon general market, economic,
financial, monetary and other conditions as they exist and can be evaluated, and
the information available to us, as of the date hereof.
Based upon the foregoing, and other matters that we considered relevant, it is
our opinion that, as of the date hereof, the consideration to be received
pursuant to the terms of the Merger is fair to the common shareholders of AMI
from a financial point of view.
Very truly yours,
DAIN BOSWORTH INCORPORATED
DAIN BOSWORTH INCORPORATED
<PAGE> 119
APPENDIX C
SECTIONS 302A.471 AND 302A.473 OF THE
MINNESOTA BUSINESS CORPORATION ACT
<PAGE> 120
SECTIONS 302A.471 AND 302A.473 OF THE
MINNESOTA BUSINESS CORPORATION ACT
SEC. 302A.471 RIGHTS OF DISSENTING SHAREHOLDERS.
Subdivision 1. Actions creating rights. A shareholder of a corporation may
dissent from, and obtain payment for the fair value of the shareholder's shares
in the event of, any of the following corporate actions:
(a) An amendment of the articles that materially and adversely affects
the rights or preferences of the shares of the dissenting shareholder in
that it:
(1) alters or abolishes a preferential right of the shares;
(2) creates, alters, or abolishes a right in respect of the
redemption of the shares, including a provision respecting a sinking
fund for the redemption or repurchase of the shares;
(3) alters or abolishes a preemptive right of the holder of the
shares to acquire shares, securities other than shares, or rights to
purchase shares or securities other than shares;
(4) excludes or limits the right of a shareholder to vote on a
matter, or to cumulate votes, except as the right may be excluded or
limited through the authorization or issuance of securities of an
existing or new class or series with similar or different voting rights;
except that an amendment to the articles of an issuing public
corporation that provides that section 302A.671 does not apply to a
control share acquisition does not give rise to the right to obtain
payment under this section;
(b) A sale, lease, transfer, or other disposition of all or
substantially all of the property and assets of the corporation, but not
including a transaction permitted without shareholder approval in section
302A.661, subdivision 1, or a disposition in dissolution described in
section 302A.725, subdivision 2, or a disposition pursuant to an order of a
court, or a disposition for cash on terms requiring that all or
substantially all of the net proceeds of disposition be distributed to the
shareholders in accordance with their respective interests within one year
after the date of disposition;
(c) A plan of merger, whether under this chapter or under chapter
322B, to which the corporation is a party, except as provided in
subdivision 3;
(d) A plan of exchange, whether under this chapter or under chapter
322B, to which the corporation is a party as the corporation whose shares
will be acquired by the acquiring corporation, if the shares of the
shareholder are entitled to be voted on the plan; or
(e) Any other corporate action taken pursuant to a shareholder vote
with respect to which the articles, the bylaws, or a resolution approved by
the board directs that dissenting shareholders may obtain payment for their
shares.
Subdivision 2. Beneficial owners.
(a) A shareholder shall not assert dissenters' rights as to less than
all of the shares registered in the name of the shareholder, unless the
shareholder dissents with respect to all the shares that are beneficially
owned by another person but registered in the name of the shareholder and
discloses the name and address of each beneficial owner on whose behalf the
shareholder dissents. In that event, the rights of the dissenter shall be
determined as if the shares as to which the shareholder has dissented and
the other shares were registered in the names of different shareholders.
(b) The beneficial owner of shares who is not the shareholder may
assert dissenters' rights with respect to shares held on behalf of the
beneficial owner, and shall be treated as a dissenting shareholder under
the terms of this section and section 302A.473, if the beneficial owner
submits to the corporation at the time of or before the assertion of the
rights a written consent of the shareholder.
Subdivision 3. Rights not to apply. Unless the articles, the bylaws, or a
resolution approved by the board otherwise provide, the right to obtain payment
under this section does not apply to a shareholder of the surviving corporation
in a merger, if the shares of the shareholder are not entitled to be voted on
the merger.
C-1
<PAGE> 121
Subdivision 4. Other rights. The shareholders of a corporation who have a
right under this section to obtain payment for their shares do not have a right
at law or in equity to have a corporate action described in subdivision 1 set
aside or rescinded, except when the corporate action is fraudulent with regard
to the complaining shareholder or the corporation.
SEC. 302A.473 PROCEDURES FOR ASSERTING DISSENTERS' RIGHTS.
Subdivision 1. Definitions.
(a) For purposes of this section, the terms defined in this
subdivision have the meanings given them.
(b) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action referred to in section 302A.471, subdivision 1
or the successor by merger of that issuer.
(c) "Fair value of the shares" means the value of the shares of a
corporation immediately before the effective date of the corporate action
referred to in section 302A.471, subdivision 1.
(d) "Interest" means interest commencing five days after the effective
date of the corporate action referred to in section 302A.471, subdivision 1
up to and including the date of payment, calculated at the rate provided in
section 549.09 for interest on verdicts and judgements.
Subdivision 2. Notice of action. If a corporation calls a shareholder
meeting at which any action described in section 302A.471, subdivision 1 is to
be voted upon, the notice of the meeting shall inform each shareholder of the
right to dissent and shall include a copy of section 302A.471 and this section
and a brief description of the procedure to be followed under these sections.
Subdivision 3. Notice of dissent. If the proposed action must be approved
by the shareholders, a shareholder who wishes to exercise dissenters' rights
must file with the corporation before the vote on the proposed action a written
notice of intent to demand the fair value of the shares owned by the shareholder
and must not vote the shares in favor of the proposed action.
Subdivision 4. Notice of procedure; deposit of shares.
(a) After the proposed action has been approved by the board and, if
necessary, the shareholders, the corporation shall send to all shareholders
who have complied with subdivision 3 and to all shareholders entitled to
dissent if no shareholder vote was required, a notice that contains:
(1) The address to which a demand for payment and certificates of
certificated shares must be sent in order to obtain payment and the date
by which they must be received;
(2) Any restrictions on transfer of uncertificated shares that will
apply after the demand for payment is received;
(3) A form to be used to certify the date on which the shareholder,
or the beneficial owner on whose behalf the shareholder dissents,
acquired the shares or an interest in them and to demand payment; and
(4) A copy of section 302A.471 and this section and a brief
description of the procedures to be followed under these sections.
(b) In order to receive the fair value of the shares, a dissenting
shareholder must demand payment and deposit certificated shares or comply
with any restrictions on transfer of uncertificated shares within 30 days
after the notice required by paragraph (a) was given, but the dissenter
retains all other rights of a shareholder until the proposed action takes
effect.
C-2
<PAGE> 122
Subdivision 5. Payment; return of shares.
(a) After the corporate action takes effect, or after the corporation
receives a valid demand for payment, whichever is later, the corporation
shall remit to each dissenting shareholder who has complied with
subdivisions 3 and 4 the amount the corporation estimates to be the fair
value of the shares, plus interest, accompanied by:
(1) The corporation's closing balance sheet and statement of income
for a fiscal year ending not more than 16 months before the effective
date of the corporate action, together with the latest available interim
financial statements;
(2) An estimate by the corporation of the fair value of the shares
and a brief description of the method used to reach the estimate; and
(3) A copy of section 302A.471 and this section, and a brief
description of the procedure to be followed in demanding supplemental
payment.
(b) The corporation may withhold the remittance described in paragraph
(a) from a person who was not a shareholder on the date the action
dissented from was first announced to the public or who is dissenting on
behalf of a person who was not a beneficial owner on that date. If the
dissenter has complied with subdivisions 3 and 4, the corporation shall
forward to the dissenter the materials described in paragraph (a), a
statement of the reason for withholding the remittance, and an offer to pay
to the dissenter the amount listed in the materials if the dissenter agrees
to accept that amount in full satisfaction. The dissenter may decline the
offer and demand payment under subdivision 6. Failure to do so entitles the
dissenter only to the amount offered. If the dissenter makes demand,
subdivisions 7 and 8 apply.
(c) If the corporation fails to remit payment within 60 days of the
deposit of certificates or the imposition of transfer restrictions on
uncertificated shares, it shall return all deposited certificates and
cancel all transfer restrictions. However, the corporation may again give
notice under subdivision 4 and require deposit or restrict transfer at a
later time.
Subdivision 6. Supplemental payment; demand. If a dissenter believes that
the amount remitted under subdivision 5 is less than the fair value of the
shares plus interest, the dissenter may give written notice to the corporation
of the dissenter's own estimate of the fair value of the shares, plus interest,
within 30 days after the corporation mails the remittance under subdivision 5,
and demand payment of the difference. Otherwise, a dissenter is entitled only to
the amount remitted by the corporation.
Subdivision 7. Petition; determination. If the corporation receives a
demand under subdivision 6, it shall, within 60 days after receiving the demand,
either pay to the dissenter the amount demanded or agreed to by the dissenter
after discussion with the corporation or file in court a petition requesting
that the court determine the fair value of the shares, plus interest. The
petition shall be filed in the county in which the registered office of the
corporation is located, except that a surviving foreign corporation that
receives a demand relating to the shares of a constituent domestic corporation
shall file the petition in the county in this state in which the last registered
office of the constituent corporation was located. The petition shall name as
parties all dissenters who have demanded payment under subdivision 6 and who
have not reached agreement with the corporation. The corporation shall, after
filing the petition, serve all parties with a summons and copy of the petition
under the rules of civil procedure. Nonresidents of this state may be served by
registered or certified mail or by publication as provided by law. Except as
otherwise provided, the rules of civil procedure apply to this proceeding. The
jurisdiction of the court is plenary and exclusive. The court may appoint
appraisers, with powers and authorities the court deems proper, to receive
evidence on and recommend the amount of the fair value of the shares. The court
shall determine whether the shareholder or shareholders in question have fully
complied with the requirements of this section, and shall determine the fair
value of the shares, taking into account any and all factors the court finds
relevant, computed by any method or combination of methods that the court, in
its discretion, sees fit to use, whether or not used by the corporation or by a
dissenter. The fair value of the shares as determined by the court is binding on
all shareholders, wherever located. A dissenter is entitled to judgment in cash
for the amount by which the fair value of the
C-3
<PAGE> 123
shares as determined by the court, plus interest, exceeds the amount, if any,
remitted under subdivision 5, but shall not be liable to the corporation for the
amount, if any, by which the amount, if any, remitted to the dissenter under
subdivision 5 exceeds the fair value of the shares as determined by the court,
plus interest.
Subdivision 8. Costs; fees; expenses.
(a) The court shall determine the costs and expenses of a proceeding
under subdivision 7, including the reasonable expenses and compensation of
any appraisers appointed by the court, and shall assess those costs and
expenses against the corporation, except that the court may assess part or
all of those costs and expenses against a dissenter whose action in
demanding payment under subdivision 6 is found to be arbitrary, vexatious,
or not in good faith.
(b) If the court finds that the corporation has failed to comply
substantially with this section, the court may assess all fees and expenses
of any experts or attorneys as the court deems equitable. These fees and
expenses may also be assessed against a person who has acted arbitrarily,
vexatiously, or not in good faith in bringing the proceeding, and may be
awarded to a party injured by those actions.
(c) The court may award, in its discretion, fees and expenses to an
attorney for the dissenters out of the amount awarded to the dissenters, if
any. (Last amended by Ch. 17, L. '93, eff. 8-1-93.)
C-4
<PAGE> 124
APPENDIX D
ILLUSTRATIVE CALCULATIONS OF EXCHANGE RATIO AND
TOTAL SHARES OF NPB STOCK
ISSUABLE IN MERGER
<PAGE> 125
APPENDIX D
Based on the September 9, 1996 capitalization of NPB and Aequitron, the
following table indicates, at various Closing Market Values, the resulting
Exchange Ratios, the approximate number of shares of NPB Common Stock to be
issued in the Merger and the percentage of NPB Common Stock immediately after
the Merger represented by the shares issued to Aequitron shareholders.
The information presented in this Appendix D is not intended as an estimate
or projection of the Closing Market Value or the number of shares of NPB Common
Stock that an Aequitron shareholder may ultimately receive in the Merger. The
actual Exchange Ratio will be based upon the average of the closing price of NPB
Common Stock for the ten trading days ending on the fifth trading day before the
Annual Meeting. Because the aggregate number of shares of NPB Common Stock to be
received in the Merger is dependent upon the market price of NPB Common Stock
during the Exchange Ratio valuation period, fluctuations in the market value of
NPB Common Stock during that valuation period will impact the number of shares
of NPB Common Stock received in the Merger in exchange for each outstanding
share of Aequitron Common Stock. As a result, the market value of NPB Common
Stock that the shareholders of Aequitron ultimately receive could be more or
less than its market value on the date of this Proxy Statement/Prospectus or on
the date of the Special Meeting. NPB stockholders and Aequitron shareholders are
advised to obtain current market quotations for Aequitron Common Stock. NO
ASSURANCE CAN BE GIVEN AS TO THE MARKET PRICE OF NPB COMMON STOCK AT ANY TIME
BEFORE THE EFFECTIVE TIME OR AS TO THE MARKET PRICE OF NPB COMMON STOCK AT ANY
TIME THEREAFTER.
<PAGE> 126
<TABLE>
<CAPTION>
APPROXIMATE VALUE
NPB % OWNERSHIP OF NPB COMMON
CLOSING APPROXIMATE OF NPB REPRESENTED STOCK PER SHARE
MARKET EXCHANGE NO. OF SHARES BY SHARES ISSUED TO OF AEQUITRON
VALUE RATIO TO BE ISSUED(1) AEQUITRON SHAREHOLDERS(2) COMMON STOCK
- ------- -------- --------------- -------------------------- -----------------
<S> <C> <C> <C> <C>
$ 29.00 0.397 2,256,605 3.6% $ 11.50
$ 28.00 0.411 2,337,198 3.7% $ 11.50
$ 27.00 0.426 2,423,761 3.8% $ 11.50
$ 26.61 0.432 2,459,241 3.9% $ 11.50
$ 26.50 0.432 2,459,241 3.9% $ 11.45
$ 26.25 0.432 2,459,241 3.9% $ 11.34
$ 26.00 0.432 2,459,241 3.9% $ 11.24
$ 25.75 0.432 2,459,241 3.9% $ 11.13
$ 25.50 0.432 2,459,241 3.9% $ 11.50
$ 25.25 0.432 2,459,241 3.9% $ 10.91
$ 25.00 0.432 2,459,241 3.9% $ 10.80
$ 24.88 0.432 2,450,241 3.9% $ 10.75
$ 24.75 0.432 2,459,241 3.9% $ 10.70
$ 24.50 0.432 2,459,241 3.9% $ 10.59
$ 24.25 0.432 2,459,241 3.9% $ 10.48
$ 24.00 0.432 2,459,241 3.9% $ 10.37
$ 23.75 0.432 2,459,241 3.9% $ 10.26
$ 23.50 0.432 2,459,241 3.9% $ 10.16
$ 23.25 0.432 2,459,241 3.9% $ 10.05
$ 23.14 0.432 2,459,241 3.9% $ 10.00
$ 23.00 0.435 2,474,160 3.9% $ 10.00
$ 22.50 0.444 2,529,142 4.0% $ 10.00
$ 22.00 0.455 2,586,622 4.1% $ 10.00
$ 21.50 0.465 2,646,776 4.2% $ 10.00
$ 21.00 0.476 2,709,795 4.3% $ 10.00
$ 20.50 0.488 2,775,887 4.4% $ 10.00
$ 20.00 0.500 2,845,285 4.5% $ 10.00
$ 19.50 0.513 2,918,241 4.6% $ 10.00
$ 19.00 0.526 2,995,036 4.7% $ 10.00
$ 18.75 0.533 3,034,970 4.7% $ 10.00
$ 18.50 0.541 3,075,983 4.8% $ 10.00
$ 18.00 0.556 3,161,427 4.9% $ 10.00
$ 17.50 0.571 3,251,754 5.1% $ 10.00
$ 17.00(3) 0.588 3,347,394 5.2% $ 10.00
</TABLE>
- ---------------
(1) Based on 5,690,569 fully diluted shares of Aequitron Common Stock
outstanding as of September 9, 1996 based on the treasury stock method at a
$10.75 per share offer price.
(2) Based on 61,000,000 fully diluted shares of NPB Common Stock outstanding as
of September 9, 1996 based on the treasury stock method.
(3) Aequitron may terminate the Merger Agreement if the Closing Market Value of
NPB Common Stock is less than $17.00; provided that NPB may negate such
termination by electing to determine the Exchange Ratio by dividing $10.00
by the Closing Market Value.
<PAGE> 127
AEQUITRON MEDICAL, INC.
14800 28TH AVENUE NORTH
MINNEAPOLIS, MINNESOTA 55447
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR
THE ANNUAL MEETING OF SHAREHOLDERS OF AEQUITRON MEDICAL, INC.
TO BE HELD ON DECEMBER 5, 1996.
The undersigned hereby appoints James B. Hickey, Jr. and William M. Milne,
each with full power of substitution, as proxy of the undersigned, to attend the
Annual Meeting of Shareholders of AEQUITRON MEDICAL, INC. (the "Company") to be
held at The Ramada Plaza Hotel, 12201 Ridgedale Drive, Minnetonka, Minnesota
55305, commencing at 10:00 a.m. local time, and at any and all adjournments
thereof, and to vote all Common Stock of the Company, as designated on the
reverse side of this proxy, with all powers the undersigned would possess if
personally present at the meeting.
This Proxy will be voted or withheld from being voted in accordance with the
instructions specified. Where no choice is specified, the Proxy will confer
discretionary authority and will be voted FOR approval of Proposals 1 and 3 and
FOR the two nominees for election for directors. This Proxy confers authority
for the above named persons to vote in his discretion with respect to amendments
or variations to the matters identified in the notice of meeting accompanying
this Proxy and other matters which may properly come before this meeting, other
than the person designated in this form of proxy. Such right may be exercised by
inserting the name of such person in the blank space provided.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSAL:
1. APPROVAL of the Merger Proposal pursuant to which the Company would merge
into Nellcor Puritan Bennett Incorporated.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
[SEE REVERSE SIDE]
- --------------------------------------------------------------------------------
(Continued and to be Signed on Reverse Side)
<PAGE> 128
2. Election of directors:
<TABLE>
<S> <C>
[ ] FOR both nominees listed below [ ] Withhold Authority to vote for nominees
(Except as marked to the contrary below) listed below.
</TABLE>
Nominees: Lawrence A. Lehmkuhl David B. Morse
(Instructions: to withhold authority to vote for either nominee, draw a
line through that nominee's name.)
3. To ratify the appointment of Ernst & Young LLP as the independent auditors
for the Company for the fiscal year ending April 30, 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Date:_____________________, 1996.
Please sign, date and return the
proxy card promptly in the
enclosed envelope.
----------------------------------
Please Sign Here
----------------------------------
Signature (if held jointly)
NOTE: Please sign exactly as name
appears on stock certificate. When
signing as executor, administrator,
attorney, trustee or guardian, please
give your full title as such. If a
corporation, please sign in full
corporate name by president or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person. If a joint
tenancy, please have both tenants
sign.
