<PAGE> 1
This filing is made pursuant
to Rule 424(b)(3) under
the Securities Act of
1933 in connection with
LOGO Registration No. 333-04683
Dear Stockholder:
You are cordially invited to attend the Special Meeting of Stockholders of
Nellcor Puritan Bennett Incorporated ("NPB") to be held on June 27, 1996, at the
offices of NPB, 4280 Hacienda Drive, Pleasanton, California 94588, commencing at
11:00 a.m., local time.
At the Special Meeting, you will be asked to consider and vote upon (a) a
proposal to approve the Amended and Restated Agreement and Plan of Merger, dated
as of May 14, 1996 (the "Merger Agreement"), by and between NPB and Infrasonics,
Inc., a California corporation ("Infrasonics"), and the issuance of shares of
common stock, $.001 par value per share, of NPB ("NPB Common Stock") pursuant to
the terms thereof (the "Merger Proposal"), and (b) a proposal to approve an
amendment to NPB's Restated Certificate of Incorporation to increase the number
of authorized shares of NPB Common Stock to 150,000,000 shares and to effect a
split of the issued stock of NPB by changing each issued share of NPB Common
Stock into two shares of NPB Common Stock (collectively, the "Stock Split
Proposal").
Pursuant to the Merger Agreement (i) Infrasonics will merge with and into
NPB (the "Merger"), (ii) each outstanding share of common stock, no par value,
of Infrasonics ("Infrasonics Common Stock") will be converted into the right to
receive .095 of one share of NPB Common Stock, including the corresponding
percentage of an NPB Preferred Stock Purchase Right, subject to adjustment based
on the average of the closing prices of NPB Common Stock for the ten trading
days ending on the fifth trading day before the Special Meeting (the "Exchange
Ratio Formula"), and (iii) each outstanding option or warrant to purchase
Infrasonics 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 based on
the merger exchange ratio for the underlying Infrasonics Common Stock.
The Exchange Ratio Formula adjusts the .095 exchange ratio (and, as a
result the number of shares of NPB Common Stock to be received by the holders of
Infrasonics Common Stock in the Merger) if the average closing prices of NPB
Common Stock for the ten trading days ending on the fifth trading day before the
Special Meeting (such average being defined as the "Closing Market Value")
exceeds $75.77 per share or is less than $65.77 per share. If the Closing Market
Value exceeds $75.77 per share, the number of shares of NPB Common Stock to be
received by holders of Infrasonics Common Stock will be equal to $7.20 divided
by the Closing Market Value. If the Closing Market Value is less than $65.77 per
share, the number of shares of NPB Common Stock to be received by holders of
Infrasonics Common Stock will be equal to $6.25 divided by the Closing Market
Value. The adjustments provided by the Exchange Ratio Formula are designed to
provide that the value of NPB Common Stock to be received by Infrasonics
shareholders as calculated by such Exchange Ratio Formula will not be greater
than $7.20, nor less than approximately $6.25, per share of Infrasonics Common
Stock.
Based on the closing price of NPB Common Stock on May 31, 1996 of $54.50,
under the Exchange Ratio Formula a holder of Infrasonics Common Stock would
receive .115 of one share of NPB Common Stock for each share of Infrasonics
Common Stock. Based on the capitalization of NPB and Infrasonics as of April 29,
1996, the shares of NPB Common Stock to be issued in the Merger, together with
shares of NPB Common Stock subject to warrants and to stock options held by
Infrasonics employees, would represent approximately 4% of the shares of NPB
Common Stock outstanding or 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, NPB AND ITS STOCKHOLDERS, AND UNANIMOUSLY RECOMMENDS
THAT HOLDERS OF SHARES OF NPB COMMON STOCK
<PAGE> 2
VOTE "FOR" APPROVAL OF BOTH THE MERGER PROPOSAL AND THE STOCK SPLIT
PROPOSAL.
The accompanying Joint Proxy Statement/Prospectus provides detailed
information concerning the proposed Merger and Stock Split and additional
information concerning NPB and Infrasonics, which you are urged to read
carefully. The complete text of the Merger Agreement is attached as Appendix A
to the Joint Proxy Statement/Prospectus.
The required vote of NPB stockholders on approval of the Merger Agreement
is a majority of the number of shares of NPB Common Stock actually voted at the
Special Meeting. Accordingly, the failure to submit a proxy card or to vote in
person at the Special Meeting, the abstention from voting by a stockholder and
broker non-votes will not affect the voting on the Merger Proposal. However,
since the required vote of NPB stockholders on approval of the Stock Split
Proposal is based upon the number of shares of NPB Common Stock outstanding, the
failure to submit a proxy card or to vote in person at the Special Meeting, the
abstention from voting by a stockholder and broker non-votes will have the same
effect as a vote AGAINST approval of the Stock Split Proposal.
It is important that your shares of NPB Common Stock be represented at the
Special Meeting, regardless of the number of shares you hold. THEREFORE, PLEASE
COMPLETE, SIGN, DATE AND RETURN YOUR PROXY CARD AS SOON AS POSSIBLE, WHETHER OR
NOT YOU PLAN TO ATTEND THE SPECIAL 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 NPB or by signing and delivering to such Secretary a proxy
bearing a later date. In addition, you may attend the Special 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,
SIG
C. RAYMOND LARKIN, JR.
President and Chief Executive Officer
<PAGE> 3
NELLCOR PURITAN BENNETT INCORPORATED
4280 HACIENDA DRIVE
PLEASANTON, CALIFORNIA 94588
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 27, 1996
------------------------
To the Stockholders of Nellcor Puritan Bennett Incorporated:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Nellcor
Puritan Bennett Incorporated, a Delaware corporation ("NPB"), will be held on
June 27, 1996, at the offices of NPB, 4280 Hacienda Drive, Pleasanton,
California 94588, commencing at 11:00 a.m., local time, for the following
purposes:
1. To consider and vote upon a proposal to approve the Amended and Restated
Agreement and Plan of Merger, dated as of May 14, 1996 (the "Merger
Agreement") by and between NPB and Infrasonics, Inc., a California
corporation ("Infrasonics"), and the issuance of shares of common stock,
$.001 par value per share, of NPB ("NPB Common Stock") pursuant to the
terms thereof (the "Merger Proposal"). Pursuant to the Merger Agreement
(i) Infrasonics will merge with and into NPB (the "Merger"), (ii) each
outstanding share of common stock, no par value, of Infrasonics
("Infrasonics Common Stock") will be converted into the right to receive
.095 of one share of NPB Common Stock, including the corresponding
percentage of an NPB Preferred Stock Purchase Right, subject to
adjustment based on the average of the closing prices of NPB Common
Stock for the ten trading days ending on the fifth trading day before
the Special Meeting (the "Exchange Ratio Formula"), and (iii) each
outstanding option or warrant to purchase Infrasonics 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 based on the merger
exchange ratio for the underlying Infrasonics Common Stock. A copy of
the Merger Agreement is attached as Appendix A to the accompanying Joint
Proxy Statement/Prospectus.
2. To consider and vote upon a proposal to approve an amendment to the
Restated Certificate of Incorporation of NPB to increase the number of
authorized shares of NPB Common Stock to 150,000,000 shares and to
effect a split of the issued stock of NPB by changing each issued share
of NPB Common Stock into two shares of NPB Common Stock (the "Stock
Split Proposal").
3. To transact such other business, incidental to the matters in Proposals
No. 1 and No. 2, as may properly come before the meeting.
The Exchange Ratio Formula adjusts the .095 exchange ratio (and, as a
result the number of shares of NPB Common Stock to be received by the holders of
Infrasonics Common Stock in the Merger) if the average closing prices of NPB
Common Stock for the ten trading days ending on the fifth trading day before the
Special Meeting (such average being defined as the "Closing Market Value")
exceeds $75.77 per share or is less than $65.77 per share. If the Closing Market
Value exceeds $75.77 per share, the number of shares of NPB Common Stock to be
received by holders of Infrasonics Common Stock will be equal to $7.20 divided
by the Closing Market Value. If the Closing Market Value is less than $65.77 per
share, the number of shares of NPB Common Stock to be received by holders of
Infrasonics Common Stock will be equal to $6.25 divided by the Closing Market
Value. The adjustments provided by the Exchange Ratio Formula are designed to
provide that the value of NPB Common Stock to be received by Infrasonics
shareholders as calculated by such Exchange Ratio Formula will not be greater
than $7.20, nor less than approximately $6.25, per share of Infrasonics Common
Stock.
Based on the closing price of NPB Common Stock on May 31, 1996 of $54.50,
under the Exchange Ratio Formula a holder of Infrasonics Common Stock would
receive .115 of one share of NPB Common Stock for each share of Infrasonics
Common Stock. Based on the capitalization of NPB and Infrasonics as of April 29,
<PAGE> 4
1996, the shares of NPB Common Stock to be issued in the Merger, together with
shares of NPB Common Stock subject to warrants and to stock options held by
Infrasonics employees, would represent approximately 4% of the shares of NPB
Common Stock outstanding or subject to options immediately following the Merger.
The Board of Directors has fixed the close of business on April 29, 1996 as
the record date for the determination of the holders of NPB Common Stock
entitled to notice of, and to vote at, the Special Meeting. Although a vote of
NPB stockholders approving the Merger Proposal is not required under the General
Corporation Law of the State of Delaware (the "DGCL"), NPB has agreed to seek
the approval of a majority of the outstanding shares of NPB Common Stock voting
thereon at the Special Meeting. The affirmative vote of the holders of a
majority of the outstanding shares of NPB Common Stock entitled to vote thereon
is necessary for the approval of the Stock Split Proposal.
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING. TO
ENSURE YOUR REPRESENTATION AT THE SPECIAL MEETING, HOWEVER, YOU ARE URGED TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE. A
POSTAGE-PREPAID ENVELOPE IS ENCLOSED FOR THAT PURPOSE. ANY STOCKHOLDER ATTENDING
THE SPECIAL MEETING MAY VOTE IN PERSON EVEN IF THAT STOCKHOLDER HAS RETURNED A
PROXY.
By Order of the Board of Directors,
SIG
LAUREEN DEBUONO
Executive Vice President, Human
Resources,
General Counsel and Secretary
Pleasanton, California
June 3, 1996
<PAGE> 5
[INFRASONICS, INC. LOGO]
Dear Shareholder:
You are cordially invited to attend the Special Meeting of Shareholders of
Infrasonics, Inc. ("Infrasonics") to be held on June 27, 1996, at the offices of
Infrasonics, 3911 Sorrento Valley Boulevard, San Diego, California 92121,
commencing at 11:00 a.m., local time.
At the Special 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 May 14, 1996 (the "Merger Agreement"), by and between Infrasonics and
Nellcor Puritan Bennett Incorporated, a Delaware corporation ("NPB") (the
"Merger Proposal"). Pursuant to the Merger Agreement (i) Infrasonics will merge
with and into NPB (the "Merger"), (ii) each outstanding share of common stock,
no par value, of Infrasonics ("Infrasonics Common Stock") will be converted into
the right to receive .095 of one share of NPB Common Stock, including the
corresponding percentage of an NPB Preferred Stock Purchase Right, subject to
adjustment based on the average of the closing prices of NPB Common Stock for
the ten trading days ending on the fifth trading day before the Special Meeting
(the "Exchange Ratio Formula"), and (iii) each outstanding option or warrant to
purchase Infrasonics 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 based on the merger exchange ratio for the underlying Infrasonics Common
Stock.
The Exchange Ratio Formula adjusts the .095 exchange ratio (and, as a
result the number of shares of NPB Common Stock to be received by the holders of
Infrasonics Common Stock in the Merger) if the average closing prices of NPB
Common Stock for the ten trading days ending on the fifth trading day before the
Special Meeting (such average being defined as the "Closing Market Value")
exceeds $75.77 per share or is less than $65.77 per share. If the Closing Market
Value exceeds $75.77 per share, the number of shares of NPB Common Stock to be
received by holders of Infrasonics Common Stock will be equal to $7.20 divided
by the Closing Market Value. If the Closing Market Value is less than $65.77 per
share, the number of shares of NPB Common Stock to be received by holders of
Infrasonics Common Stock will be equal to $6.25 divided by the Closing Market
Value. The adjustments provided by the Exchange Ratio Formula are designed to
provide that the value of NPB Common Stock to be received by Infrasonics
shareholders as calculated by such Exchange Ratio Formula will not be greater
than $7.20, nor less than approximately $6.25, per share of Infrasonics Common
Stock.
Based on the closing price of NPB Common Stock on May 31, 1996 of $54.50,
under the Exchange Ratio Formula a holder of Infrasonics Common Stock would
receive .115 of one share of NPB Common Stock for each share of Infrasonics
Common Stock. Based on the capitalization of NPB and Infrasonics as of April 29,
1996, the shares of NPB Common Stock to be issued in the Merger, together with
shares of NPB Common Stock subject to warrants and to stock options held by
Infrasonics employees, would represent approximately 4% of the shares of NPB
Common Stock outstanding or 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, INFRASONICS AND ITS SHAREHOLDERS, AND UNANIMOUSLY
RECOMMENDS THAT HOLDERS OF SHARES OF INFRASONICS COMMON STOCK VOTE "FOR"
APPROVAL OF THE MERGER AGREEMENT.
The accompanying Joint Proxy Statement/Prospectus provides detailed
information concerning the proposed Merger and additional information concerning
NPB and Infrasonics, which you are urged to read carefully. The complete text of
the Merger Agreement is attached as Appendix A to the Joint Proxy
Statement/Prospectus.
As a holder of Infrasonics 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 Agreement. Please note that
a signed proxy which 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 Chapter 13 of the California Corporations Code (the "CCC"). A
summary of certain provisions of Chapter 13 of the CCC pertaining to the rights
of dissenting shareholders in connection with the Merger is included in this
Joint Proxy Statement/Prospectus in the
<PAGE> 6
section entitled "Dissenters' Rights of Infrasonics Shareholders." The complete
text of Chapter 13 of the CCC is set forth as Appendix E to this Joint Proxy
Statement/Prospectus.
It is important that your shares of Infrasonics Common Stock be represented
at the Special Meeting, regardless of the number of shares you hold. The
required vote of Infrasonics shareholders on approval of the Merger Agreement is
based upon the number of outstanding shares of Infrasonics 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 Special Meeting, the abstention
from voting by a stockholder 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 SPECIAL 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 Infrasonics or by signing and delivering to such Secretary a proxy bearing a
later date. In addition, you may attend the Special 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,
SIG
JIM HITCHIN
President and Chief Executive Officer
<PAGE> 7
INFRASONICS, INC.
3911 SORRENTO VALLEY BOULEVARD
SAN DIEGO, CALIFORNIA 92121
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 27, 1996
------------------------
To the Shareholders of Infrasonics, Inc.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders of
Infrasonics, Inc., a California corporation ("Infrasonics"), will be held on
June 27, 1996, at the offices of Infrasonics, 3911 Sorrento Valley Boulevard,
San Diego, California 92121, commencing at 11:00 a.m., local time, for the
following purpose:
To consider and vote upon a proposal to approve the Amended and Restated
Agreement and Plan of Merger, dated as of May 14, 1996 (the "Merger
Agreement") by and between Infrasonics and Nellcor Puritan Bennett
Incorporated, a Delaware corporation ("NPB"). Pursuant to the Merger
Agreement (i) Infrasonics will merge with and into NPB (the "Merger"),
(ii) each outstanding share of common stock, no par value, of
Infrasonics ("Infrasonics Common Stock") will be converted into the
right to receive .095 of one share of NPB Common Stock, including the
corresponding percentage of an NPB Preferred Stock Purchase Right,
subject to adjustment based on the average of the closing prices of NPB
Common Stock for the ten trading days ending on the fifth trading day
before the Special Meeting (the "Exchange Ratio Formula"), and (iii)
each outstanding option or warrant to purchase Infrasonics 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 based on the merger
exchange ratio for the underlying Infrasonics Common Stock. A copy of
the Merger Agreement is attached as Appendix A to the accompanying Joint
Proxy Statement/Prospectus.
The Exchange Ratio Formula adjusts the .095 exchange ratio (and, as a
result the number of shares of NPB Common Stock to be received by the holders of
Infrasonics Common Stock in the Merger) if the average closing prices of NPB
Common Stock for the ten trading days ending on the fifth trading day before the
Special Meeting (such average being defined as the "Closing Market Value")
exceeds $75.77 per share or is less than $65.77 per share. If the Closing Market
Value exceeds $75.77 per share, the number of shares of NPB Common Stock to be
received by holders of Infrasonics Common Stock will be equal to $7.20 divided
by the Closing Market Value. If the Closing Market Value is less than $65.77 per
share, the number of shares of NPB Common Stock to be received by holders of
Infrasonics Common Stock will be equal to $6.25 divided by the Closing Market
Value. The adjustments provided by the Exchange Ratio Formula are designed to
provide that the value of NPB Common Stock to be received by Infrasonics
shareholders as calculated by such Exchange Ratio Formula will not be greater
than $7.20, nor less than approximately $6.25, per share of Infrasonics Common
Stock.
Based on the closing price of NPB Common Stock on May 31, 1996 of $54.50,
under the Exchange Ratio Formula a holder of Infrasonics Common Stock would
receive .115 of one share of NPB Common Stock for each share of Infrasonic's
Common Stock. Based on the capitalization of NPB and Infrasonics as of April 29,
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 Infrasonics
employees and warrants would represent approximately 4% of the shares of NPB
Common Stock outstanding or subject to options immediately following the Merger.
The Board of Directors has fixed the close of business on April 29, 1996 as
the record date for the determination of the holders of Infrasonics Common Stock
entitled to notice of, and to vote at, the Special Meeting. The affirmative vote
of a majority of the total shares outstanding is necessary for approval of the
Merger Agreement.
<PAGE> 8
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING. TO
ENSURE YOUR REPRESENTATION AT THE SPECIAL MEETING, HOWEVER, YOU ARE URGED TO
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE. A
POSTAGE-PREPAID ENVELOPE IS ENCLOSED FOR THAT PURPOSE. ANY SHAREHOLDER ATTENDING
THE SPECIAL MEETING MAY VOTE IN PERSON EVEN IF THAT SHAREHOLDER HAS RETURNED A
PROXY.
By Order of the Board of Directors,
SIG
GUY GANSEL
Secretary
San Diego, California
June 3, 1996
<PAGE> 9
NELLCOR PURITAN BENNETT INCORPORATED
AND INFRASONICS, INC.
JOINT PROXY STATEMENT
NELLCOR PURITAN BENNETT INCORPORATED
PROSPECTUS
This Joint Proxy Statement/Prospectus ("Joint Proxy Statement/Prospectus")
is being furnished to the holders of common stock, $.001 par value per share
(the "NPB Common Stock"), of Nellcor Puritan Bennett Incorporated, a Delaware
corporation ("NPB"), in connection with the solicitation of proxies by the Board
of Directors of NPB for use at the Special Meeting of Stockholders of NPB to be
held at NPB's offices at 4280 Hacienda Drive, Pleasanton, California 94588 on
June 27, 1996, commencing at 11:00 a.m., local time, and at any and all
adjournments or postponements thereof (the "NPB Special Meeting").
This Joint Proxy Statement/Prospectus also is being furnished to the holders
of common stock, no par value (the "Infrasonics Common Stock"), of Infrasonics,
Inc., a California corporation ("Infrasonics"), in connection with the
solicitation of proxies by the Board of Directors of Infrasonics for use at the
Special Meeting of Shareholders of Infrasonics to be held at Infrasonics's
offices at 3911 Sorrento Valley Boulevard, San Diego, California 92121 on June
27, 1996 at 11:00 a.m., local time, and at any and all adjournments or
postponements thereof (the "Infrasonics Special Meeting").
This Joint Proxy Statement/Prospectus relates to the Amended and Restated
Agreement and Plan of Merger, dated as of May 14, 1996 (as amended, the "Merger
Agreement"), by and between NPB and Infrasonics, pursuant to which Infrasonics
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
Joint Proxy Statement/Prospectus. In the Merger, each outstanding share of
Infrasonics Common Stock (excluding shares held by dissenting shareholders who
have asserted appraisal rights (the "Excluded Shares")), will be converted into
the right to receive .095 (without giving effect to the proposed stock split) of
a fully paid and nonassessable share (the "Exchange Ratio") of NPB Common Stock,
including the corresponding percentage of an NPB Preferred Stock Purchase Right
(as hereinafter defined). The Exchange Ratio is subject to adjustment, based on
the average of the closing prices of NPB Common Stock for the ten trading days
ending on the fifth trading day before the date of the NPB and Infrasonics
Special Meetings (the "Exchange Ratio Formula"). Cash will be delivered in lieu
of fractional shares.
The Exchange Ratio Formula adjusts the .095 exchange ratio (and, as a result
the number of shares of NPB Common Stock to be received by the holders of
Infrasonics Common Stock in the Merger) if the average closing prices of NPB
Common Stock for the ten trading days ending on the fifth trading day before the
Special Meeting (such average being defined as the "Closing Market Value")
exceeds $75.77 per share or is less than $65.77 per share. If the Closing Market
Value exceeds $75.77 per share, the number of shares of NPB Common Stock to be
received by holders of Infrasonics Common Stock will be equal to $7.20 divided
by the Closing Market Value. If the Closing Market Value is less than $65.77 per
share, the number of shares of NPB Common Stock to be received by holders of
Infrasonics Common Stock will be equal to $6.25 divided by the Closing Market
Value. The adjustments provided by the Exchange Ratio Formula are designed to
provide that the value of NPB Common Stock to be received by Infrasonics
shareholders as calculated by such Exchange Ratio Formula will not be greater
than $7.20, nor less than approximately $6.25, per share of Infrasonics Common
Stock.
Based on the closing price of NPB Common Stock on May 31, 1996 of $54.50,
under the Exchange Ratio Formula a holder of Infrasonics Common Stock would
receive .115 of one share of NPB Common Stock for each share of Infrasonics
Common Stock. Based on the capitalization of NPB and Infrasonics as of April 29,
1996, the shares of NPB Common Stock to be issued in the Merger, together with
shares of NPB Common Stock subject to warrants and to stock options held by
Infrasonics employees, would represent approximately 4% of the shares of NPB
Common Stock outstanding or subject to options immediately following the Merger.
Appendix F to this Joint Proxy Statement/Prospectus sets forth examples of
possible Exchange Ratios at varying Closing Market Values and the resulting
approximate total number of shares of NPB Common Stock that would be issued in
the Merger based on the April 29, 1996 capitalization of NPB and Infrasonics.
Consummation of the Merger is subject to various conditions, including
adoption at the Infrasonics Special Meeting of the Merger Agreement by the
holders of a majority of the outstanding shares of Infrasonics Common Stock
entitled to vote thereon and approval of the Merger Agreement by a majority of
the shares of NPB Common Stock voting thereon at the NPB Special Meeting. At the
NPB Special Meeting, NPB stockholders will also be asked to approve an amendment
to the Restated Certificate of Incorporation of NPB to increase the number of
authorized shares of NPB Common Stock to 150,000,000 shares and to effect a
split of the issued stock of NPB by changing each issued share of NPB Common
Stock, including the shares issued to the holders of Infrasonics Common Stock,
into two shares of NPB Common Stock.
This Joint Proxy Statement/Prospectus also constitutes a prospectus of NPB
for the issuance of up to 1,763,950 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 May 31, 1996, the closing sales price for NPB Common
Stock as reported on Nasdaq was $54.50 per share.
All information contained in this Joint Proxy Statement/Prospectus with
respect to NPB has been provided by NPB. All information contained in this Joint
Proxy Statement/Prospectus with respect to Infrasonics has been provided by
Infrasonics. This Joint Proxy Statement/Prospectus and the accompanying forms of
proxy are first being mailed to stockholders of NPB and shareholders of
Infrasonics on or about June 3, 1996. A stockholder who has given a proxy may
revoke it at any time prior to its exercise. See "The NPB Special Meeting --
Record Date; Voting Rights; Proxies" and "The Infrasonics Special
Meeting -- Record Date; Voting Rights; Proxies."
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED BY BOTH NPB STOCKHOLDERS AND INFRASONICS 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 both NPB and
Infrasonics, Corporate 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 JOINT PROXY STATEMENT/PROSPECTUS IS JUNE 3, 1996.
<PAGE> 10
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 Joint
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
Joint 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 Infrasonics 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,
material filed by NPB and Infrasonics can be inspected at the offices of the
National Association of Securities Dealers, Reports Section, 1735 K Street,
N.W., Washington, D.C. 20006.
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE DOCUMENTS
RELATING TO NPB AND TO INFRASONICS THAT ARE NOT PRESENTED HEREIN OR DELIVERED
HEREWITH. NPB WILL PROVIDE WITHOUT CHARGE TO ANY PERSON TO WHOM THIS JOINT PROXY
STATEMENT/PROSPECTUS IS DELIVERED, INCLUDING ANY BENEFICIAL OWNER OF NPB COMMON
STOCK OR INFRASONICS 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. INFRASONICS WILL PROVIDE WITHOUT CHARGE
TO ANY PERSON TO WHOM THIS JOINT PROXY STATEMENT/PROSPECTUS IS DELIVERED,
INCLUDING ANY BENEFICIAL OWNER OF NPB COMMON STOCK OR INFRASONICS COMMON STOCK,
UPON WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY OF ANY OR ALL SUCH DOCUMENTS
RELATING TO INFRASONICS (OTHER THAN EXHIBITS TO SUCH DOCUMENTS THAT ARE NOT
SPECIFICALLY INCORPORATED HEREIN BY REFERENCE). WRITTEN REQUESTS FOR SUCH
DOCUMENTS SHOULD BE DIRECTED TO INFRASONICS, INC., 3911 SORRENTO VALLEY
BOULEVARD, SAN DIEGO, CALIFORNIA 92121, ATTENTION: INVESTOR RELATIONS, AND
TELEPHONE REQUESTS MAY BE DIRECTED TO (619) 450-9898. IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUESTS SHOULD BE MADE BY JUNE 14, 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> 11
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
Joint Proxy Statement/Prospectus.
1. NPB's Annual Report on Form 10-K for the year ended July 2, 1995;
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, and April 3, 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 Infrasonics with the Commission
pursuant to the Exchange Act are hereby incorporated by reference into this
Joint Proxy Statement/Prospectus:
1. Infrasonics's Annual Report on Form 10-K for the year ended June 30,
1995;
2. Infrasonics's Quarterly Reports on Form 10-Q for the quarters ended
September 30, 1995, December 31, 1995, and March 31, 1996;
3. Infrasonics's Current Report on Form 8-K dated March 8, 1996; and
4. The description of Infrasonics Common Stock contained in the
Registration Statement on Form 8-A filed by Infrasonics with the
Commission, File No. 0-12998, including any amendments or reports filed
for the purpose of updating such description.
In addition, all reports and other documents filed by NPB or Infrasonics
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 date of the NPB Special Meeting, with
respect to such materials filed by NPB, and (b) the date of the Infrasonics
Special Meeting, with respect to such materials filed by Infrasonics, 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 Joint 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 Joint Proxy
Statement/Prospectus.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS WITH RESPECT TO THE MATTERS DESCRIBED IN THIS JOINT 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 INFRASONICS. THIS JOINT 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 JOINT 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 INFRASONICS SINCE THE DATE HEREOF OR THAT THE
INFORMATION IN THIS JOINT 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> 12
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION................................................................. i
INCORPORATION OF DOCUMENTS BY REFERENCE............................................... ii
SUMMARY............................................................................... 1
The Companies....................................................................... 1
The Special Meetings................................................................ 2
Surrender of Stock Certificates..................................................... 3
Recommendations of the Boards of Directors.......................................... 3
Risk Factors........................................................................ 3
The Merger.......................................................................... 4
Opinions of Financial Advisors...................................................... 5
Conflicts of Interest............................................................... 6
Certain Federal Income Tax Consequences............................................. 7
Comparative Rights of Stockholders.................................................. 7
Comparative Per Share Prices and Dividend Policies.................................. 7
Selected Historical Financial Data.................................................. 8
Summary Unaudited Pro Forma Combined Condensed Financial Data....................... 10
Comparative Per Share Data.......................................................... 11
RISK FACTORS.......................................................................... 12
Uncertainties Associated with the Integration of Infrasonics........................ 12
Uncertainties Associated with the Integration of Other Acquired Businesses.......... 12
Health Care Reform/Pricing Pressure................................................. 12
Uncertain Impact of Growth of Managed Care Organizations............................ 13
Cost and Uncertainty of Regulatory Compliance....................................... 13
Uncertainty Related to Patents and Proprietary Rights............................... 13
Intense Competition; Rapid Technological and Market Changes......................... 14
Dependence on New Product Development............................................... 14
Product Liability Exposure.......................................................... 14
Impact of Currency Fluctuations; Importance of Foreign Sales........................ 15
Volatility of Stock Price........................................................... 15
Certain Anti-Takeover Provisions.................................................... 15
THE NPB SPECIAL MEETING............................................................... 16
Purpose of the NPB Special Meeting.................................................. 16
Record Date; Voting Rights; Proxies................................................. 16
Solicitation of Proxies............................................................. 16
Quorum.............................................................................. 16
Required Vote....................................................................... 17
THE INFRASONICS SPECIAL MEETING....................................................... 18
Purpose of the Infrasonics Special Meeting.......................................... 18
Record Date; Voting Rights; Proxies................................................. 18
Solicitation of Proxies............................................................. 18
Quorum.............................................................................. 18
Required Vote....................................................................... 19
THE MERGER............................................................................ 20
General............................................................................. 20
Effective Time...................................................................... 20
Conversion of Shares; Procedures for Exchange of Certificates....................... 20
Background of the Merger............................................................ 21
Recommendation of the NPB Board; Reasons for the Merger............................. 24
</TABLE>
iii
<PAGE> 13
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Merger...............25Opinions of Robertson Stephens and Alex. Brown............... 26
Conflicts of Interest............................................................... 35
Certain Federal Income Tax Consequences............................................. 37
Accounting Treatment................................................................ 38
Regulatory Approvals................................................................ 38
Resale Restrictions................................................................. 39
DISSENTERS' RIGHTS OF INFRASONICS SHAREHOLDERS........................................ 39
Demand for Purchase................................................................. 40
Other Requirements.................................................................. 41
THE MERGER AGREEMENT.................................................................. 42
The Merger.......................................................................... 42
Effective Time of the Merger........................................................ 42
Conversion of Securities............................................................ 42
Stock Options....................................................................... 43
Exchange of Shares.................................................................. 43
Representations and Warranties...................................................... 44
Certain Covenants................................................................... 45
No Solicitation..................................................................... 47
Certain Employee Benefit Plan Matters............................................... 47
Director and Officer Indemnification................................................ 47
Management After the Merger......................................................... 48
Conditions.......................................................................... 48
Termination......................................................................... 48
Cancellation Fees; Expenses......................................................... 49
Amendment; Waiver................................................................... 49
Expenses............................................................................ 50
COMPARATIVE PER SHARE PRICES AND DIVIDEND POLICIES.................................... 50
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS........................... 51
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS.................. 54
COMPARISON OF STOCKHOLDER RIGHTS...................................................... 55
General............................................................................. 55
Stockholders Rights Plan............................................................ 55
Election and Number of Directors; Filling Vacancies; Removal........................ 55
Stockholders Meetings............................................................... 56
Stockholders Vote for Business Combinations......................................... 57
Common Stock........................................................................ 58
Preferred Stock..................................................................... 58
Business Combinations............................................................... 59
Limitation of Liability of Directors................................................ 60
Indemnification of Directors and Officers........................................... 60
Dissenters' Rights.................................................................. 61
Dividends........................................................................... 61
Stockholder Voting.................................................................. 62
Inspection of Stockholder List...................................................... 62
Loans to Officers and Employees..................................................... 62
Dissolution......................................................................... 62
PROPOSAL NO. 1 -- APPROVAL OF THE MERGER AGREEMENT.................................... 62
</TABLE>
iv
<PAGE> 14
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROPOSAL NO. 2 - STOCK SPLIT PROPOSAL............................................... 62
General............................................................................. 62
Purposes and Effects of the Amendment and Stock Split............................... 63
Effectiveness....................................................................... 63
Voting.............................................................................. 64
OTHER MATTERS......................................................................... 64
LEGAL MATTERS......................................................................... 64
EXPERTS............................................................................... 64
STOCKHOLDER PROPOSALS................................................................. 64
APPENDIX A -- Amended and Restated Agreement and Plan of Merger....................... A-1
APPENDIX B -- Robertson Stephens Opinion.............................................. B-1
APPENDIX C -- Alex. Brown Opinion..................................................... C-1
APPENDIX D -- Form of Amendment To Restated Certificate of Incorporation of NPB....... D-1
APPENDIX E -- Chapter 13 of the California Corporations Code.......................... E-1
APPENDIX F -- Illustrative Calculations of Exchange Ratio and Total Shares of NPB
Stock Issuable in Merger............................................................ F-1
</TABLE>
v
<PAGE> 15
SUMMARY
The following is a summary of certain information contained elsewhere in
this Joint 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 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 Joint Proxy
Statement/Prospectus. Stockholders of NPB and shareholders of Infrasonics should
read carefully this Joint Proxy Statement/Prospectus in its entirety. Certain
capitalized terms used in this summary are defined elsewhere in this Joint Proxy
Statement/Prospectus.
This Joint 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 Infrasonics'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.
Infrasonics, Inc. Infrasonics, a corporation organized under the laws of
the State of California, together with its subsidiaries, designs, manufactures
and markets technologically advanced respiratory care products and infant
incubators. Infrasonics's respiratory care products include microprocessor
controlled conventional and high-frequency ventilators for adults and infants,
breath monitoring and synchronization devices, a computerized pulmonary
diagnostic unit and over 100 ventilator accessory components. These products are
used to support and monitor the breathing of post-surgical patients still under
the effect of general anesthesia or muscle paralyzers, patients with lung cancer
and other severe pulmonary diseases, and premature and full term infants whose
lungs have not fully matured. Infrasonics's microprocessor controlled incubators
are used to regulate heat and moisture loss from sick and recovering newborns in
an intensive care setting. Infrasonics sells its products through a 20-person
force of sales representatives and six dealer representatives in the United
States and through a network of approximately 78 dealer-representatives abroad.
As used herein, the term "Infrasonics" refers to Infrasonics, Inc. and its
subsidiaries, unless the context otherwise requires. The principal executive
offices of Infrasonics are located at 3911 Sorrento Valley Boulevard, San Diego,
California 92121 and the telephone number at that address is (619) 450-9898.
1
<PAGE> 16
THE SPECIAL MEETINGS
Time, Place and Date. A Special Meeting of Stockholders of NPB will be
held at NPB's offices, 4280 Hacienda Drive, Pleasanton, California 94588 on June
27, 1996, at 11:00 a.m., Pacific Time (including any and all adjournments or
postponements thereof, the "NPB Special Meeting").
A Special Meeting of Shareholders of Infrasonics will be held at
Infrasonics's offices, 3911 Sorrento Valley Boulevard, San Diego, California
92121, on June 27, 1996, at 11:00 a.m., Pacific Time (including any and all
adjournments or postponements thereof, the "Infrasonics Special Meeting").
Purpose of the Special Meetings. At the NPB Special Meeting, holders of
NPB Common Stock will be asked to consider and vote upon a proposal to approve
the Merger Agreement, a copy of which is attached to this Joint Proxy
Statement/Prospectus as Appendix A, including the issuance of the shares of NPB
Common Stock pursuant to the Merger Agreement (the "Merger Proposal"). In
addition, holders of NPB Common Stock will consider and vote upon a proposal to
amend NPB's Restated Certificate of Incorporation to increase the number of
authorized shares of Common Stock to 150,000,000 shares and to effect a split of
the issued stock of NPB by changing each issued share of NPB Common Stock into
two shares of NPB Common Stock (collectively, the "Stock Split Proposal"). At
the Infrasonics Special Meeting, holders of Infrasonics Common Stock will be
asked to consider and vote upon a proposal to approve the Merger Agreement. See
"The Merger," "The Merger Agreement," "Proposal No. 1 -- Approval of the Merger
Agreement" and "Proposal No. 2 -- Stock Split Proposal."
All shares of NPB and Infrasonics Common Stock represented by properly
executed proxies will be voted at the respective NPB and Infrasonics Special
Meetings in accordance with the directions on the proxies, unless such proxies
have been previously revoked. If no direction is indicated, in the case of NPB,
the shares will be voted FOR the Merger Proposal and FOR the Stock Split
Proposal. If no direction is given, in the case of Infrasonics, the shares will
be voted FOR the Merger Proposal. Any NPB or Infrasonics stockholder giving a
proxy may revoke his or her proxy at any time before its exercise at the NPB
Special Meeting or the Infrasonics Special Meeting, as the case may be, by (1)
filing written notice of such revocation with the Secretary of NPB or
Infrasonics, as the case may be, or (2) signing and delivering to such Secretary
a proxy bearing a later date. However, the mere presence at the Special Meetings
of a NPB or Infrasonics stockholder who has delivered a valid proxy will not of
itself revoke that proxy. See "The NPB Special Meeting -- Record Date; Voting
Rights; Proxies" and "The Infrasonics Special Meeting -- Record Date; Voting
Rights; Proxies."
Votes Required; Record Date. Although a vote of NPB stockholders approving
the Merger Proposal is not required under the DGCL, NPB has agreed to seek the
approval of a majority of the shares of NPB Common Stock voting thereon at the
NPB Special Meeting. Approval of the Stock Split Proposal requires the
affirmative vote of the holders of a majority of the outstanding shares of NPB
Common Stock entitled to vote thereon at the NPB Special Meeting. Holders of NPB
Common Stock are entitled to one vote per share. Only holders of NPB Common
Stock at the close of business on April 29, 1996 (the "NPB Record Date") are
entitled to notice of and to vote at the NPB Special Meeting. See "The NPB
Special Meeting." As of April 29, 1996, directors and executive officers of NPB
and their affiliates were beneficial owners of an aggregate of 1,038,194 shares
of NPB Common Stock (exclusive of any shares issuable upon the exercise of stock
options remaining unexercised as of such date), or approximately 3.6% of the
28,790,761 shares of NPB Common Stock that were issued and outstanding as of
such date. Each of the directors and executive officers of NPB has indicated an
intention to vote all shares of NPB Common Stock beneficially owned by him or
her in favor of approval of the Merger Proposal and the Stock Split Proposal.
Consummation of the Merger also requires approval of the proposal to adopt
the Merger Agreement by the holders of a majority of the outstanding shares of
Infrasonics Common Stock entitled to vote thereon at the Infrasonics Special
Meeting. Holders of Infrasonics Common Stock are entitled to one vote per share.
Only holders of Infrasonics Common Stock at the close of business on April 29,
1996 (the "Infrasonics Record Date") are entitled to notice of and to vote at
the Infrasonics Special Meeting. See "The Infrasonics Special Meeting." As of
April 29, 1996, directors and executive officers of Infrasonics and their
affiliates were beneficial owners of an aggregate of 372,450 shares of
Infrasonics Common Stock (exclusive of any shares
2
<PAGE> 17
issuable upon the exercise of stock options remaining unexercised as of such
date), or approximately 3.5% of the 10,578,041 shares of Infrasonics Common
Stock that were issued and outstanding as of such date. Each of the directors
and executive officers of Infrasonics has indicated an intention to vote all
shares of Infrasonics Common Stock beneficially owned by him or her in favor of
approval of the Merger Agreement.
SURRENDER OF STOCK CERTIFICATES
NPB has authorized The First National Bank of Boston 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 Infrasonics
shareholder. The letter of transmittal will contain instructions with respect to
the surrender of certificates representing Infrasonics Common Stock to be
exchanged for NPB Common Stock. See "The Merger -- Conversion of Shares;
Procedures for Exchange of Certificates."
INFRASONICS SHAREHOLDERS SHOULD NOT FORWARD CERTIFICATES FOR INFRASONICS
COMMON STOCK TO THE EXCHANGE AGENT UNTIL THEY HAVE RECEIVED TRANSMITTAL LETTERS.
INFRASONICS SHAREHOLDERS SHOULD NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED
PROXY.
RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
THE BOARDS OF DIRECTORS OF NPB AND INFRASONICS HAVE EACH UNANIMOUSLY
APPROVED THE MERGER AGREEMENT. THE BOARD OF DIRECTORS OF NPB (THE "NPB BOARD")
BELIEVES THAT THE TERMS OF THE MERGER AGREEMENT ARE FAIR TO, AND IN THE BEST
INTERESTS OF, NPB AND ITS STOCKHOLDERS, AND UNANIMOUSLY RECOMMENDS THAT HOLDERS
OF SHARES OF NPB COMMON STOCK VOTE "FOR" APPROVAL OF THE MERGER PROPOSAL AND THE
STOCK SPLIT PROPOSAL. THE BOARD OF DIRECTORS OF INFRASONICS (THE "INFRASONICS
BOARD") BELIEVES THAT THE TERMS OF THE MERGER AGREEMENT ARE FAIR TO, AND IN THE
BEST INTERESTS OF, INFRASONICS AND ITS SHAREHOLDERS, AND UNANIMOUSLY RECOMMENDS
THAT HOLDERS OF SHARES OF INFRASONICS COMMON STOCK VOTE "FOR" APPROVAL OF THE
MERGER AGREEMENT. THE APPROVAL OF THE MERGER AGREEMENT BY THE STOCKHOLDERS OF
NPB AND THE SHAREHOLDERS OF INFRASONICS 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 INFRASONICS, AS MORE FULLY DESCRIBED HEREIN. See "The
Merger -- Background of the Merger"; "-- Recommendation of the NPB Board;
Reasons for the Merger and Stock Split Proposals"; "-- Recommendation of the
Infrasonics 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 Infrasonics after the Merger will be subject to a number of risks,
including: the uncertainties associated with the integration of the business of
Infrasonics 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 NPB STOCK SPLIT PROPOSAL OR APPROVE THE MERGER AGREEMENT, AS THE CASE MAY
BE, NPB STOCKHOLDERS AND
3
<PAGE> 18
INFRASONICS 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) Infrasonics will be merged with and
into NPB, with NPB being the surviving corporation, and (ii) each issued and
outstanding share of Infrasonics 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 .095 of a fully paid and
non-assessable share (the "Exchange Ratio") of NPB Common Stock, together with
the corresponding percentage of an NPB Preferred Stock Purchase Right. The
Exchange Ratio is subject to adjustment, based on the average of the closing
prices of NPB Common Stock for the ten trading days ending on the fifth trading
day before the consummation of the Merger (the "Closing Market Value"), in order
that the value of NPB Common Stock to be received by Infrasonics shareholders as
calculated under the Exchange Ratio Formula will not be greater than $7.20, nor
less than approximately $6.25 per share. The Exchange Ratio is calculated as
follows: (1) if the Closing Market Value is greater than or equal to $65.77 and
less than or equal to $75.77, the Exchange Ratio will be .095; (2) if the
Closing Market Value is greater than $75.77, the Exchange Ratio will be the
quotient of (a) $7.20 divided by (b) the Closing Market Value, rounded to the
nearest one-one thousandth of a share; and (3) if the Closing Market Value is
less than $65.77, the Exchange Ratio will be the the quotient of (x) $6.25
divided by (y) the Closing Market Value, rounded to the nearest one-one
thousandth of a share. A table is provided in Appendix F to this Joint Proxy
Statement/Prospectus which sets forth examples of possible Exchange Ratios at
varying Closing Market Values and the resulting total number of shares of NPB
Common Stock that would be issued in the Merger based upon the April 29, 1996
capitalization of NPB and Infrasonics. 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 Infrasonics Common Stock. As a result, the market
value of NPB Common Stock that the shareholders of Infrasonics ultimately
receive could be more or less than its market value on the date of this Joint
Proxy Statement/Prospectus or on the date of the Special Meetings. NPB
stockholders and Infrasonics shareholders are advised to obtain current market
quotations for NPB Common Stock and Infrasonics 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 F, NPB and Infrasonics would
recirculate a supplement to this Joint Proxy Statement/Prospectus or an Amended
Joint Proxy Statement/Prospectus containing information concerning the actual
exchange ratio, and would offer all holders of NPB Common Stock and Infrasonics
Common Stock who were entitled to vote on the Merger as of the Record Date an
opportunity to change their votes prior to the Special Meetings (in which case,
the Special Meetings 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
Infrasonics 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 Market Value. 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
Infrasonics to effect the Merger are subject to the satisfaction of certain
conditions, including, among others: (i) obtaining the approval of NPB
stockholders and Infrasonics 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
4
<PAGE> 19
defined)); (iv) the absence of any action by any federal or state governmental
entity that imposes any condition upon NPB or Infrasonics 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 Infrasonics
if, among other things, the Merger is not consummated by October 5, 1996. The
Merger Agreement also may be terminated by either NPB or Infrasonics under other
circumstances, including the failure of NPB's stockholders to approve the Merger
Proposal or of Infrasonics's shareholders to approve the Merger Agreement. Under
certain circumstances leading to termination of the Merger Agreement, NPB or
Infrasonics, as the case may 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 the General Corporation Law of the State of
Delaware (the "DGCL"), the holders of NPB Common Stock are not entitled to
appraisal rights with respect to the Merger Proposal or the Stock Split
Proposal.
Holders of Infrasonics Common Stock who, not later than the date of the
Infrasonics Special Meeting, deliver to Infrasonics a written demand for
dissenters' rights, who vote against the approval and adoption of the Merger
Agreement and who comply with all other applicable requirements of Chapter 13 of
the California Corporations Code (the "CCC"), will have the right to receive
payment in cash of the "fair market value" (estimated at $5.50) of such holders'
shares of Infrasonics Common Stock; although no holder of Infrasonics Common
Stock will be entitled to dissenters' rights unless holders of at least 5% of
the outstanding shares of Infrasonics Common Stock have perfected their
dissenters' rights in accordance with the CCC. The procedure for perfecting
dissenters' rights is summarized under the caption "Dissenters' Rights of
Infrasonics Shareholders," and the pertinent provisions of Chapter 13 of the CCC
are included as Appendix E to this Joint Proxy Statement/Prospectus.
Governmental Approvals Required. Certain aspects of the Merger will
require notifications to, and/or approvals from, certain United States
authorities. NPB and Infrasonics 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,
Infrasonics's independent accountants, to this effect. See "The
Merger -- Accounting Treatment" and "The Merger Agreement -- Conditions."
OPINIONS OF FINANCIAL ADVISORS
Robertson, Stephens & Company, LLC ("Robertson Stephens") has acted as
financial advisor to NPB in connection with the Merger and has delivered a
written opinion, dated May 14, 1996, to the NPB Board that, subject to certain
assumptions, the Exchange Ratio was fair to NPB stockholders, from a financial
point of view, as of the date of such opinion.
5
<PAGE> 20
Alex. Brown & Sons Incorporated ("Alex. Brown") has acted as financial
advisor to Infrasonics in connection with the Merger and has delivered to the
Infrasonics Board a written opinion, dated May 14, 1996, that the Exchange Ratio
was fair to the holders of Infrasonics Common Stock, from a financial point of
view, as of the date of such opinion.
Copies of the written opinions of Robertson Stephens and Alex. Brown, which
set forth the respective assumptions made, matters considered and limitations on
the reviews undertaken, are attached as Appendices B and C, respectively, to
this Joint Proxy Statement/Prospectus and should be read carefully in their
entirety. See "The Merger -- Opinions of Robertson Stephens and Alex. Brown."
CONFLICTS OF INTEREST
In considering the recommendation of the Infrasonics Board with respect to
the approval by the Infrasonics shareholders of the proposal to adopt the Merger
Agreement and the transactions contemplated thereby, shareholders should be
aware that certain members of Infrasonics management and the Infrasonics Board
have certain interests in the Merger that are in addition to the interests of
shareholders of Infrasonics generally. These interests arise from, among other
things, certain indemnification and insurance arrangements and employment and
consulting agreements among NPB, Infrasonics and directors and certain executive
officers of Infrasonics.
NPB has agreed to offer Jim Hitchin a two-year renewable employment
agreement, pursuant to which Mr. Hitchin will serve as Senior
Consultant -- Special Projects of NPB at an annual salary of $250,000 for the
first year and $275,000 for the second year. Under the terms of this agreement,
Mr. Hitchin will be entitled to certain benefits, including an option to
purchase 50,000 (post-split) shares of NPB Common Stock, and if he is terminated
(other than due to death or disability, or for cause) within two years after the
Merger, the maximum severance payment that he would have been entitled to under
his previous employment agreement with Infrasonics that may be paid without
resulting in an "excess parachute payment" as defined in Section 280G of the
Internal Revenue Code. Based on Mr. Hitchin's compensation for 1991 through
1995, severance payments could be made in an amount up to approximately
$600,000. See "Conflicts of Interest -- Employment Agreement." Under the terms
of the Merger Agreement, all stock options of Infrasonics outstanding on March
8, 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 May 23, 1996,
employees (or former employees) of Infrasonics held options to purchase an
aggregate 581,939 shares of Infrasonics Common Stock at a weighted average
exercise price of $3.53 per share (at exercise prices ranging from $2.38 to
$8.26 per share). See "Conflicts of Interest -- Stock Option Plans." Upon
consummation of the Merger, the outside directors of Infrasonics will enter into
Consulting Agreements with NPB pursuant to which they will each provide up to 30
hours of consulting services to NPB as requested by NPB in exchange for $50,000
in the case of Mr. Vanderpool and $25,000 for each of the other outside
directors. Upon consummation of the Merger, outstanding options to purchase
Infrasonics Common Stock held by the outside directors will cease to vest and
will terminate thereafter unless vested options are exercised within the time
frame set forth in the applicable option agreements. See "Conflicts of
Interest -- Consulting Agreements with Directors." In addition, for a period of
four years from the Effective Time, (i) all rights of indemnification and
reimbursement of expenses existing on the Effective Date under Infrasonics's
Articles of Incorporation, Bylaws and indemnification agreements in favor of
officers and directors of Infrasonics will survive; (ii) NPB will indemnify and
advance expenses to such persons to the full extent required or permitted by
Infrasonics's Articles of Incorporation, 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 "Conflicts of Interest -- Indemnification and
Insurance." NPB will also make severance payments to certain employees and
officers. As to officers, in the event that any of Frederick C. McGee, Tom
Bowie, Guy Gansel or Ralph Anderson is terminated within 18 months of the
Merger, he will receive 18 months salary (at an annual rate, as of the date
hereof, of $95,000, $90,000, $141,750 and $100,000, respectively), COBRA
reimbursement for 18 months and outplacement assistance. See "Conflicts of
Interest -- Severance Arrangements." See "The Merger -- Conflicts of Interest."
6
<PAGE> 21
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 Infrasonics shareholders (except with respect to cash received by
dissenting shareholders or in lieu of fractional shares), NPB stockholders, NPB
or Infrasonics 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 Infrasonics shareholders are currently governed by the CCC,
Infrasonics's Articles of Incorporation and Infrasonics's Bylaws. Upon
consummation of the Merger, Infrasonics shareholders will become stockholders of
NPB, which is a Delaware corporation, and their rights as NPB stockholders will
be governed by the 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 Infrasonics and stockholders of NPB, see
"Comparison of Stockholder Rights."
COMPARATIVE PER SHARE PRICES AND DIVIDEND POLICIES
Both the NPB Common Stock and the Infrasonics Common Stock are listed and
traded on Nasdaq. The following table sets forth the high and low sale prices
per share of NPB Common Stock and Infrasonics Common Stock for the calendar
quarters indicated, as reported by Nasdaq.
<TABLE>
<CAPTION>
NPB INFRASONICS
COMMON STOCK COMMON STOCK
---------------- ----------------
HIGH LOW HIGH LOW
------ ------- ------- ------
<S> <C> <C> <C> <C>
Calendar 1994:
First Quarter..................................... $29.50 $24.25 $6.00 $3.875
Second Quarter.................................... 28.75 24.375 5.625 3.38
Third Quarter..................................... 31.50 26.00 4.00 2.38
Fourth Quarter.................................... 34.00 28.25 4.75 2.875
Calendar 1995:
First Quarter..................................... 38.25 31.50 4.00 2.38
Second Quarter.................................... 47.75 36.00 4.25 2.38
Third Quarter..................................... 55.75 44.688 7.0625 3.75
Fourth Quarter.................................... 62.00 47.38 7.125 5.00
Calendar 1996:
First Quarter..................................... 72.75 55.50 6.75 5.00
Second Quarter (through May 31)................... 69.75 48.00 6.4375 5.75
</TABLE>
On March 8, 1996, the last trading day prior to announcement of the Merger
Agreement, the closing sales prices of NPB Common Stock and Infrasonics Common
Stock as reported by Nasdaq were $65.00 per share and $5.50 per share,
respectively. The equivalent per share value of Infrasonics Common Stock as of
such date was approximately $6.25. On May 31, 1996, the closing sales prices of
NPB Common Stock and Infrasonics Common Stock as reported by Nasdaq were $54.50
per share and $6.0625 per share, respectively. Based upon the May 31, 1996
closing price of NPB Common Stock and an Exchange Ratio of .115, the equivalent
per share value of Infrasonics Common Stock as of such date was approximately
$6.27.
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 Infrasonics
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 consummation of the Merger, in order
that the value of NPB's Common Stock to be received by
7
<PAGE> 22
Infrasonics shareholders as calculated under the adjustment formula is not less
than approximately $6.25 per share. See "The Merger Agreement -- Conversion of
Securities." STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR NPB
COMMON STOCK AND INFRASONICS COMMON STOCK. NO ASSURANCE CAN BE GIVEN AS TO THE
FUTURE PRICES OR MARKETS FOR NPB COMMON STOCK OR INFRASONICS COMMON STOCK.
No dividends have been declared or paid on NPB Common Stock or Infrasonics
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 Infrasonics
have been derived from their respective historical financial statements and
should be read in conjunction with such consolidated financial statements and
the notes thereto incorporated by reference herein. The NPB and Infrasonics
historical financial data as of and for the nine months ended March 31, 1996 and
April 2, 1995, and as of and for the nine months ended March 31, 1996 and 1995,
respectively, have been derived from unaudited financial statements of NPB or
Infrasonics, as the case may be, and have been prepared on the same basis as the
historical information derived from audited financial statements. In the opinion
of the managements of NPB and Infrasonics, respectively, the unaudited financial
statements of NPB or Infrasonics, as the case may be, 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. NPB's "Selected Historical Financial Data" as of and for
each of the five fiscal years in the period ended July 2, 1995 and the unaudited
nine months ended April 2, 1995, has been prepared by combining the financial
data as of and for each of the five fiscal years in the period ended July 2,
1995 and the nine months ended April 2, 1995 of Nellcor Incorporated ("Nellcor")
with financial data as of and for each of the three fiscal years in the period
ended January 31, 1995, the two fiscal years in the period ended December 31,
1991 and the unaudited nine months ended October 31, 1994, respectively of
Puritan-Bennett Corporation ("Puritan-Bennett"). The operating results of NPB
and Infrasonics for the nine months ended March 31, 1996, are not necessarily
indicative of the results that may be expected for the years ending July 7,
1996, in the case of NPB, and June 30, 1996, in the case of Infrasonics. No cash
dividends have been declared or paid on Infrasonics's Common Stock.
8
<PAGE> 23
SELECTED HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NPB
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
---------------------------------------------------- --------------------
JULY 2, JULY 3, JULY 4, JULY 5, JULY 7, MARCH 31, APRIL 2,
1995 1994(2) 1993 1992(1) 1991(1) 1996(3) 1995
-------- -------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL STATEMENT OF OPERATIONS DATA:
Net revenue.................................. $600,066 $544,227 $518,246 $452,286 $410,805 $487,354 $438,579
Income from operations....................... 75,240 7,710 58,962 31,428 45,909 (16,938 ) 53,844
Income (loss) before cumulative effect of
accounting change........................ 49,463 (6,422) 39,715 21,867 32,135 (21,901 ) 33,727
Income (loss) per common share before
cumulative effect of accounting change... 1.77 (0.23) 1.46 0.83 1.26 (0.75 ) 1.21
Common dividends per share(4).............. 0.05 0.05 0.05 0.05 0.05 0.00 0.04
Shares used to compute income (loss) per
common share before cumulative effect of
accounting change........................ 27,931 27,364 27,140 26,504 25,534 29,248 27,794
HISTORICAL BALANCE SHEET DATA:
Working capital.............................. $249,743 $209,855 $224,772 $179,374 $177,606 $211,333 $252,116
Total assets................................. 575,436 499,035 470,014 397,442 335,993 527,820 533,994
Long-term obligations........................ 84,690 66,062 64,351 49,085 46,293 26,112 88,581
Stockholders' equity......................... 366,705 316,625 326,187 275,421 238,752 366,019 340,470
</TABLE>
INFRASONICS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
---------------------------------------------------- ---------------------
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, MARCH 31, MARCH 31,
1995 1994 1993 1992 1991 1996 1995
-------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL STATEMENT OF OPERATIONS DATA:
Net sales.................................... $23,000 19,906 18,689 $15,037 $10,491 $19,271 $15,669
Income/(loss) from operations................ (1,836 ) 731 1,057 1,554 762 1,615 (1,911)
Net income/(loss) from operations.......... (1,351 ) 617 1,291 1,813 735 1,306 (1,498)
Net income/(loss) from operations per
share.................................... (.13 ) .06 .13 .19 .09 0.12 (0.14)
Shares used to compute net income/(loss)
from operations per share................ 10,339 10,341 10,236 9,793 8,277 10,830 10,339
HISTORICAL BALANCE SHEET DATA:
Working capital.............................. $17,216 $18,508 $17,751 $17,772 $ 5,351 $19,086 $16,871
Total assets................................. 26,954 28,534 27,596 22,811 8,736 30,216 27,076
Long term obligations........................ -- -- -- -- -- -- --
Shareholders' equity......................... 25,560 26,893 26,071 21,793 7,327 27,512 25,404
</TABLE>
- ---------------
(1) Puritan-Bennett changed its year end from a calendar year end to a fiscal
year ended January 31, effective February 1, 1992. The one-month period
ended January 31, 1992 ("transition period") was audited. Selected
historical financial data for the transition period are as follows: net
revenue $19.7 million, loss from operations $1.5 million, net loss from
operations $2.2 million, net loss from operations per share of $0.20 and
11.6 million shares used to compute net loss from operations per share. No
cash dividends were declared or paid with respect to the transition period.
(2) NPB accrued restructuring charges totaling approximately $43.2 million and
NPB recorded litigation settlements totaling approximately $13.0 million
during the fiscal year ended July 3, 1994.
(3) In connection with the merger of Nellcor and Puritan-Bennett, one-time
merger and related costs of $92.6 million were recorded during the nine
months ended March 31, 1996.
(4) Common dividends per share relates to cash dividends declared by
Puritan-Bennett prior to its merger with Nellcor. NPB has no present
intention to declare any dividends in the future.
9
<PAGE> 24
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 Infrasonics,
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 2, 1995 and the unaudited
nine months ended March 31, 1996 and April 2, 1995 have been combined with
Infrasonics's financial data for each of the three fiscal years in the period
ended June 30, 1995 and the unaudited nine months ended March 31, 1996 and 1995,
respectively. For the purpose of the unaudited pro forma combined balance sheet
data, NPB's financial data at March 31, 1996 were combined with Infrasonics's
financial data at March 31, 1996. To reflect the August 25, 1995 stock-for-stock
merger of Nellcor and Puritan-Bennett, which was accounted for as a pooling of
interests, NPB's financial data for each of the three fiscal years in the period
ended July 2, 1995 and the unaudited nine months ended April 2, 1995 has been
prepared by combining Nellcor's financial data for each of the three fiscal
years in the period ended July 2, 1995 and the nine months ended April 2, 1995
with Puritan-Bennett's financial data for each of the three fiscal years in the
period ended January 31, 1995 and the unaudited nine months ended October 31,
1994.
The unaudited pro forma information is presented for comparative purposes
only and does not purport to be indicative of the operating results or financial
position that would have occurred if the Merger had been consummated at the
beginning of the periods, nor is such information necessarily indicative of the
future operating results or financial position of NPB and Infrasonics.
SUMMARY UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
------------------------------ --------------------
JULY 2, JULY 3, JULY 4, MARCH 31, APRIL 2,
1995 1994(1) 1993 1996 1995
-------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
PRO FORMA COMBINED STATEMENT OF OPERATIONS
DATA:
Net revenue............................... $623,066 $564,132 $536,935 $ 506,625 $454,248
Income (loss) from operations............. 73,404 8,441 60,018 (15,323) 51,933
Income (loss) before cumulative effect of
accounting change....................... 48,112 (5,805) 41,006 (20,595) 32,230
Income (loss) per common share before
cumulative effect of accounting
change.................................. 1.66 (0.20) 1.46 (0.68) 1.12
Shares used to compute income (loss) per
common share before cumulative effect of
accounting change....................... 28,913 28,346 28,112 30,277 28,776
</TABLE>
<TABLE>
<CAPTION>
MARCH 31,
1996
---------
<S> <C>
PRO FORMA COMBINED BALANCE SHEET DATA:
Working capital........................ $ 222,419
Total assets........................... 558,036
Long-term obligations.................. 26,112
Stockholders' equity................... 385,531
</TABLE>
- ---------------
(1) In fiscal 1994, Nellcor Puritan Bennett accrued restructuring charges
totaling approximately $43.2 million and recorded litigation settlements
totalling approximately $13.0 million.
10
<PAGE> 25
COMPARATIVE PER SHARE DATA
The following table presents historical, unaudited pro forma combined and
unaudited pro forma equivalent per share data of NPB and Infrasonics 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 Infrasonics have been calculated by multiplying the
NPB pro forma combined amounts by the Exchange Ratio of 0.095. 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 Infrasonics, incorporated by reference in this Joint Proxy
Statement/Prospectus, and the unaudited pro forma combined condensed financial
statements included elsewhere in this Joint 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 2, 1995 and the unaudited nine months ended March 31,
1996 with the Infrasonics results for each of the three fiscal years in the
period ended June 30, 1995 and the unaudited nine months ended March 31, 1996,
respectively, and NPB's financial position at July 2, 1995 and March 31, 1996
with Infrasonics's financial position at June 30, 1995 and March 31, 1996. The
NPB historical results for each of the three fiscal years in the period ended
July 2, 1995 and the financial position at July 2, 1995 have been prepared by
combining Nellcor's historical results for each of the three fiscal years in the
period ended July 2, 1995 with Puritan-Bennett's historical results for each of
the three fiscal years ended January 31, 1995, and Nellcor's financial position
at July 2, 1995 with Puritan-Bennett's financial position at January 31, 1995.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------ NINE MONTHS
JULY ENDED
2, JULY 3, JULY 4, MARCH 31,
1995 1994 1993 1996
------ ------- ------- -----------
<S> <C> <C> <C> <C>
NPB COMMON STOCK
Net income/(loss) from operations per share:
Historical........................................ $ 1.77 $ (0.23) $ 1.46 $ (0.75)
Pro forma combined................................ $ 1.66 $ (0.20) $ 1.46 $ (0.68)
Cash dividend per share(1):
Historical........................................ $ 0.05 $ 0.05 $ 0.05 $ --
Book value per share at period end:
Historical........................................ $13.20 n/a n/a $ 12.72
Pro forma combined................................ $13.64 n/a n/a $ 12.94
INFRASONICS COMMON STOCK
Net income/(loss) from operations per share:........ $
Historical........................................ $(0.13) $ 0.06 $ 0.13 $ 0.12
Pro forma equivalent.............................. $ 0.16 $ (0.02) $ 0.14 $ (0.06)
Cash dividend per share(1):
Historical........................................ -- -- -- --
Pro forma equivalent.............................. $0.005 $ 0.005 $ 0.005 --
Book value per share at period end:
Historical........................................ $ 2.47 n/a n/a $ 2.61
Pro forma equivalent.............................. $ 1.30 n/a n/a $ 1.23
</TABLE>
- ---------------
(1) Cash dividend per share relates to dividends declared by Puritan-Bennett
prior to its merger with Nellcor. NPB has no present intention to declare
any dividends in the future.
11
<PAGE> 26
RISK FACTORS
This Joint 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
Joint Proxy Statement/Prospectus, should be considered carefully.
UNCERTAINTIES ASSOCIATED WITH THE INTEGRATION OF INFRASONICS
The Merger involves the integration of Infrasonics into NPB. Among the
factors considered by the NPB Board and Infrasonics Board in connection with
their approval of the Merger Agreement were the opportunities for operating
efficiencies that they expect will ultimately result from the Merger. The
integration of Infrasonics'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 Infrasonics into NPB
will be overcome or that the benefits expected from such integration will be
realized. The difficulties of combining the Infrasonics 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 Infrasonics 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 July 7, 1996, currently estimated to be in the range of $10 million to
$15 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. In connection with the
transaction, NPB has 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 the
two 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 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
12
<PAGE> 27
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 Infrasonics.
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, in recent years. In January 1994, Puritan-Bennett entered into
a consent decree with the FDA pursuant to which Puritan-Bennett 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 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.
FDA Enforcement With Respect to Infrasonics. In January 1993, the FDA
inspected Infrasonics's facilities and identified certain alleged violations of
the FDA regulations on Good Manufacturing Procedures. After a response from
Infrasonics, an FDA warning letter and a two-month period of weekly updates from
Infrasonics, the identified issues were resolved to the satisfaction of the FDA.
The FDA inspected Infrasonics again in August 1994 and identified additional
issues, to which Infrasonics responded to the satisfaction of the FDA. There can
be no assurance that in the future Infrasonics will not experience problems
associated with FDA regulatory compliance or increased general costs of ongoing
regulatory compliance.
UNCERTAINTY RELATED TO PATENTS AND PROPRIETARY RIGHTS
From time to time, NPB and Infrasonics 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 Infrasonics may be resolved by means of a negotiated
settlement or by contesting the claim through the judicial process. There can be
no
13
<PAGE> 28
assurance that the business, results of operations or the financial condition of
NPB or Infrasonics will not suffer an adverse impact as a result of intellectual
property claims that may be commenced against NPB or Infrasonics in the future.
INTENSE COMPETITION; RAPID TECHNOLOGICAL AND MARKET CHANGES
The medical device industry is characterized by rapidly evolving technology
and increased competition. Competitors of NPB and Infrasonics include large
medical companies, some of which have greater financial and technical resources
and broader product lines than NPB and Infrasonics, even on a combined basis.
NPB and Infrasonics 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 Infrasonics. 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 Infrasonics. 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 Infrasonics or that would
render some products offered by NPB and Infrasonics 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 Infrasonics 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 Infrasonics 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 Infrasonics 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 are 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 Infrasonics products may suffer serious injury or death,
which may lead to product liability claims against both NPB and Infrasonics.
There can be no assurance that such product liability claims will not have an
adverse effect on its business, results of operations or financial condition.
In February 1996, Infrasonics was named as one of the defendants in an
action seeking $32 million in damages for injuries sustained in connection with
the use of an Infrasonics ventilator. The damages sought by the plaintiff exceed
the amount of Infrasonics's insurance coverage. The litigation is in the
preliminary stages and its ultimate outcome cannot currently be determined;
thus, there can be no assurance that Infrasonics will prevail in the litigation.
In addition, there can be no assurance that product liability insurance coverage
14
<PAGE> 29
maintained by Infrasonics or NPB will ultimately prove to be adequate for
existing or any future claims, or that such coverage will continue to remain
available on acceptable terms or at all.
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 Infrasonics 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 Infrasonics 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 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 Infrasonics 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 Infrasonics. 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 Special
Meeting (the "Closing Market Value"), the number of shares of NPB Common Stock
to be issued in the Merger would 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."
15
<PAGE> 30
THE NPB SPECIAL MEETING
PURPOSE OF THE NPB SPECIAL MEETING
At the NPB Special Meeting, holders of NPB Common Stock will consider and
vote upon the Merger Proposal and the Stock Split Proposal. For a description of
the Merger Proposal, see "Proposal No. 1 -- Approval of the Merger Agreement."
For a description of the Stock Split Proposal, see "Proposal No. 2 -- Stock
Split Proposal." Stockholders of NPB will also consider and vote on any other
matter that may properly come before the meeting. Although a vote of NPB
stockholders approving the Merger Proposal is not required under the DGCL, NPB
has agreed to seek stockholder approval thereof. Stockholder approval of the
Stock Split Proposal is required by the DGCL.
THE NELLCOR BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT, BELIEVES
THAT THE TERMS OF THE MERGER AGREEMENT ARE FAIR TO, AND IN THE BEST INTERESTS
OF, NPB AND ITS STOCKHOLDERS, AND UNANIMOUSLY RECOMMENDS THAT HOLDERS OF SHARES
OF NPB COMMON STOCK VOTE "FOR" APPROVAL OF BOTH THE MERGER PROPOSAL AND THE
STOCK SPLIT PROPOSAL.
RECORD DATE; VOTING RIGHTS; PROXIES
Only holders of NPB Common Stock at the close of business on April 29, 1996
(the "NPB Record Date") are entitled to notice of and to vote at the NPB Special
Meeting.
As of the NPB Record Date, there were 28,790,761 shares of NPB Common Stock
issued and outstanding, each of which entitled the holder thereof to one vote.
All shares of NPB 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 NPB COMMON STOCK WILL BE VOTED "FOR" THE MERGER
PROPOSAL AND THE STOCK SPLIT PROPOSAL. NPB does not know of any matters other
than as described in the Notice of Special Meeting that are to come before the
NPB Special Meeting. If any other matter or matters are properly presented for
action at the NPB Special Meeting, the persons named in the enclosed form of
proxy and acting thereunder will have the discretion to vote on such matters in
accordance with their best judgment. A stockholder who has given a proxy may
revoke it at any time prior to its exercise by giving written notice thereof to
the Secretary of NPB, by signing and returning a later dated proxy, or by voting
in person at the NPB Special Meeting. However, mere attendance at the NPB
Special Meeting will not in and of itself have the effect of revoking the proxy.
Votes cast by proxy or in person at the NPB Special 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 NPB Board. NPB 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 NPB 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 materials to owners of NPB 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. NPB
and Infrasonics have retained Corporate Investor Communications, Inc. to aid in
the solicitation of proxies from stockholders of NPB and shareholders of
Infrasonics, respectively. The aggregate fees of such firm for the solicitation
of proxies from the stockholders of NPB and Infrasonics are estimated to be
$15,000 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 NPB Common Stock
entitled to vote is necessary to constitute a quorum at the NPB Special Meeting.
For purposes of determining whether a quorum is present, the inspector of
election will
16
<PAGE> 31
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").
REQUIRED VOTE
Although a vote of NPB stockholders approving the Merger Agreement is not
required under the DGCL, NPB has agreed to seek the approval of a majority of
the outstanding shares of NPB Common Stock voting thereon at the NPB Special
Meeting. Approval of the Stock Split Proposal requires the affirmative vote of
the holders of a majority of the outstanding shares of NPB Common Stock entitled
to vote thereon at the NPB Special Meeting.
For purposes of determining whether the Merger Proposal has been approved,
the inspector of election will exclude abstentions and broker non-votes from the
number of shares deemed to have voted on such matter at the NPB Special Meeting.
Accordingly, abstentions and broker non-votes will not affect the voting on the
Merger Proposal. For purposes of determining whether the Stock Split Proposal
has been approved, the inspector of election will include abstentions and broker
non-votes in the number of outstanding shares of NPB Common Stock entitled to
vote thereon at the NPB Special Meeting. Accordingly, abstentions and broker
non-votes will have the effect of a "NO" vote on the Stock Split Proposal.
As of April 29, 1996, directors and executive officers of NPB and their
affiliates were beneficial owners of an aggregate of 1,038,194 shares of NPB
Common Stock (exclusive of any shares issuable upon the exercise of stock
options remaining unexercised as of such date), or approximately 3.6% of the
28,790,761 shares of NPB Common Stock that were issued and outstanding as of
such date. Each of the directors and executive officers of NPB has indicated an
intention to vote all shares of NPB Common Stock beneficially owned by him or
her in favor of approval of the Merger Proposal and the Stock Split Proposal.
THE MATTERS TO BE CONSIDERED AT THE NPB SPECIAL MEETING ARE OF GREAT
IMPORTANCE TO THE STOCKHOLDERS OF NPB. ACCORDINGLY, STOCKHOLDERS ARE URGED TO
READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS, AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE
ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
17
<PAGE> 32
THE INFRASONICS SPECIAL MEETING
PURPOSE OF THE INFRASONICS SPECIAL MEETING
At the Infrasonics Special Meeting, holders of Infrasonics Common Stock
will consider and vote upon a proposal to approve the Merger Agreement. As a
result of the Merger, Infrasonics will merge with and into NPB and NPB will be
the surviving corporation.
THE INFRASONICS BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT,
BELIEVES THAT THE TERMS OF THE MERGER AGREEMENT ARE FAIR TO, AND IN THE BEST
INTERESTS OF, INFRASONICS AND ITS SHAREHOLDERS, AND UNANIMOUSLY RECOMMENDS THAT
HOLDERS OF SHARES OF INFRASONICS COMMON STOCK VOTE "FOR" APPROVAL OF THE MERGER
AGREEMENT.
RECORD DATE; VOTING RIGHTS; PROXIES
Only holders of Infrasonics Common Stock at the close of business on April
29, 1996 (the "Infrasonics Record Date") are entitled to notice of and to vote
at the Infrasonics Special Meeting.
As of the Infrasonics Record Date, there were 10,578,041 shares of
Infrasonics Common Stock issued and outstanding, each of which entitled the
holder thereof to one vote.
All shares of Infrasonics 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 INFRASONICS COMMON STOCK WILL BE VOTED IN FAVOR OF
APPROVAL OF THE MERGER AGREEMENT. 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 Infrasonics, by signing and returning a later dated proxy, or by
voting in person at the Infrasonics Special Meeting. However, mere attendance at
the Infrasonics Special Meeting will not in and of itself have the effect of
revoking the proxy. Votes cast by proxy or in person at the Infrasonics Special
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 Infrasonics Board.
Infrasonics 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 Infrasonics 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 Infrasonics 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. Infrasonics and NPB have retained
Corporate Investor Communications, Inc. to aid in the solicitation of proxies
from their respective stockholders. The aggregate fees of such firm for the
solicitation of proxies from the stockholders of Infrasonics and NPB are
estimated to be $15,000 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 Infrasonics Common Stock
entitled to vote is necessary to constitute a quorum at the Infrasonics Special
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").
18
<PAGE> 33
REQUIRED VOTE
Approval of the Merger Agreement requires the affirmative vote of a
majority of the outstanding shares of Infrasonics 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 Infrasonics
Special Meeting. Accordingly, abstentions and broker non-votes will have the
effect of a "NO" vote on the proposal to approve the Merger Agreement.
As of April 29, 1996, directors and executive officers of Infrasonics and
their affiliates were beneficial owners of an aggregate of 372,450 shares of
Infrasonics Common Stock (exclusive of any shares issuable upon the exercise of
stock options remaining unexercised as of such date), or approximately 3.5% of
the 10,578,041 shares of Infrasonics Common Stock that were issued and
outstanding as of such date. Each of the directors and executive officers of
Infrasonics has indicated an intention to vote all shares of Infrasonics Common
Stock beneficially owned by him or her in favor of approval of the Merger
Agreement.
THE MATTERS TO BE CONSIDERED AT THE INFRASONICS SPECIAL MEETING ARE OF
GREAT IMPORTANCE TO THE SHAREHOLDERS OF INFRASONICS. ACCORDINGLY, SHAREHOLDERS
ARE URGED TO READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS JOINT
PROXY STATEMENT/PROSPECTUS, AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE
ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
19
<PAGE> 34
THE MERGER
This section of the Joint 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 Joint Proxy
Statement/Prospectus and is incorporated herein by reference. All stockholders
are urged to read the Merger Agreement.
GENERAL
The Merger Agreement provides that the Merger will be consummated if the
approvals of NPB stockholders and Infrasonics shareholders required therefor are
obtained and all other conditions to the Merger are satisfied or waived as
provided in the Merger Agreement. Upon consummation of the Merger, Infrasonics
will be merged with and into NPB, and NPB will be the surviving corporation.
Upon consummation of the Merger, each outstanding share of Infrasonics
Common Stock (other than shares held by dissenting shareholders who have
asserted appraisal rights), will be converted into the right to receive .095 of
a fully paid and nonassessable share of NPB Common Stock, including the
corresponding percentage of an associated NPB Preferred Stock Purchase Right.
The Exchange Ratio is subject to adjustment, based on the Closing Market Value,
in order that the value of NPB's Common Stock to be received by Infrasonics
shareholders as calculated under the Exchange Ratio Formula will not be greater
than $7.20, nor less than approximately $6.25 per share. The Exchange Ratio is
calculated as follows: (1) if the Closing Market Value is greater than or equal
to $65.77 and less than or equal to $75.77, the Exchange Ratio will be .095; (2)
if the Closing Market Value is greater than $75.77, the Exchange Ratio will be
the quotient of (a) $7.20 divided by (b) the Closing Market Value, rounded to
the nearest one-one thousandth of a share; and (3) if the Closing Market Value
is less than $65.77, the Exchange Ratio will be the quotient of (x) $6.25
divided by (y) the Closing Market Value, rounded to the nearest one-one
thousandth of a share. Cash will be delivered in lieu of fractional shares as
described in the Merger Agreement.
Based upon the capitalization of NPB and Infrasonics as of April 29, 1996,
the shareholders of Infrasonics will own approximately 4% of the outstanding NPB
Common Stock following consummation of the Merger assuming no exercise of
outstanding options to acquire NPB Common Stock or Infrasonics Common Stock and
assuming an Exchange Ratio of .112. Such percentage could change depending on
whether and to what extent shares of NPB Common Stock and Infrasonics Common
Stock issuable upon exercise of outstanding NPB or Infrasonics stock options are
issued and whether any Infrasonics 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 with the Secretary of State of the State of
Delaware ("Certificate of Merger") 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 October 5, 1996 and under certain other
conditions. See "The Merger Agreement -- Conditions" and "-- Termination."
CONVERSION OF SHARES; PROCEDURES FOR EXCHANGE OF CERTIFICATES
Except for dissenters' shares, the conversion of Infrasonics 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.
As soon as practicable after the Effective Time, a transmittal letter will
be mailed by the Exchange Agent to each shareholder of Infrasonics informing
such shareholder of the procedures to follow in forwarding Infrasonics stock
certificates to the Exchange Agent. Upon receipt of the Infrasonics stock
certificates, the Exchange Agent will deliver whole shares of NPB Common Stock
to the shareholder and cash in lieu of
20
<PAGE> 35
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
Infrasonics Common Stock is to be made to a person other than the Infrasonics
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
Infrasonics 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 Infrasonic
Common Stock on the stock transfer books of Infrasonics. If a certificate
representing Infrasonics 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 Infrasonics
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 Infrasonics 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 Infrasonics 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.
INFRASONICS SHAREHOLDERS SHOULD NOT FORWARD CERTIFICATES FOR INFRASONICS
COMMON STOCK TO THE EXCHANGE AGENT UNTIL THEY HAVE RECEIVED TRANSMITTAL LETTERS.
INFRASONICS SHAREHOLDERS SHOULD NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED
PROXY.
BACKGROUND OF THE MERGER
Increased competitive pressures in the health care industry and significant
health care reform initiatives have contributed to a trend towards consolidation
in the industry. Partially in response to these trends, Nellcor (the predecessor
of NPB) established a strategic objective to grow through acquisitions and
strategic combinations in order to broaden its product line and enhance its
competitive position. At its meeting on January 11, 1994, the Board of Directors
of Nellcor established a strategic objective to seek acquisitions and merger
candidates. As part of this strategy, Nellcor retained Robertson Stephens in May
1994 to identify possible candidates for acquisition by or strategic combination
with Nellcor. Since the adoption of that strategy, NPB has initiated discussions
with a number of other potential merger and acquisition candidates for a
strategic business combination and in August of 1995 acquired Puritan-Bennett.
NPB regularly identifies and evaluates acquisition opportunities and from time
to time since the acquisition of Puritan-Bennett has engaged in discussions with
a number of potential candidates, including Infrasonics. However, since such
acquisition of Puritan-Bennett none of the discussions with any of the potential
acquisition candidates, except Infrasonics, has gone beyond preliminary stages
and, accordingly, no firm offers were made or received concerning these
acquisition candidates. In addition, as of the date of this Joint Proxy
Statement/Prospectus, there are no agreements or arrangements between NPB and
any other party other than Infrasonics concerning any acquisition.
Over the course of the last few years, Infrasonics had completed the
acquisition of substantially all of the assets of PremiCare Corporation and
Advanced Pulmonary Technologies, Inc. Since last June, Infrasonics has from time
to time had discussions with various participants in the medical devices
industry in an effort to explore the future of the industry and the role of
Infrasonics and its products in the industry in light of the increased
competition, consolidation trends and healthcare reform proposals that were
affecting the industry. Infrasonics considered possible acquisitions of and by
various industry participants and, in June 1995, retained Alex. Brown to render
certain financial advisory and investment banking services to Infrasonics in
connection with business combinations. Since June 1995, Infrasonics had
approximately seven contacts with other parties in connection with potential
acquisitions. During that period, Infrasonics did not receive any firm offers or
21
<PAGE> 36
enter into any arrangements with merger candidates, other than with NPB as
reflected in the Merger Agreement, and Infrasonics did not retain any outside
advisor for those activities other than Alex. Brown.
In July 1995, NPB and Infrasonics executed and delivered a Confidentiality
Agreement, pursuant to which NPB could obtain certain confidential information
relating to Infrasonics; however, at this time Nellcor was in the process of
merging with Puritan-Bennett, and no discussions were pursued.
On December 20, 1995, Mr. Jim Hitchin, the President and Chief Executive
Officer of Infrasonics, met with Mr. C. Raymond Larkin, the Chief Executive
Officer of NPB. In the course of their meeting, Mr. Hitchin and Mr. Larkin
discussed potential benefits that might result from a combination of the two
companies.
During the weeks of January 28, 1996 and February 4, 1996, NPB and
Infrasonics exchanged publicly available information both directly and through
their representatives.
On February 20, 1996, Mr. Hitchin, Mr. Larkin, Mr. Michael Downey, Chief
Financial Officer of NPB, Ms. Laureen DeBuono, General Counsel of NPB, Mr. James
Shapiro and Ms. Kathryn Coffey of Alex. Brown, and Mr. David Hetz and Ms.
Natalie Nordin of Robertson Stephens met to explore a possible combination and
the possible synergies that might result therefrom, and to discuss the potential
structure and general terms of a merger involving NPB and Infrasonics.
On February 21, 1996, the Infrasonics Board of Directors discussed the
possible combination of Infrasonics with NPB. In the course of the meeting, Mr.
Hitchin received the questions, comments and issues of concern of members of the
Infrasonics Board with respect to a possible combination, and obtained the
authorization of the Infrasonics Board to continue to explore the possibility of
a combination with NPB. The issues of concern expressed by members of the
Infrasonics Board of Directors at the February 21 meeting related to protection
of the proprietary and confidential information of Infrasonics and the retention
of its employees and key business relationships through the acquisition process.
Also on February 21, 1996, NPB's counsel circulated a Confidentiality
Agreement, which was executed on February 22, 1996 by the parties. 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
Infrasonics.
On February 22, 1996, NPB provided to Infrasonics a preliminary draft of a
form of merger agreement and discussions ensued between outside counsel to NPB
and outside counsel to Infrasonics regarding the proposed structure and other
principal terms of the proposed merger agreement. Subsequent thereto, a variety
of telephonic meetings took place involving various senior managers of NPB and
Infrasonics, as well as financial and legal advisors of both companies.
Infrasonics's management continued to negotiate with representatives of NPB, and
various representatives of Infrasonics and NPB conducted due diligence
investigations on behalf of Infrasonics and NPB, respectively.
On February 29, 1996, at a telephonic meeting of the Infrasonics Board, Mr.
Hitchin advised the Infrasonics Board of the status of the discussions with NPB,
various proposals that had been suggested by NPB and Infrasonics, and the views
of Alex. Brown regarding both the proposals and the likely direction of future
negotiations. It was the consensus of the Infrasonics Board that management
should actively continue discussions with NPB. These proposals and views related
to the valuations that had been discussed by NPB and Infrasonics and the
possible means of using adjustments in the exchange ratio to address potential
fluctuations in the market price of NPB shares until the closing of the Merger.
On March 1, 1996, NPB received Infrasonics's comments on the draft Merger
Agreement. On March 4, 1996, NPB's counsel circulated a revised Merger
Agreement. Following conversations among NPB, Infrasonics, and their respective
counsel, a revised merger agreement and related documents were circulated on
March 6, 1996.
On March 7, 1996, the Infrasonics Board held a special meeting, at which
representatives from Alex. Brown, outside legal counsel and independent
accountants were present to advise the Board. Infrasonics's management reviewed
the material terms of the proposed merger agreement, which had previously been
circulated to the Board. Infrasonics's management reviewed for the Board the
history of the negotiations and management's recommendations that the Merger be
effected. In this connection, representatives of Infrason-
22
<PAGE> 37
ics's outside financial advisor, Alex. Brown, indicated to the Infrasonics Board
that, provided the exchange ratio formulation did not change in final
negotiations, Alex. Brown would be in a position to render its opinion that the
Exchange Ratio is fair, from a financial point of view, to Infrasonic's
shareholders once the parties completed negotiations of the definitive merger
agreement. In addition to the foregoing and the benefits of the proposed
transaction, the Infrasonics 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 Infrasonics Board discussed the competitive position of
Infrasonics and its business strategy assuming both the continued operation as a
stand-alone company and the completion of the proposed transaction. 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
Infrasonics and NPB, and the lack of availability of other alternatives through
which similar or greater long-term value could be achieved for Infrasonics
shareholders. The Infrasonics Board also reviewed the accounting treatment of
the Merger with Infrasonics's accountants. The Board concluded that, provided
that the exchange ratio formulation did not change in final negotiations, the
Merger was fair to and in the best interests of Infrasonics and its
shareholders. Subject to such proviso, the Board unanimously voted to approve
the Merger, to authorize management to execute, deliver and perform the Merger
Agreement and to recommend to Infrasonics shareholders that they vote in favor
of the Merger Agreement. Except as described below, the exchange ratio
formulation approved by the Infrasonics Board on March 7 was the exchange ratio
finally agreed upon between Infrasonics and NPB on March 8 and was not changed
in further negotiations.
During the meeting of the NPB Board on March 8, 1996, Mr. Larkin, Mr.
Downey and Ms. DeBuono updated the NPB Board regarding the status of the
proposed transaction, and Robertson Stephens presented its analysis of the
financial terms of the Merger and the financial impact to NPB and its
stockholders of the Merger. Robertson Stephens provided its oral opinion, which
was subsequently confirmed in writing, that the Exchange Ratio was fair to NPB
and its stockholders, from a financial point of view. NPB's counsel explained
the terms of the Merger Agreement and NPB's accountants explained the tax and
accounting treatment of the Merger. The NPB Board unanimously approved the final
terms of the Merger Agreement.
On March 8, 1996, the parties agreed upon a pricing structure for the
Merger. After completion of its analysis, Alex. Brown then rendered its opinion
to the Infrasonics Board that, as of the date of such opinion, the Exchange
Ratio was fair from a financial point of view to Infrasonics's shareholders, at
which time NPB and Infrasonics executed and delivered the Agreement and Plan of
Merger. Subsequently, Infrasonics has had no discussions with other potential
acquirors with respect to a possible combination.
Subsequently, Robertson Stephens delivered written confirmation of the oral
opinion presented to the NPB Board on March 8, 1996.
The Merger Agreement originally provided for the right of Infrasonics to
terminate the Merger Agreement if the Closing Market Value of NPB Common Stock
was less than $55.77; provided that NPB could negate such termination by
electing to determine the Exchange Ratio by dividing $6.25 by the Closing Market
Value. Following NPB's announcement of its financial results for the third
quarter ended March 31, 1996, the market value of NPB Common Stock dropped to
below the threshold of $55.77 and stayed below that price over the next four
weeks. Concerned about the uncertainties created by the trading prices of the
NPB Common Stock continuing to trade below the $55.77 threshold and in order to
provide Infrasonics more certainty as to the value of the consideration to be
paid to its shareholders in the Merger, on May 8, 1996, NPB proposed (i)
amending the Exchange Ratio formula to provide for Infrasonics shareholders
receiving under the formula not less than $6.25 in NPB Common Stock for each
share of Infrasonics Common Stock, and (ii) amending the Merger Agreement so
that the Exchange Ratio would be determined on the basis of the average of the
closing prices of NPB Common Stock for the ten trading days ending on the fifth
day prior to the date of the Infrasonics Special Meeting (collectively, the
"Exchange Ratio Amendment"). On May 14, 1996, the respective Boards of Directors
of NPB and Infrasonics held separate meetings at which the Exchange Ratio
Amendment was unanimously approved by each company's directors. At the May 14,
1996 meeting of the NPB Board of Directors, Robertson Stephens presented its
analysis of the financial terms of the
23
<PAGE> 38
Merger Agreement as impacted by the Exchange Ratio Amendment and rendered its
opinion that, subject to certain assumptions, the Exchange Ratio (as so amended)
was fair to NPB and its stockholders from a financial point of view. Similarly,
at the May 14, 1996 meeting of the Infrasonics Board of Directors Alex. Brown
presented its analysis of the financial terms of the Merger Agreement as
impacted by the Exchange Ratio Amendment and reconfirmed its opinion that the
Exchange Ratio (as so amended) was fair, from a financial point of view, to
Infrasonics's shareholders.
RECOMMENDATION OF THE NPB BOARD; REASONS FOR THE MERGER
THE NPB 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, NPB AND ITS STOCKHOLDERS, AND UNANIMOUSLY RECOMMENDS THAT HOLDERS
OF SHARES OF NPB COMMON STOCK VOTE "FOR" APPROVAL OF THE MERGER PROPOSAL.
The NPB Board has concluded that the terms of the proposed Merger are fair
to, and 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 via growth through acquisition,
expanding its existing product line to include complementary new products and,
as described below, potentially obtaining manufacturing and other synergies, and
would enhance NPB's product offerings to respiratory impaired patients
throughout the continuum of care.
The NPB Board concluded that the proposed Merger will further such
strategic objectives because of its belief that:
1. The additional product offerings will enable NPB to respond more
fully to the demands of the rapidly consolidating health care industry, the
current economic and market conditions in the health care industry,
including competitive pricing and governmental regulation pressures, which
are driving a trend toward consolidation of health care companies. Due to
these pressures, the Board is of the view that it is necessary to address
the full continuum of respiratory care in various health care settings. The
Board is also of the view that the Merger will increase NPB's ability to
address wider market segments efficiently.
2. Infrasonics's product line complements that of NPB and enhances the
market presence of NPB in the respiratory products industry.
3. NPB may be able to realize manufacturing, marketing, research and
development and distribution efficiencies through greater economies of
scale and the elimination of redundancies. The Board is of the view that,
with both competition increasing and pricing pressures becoming more acute,
the most effective way to achieve profitability and more favorable
operating margins is through reduction of operating expenses. Based upon
the expected consolidation of manufacturing and corporate offices, and the
potential realization of savings in cost of services, sales, management and
administrative expenses, the Board determined that after the Merger NPB is
more likely to achieve more favorable operating margins than NPB and
Infrasonics could on a stand-alone basis. The Board also recognized that
any initial cost savings from operating synergies could be offset, in whole
or in part, by the costs associated with the negotiation and consummation
of the Merger, as well as the amounts to be paid to certain individuals in
connection with the Merger or upon the subsequent termination of their
employment. Although the NPB Board believed there were opportunities for
operating synergies and cost savings resulting from the Merger, the NPB
Board did not attempt to quantify such synergies or cost savings, and the
presence or absence of such synergies or cost savings was not a material
factor in the NPB Board's decision to approve the Merger. The Board
considered that the larger presence of NPB in common markets may provide a
broader base of referrals and bring greater resources to existing markets,
allowing NPB to enhance operating margins through increased volume and
reduced expenses as a percentage of revenue. In addition, the Board
determined that the increased breadth of its products after the Merger
could improve NPB's ability to enter new markets on a more cost-effective
basis and to realize the growth and critical mass that is necessary to
compete effectively and profitability in the current climate of the
industry.
24
<PAGE> 39
4. NPB may be able to realize increased product innovation from the
combination of the companies' research and development activities.
In reaching its conclusion that the proposed Merger is fair to, and in the
best interests of, NPB and its stockholders, the NPB Board also considered,
among other factors:
1. its knowledge of the business, operations, properties, assets,
financial condition, operating results and prospects of NPB and
Infrasonics;
2. current industry, economic and market conditions;
3. presentations by NPB's management with respect to, and the analysis
of Robertson Stephens of, NPB, Infrasonics and the Merger;
4. the opinion of Robertson Stephens that, subject to certain
assumptions, as of May 14, 1996, the Exchange Ratio was fair to NPB and its
stockholders, from a financial point of view (see "The Merger -- Opinions
of Robertson Stephens and Alex. Brown"). Although the NPB Board of
Directors did not specifically adopt the opinion, it relied upon that
opinion and such opinion was of primary importance to the Board of
Directors in reaching its conclusion to approve the Merger Agreement and
the transactions contemplated thereby;
5. the terms of the Merger Agreement and the nature and amount of the
termination fees that may be payable under certain circumstances. The Board
believed that the termination fees payable by Infrasonics under certain
circumstances provided an adequate level of assurance that Infrasonics was
sufficiently committed to the consummation of the Merger (see "The Merger
Agreement");
6. the accounting and tax treatment of the Merger; and
7. the opportunity for NPB stockholders to participate in a more
diversified company.
In view of the variety of factors considered in connection with its
evaluation of the Merger, the NPB Board did not find it practicable to and did
not quantify or otherwise assign relative weights to the specific factors
considered in reaching its determination. In addition, individual members of the
NPB Board may have given different weights to different factors.
RECOMMENDATION OF THE INFRASONICS BOARD; REASONS FOR THE MERGER
THE INFRASONICS 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, INFRASONICS AND ITS SHAREHOLDERS, AND UNANIMOUSLY
RECOMMENDS THAT HOLDERS OF SHARES OF INFRASONICS COMMON STOCK VOTE "FOR"
APPROVAL OF THE MERGER AGREEMENT.
The Infrasonics Board concluded that the terms of the proposed Merger are
fair to, and in the best interests of, Infrasonics and its shareholders. The
Board reviewed the prospects of Infrasonics 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 their consideration of the Merger alternative, the Board
discussed the material terms of the proposed merger agreement, which had
previously been circulated to the Board, and the range of valuation issues that
were still being addressed. Infrasonics's management reviewed for the Board the
history of the negotiations and presented management's recommendations that the
Merger be effected. In this connection, the Infrasonics Board also considered
the fact that representatives of Alex. Brown indicated to the Infrasonics 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, Alex. Brown 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 Infrasonics
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 Infrasonics
Board discussed the competitive position of Infrasonics and its development
strategy, potential synergies and cost savings resulting from long-term
reductions in facilities and personnel that could be achieved through a possible
combination, changes in
25
<PAGE> 40
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 Infrasonics and NPB,
and the apparent lack of availability of other alternatives through which
similar or greater long-term value could be achieved for Infrasonics
shareholders. The Infrasonics Board did not attempt to quantify the synergies on
lost 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 Infrasonics
Board's decision to approve the Merger. On the basis of all these factors, the
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
Infrasonics and its shareholders. The Board unanimously voted to approve the
Merger, to authorize management to execute, deliver and perform the Merger
Agreement and to recommend to Infrasonics 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 Infrasonics 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 Infrasonics Board may have given different weights to different
factors.
OPINIONS OF ROBERTSON STEPHENS AND ALEX. BROWN
Opinion of Robertson Stephens. NPB retained Robertson Stephens to act as
its financial advisor in connection with the Merger. Robertson Stephens was
retained based on Robertson Stephens' experience as a financial advisor in
connection with mergers and acquisitions as well as Robertson Stephens's
industry knowledge and familiarity with NPB.
At the May 14, 1996 special meeting of NPB's Board of Directors, Robertson
Stephens 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, the Exchange Ratio was fair to stockholders of
NPB from a financial point of view. Robertson Stephens did not recommend to NPB
that any specific ratio constituted the appropriate Exchange Ratio for the
Merger. In rendering its opinion, Robertson Stephens assumed that the Exchange
Ratio will not be adjusted under the terms of the Merger Agreement so that it
would exceed 0.157. The NPB Board of Directors has agreed that if the Closing
Market Value, as defined in the Merger Agreement, is materially below $39.77
(which equates to an exchange ratio of 0.157) then NPB will resolicit proxies in
connection with the Merger. Robertson Stephens also assumed, among other things,
that the Merger will be treated as a tax free reorganization and as a pooling of
interests in accordance with generally accepted accounting principles. Robertson
Stephens's opinion to the NPB Board addresses only the fairness of the Exchange
Ratio to the stockholders of NPB from a financial point of view, and does not
constitute a recommendation to any stockholder as to how such stockholder should
vote at the NPB Special Meeting. Robertson Stephens expresses no opinion as to
the tax consequences of the Merger, and Robertson Stephens's opinion as to the
fairness of the Exchange Ratio does not take into account the particular tax
status or position of any holder of NPB Common Stock. In rendering its opinion,
Robertson Stephens was not engaged as an agent or fiduciary of NPB stockholders
or any other third party.
WHILE THE FOLLOWING DESCRIPTION REVIEWS ALL OF THE MATERIAL ANALYSES
PERFORMED BY ROBERTSON STEPHENS, THE COMPLETE TEXT OF THE OPINION DATED MAY 14,
1996 IS ATTACHED HERETO AS APPENDIX B AND THE SUMMARY OF THE OPINION SET FORTH
BELOW IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH
OPINION. STOCKHOLDERS OF NPB ARE URGED TO READ SUCH OPINION CAREFULLY AND IN ITS
ENTIRETY FOR A DESCRIPTION OF THE PROCEDURES FOLLOWED, THE FACTORS CONSIDERED,
THE ASSUMPTIONS MADE AND SCOPE OF THE REVIEW UNDERTAKEN BY, AS WELL AS
LIMITATIONS ON THE REVIEW UNDERTAKEN BY, ROBERTSON STEPHENS IN RENDERING ITS
OPINION.
In connection with the preparation of its opinion dated May 14, 1996,
Robertson Stephens, among other things: (i) reviewed financial information on
NPB and Infrasonics furnished to it by each respective company, including
certain internal financial analyses and forecasts prepared by the respective
managements of NPB and Infrasonics; (ii) reviewed publicly available
information; (iii) held discussions with the management of NPB and Infrasonics
concerning the businesses, past and current business operations, financial
condition and future prospects of both companies, independently and combined,
(iv) reviewed the Merger Agreement; (v) reviewed the stock price and trading
histories of both companies; (vi) reviewed the exchange ratio implied by
historical stock prices of the two companies; (vii) reviewed the contribution by
each company to pro forma
26
<PAGE> 41
combined revenue, gross income, operating income, pretax income and net income;
(viii) reviewed the valuations of publicly traded companies which Robertson
Stephens deemed comparable to Infrasonics; (ix) compared the financial terms of
the Merger with other transactions which Robertson Stephens deemed relevant; (x)
prepared discounted cash flow analyses of Infrasonics; and (xi) analyzed the pro
forma earnings per share of the combined company.
Based on past activities, Robertson Stephens has a certain degree of
familiarity with NPB and the industry in which it operates. In addition, in the
course of its engagement, Robertson Stephens made further investigations of both
NPB and Infrasonics. In arriving at its opinion, however, Robertson Stephens did
not independently verify any of the foregoing information and relied on all such
information being complete and accurate in all material respects. Furthermore,
Robertson Stephens did not obtain any independent evaluation or appraisal of the
properties or assets and liabilities of NPB or Infrasonics or of any of their
subsidiaries, nor was Robertson Stephens furnished with any such evaluations or
appraisals. The opinion is necessarily based upon market, economic and other
conditions that existed and could be evaluated as of the date of the opinion,
and on information available to Robertson Stephens as of such date. It should be
understood that, although subsequent developments may affect its opinion,
Robertson Stephens does not have any obligation to update, revise or reaffirm
its opinion.
In performing its analyses as described below, Robertson Stephens used and
relied upon projections from NPB that were provided by NPB's management, and
projections from Infrasonics that were provided by Infrasonics's management (the
"Infrasonics Management Case"). In view of the variability of Infrasonics's
historical operating results, Robertson Stephens also reviewed an alternative
set of projections for Infrasonics (the "Adjusted Infrasonics Management Case")
which generally incorporated the same assumptions and estimates as the
Infrasonics Management Case, except that they were adjusted to reduce the
assumed levels of revenue growth and gross margins and to increase the assumed
level of selling, general and administrative expense. With respect to the
financial and operating forecasts and estimated potential cost savings and
synergies (and the assumptions and bases therefor) of NPB and Infrasonics which
Robertson Stephens reviewed, Robertson Stephens assumed that such forecasts and
estimates had been reasonably prepared in good faith on the basis of reasonable
assumptions and reflected the best available estimates and judgments of the
respective managements of NPB and Infrasonics, and assumed that such forecasts
will be realized in the amounts and in the time periods currently estimated by
such managements of NPB and Infrasonics. In addition, Robertson Stephens relied
upon estimates and judgments of NPB and Infrasonics managements as to the future
financial performance of both companies and as to such potential cost savings
and synergies that could result from the Merger. The forecasts, estimates and
judgments of NPB and Infrasonics on which Robertson Stephens relied constitute
forward-looking information, are based on numerous factors and events beyond the
control of the parties, and are inherently subject to significant uncertainty.
See "Investment Considerations." Accordingly, actual future results may vary
materially from those projected.
The following paragraphs summarize the most significant quantitative and
qualitative analyses performed by Robertson Stephens in arriving at its opinion
and reviewed with the NPB Board of Directors and do not purport to be a complete
description of the analyses performed by Robertson Stephens. The information
presented below is based on the financial condition of NPB and Infrasonics as of
a date or dates shortly before the Merger Agreement was executed on May 14, 1996
and stock price information through the close of the market on May 8, 1996.
Stock Price and Trading History. Robertson Stephens reviewed the trading
activity including share price and trading volume of Infrasonics Common Stock
since December 30, 1994 and NPB Common Stock since May 8, 1995. In addition,
Robertson Stephens compared the indexed performance of NPB Common Stock,
Infrasonics Common Stock, the Standard & Poor's 400 Index, a composite index
based upon closing market prices of certain publicly traded companies considered
by Robertson Stephens to be comparable in certain respects to Infrasonics (the
"Comparable Companies Index"), and the Robertson Stephens Medical
Products/Supplies Index since November 9, 1995. The Comparable Companies Index
consisted of the closing market prices of the following companies: Aequitron
Medical, Inc., Healthdyne Technologies, Inc., NPB, Protocol Systems, Inc., and
Respironics, Inc. In addition, Robertson Stephens reviewed selected commentary
of research analysts at different points in the trading history of NPB Common
Stock. This information was
27
<PAGE> 42
presented to provide the NPB Board of Directors with background information
regarding the respective stock prices of NPB and Infrasonics over the periods
indicated.
Exchange Ratio Analysis. Robertson Stephens reviewed the exchange ratio of
shares of NPB Common Stock per share of Infrasonics Common Stock implied by the
daily closing prices of Infrasonics Common Stock and NPB Common Stock since May
9, 1995. Robertson Stephens noted that the implied exchange ratio on May 8, 1996
was 0.119, and that the average implied exchange ratios for the latest 30, 60,
90 trading days and the last twelve months ending May 8, 1996 were 0.106, 0.099,
0.098, and 0.100 respectively. Robertson Stephens noted that the implied
exchange ratio ranged from a high of 0.148 on September 25, 1995 to a low of
0.057 on June 3, 1995.
Contribution Analysis. Robertson Stephens compared the contribution of NPB
and Infrasonics to pro forma combined revenue, gross profit, operating income,
pretax income, and net income for calendar years 1996 and 1997 and fiscal years
1996, 1997 and 1998. Based on the Adjusted Infrasonics Management Case for such
periods, Robertson Stephens noted that Infrasonics contributed approximately
3.9% to 4.4% of revenue, approximately 4.0% to 4.5% of gross profit,
approximately 2.0% to 2.9% of operating income, approximately 2.2% to 2.9% of
pretax income, approximately 2.2% to 2.6% of net income. Based on the
Infrasonics Management Case for such periods, Robertson Stephens noted that
Infrasonics contributes approximately 4.1% to 7.7% of revenue, approximately
4.2% to 8.1% of gross profit, approximately 2.6% to 7.1% of operating income,
approximately 2.8% to 6.9% of pretax income, approximately 2.7% to 6.2% of net
income. These ranges do not give effect to potential cost savings and synergies
that could be achieved in the Merger.
Robertson Stephens compared these historical and projected contribution
figures with the approximate 3.5% to 5.6% ownership position Infrasonics
shareholders would have in the pro forma company based on exchange ratios of
0.095 to 0.157.
Comparable Company Analysis. Robertson Stephens compared certain financial
data and multiples of income parameters accorded to other publicly traded
companies deemed by Robertson Stephens to be comparable to Infrasonics.
Financial data compared included market capitalization, historical and projected
revenues, EBIT, net income and earnings per share, gross margin, operating
margin, net margin, historical and projected revenue growth rates, historical
earnings per share growth rates, and projected earnings per share growth rates
as reported by ZACKS Investment Research. Multiples compared included total
capitalization to revenue, total capitalization to EBIT, price per share to
earnings per share and price per share to earnings per share divided by
projected growth rate. Companies deemed by Robertson Stephens to be comparable
to Infrasonics included Aequitron Medical, Inc., Healthdyne Technologies, Inc.,
NPB, Protocol Systems, Inc., and Respironics, Inc. (the "Comparable Companies").
Robertson Stephens compared the Comparable Companies' financial data to
both the Adjusted Infrasonics Management Case and the Infrasonics Management
Case. For the Adjusted Infrasonics Management Case, based on total
capitalization to revenue multiples for the Comparable Companies of 1.1 to 2.9
for the last twelve months, 0.9 to 2.4 for projected calendar 1996, and 1.2 to
2.0 for projected calendar 1997, Infrasonics's implied equity value per share
ranged from $3.06 to $8.32. Based on total capitalization to EBIT multiples of
11.9 to 23.6 for the annualized 1996 third quarter, 8.9 to 19.5 for projected
calendar 1996, and 9.1 to 16.0 for projected calendar 1997, Infrasonics's
implied equity value per share ranged from $2.81 to $6.57. Based on price per
share to earnings per share multiples for the Comparable Companies of 16.6 to
29.4 for the annualized 1996 third quarter, 14.0 to 29.8 for projected calendar
1996, and 11.6 to 24.9 for projected calendar 1997, Infrasonics's implied equity
value per share ranged from $2.40 to $6.55. For the Infrasonics Management Case,
based on the same total capitalization to revenue multiples, Infrasonics's
implied equity value per share ranged from $3.50 to $10.51. Based on the same
total capitalization to EBIT multiples, Infrasonics's implied equity value per
share ranged from $3.64 to $13.22. Based on the same price per share to earnings
per share multiples, Infrasonics's implied equity value per share ranged from
$3.69 to $12.17. These ranges do not give effect to potential cost savings and
synergies that could be achieved in the Merger.
Robertson Stephens then reviewed the ratios of these implied equity values
per share to the NPB closing price of NPB Common Stock on May 8, 1996 of $49.00.
Under the Adjusted Infrasonics Management Case analysis, the implied exchange
ratios ranged from 0.049 to 0.170. Under the Infrasonics Management Case
28
<PAGE> 43
analysis, the implied exchange ratios ranged from 0.071 to 0.270. Robertson
Stephens also noted that the implied exchange ratio of 0.128, based on the
closing NPB price per share of $49.00 on March 8, 1996, was within these ranges,
but also noted that the implied exchange ratios would vary with changes in the
closing prices of the NPB Common Stock.
Selected Precedent Acquisitions. Robertson Stephens reviewed six recent
acquisitions or mergers in the respiratory equipment industry. In examining
these transactions, Robertson Stephens analyzed certain financial parameters of
the acquired company relative to the consideration offered, based on certain
publicly available information. Multiples analyzed included consideration
offered plus net debt assumed to latest twelve months revenue, consideration
offered plus net debt assumed to latest twelve months EBIT and consideration
offered to latest twelve months net income. Based on the consideration offered
plus net debt to latest twelve months revenue multiples of 0.5 to 2.7 in these
transactions, Infrasonics's implied equity value per share ranged from $2.06 to
$7.76. Based on consideration offered plus net debt to latest twelve months EBIT
multiples (applied to Infrasonics's annualized fiscal 1996 third quarter EBIT)
of 13.8 to 24.3 for these transactions, Infrasonics's implied equity value per
share ranged from $4.12 to $6.75. Based on consideration offered to latest
twelve months net income multiples (applied to Infrasonics's annualized fiscal
1996 third quarter net income) of 17.8 to 28.2 for these transactions,
Infrasonics's implied equity value per share ranged from $4.61 to $6.93.
Robertson Stephens also analyzed the premium paid over market price one day and
four weeks prior to the announcement. Based on premiums to the price of one day
prior to announcement of 38.9% to 39.6%, Infrasonic's implied equity value per
share ranged from $8.07 to $8.11. Based on premiums to the price four weeks
prior to announcement of 65.0% to 72.1%, Infrasonics's implied equity value per
share ranged from $10.21 to $10.65. Based on such premiums paid over market
price and the closing price of Infrasonics stock one day prior to announcement
of $5.50, the implied equity values per share ranged from $7.64 to $9.47.
The implied exchange ratios at the closing NPB price per share of $49.00 on
May 8, 1996 ranged from 0.042 to 0.217. Robertson Stephens also noted that the
implied exchange ratio of 0.128, based on the closing NPB price per share of
$49.00 on March 8, 1996, was within these ranges, but also noted that the
implied exchange ratios would vary with changes in the closing prices of the NPB
Common Stock.
Discounted Cash Flow Analysis. Robertson Stephens also performed
discounted cash flow analyses of Infrasonics. Based on the Adjusted Infrasonics
Management Case, Infrasonics's implied equity values per share ranged from $4.96
to $6.51. Based on the Infrasonics Management Case, Infrasonics's implied equity
values per share ranged from $12.37 to $16.68. In performing these analyses,
Robertson Stephens selected the following parameters: terminal valuations
between 14 times and 16 times latest twelve month EBIT at the end of fiscal year
ending June 2001 and discount rates of between 12% and 16%. These ranges do not
give effect to potential cost savings and synergies that could be achieved in
the Merger.
For the Adjusted Infrasonics Management Case, the implied exchange ratios
at the closing NPB price per share of $49.00 on May 8, 1996 ranged from 0.101 to
0.133. For the Infrasonics Management Case, the implied exchange ratios ranged
from 0.253 to 0.340. Robertson Stephens also noted that the implied exchange
ratio of 0.128, based on the closing NPB price per share of $49.00 on March 8,
1996, was within these ranges, but also noted that the implied exchange ratios
would vary with changes in the closing prices of the NPB Common Stock.
Pro Forma Merger Analysis. Robertson Stephens also analyzed the pro forma
earnings per share of the combined company based on a range of Closing Market
Values of NPB Common Stock of $40.00 to $64.00. For the Adjusted Infrasonics
Management Case, such analysis indicated that, in the absence of cost savings
and synergies and excluding merger related expenses, the effect on pro forma
earnings per share of the combined companies, compared to NPB as a standalone
entity, would range from reductions of 3.4% to 1.4% and reductions of 2.9% to
0.9% for the fiscal years ending June 1997 and 1998, respectively.
For the Infrasonics Management Case, such analysis indicated that, in the
absence of cost savings and synergies and excluding merger related expenses, the
effect on pro forma earnings per share of the combined companies, compared to
NPB as a standalone entity, would range from a reduction of 1.5% to an increase
of 0.5% and increases of 0.8% to 2.9% for the fiscal years ending June 1997 and
1998, respectively.
29
<PAGE> 44
The preparation of fairness opinions involves various determinations as to
the most appropriate and relevant quantitative and qualitative methods of
financial analyses and the application of those methods to the particular
circumstances and, therefore, such opinions are not readily susceptible to
summary description. Robertson Stephens did not form a conclusion as to whether
any individual analysis, considered in isolation, supported or failed to support
an opinion as to fairness. Rather, in reaching its conclusion, Robertson
Stephens considered the results of the analyses in light of each other and
ultimately reached its opinion based on the results of all analyses taken as a
whole. In arriving at its opinion, Robertson Stephens did not attribute any
particular weight to any analysis or factor considered by it, but rather made
qualitative judgments as to the significance and relevance of each analysis and
factor. Accordingly, Robertson Stephens believes its analyses must be considered
as a whole and that considering any portion of such analyses and the factors
considered, without considering all analyses and current factors, could create a
misleading or incomplete view of the process underlying opinions. In its
analyses, Robertson Stephens made numerous assumptions with respect to industry
performance, general business and other conditions and matters, many of which
are beyond the control of NPB and Infrasonics. Any estimates contained in these
analyses are not necessarily indicative of actual values or predictive of future
results or values, which may be significantly more or less favorable than as set
forth therein. In addition, analyses relating to the value of business do not
purport to be appraisals or to reflect the prices at which businesses may
actually be sold.
Robertson Stephens was retained based on Robertson Stephens's experience as
financial advisor in connection with mergers and acquisitions as well as
Robertson Stephens's investment banking relationship and familiarity with NPB.
Robertson Stephens has provided financial advisory and investment banking
services to NPB since 1987. Robertson Stephens acted as underwriter for the
initial public offering of Nellcor (NPB's predecessor before the merger with
Puritan-Bennett Corporation) in May 1987 and with respect to that transaction,
Robertson Stephens has been compensated for such services in the form of
customary underwriting discounts. Robertson Stephens acted as financial advisor
to Nellcor in its merger with Puritan-Bennett Corporation in August 1995, and
with respect to that transaction, Robertson Stephens has been compensated for
such services in the form of customary advisory fees. Robertson Stephens also
makes a market in NPB Common Stock. In the course of its market making and other
activities, Robertson Stephens may, from time to time, have a long or short
position in, and buy and sell securities of, NPB.
NPB formally engaged Robertson Stephens on May 24, 1994 by means of an
engagement letter to provide financial advisory service in connection with
potential merger or acquisition transactions. Such engagement letter was jointly
amended by NPB and Robertson Stephens by means of an amendment letter dated
March 8, 1996. The engagement letter as amended provides that, for its services,
Robertson Stephens is to be paid, contingent upon the closing of the Merger, a
fee of $700,000. NPB has also agreed to indemnify Robertson Stephens for certain
liabilities, including liabilities under the federal securities laws or relating
to or arising out of Robertson Stephens's engagement as financial advisor to
NPB.
Robertson Stephens is a nationally recognized investment banking firm. As
part of its investment banking business, Robertson Stephens is frequently
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, secondary distributions of
securities, private placements and other purposes.
Opinion of Alex. Brown.
Infrasonics retained Alex. Brown on June 12, 1995 to act as Infrasonics's
financial advisor in connection with merger and acquisition transactions such as
the Merger, including rendering its opinion to the Board of Directors of
Infrasonics as to the fairness, from a financial point of view, of the Exchange
Ratio to Infrasonics's shareholders.
At the March 7, 1996 meeting of the Infrasonics Board of Directors,
representatives of Alex. Brown made a presentation with respect to the original
Merger Agreement and indicated to the Board that it would be in a position to
deliver its opinion, delivered in writing as of March 8, 1996, that, as of the
date of such opinion, and subject to the assumptions made, matters considered
and limitations set forth in such opinion, the Exchange Ratio, as determined by
the companies' negotiations, was fair, from a financial point of view, to
Infrasonics's
30
<PAGE> 45
shareholders. At the May 14, 1996 meeting of the Infrasonics Board of Directors
held in connection with the amendment of the Merger Agreement, representatives
of Alex. Brown updated certain of its analyses from the March 7, 1996
presentation and delivered its opinion that as of May 14, 1996, and subject to
the assumptions made, matters considered and limitations set forth in such
opinion and summarized below, the Exchange Ratio, as determined by the
companies' negotiations, was fair, from a financial point of view, to
Infrasonics shareholders. No limitations were imposed by the Board upon Alex.
Brown with respect to the investigations made or procedures followed by it in
rendering its opinion.
THE FULL TEXT OF ALEX. BROWN'S WRITTEN OPINION DATED MAY 14, 1996 (THE
"ALEX. BROWN OPINION"), WHICH SETS FORTH, AMONG OTHER THINGS, ASSUMPTIONS MADE,
MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED HERETO
AS APPENDIX C AND IS INCORPORATED HEREIN BY REFERENCE. INFRASONICS SHAREHOLDERS
ARE URGED TO READ THE ALEX. BROWN OPINION IN ITS ENTIRETY. THE SUMMARY OF THE
ALEX. BROWN OPINION SET FORTH IN THIS JOINT PROXY STATEMENT/PROSPECTUS SETS
FORTH THE MATERIAL ANALYSES AND MATTERS PRESENTED BY ALEX. BROWN TO THE
INFRASONICS BOARD AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF SUCH OPINION. THE ALEX. BROWN OPINION IS DIRECTED TO THE BOARD, ADDRESSES
ONLY THE FAIRNESS OF THE EXCHANGE RATIO TO INFRASONICS'S SHAREHOLDERS FROM A
FINANCIAL POINT OF VIEW AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
INFRASONICS SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE
INFRASONICS SPECIAL MEETING. THE ALEX. BROWN OPINION WAS RENDERED TO THE
INFRASONICS BOARD FOR ITS CONSIDERATION IN DETERMINING WHETHER TO APPROVE THE
MERGER AGREEMENT.
In connection with the Alex. Brown Opinion, Alex. Brown reviewed certain
publicly available financial information concerning Infrasonics and NPB and
certain internal analyses and other information regarding Infrasonics furnished
to it by Infrasonics. Alex. Brown also held discussions with the members of the
senior managements of Infrasonics and NPB regarding the businesses and
properties of Infrasonics and the joint prospects of a combined company. In
addition, Alex. Brown: (i) reviewed the reported prices and trading activity for
the common stock of both Infrasonics and NPB; (ii) compared certain financial
and stock market information for Infrasonics and NPB with similar information
for certain comparable companies whose securities are publicly traded; (iii)
reviewed the financial terms of certain recent business combinations which it
deemed comparable in whole or in part; (iv) reviewed and analyzed the historical
and current financial condition of Infrasonics, which included a review of
Infrasonics's recent financial statements and an analysis of revenue growth,
operating margins and operating margin trends; and (v) reviewed the terms of the
Merger Agreement.
In conducting its review and arriving at its opinion that the Exchange
Ratio, negotiated by management of NPB and Infrasonics, was fair, Alex. Brown
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 Infrasonics and other information relating to the
prospects of Infrasonics provided to Alex. Brown by Infrasonics, Alex. Brown
assumed that such projections and other information were reasonably prepared and
reflected the best currently available judgments and estimates of the management
of Infrasonics as to the likely future financial performances of Infrasonics and
of the combined entity. The financial projections of Infrasonics that were
provided to Alex. Brown were utilized and relied upon by Alex. Brown in the
Contribution Analysis, the Discounted Cash Flow Analysis and the Pro Forma
Earnings Analysis summarized below. Alex. Brown assumed, with the consent of
Infrasonics, that the Merger will qualify for pooling of interests accounting
treatment and as a tax-free transaction for the shareholders of Infrasonics.
Alex. Brown did not make and it was not provided with an independent evaluation
or appraisal of the assets of Infrasonics and NPB, nor has Alex. Brown been
furnished with any such evaluations or appraisals. The Alex. Brown Opinion is
based on market, economic and other conditions as they existed and could be
evaluated as of the date of the opinion letter.
31
<PAGE> 46
The following is a summary of the analyses performed and factors considered
by Alex. Brown in connection with rendering the Alex. Brown Opinion.
Historical Stock Price Performance. Alex. Brown reviewed and analyzed the
daily closing per share market prices and trading volume for Infrasonics Common
Stock over the period from March 6, 1995 to May 10, 1996 and for NPB Common
Stock from March 6, 1995 to May 10, 1996. In addition, Alex. Brown reviewed the
daily closing per share market prices and trading volume for Infrasonics and NPB
over the period from March 5, 1993 to May 10, 1995. Although Alex. Brown
reviewed the trading volume of Infrasonics Common Stock and NPB Common Stock, it
primarily focused on the relative stock price movements of the two companies.
Alex. Brown also reviewed the trading volumes for Infrasonics Common Stock at
various prices for the period beginning March 6, 1994 and ending May 10, 1996.
This information was presented to provide the Board with background information
regarding the respective stock prices of Infrasonics and NPB over the periods
indicated. No conclusions were drawn from this analysis.
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. Alex. Brown
compared certain financial information (based on the commonly used valuation
measurements described below) related to Infrasonics and NPB to certain
corresponding information from comparable, publicly traded companies. Such
financial information included, among other things: (i) common equity market
valuation; (ii) projected five year growth rates; (iii) operating performance;
(iv) ratios of common equity market value as adjusted for debt and cash
("Adjusted Value") to revenue, earnings before interest expense and income taxes
("EBIT"), and earnings before interest expense, income taxes, depreciation and
amortization ("EBITDA"), each for the latest reported twelve month period as
derived from publicly available information; and (v) ratios of common equity
market prices per share ("Equity Value") to earnings per share ("EPS"). The
financial information used in connection with the multiples provided below with
respect to Infrasonics, NPB and their respective comparable companies was based
on the latest reported twelve month period as derived from publicly available
information. EPS for NPB for calendar years 1996 and 1997 was as reported by the
Institutional Brokers Estimating System ("IBES"). EPS for Infrasonics for
calendar year 1996 and 1997 was provided by Infrasonics.
Alex. Brown compared financial information relating to Infrasonics to
certain corresponding information from a group of four comparable, publicly
traded companies consisting of Allied Healthcare Products, Inc., Healthdyne
Technologies, Inc., ResMed, Inc., and Respironics, Inc. (collectively, the
"Selected Infrasonics Companies"). Alex. Brown noted that, on a trailing twelve
month basis, the multiple of Adjusted Value to revenues was 2.3x for
Infrasonics, compared to a range of 1.2x to 2.1x, with a mean of 1.6x, for the
Selected Infrasonics Companies; the multiple of Equity Value to calendar year
1996 EPS was 22.6x for Infrasonics, compared to a range of 9.4x to 24.9x, with a
mean of 16.7x for the Selected Infrasonics Companies; and the multiple of Equity
Value to calendar year 1997 EPS was 12.8x. for Infrasonics, compared to a range
of 7.2x to 20.0x, with a mean of 13.1x, for the Selected Infrasonics Companies.
As a result of the foregoing procedures, Alex. Brown noted that the multiples
for Infrasonics were generally within the range of multiples for the Selected
Infrasonics Companies.
Alex. Brown compared financial information relating to NPB to certain
corresponding information from a group of eleven comparable, publicly traded
companies consisting of Acuson Corporation, Advanced Technology Laboratories,
Inc., Allied Healthcare Products, Inc., Healthdyne Technologies, Inc., Invacare
Corporation, Marquette Electronics, Inc., Protocol Systems, Inc., ResMed, Inc.,
Respironics, Inc., Spacelabs Medical Inc. and Sunrise Medical, Inc.
(collectively, the "Selected NPB Companies"), Alex. Brown noted that, on a
trailing twelve month basis, the multiple of Adjusted Value to revenues was 2.1x
for NPB compared to a range of 0.8x to 2.9x, with a mean of 1.6x, for the
Selected NPB Companies; and the multiple of Adjusted Value to EBIT was 14.3x for
NPB, compared to a range of 7.3x to 29.8x, with a mean of 16.3x, for the
Selected NPB Companies. Alex. Brown further noted that the multiple of Equity
Value to trailing twelve month EPS was 20.8x for NPB, compared to a range of
8.5x to 44.2x, with a mean of 23.6x, for the Selected NPB Companies; the
multiple of Equity Value to calendar year 1996 EPS was 17.3x for NPB, compared
to a range of 9.9x to 27.0x, with a mean of 19.4x for the Selected NPB
Companies; and the multiple of Equity Value to calendar year 1997 EPS was 14.3x
for NPB, compared to a range of 7.8x to 21.8x, with a mean of
32
<PAGE> 47
15.2x, for the Selected NPB Companies. As a result of the foregoing procedures,
Alex. Brown noted that the multiples for NPB were generally within the range of
multiples for the Selected NPB Companies.
Analysis of Selected Mergers and Acquisitions. Alex. Brown reviewed the
financial terms, to the extent publicly available, of 13 completed mergers and
acquisitions since September 1992 in the respiratory care and monitoring
industry (the "Selected Transactions"). Alex. Brown calculated various financial
multiples and the premiums over market value based on certain publicly available
information for each of the Selected Transactions and compared them to
corresponding financial multiples and the premiums over market for the Merger,
based on the minimum and maximum per share values contemplated by the Merger
Agreement of $6.25 and $7.20, respectively. The 13 transactions reviewed, in
reverse chronological order of public announcement, were: Thermo Electron
Corp./Bird Medical Technologies, Inc. (June 9, 1993); Nellcor,
Inc./Puritan-Bennett Corp. (May 21, 1995); Allied Healthcare Products/Bear
Medical Technologies, (February 10, 1995); Johnson & Johnson/Kodak Clinical
Diagnostics Division (September 15, 1994); Allied Healthcare Products/B&F
Medical Products (September 2, 1994); Marquette Electronics/Corometrics Medical
Systems, Inc. (April 8, 1994); Advanced Technology Labs/Interspec, Inc.
(February 15, 1994); Medtronic Inc./Electromedics, Inc, (November 19, 1993);
Mallinckrodt Medical/DAR SpA (September 21, 1993); Sunrise Medical Inc./Homecare
Holdings, Inc. (June 15, 1993); CONMED Corporation/Andover Medical (Medtronic)
(June 15, 1993); Smiths Industries/Intertech Resources (September 21, 1992); and
Thermotrex/LORAD Corp, (September 15, 1992). These transactions involved the
acquisitions of respiratory care and monitoring companies that primarily sold
their products into the hospital market. Alex. Brown noted that the multiple of
adjusted purchase price (value of consideration paid for common equity adjusted
for debt, preferred stock and cash) to trailing twelve month revenue ranged from
2.4x to 2.8x for the Merger versus a range of 0.8x to 2.4x, with a mean of 1.4x,
for the Selected Transactions, and the multiple of adjusted purchase price to
trailing twelve month operating income ranged from 31.7x to 37.4x for the Merger
versus a range of 5.4x to 19.2x, with a mean of 11.5x, for the Selected
Transactions. Alex. Brown further noted that the multiple of aggregate purchase
price to trailing twelve month net income ranged from 161.7x to 186.3x for the
Merger verses a range of 12.1x to 42.3x, with a mean of 26.4x, for the Selected
Transactions, and the multiple of aggregate purchase price to fiscal year 1996
net income ranged from 34.3x to 39.5x for the Merger versus a range of 14.9x to
27.2x, with a mean of 20.3x, for the Selected Transactions. All multiples for
the Selected Transactions were based on public information available at the time
of announcement of such transaction, without taking into account differing
market and other conditions during the three-year period during which the
Selected Transactions occurred.
Alex. Brown also reviewed the premium to Infrasonics's per share market
price paid in 65 proposed, pending and completed pooling transactions in the
health care industry ("Selected Pooling Transactions"). Alex. Brown noted that
the Selected Pooling Transactions were effected at a range of the premium to
target market price four weeks prior to announcement and to target market price
one day prior to announcement of -10.1% to 142.1%, with a mean of 46.1%, and
- -18.8% to 84.0%, with a mean of 30.6%, respectively, versus transaction premiums
of 12.4% and 13.6%, respectively, for the Merger (based on the per share market
price four weeks prior to and one day prior to the March 11, 1996 announcement
of the proposed Merger).
Historical Exchange Ratio Analysis. Alex. Brown reviewed and analyzed the
historical ratio of the daily per share market closing prices of Infrasonics
Common Stock divided by the corresponding prices of NPB Common Stock over the
twelve-month period prior to March 8, 1996 and as of March 8, 1996. The average
exchange ratio for this twelve-month period was 0.095. Alex. Brown noted that
during this period the ratio was as low as 0.056 on May 3, 1995 and as high as
0.148 on September 25, 1995.
Contribution Analysis. Alex. Brown analyzed the relative contributions of
Infrasonics and NPB, as compared to Infrasonics's relative pro forma ownership
of approximately 4.8% of the outstanding capital of the combined company, to the
pro forma income statement of the combined company, based on managements'
projections for Infrasonics and an average of two Wall Street research report
forecasts, dated April 1996, for NPB. This analysis showed that on a pro forma
combined basis (excluding (i) the effect of any synergies that may be realized
as a result of the Merger and (ii) non-recurring expenses relating to the
Merger), based on the fiscal year ending June 30, 1995 for both companies,
Infrasonics and NPB would account for
33
<PAGE> 48
approximately 3.7% and 96.3%, respectively, of the combined company's pro forma
revenue and approximately -2.4% and 102.4% respectively, of the combined
company's pro forma operating income.
The contribution analysis also indicated that for the fiscal year ending
June 30, 1996, Infrasonics and NPB would contribute approximately 4.0% and
96.0%, respectively, of the combined company's pro forma revenue and 2.6% and
97.4%, respectively, of the combined company's pro forma operating income.
Discounted Cash Flow Analysis. Alex. Brown performed two discounted cash
flow analyses for Infrasonics a management case (the "Management Case") and an
adjusted management case (the "Adjusted Management Case"). The discounted cash
flow approach values a business based on the current value of the future cash
flow that the business will generate. To establish a current value under this
approach, future cash flow must be estimated and an appropriate discount rate
determined. In the Management Case, Alex. Brown used estimates of projected
financial performance for Infrasonics for the fiscal years 1996 through 2000
prepared by Infrasonics's management. Alex. Brown aggregated the present value
of the cash flows through fiscal year 2000 with the present value of a range of
terminal values. Alex. Brown discounted these cash flows at discount rates
ranging from 14% to 20%. The terminal value was computed based on projected
revenue in fiscal year 2000 and a range of terminal multiples of 1.0x to 1.6x.
Alex. Brown arrived at such discount rates based on its judgment of the weighted
average cost of capital of publicly traded companies and arrived at such
terminal values based on its review of the trading characteristics of the common
stock of the Selected Companies. This analysis indicated a range of values of
$5.04 to $9.46 per Infrasonics share.
In the Adjusted Management Case, Alex. Brown used estimates of projected
financial performance for Infrasonics for the fiscal years 1996 through 2000.
The estimates for fiscal 1996 used in the Adjusted Management Case did not
differ from those used in the Management Case. The estimates for fiscal 1997
through 2000 were prepared by Alex. Brown and assumed revenue growth rates below
those assumed in the Management Case. All operating margins in the Adjusted
Management Case were identical to those in the first case discussed above. Using
an identical methodology, discount rates and terminal values, this analysis
indicated a range of values of $3.92 to $5.61 per Infrasonics share.
Pro Forma Combined Earnings Analysis. Alex. Brown analyzed certain pro
forma effects of the Merger. Based on such analysis, Alex. Brown computed the
resulting dilution/accretion to the combined company's EPS estimate for the
fiscal years ending 1996, 1997 and 1998, pursuant to the Merger before and after
taking into account any potential cost savings and other synergies that
Infrasonics and NPB could achieve if the Merger were consummated and before
nonrecurring costs relating to the Merger. Alex. Brown noted that before taking
into account any potential cost savings and other synergies and before certain
nonrecurring costs relating to the Merger, the Merger would be approximately
1.2%, 3.6% and 5.5% accretive to the combined company's EPS for the fiscal years
ending 1996, 1997 and 1998, respectively. Alex. Brown also noted that after
taking into account potential cost savings and other synergies as estimated by
Infrasonics management for the fiscal years ending 1996, 1997 and 1998,
respectively, and before nonrecurring costs relating to the Merger, the Merger
would be approximately 5.2% to 7.0% accretive to the combined company's EPS for
the fiscal year ending 1997. There can be no assurance that the combined company
will be able to realize savings and synergies in the amounts estimated, or at
all, 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 Infrasonics, NPB or the Merger. Accordingly, such analyses
must take into account differences in the financial and operating
characteristics of the Selected Companies and the companies in the Selected
Transactions and other factors that would affect the public trading value and
acquisition value of the Selected Companies and the Selected Transactions,
respectively.
While the foregoing summary describes all analyses and factors that Alex.
Brown deemed material in its presentation to the Infrasonics Board of Directors,
it is not a comprehensive description of all analyses and factors considered by
Alex. Brown. 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 application of these methods to the particular
circumstances and, therefore, such an opinion is not readily susceptible to
summary description. Alex. Brown believes that its analyses must be considered
as a whole and
34
<PAGE> 49
that selecting portions of its analyses and of the factors considered by it,
without considering all analyses and factors, would create an incomplete view of
the evaluation process underlying the Alex. Brown Opinion. In performing its
analyses, Alex. Brown considered general economic, market and financial
conditions and other matters, many of which are beyond the control of
Infrasonics and NPB. The analyses performed by Alex. Brown 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 a letter agreement dated June 12, 1995 between Infrasonics and
Alex. Brown, the fees to date payable to Alex. Brown consist of a $50,000 fee
payable upon execution of the letter agreement and a $200,000 fee payable upon
rendering of the Alex. Brown Opinion, which aggregate amount will be credited
against a transaction fee of approximately $960,000 (assuming a total Merger
consideration of $69.3 million), payable upon consummation of the Merger. In
addition, Infrasonics has agreed to reimburse Alex. Brown for its reasonable
out-of-pocket expenses incurred in connection with rendering financial advisory
services, including fees and disbursements of its legal counsel. Infrasonics has
agreed to indemnify Alex. Brown and its directors, officers, agents, employees
and controlling persons, for certain costs, expenses, losses, claims, damages
and liabilities related to or arising out of its rendering of services under its
engagement as financial advisor.
The Board of Directors of Infrasonics retained Alex. Brown to act as its
advisor based upon Alex. Brown's qualifications, reputation, experience and
expertise. Alex. Brown is an internationally recognized investment banking firm
and, as a customary part of its investment banking business, is engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, private placements and valuations for
corporate and other purposes. Alex. Brown may actively trade the equity
securities of Infrasonics and NPB for its own account and for the account of its
customers and accordingly may at any time hold a long or short position in such
securities. Alex. Brown regularly publishes research reports regarding the
medical device industry and publicly traded companies in the medical device
industry.
CONFLICTS OF INTEREST
In considering the recommendations of the NPB Board and the Infrasonics
Board with respect to the Merger Agreement and the transactions contemplated
thereby, stockholders should be aware that certain members of the management of
NPB and Infrasonics have interests in the Merger that are in addition to the
interests of stockholders of NPB and Infrasonics generally.
Employment Agreement. In the Merger Agreement, NPB has agreed that it will
offer to Jim Hitchin a two-year, renewable employment agreement, which would be
effective from and after the closing of the Merger and would replace his March
24, 1992 Employment Agreement with Infrasonics. The employment agreement with
Mr. Hitchin will provide for an initial term of two years in which Mr. Hitchin
would serve as Senior Consultant -- Special Projects of NPB. As Senior
Consultant -- Special Projects, Mr. Hitchin will report to Mr. Larkin, the Chief
Executive Officer of NPB, and will assist with the integration of Infrasonics
into NPB and direct the rationalization of NPB's ventilation business over the
continuum of care. Pursuant to the terms of the proposed employment agreement,
Mr. Hitchin will be entitled to receive a salary of $250,000 per year through
the one year anniversary of the Effective Date, and a salary of $275,000 per
year thereafter. Mr. Hitchin's employment agreement will also provide for
certain additional employee benefits, including an opportunity to purchase the
automobile provided to him by Infrasonics at a price equal to the depreciated
book value reflected on Infrasonic's accounting records immediately prior to the
Effective Date, an automobile allowance in accordance with NPB's standard
policies, an option to purchase 50,000 (post-split) shares of NPB Common Stock,
and severance payments upon certain termination events described below.
Mr. Hitchin's employment agreement will provide that if Mr. Hitchin's
employment with Nellcor is terminated prior to the date two years after the
effective date (other than on account of death or disability or for cause) he
will be entitled to receive a sum equal to the change of control severance
amount he would have been entitled to receive under his Infrasonics employment
agreement had he been terminated thereunder
35
<PAGE> 50
within two years of a change of control "event" (as such term is defined in the
Employment Agreement). Under his Infrasonics employment agreement, Mr. Hitchin
is currently entitled to a severance amount equal to the largest sum that can be
paid without resulting in an "excess parachute payment" as defined in Section
280G of the Internal Revenue Code. Based on Mr. Hitchin's compensation for 1991
through 1995, severance payments could be made in an amount up to approximately
$600,000.
Stock Option Plans. Under the terms of the Merger Agreement, NPB has
agreed that all stock options of Infrasonics outstanding on March 8, 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 Infrasonics 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 Infrasonics Common Stock under such option immediately prior to the
Merger divided by the Exchange Ratio. See "The Merger Agreement -- Stock
Options."
The assumption of such options enables participants in Infrasonics's 1995
Stock Option Plan, 1991 Stock Option Plan and 1983 Employee 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 May 23,
1996, employees (or former employees) of Infrasonics held options to purchase an
aggregate of 581,939 shares of Infrasonics Common Stock at a weighted average
exercise price of $3.53 per share (at exercise prices ranging from $2.38 to
$8.26 per share).
Consulting Agreements with Directors. Messrs. Harry L. Casari, Robert A.
Hovee, and E.A. Vanderpool and Ms. Janet Colson, constituting the outside
directors of Infrasonics, will upon consummation of the Merger enter into
Consulting Agreements with NPB. Such individuals will provide up to 30 hours of
consulting services to NPB as requested by NPB in exchange for payment of
$50,000 in the case of Mr. Vanderpool and $25,000 per individual for Messrs.
Casari and Hovee and Ms. Colson. Upon consummation of the Merger, outstanding
options to purchase Infrasonics Common Stock held by these outside directors
will cease to vest and will terminate thereafter unless vested options are
exercised within the time frame set forth in the applicable option agreements.
Indemnification and Insurance. Under the terms of the Merger Agreement,
NPB has agreed that for a period of four 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 Infrasonics (the
"Indemnified Parties") under the provisions existing on the date of the Merger
Agreement in the Articles of Incorporation, Bylaws and indemnification
agreements of Infrasonics 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
Infrasonics.
NPB has also agreed to maintain, for a period of four 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 Infrasonics's existing officers' and directors'
liability insurance policies, on terms substantially no less advantageous to
such officers and directors than such existing insurance.
Severance Arrangements. NPB has agreed to provide certain severance
benefits to certain employees, as well as the following Infrasonics officers:
Messrs. Frederick C. McGee, Tom Bowie, Guy Gansel, and Ralph Anderson. In the
event any of these officers is terminated within 18 months of the Closing, such
officers will receive eighteen months' base salary, COBRA reimbursement for
eighteen months, and outplacement assistance. As of May 9, 1996, the annual
salaries for such officers are $95,000, $90,000, $141,750 and $100,000,
respectively.
Transition Bonus Program. NPB has agreed to furnish a three-tier
Transition Bonus Program for Infrasonics's employees following the Merger. The
purpose of the program is to provide an incentive to employees of Infrasonics to
remain as Infrasonics employees before and after the Merger.
Bonuses issued in connection with this program will be equal to an
employee's base salary for an eight, sixteen or twenty-four-week period. The
bonus calculation will be based on an employees salary as of
36
<PAGE> 51
November 1, 1996, and will not include overtime or shift differential. To be
eligible for the bonus, such an employee must remain a regular Infrasonics
employee continuously through November 1, 1996. Bonus amounts will be paid to
applicable employees on November 15, 1996. The bonus program currently applies
to approximately 220 Infrasonics employees and, based on current compensation
levels and assuming all such employees satisfy the requirements for their bonus,
is projected to cost approximately $915,000. This cost is subject to change
depending upon changes in the number of applicable employes and compensation
levels.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Gray Cary Ware & Freidenrich, counsel to Infrasonics, is of the opinion
that the material federal income tax consequences of the Merger, insofar as they
relate to Infrasonics 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 Infrasonics 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 Infrasonics as a
result of the Merger;
(iii) no gain or loss will be recognized by the shareholders of
Infrasonics upon the conversion of their Infrasonics 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 Infrasonics 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 Infrasonics 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 Infrasonics 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 Infrasonics Common Stock pursuant to the Merger will
include the period that such shares of Infrasonics Common Stock were held
by the holder, provided such shares of Infrasonics Common Stock were held
as capital assets by the holder at the Effective Time; and
(vii) a dissenting shareholder of Infrasonics 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
is 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 Infrasonics receive
an opinion from its counsel, Gray Cary Ware & Freidenrich, to the effect that
the Merger will constitute a reorganization within the meaning of Section 368(a)
of the Code and NPB and Infrasonics 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,
Infrasonics and others, including of those shareholders of Infrasonics holding a
substantial amount of Infrasonics Common Stock (the "Major Shareholders")
verifying that such Major Shareholders have no plan or intention as of the
Effective
37
<PAGE> 52
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 OR WARRANTS, AND MAY
NOT APPLY TO CERTAIN HOLDERS SUBJECT TO SPECIAL TAX RULES, INCLUDING HOLDERS WHO
ACQUIRED INFRASONICS 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 INFRASONICS 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 Infrasonics will
be carried forward to the operations of the combined companies at their recorded
amounts, results of operations of the combined companies will include income of
NPB and Infrasonics for the entire fiscal period in which the combination occurs
and the historical results of operations of the 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 each of NPB and
Infrasonics of a letter from their respective independent public accountants
stating that, in their respective opinions, the Merger will qualify as a pooling
of interests for accounting purposes. See "The Merger Agreement -- Conditions."
Certain events, including certain transactions with respect to Infrasonics
Common Stock or NPB Common Stock by affiliates of NPB and Infrasonics,
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 "The
Merger -- 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 Infrasonics each filed
notification and report forms under the HSR Act with the FTC and the Antitrust
Division on March 15, 1996.
The waiting period under the HSR Act for NPB and Infrasonics expired on
April 15, 1996. Neither NPB nor Infrasonics received a request for additional
information from the Antitrust Division or the FTC prior to expiration of the
waiting period.
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 Infrasonics. 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
38
<PAGE> 53
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 Infrasonics 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 Infrasonics 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 Infrasonics 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 Infrasonics 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 Infrasonics 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.
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 "The Merger -- Accounting
Treatment."
The Merger Agreement requires each of NPB and Infrasonics 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 INFRASONICS SHAREHOLDERS
The rights of Infrasonics shareholders who dissent in connection with the
Merger are governed by specific legal provisions contained in Chapter 13
(Sections 1300-1312) of the CCC, the text of which is attached as Appendix E
hereto. The description of dissenters' rights contained in this Joint Proxy
Statement/Prospectus is qualified in its entirety by reference to those sections
of the CCC. FAILURE TO FOLLOW THE STEPS REQUIRED BY CHAPTER 13 OF THE CCC FOR
PERFECTING DISSENTERS' RIGHTS MAY RESULT IN THE LOSS OF SUCH RIGHTS.
If the Merger is completed, certain of the Infrasonics shareholders who
object to the Merger and who have fully complied with all applicable provisions
of Chapter 13 of the CCC may have the right to require Infrasonics to purchase
the shares of Infrasonics Common Stock held by them for cash at the fair market
value of those shares on the day before the terms of the Merger were first
announced, excluding any appreciation or depreciation because of the Merger.
Persons who are beneficial owners of shares of Infrasonics Common Stock but
whose shares are held by another person, such as a broker or nominee, should
instruct the record holder to follow the procedures outlined below if such
persons wish to dissent with respect to any or all of their shares. Under the
CCC, no shareholder who is entitled to exercise dissenters' rights has any right
at law or in equity to attack the validity of the Merger or to have the Merger
set aside or rescinded, except in an
39
<PAGE> 54
action to test whether the number of shares required to authorize or approve the
Merger had been legally voted in favor of the Merger.
Shares of Infrasonics Common Stock must be purchased by Infrasonics upon
demand from a dissenting shareholder if all applicable requirements are complied
with, but only if (a) demands for payment are filed with respect to 5% or more
of the outstanding shares of such Infrasonics Common Stock, or (b) the shares
are subject to a restriction on transfer imposed by Infrasonics or by any law or
regulation.
Infrasonics is not aware of any restriction on transfer of any of the
shares of Infrasonics Common Stock except restrictions that may be imposed upon
shareholders who are deemed to be "affiliates" of Infrasonics as that term is
defined in Rule 144 under the Securities Act. Those shareholders who believe
there is some such restriction affecting their shares should consult with their
own legal counsel as to the nature and extent of any dissenters' rights they may
have.
For an Infrasonics shareholder to exercise the right to have Infrasonics
purchase his or her shares of Infrasonics Common Stock, the procedures to be
followed under Chapter 13 of the CCC include the following requirements:
(i) The shareholder of record must have voted the shares against the
Merger. It is not sufficient to abstain from voting. However, the
shareholder may abstain as to part of his or her shares or vote part of
those shares for the Merger without losing the right to have purchased
those shares which were voted against the Merger.
(ii) Any such shareholder who voted against the Merger, and who
wishes to have purchased his or her shares that were voted against the
Merger, must make a written demand to have Infrasonics purchase those
shares for cash at their fair market value. The demand must include the
information specified below and must be received by Infrasonics or its
transfer agent not later than the date of the Infrasonics Special Meeting.
Within ten days after the approval of the Merger by Infrasonics
shareholders, the respective holders of shares of Infrasonics Common Stock who
voted against the Merger and made a timely demand for purchase (and who are
entitled to require Infrasonics to purchase their shares because either (i)
holders of 5% or more of the outstanding shares filed demands by the date of the
Infrasonics Special Meeting, or (ii) the shares are restricted as to transfer)
must be notified by Infrasonics of the approval and Infrasonics must offer all
of these shareholders a cash price for their shares that Infrasonics considers
to be the fair market value of the shares on the day before the terms of the
Merger were first announced, excluding any appreciation or depreciation because
of the proposed Merger. The notice also must contain a brief description of the
procedures to be followed under Chapter 13 of the CCC in order for a shareholder
to exercise the right to have Infrasonics purchase his or her shares, including
the 30-day time period for submitting certificates representing shares as to
which dissenters' rights are being exercised, and attach a copy of the relevant
provisions of the CCC.
DEMAND FOR PURCHASE
Merely voting or delivering a proxy directing a vote against the approval
of the Merger does not constitute a demand for purchase. A written demand is
essential.
In all cases, the written demand that the dissenting shareholder must
deliver to Infrasonics must:
(i) be made by the person who was the shareholder of record,
including a transferee of record, on the Infrasonics Record Date set for
voting on the Merger (or his or her duly authorized representative) and not
by someone who is merely a beneficial owner of the shares;
(ii) state the number and class of dissenting shares; and
(iii) include a demand that Infrasonics purchase the shares at what
the shareholder claims to be the fair market value of such shares on the
day before the terms of the Merger were first announced, excluding any
appreciation or depreciation because of the proposed Merger. It is
Infrasonics's position that this day is March 8, 1996. A shareholder may
take the position in the written demand that a different
40
<PAGE> 55
date is applicable. The shareholder's statement of fair market value
constitutes an offer by such dissenting shareholder to sell the shares to
Infrasonics at such price.
In addition, it is recommended that the following conditions be complied
with to ensure that the demand is properly executed and delivered:
(i) The demand should be sent by registered or certified mail,
return receipt requested.
(ii) The demand should be signed by the shareholder of record (or his
or her duly authorized representative) exactly as his or her name appears
on the stock certificates evidencing the shares.
(iii) A demand for the purchase of shares owned jointly by more than
one person should identify and be signed by all such holders.
(iv) Any person signing a demand for purchase in any representative
capacity (such as attorney-in-fact, executor, administrator, trustee or
guardian) should indicate his or her title and, if Infrasonics so requests,
furnish written proof of his or her capacity and authority to sign the
demand.
A shareholder may not withdraw a demand for payment without the consent of
Infrasonics. Under the terms of the CCC, a demand by a shareholder is not
effective for any purchase unless it is received by Infrasonics (or any transfer
agent thereof).
OTHER REQUIREMENTS
Within 30 days after the date on which the notice of the approval of the
Merger is mailed by Infrasonics to its shareholders, the shareholder's
certificates representing any shares which any shareholder demands be purchased
must be submitted to Infrasonics at its principal office, or at the office of
any transfer agent thereof, to be stamped with a statement that the shares are
dissenting shares. Upon subsequent transfer of these shares, the new
certificates will be similarly stamped, together with the name of the original
dissenting shareholder.
If Infrasonics and a dissenting shareholder agree that the shares held by
such shareholder are eligible for dissenters' rights and agree upon the price of
such shares, the dissenting shareholder is entitled to receive from Infrasonics
the agreed price with interest thereon at the legal rate on judgments from the
date of such agreement. Any agreement fixing the fair market value of dissenting
shares as between Infrasonics and the holders thereof must be filed with the
Secretary of Infrasonics at the address set forth below. Subject to certain
provisions of Section 1306 and Chapter 5 of the CCC, payment of the fair market
value of the dissenting shares shall be made within 30 days after the amount
thereof has been agreed upon or within 30 days after the statutory or
contractual conditions to the Merger are satisfied, whichever is later. Cash
dividends declared and paid by Infrasonics upon the dissenting shares after the
date of approval of the Merger by its shareholders and prior to payment for the
shares shall be credited against the total amount to be paid by Infrasonics.
If Infrasonics and a dissenting shareholder fail to agree on either the
fair market value of the shares or on the eligibility of the shares to be
purchased, then either the shareholder or Infrasonics may file a complaint for
judicial resolution of the dispute in the superior court of the proper county.
The complaint must be filed within six months after the date on which the
respective notice of approval is mailed to the shareholders. If a complaint is
not filed within six months, the shares will lose their status as dissenting
shares. Two or more dissenting shareholders may join as plaintiffs or be joined
as defendants in such an action. If the eligibility of the shares is at issue,
the court will first decide this issue. If the fair market value of the shares
is in dispute, the court will determine, or shall appoint one or more impartial
appraisers to assist in its determination of, the fair market value. The costs
of the action will be assessed or apportioned as the court considers equitable,
but if the fair market value is determined to exceed 125% of the price offered
to the shareholder, Infrasonics will be required to pay such costs.
Any demands, notices, certificates or other documents required to be
delivered to Infrasonics may be sent to the Secretary, Infrasonics, Inc., 3911
Sorrento Valley Boulevard, San Diego, California 92121.
41
<PAGE> 56
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 Infrasonics 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 initial directors of the Surviving Corporation, and the
officers of NPB will be the initial 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") after
the later of (i) the date on which both Infrasonics and NPB stockholders
meetings approving the Merger have occurred, and (ii) the day on which all of
the conditions to the Merger are satisfied or waived, or at such other date as
NPB and Infrasonics 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 California as provided by Section 1108 of the CCC. The time at
which the Certificate of Merger is filed in Delaware 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 Infrasonics Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares held by a dissenting
holder as to which appraisal has been perfected ("Excluded Shares")) will be
converted into the right to receive 0.095 of a fully paid and nonassessable
share of NPB Common Stock, together with the corresponding percentage of an
associated NPB Preferred Stock Purchase Right, will cease to be outstanding, and
will be canceled and retired, except as described below. The Exchange Ratio is
subject to adjustment based on the average of the closing prices of NPB Common
Stock for the ten trading days ending on the fifth trading day before the
Special Meetings (the "Closing Market Value") and is calculated as follows: (i)
if the Closing Market Value is greater than or equal to $65.77 and less than or
equal to $75.77, the Exchange Ratio will be .095; (ii) if the Closing Market
Value is greater than $75.77, the Exchange Ratio will be the quotient of (a)
$7.20 divided by (b) the Closing Market Value, rounded to the nearest one-one
thousandth of a share; and (iii) if the Closing Market Value is less than
$65.77, the Exchange Ratio will be the quotient of (x) $6.25 divided by (y) the
Closing Market Value, rounded to the nearest one-one thousandth of a share.
Appendix F to this Joint Proxy Statement Prospectus sets forth 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 outstanding share of Infrasonics
Common Stock. As a result, the market value of NPB Common Stock that the
shareholders of Infrasonics ultimately receive could be more or less than its
market value on the date of this Joint Proxy Statement/Prospectus or on the date
of the Special Meetings. NPB stockholders and Infrasonics shareholders are
advised to obtain current market quotations for Infrasonics 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
42
<PAGE> 57
ratio were determined to be materially outside of the range set forth in
Appendix F, NPB and Infrasonics would recirculate a supplement to this Joint
Proxy Statement/Prospectus or an Amended Joint Proxy Statement/Prospectus
containing information concerning the actual exchange ratio, and would offer all
holders of NPB Common Stock and Infrasonics Common Stock who were entitled to
vote on the Merger as of the Record Date an opportunity to change their votes
prior to the Special Meetings (in which case, the Special Meetings 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 Infrasonics
Common Stock other than Excluded Shares (a "Certificate") will upon consummation
of the Merger cease to have any rights with respect to such Infrasonics Common
Stock, except the right to receive, without interest, shares of NPB Common Stock
and cash in lieu of fractional shares (as described in "The Merger
Agreement -- 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 (including the Stock-Split), 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 Infrasonics or any subsidiary of
Infrasonics will become treasury stock of NPB.
STOCK OPTIONS
As of the Effective Time, each of the options to acquire Infrasonics Common
Stock (each, an "Infrasonics 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 Infrasonics
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 Infrasonics immediately prior to
the Effective Time divided by the Exchange Ratio; provided that in the case of
any Infrasonics 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 Infrasonics Stock Options will be
subject to the same terms and conditions as were applicable to Infrasonics 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 Infrasonics
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 Infrasonics 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. INFRASONICS
SHAREHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY RECEIVE A LETTER
OF TRANSMITTAL.
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 Market Value.
43
<PAGE> 58
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 Infrasonics will be
closed and no further transfers of shares of Infrasonics Common Stock will be
made.
Neither the Exchange Agent nor any party to the Merger Agreement is liable
to a holder of shares of Infrasonics 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 Infrasonics Common Stock represented by the Certificate are
converted in the Merger.
If holders of Infrasonics Common Stock are entitled to dissent from the
Merger and demand appraisal of any such Infrasonics Common Stock in accordance
with the provisions of Chapter 13 of the CCC (each person electing to exercise
such rights, a "Dissenting Holder"), any Excluded Shares 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 CCC; provided, however, that each share of Infrasonics Common
Stock held by a Dissenting Holder who, after the Effective Time withdraws his
demand for appraisal or lose his rights of appraisal with respect to such shares
of Infrasonics Common Stock, in either case pursuant to the CCC, 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
Infrasonics 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 Articles of Incorporation and 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 Joint 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
Infrasonics; (u) real property; (v) the provision of complete copies of all
documents to NPB; (w) ownership of Infrasonics shares; (x) receipt of fairness
opinion; (y) pooling of interests; (z) accounts receivable; (aa) customers and
suppliers; (bb) complete representations; (cc) takeover statutes; and (dd)
voting arrangements.
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;
44
<PAGE> 59
(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 Certificate of Incorporation and 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 Joint Proxy
Statement/Prospectus; (g) ownership of shares of NPB Common Stock; (h) receipt
of fairness opinion; (i) compliance with applicable law; (j) ownership of shares
of Infrasonics Common Stock; (k) the provision of complete copies of all
documents to Infrasonics; (l) pooling of interests; and (m) complete
representations.
CERTAIN COVENANTS
Infrasonics 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 Infrasonics also agreed that, among other things: (i)
through the Effective Time, Infrasonics 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 other than in accordance with the Stock Split Proposal.
Infrasonics 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 Articles of Incorporation or 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 $60,000; (xv) pay,
discharge, or satisfy in an amount in excess of $40,000 in any one case or
$200,000 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
45
<PAGE> 60
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 June 30, 1995, except as
contemplated by the Merger Agreement or as required by changes in generally
accepted accounting principles.
NPB and Infrasonics also agreed that neither NPB, Infrasonics 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 Infrasonics also agreed that each and its 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 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 Infrasonics 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 Infrasonics, as applicable, in the Merger
Agreement untrue or incorrect in any material respect.
NPB and Infrasonics 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 Infrasonics will furnish NPB with all information concerning Infrasonics
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.
Infrasonics and NPB agreed, except to the extent required in the exercise
of the fiduciary duties of the Board of Directors of Infrasonics or NPB, as the
case may be, under applicable law as advised by independent counsel, to
recommend approval and adoption of the Merger Agreement by their respective
stockholders and to use their respective best efforts to obtain such approval.
NPB has agreed to vote in favor of approval and adoption of the Merger Agreement
at the Infrasonics Special Meeting all shares of Infrasonics Common Stock which
it beneficially owns at such time, although NPB does not presently beneficially
own any such shares and Infrasonics will similarly vote any shares of NPB Common
Stock in favor of the Merger Proposal and Stock Split Proposal at the NPB
Special Meeting although Infrasonics does not currently beneficially own any
such shares.
NPB and Infrasonics have agreed that not later than ten days 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
46
<PAGE> 61
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 Nasdaq of the listing of the shares of NPB Common
Stock to be issued pursuant to the Merger and the Stock Split and to cause such
additional shares to be approved for listing.
NO SOLICITATION
Until the consummation of the Merger, Infrasonics may not, except to the
extent required in the exercise of the fiduciary duties of the Board of
Directors of Infrasonics 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").
Infrasonics 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 Board of Directors of Infrasonics, the terms of such
proposals) are received and furnish to NPB a copy of any written proposal.
CERTAIN EMPLOYEE BENEFIT PLAN MATTERS
Infrasonics 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 Infrasonics 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 Infrasonics Common
Stock granted under Infrasonics's stock option plans will become options to
acquire NPB Common Stock. The vesting and exercisability of such options will
not be accelerated as a result of the Merger.
NPB has agreed to provide certain bonus programs to existing Infrasonics
employees. See "The Merger -- Conflicts of Interest."
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 Infrasonics (the "Indemnified
Parties") under the provisions existing on the date of the Merger Agreement, the
Articles of Incorporation, Bylaws and indemnification agreements of Infrasonics
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 Infrasonics's Articles of Incorporation and Bylaws and
indemnification agreements of Infrasonics. See "The Merger -- Conflicts of
Interest."
For a period of four 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
Infrasonics'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."
47
<PAGE> 62
MANAGEMENT AFTER THE MERGER
The existing directors and officers of NPB shall remain in such positions
following consummation of the Merger. In the Merger Agreement, NPB has agreed to
offer Jim Hitchin employment as Senior Consultant -- Special Projects. See "The
Merger -- Conflicts of Interest."
CONDITIONS
The obligations of NPB and Infrasonics to effect the Merger are subject to
the satisfaction of certain conditions, including, among others: (i) obtaining
NPB and Infrasonics stockholder approvals; (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 Articles 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 Infrasonics 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) obtain 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") which 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 Infrasonics 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
Infrasonics from Ernst & Young LLP, Infrasonics's independent accountants
("Ernst & Young"), in each case to the effect 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 Infrasonics 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 Infrasonics will each be a party
to the reorganization within the meaning of Section 368(b) of the Code; and
(iii) each of NPB and Infrasonics has received an opinion of counsel to the
other. In addition, Infrasonics'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 and the offer by NPB of employment to Jim Hitchin on certain
specified terms and conditions. NPB's obligation to effect the Merger is subject
to Infrasonics having 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
stockholders of NPB and Infrasonics: (i) by mutual written consent of NPB and
Infrasonics; (ii) by either NPB or Infrasonics, if the Merger has not been
consummated on or before October 5, 1996; (iii) by either NPB or Infrasonics, if
there has been any material breach of a
48
<PAGE> 63
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 Board of Directors of Infrasonics has (a)
withdrawn or modified in a manner adverse to it such 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 Infrasonics 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 either of NPB or Infrasonics, if any approval of the stockholders of the
other 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 stockholders or at any adjournment thereof; or (vii) by
Infrasonics 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 it.
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
Infrasonics or their respective officers or directors, except as specifically
provided in the Merger Agreement.
CANCELLATION FEES; EXPENSES
If at any time (i) Infrasonics has entered into an agreement with respect
to an Acquisition Proposal, other than the Merger; (ii) Infrasonics 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 Infrasonics 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) (if terminated because approval of
the Infrasonics shareholders was not obtained) of the first paragraph under
"Termination," then NPB shall be entitled to be paid by Infrasonics a fee in
cash or immediately available funds of one million five hundred thousand U.S.
dollars ($1,500,000) (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
Infrasonics and except as provided in the following paragraph.
In the event that either Infrasonics 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 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
Infrasonics at any time before or after approval thereof by the shareholders of
Infrasonics, 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 Infrasonics 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
49
<PAGE> 64
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
Infrasonics will share equally the expenses incurred in connection with filings
under the HSR Act, printing and mailing this Joint Proxy Statement/Prospectus
and all aspects of the Registration Statement.
COMPARATIVE PER SHARE PRICES AND DIVIDEND POLICIES
Both the NPB Common Stock and the Infrasonics Common Stock are listed and
traded on Nasdaq. The following table sets forth the high and low sale prices
per share of NPB Common Stock and Infrasonics Common Stock for the calendar
quarters indicated, as reported by Nasdaq.
<TABLE>
<CAPTION>
NPB INFRASONICS
COMMON STOCK COMMON STOCK
---------------- ----------------
HIGH LOW HIGH LOW
------ ------- ------- ------
<S> <C> <C> <C> <C>
Calendar 1994:
First Quarter..................................... $29.50 $24.25 $6.00 $3.875
Second Quarter.................................... 28.75 24.375 5.625 3.38
Third Quarter..................................... 31.50 26.00 4.00 2.38
Fourth Quarter.................................... 34.00 28.25 4.75 2.875
Calendar 1995:
First Quarter..................................... 38.25 31.50 4.00 2.38
Second Quarter.................................... 47.75 36.00 4.25 2.38
Third Quarter..................................... 55.75 44.688 7.0625 3.75
Fourth Quarter.................................... 62.00 47.38 7.125 5.00
Calendar 1996:
First Quarter..................................... 72.75 55.50 6.75 5.00
Second Quarter (through May 31)................... 69.75 48.00 6.4375 5.75
</TABLE>
On March 8, 1996, the last trading day prior to announcement of the Merger
Agreement, the closing sales prices of NPB Common Stock and Infrasonics Common
Stock as reported by Nasdaq were $65.00 per share and $5.50 per share,
respectively. The equivalent per share value of Infrasonics Common Stock as of
such date was approximately $6.25. On May 31, 1996, the closing sales prices of
NPB Common Stock and Infrasonics Common Stock as reported by Nasdaq were $54.50
per share and $6.0625 per share, respectively. Based upon the May 31, 1996
closing price of NPB Common Stock and an Exchange Ratio of .115, the equivalent
per share value of Infrasonics Common Stock as of such date was approximately
$6.27.
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 Infrasonics
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 consummation of the Merger, in order
that the value of NPB's Common Stock to be received by Infrasonics shareholders
as calculated under the adjustment formula is not less than approximately $6.25
per share. See "The Merger Agreement -- Conversion of Securities." STOCKHOLDERS
ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR NPB COMMON STOCK AND
INFRASONICS COMMON STOCK. NO ASSURANCE CAN BE GIVEN AS TO THE FUTURE PRICES OR
MARKETS FOR NPB COMMON STOCK OR INFRASONICS COMMON STOCK.
No dividends have been declared or paid on NPB Common Stock or Infrasonics
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.
50
<PAGE> 65
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements
assume the Merger between NPB and Infrasonics 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 Infrasonics, which are
incorporated by reference in this Joint Proxy Statement/Prospectus. The
unaudited pro forma combined condensed balance sheet combines NPB's March 31,
1996 unaudited consolidated balance sheet with Infrasonics's March 31, 1996
unaudited 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 2, 1995 and the unaudited nine months
ended March 31, 1996 and April 2, 1995 with Infrasonics's historical results for
each of the three fiscal years in the period ended June 30, 1995 and the
unaudited nine months ended March 31, 1996 and 1995, respectively. To reflect
the August 25, 1995 merger of Nellcor and Puritan-Bennett as a pooling of
interests, NPB's historical results for each of the three fiscal years in the
period ended July 2, 1995 and the unaudited nine months ended April 2, 1995,
have been prepared by combining Nellcor's financial data for each of the three
fiscal years in the period ended July 2, 1995 and the nine months ended April 2,
1995 with Puritan Bennett's financial data for each of the three fiscal years in
the period ended January 31, 1995 and the unaudited nine months ended October
31, 1994.
The unaudited balance sheet of NPB at March 31, 1996 and Infrasonics at
March 31, 1996, and the unaudited statement of operations for the nine months
ended March 31, 1996 and April 2, 1995 of NPB, and March 31, 1996 and 1995 of
Infrasonics have been prepared on the same basis as the historical information
derived from audited financial statements. In the opinion of the managements of
NPB and Infrasonics, respectively, the unaudited financial statements of NPB and
Infrasonics referred to above from which such data have been derived, contain
all adjustments, consisting of normal recurring accruals, necessary for the fair
presentation of the results for such periods.
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 Infrasonics
incorporated by reference in this Proxy Statement/Prospectus.
51
<PAGE> 66
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
NPB INFRASONICS PRO FORMA COMBINED
MARCH 31, 1996 MARCH 31, 1996 ADJUSTMENTS PRO FORMA
-------------- --------------- ----------- ---------
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents............. $ 75,712 $ 6,045 $ 81,757
Marketable securities................. 3,169 971 4,140
Trade notes and accounts receivable,
net................................ 126,346 6,358 132,704
Inventories........................... 110,068 7,996 118,064
Deferred income taxes and other
current assets..................... 31,727 420 32,147
-------- ------- --------
Total current assets.......... 347,022 21,790 368,812
-------- ------- --------
Net property and equipment.............. 125,069 2,588 127,657
Capitalized software costs.............. 2,050 2,050
Other assets and goodwill, net.......... 55,729 3,789 59,518
-------- ------- --------
Total assets.................. $527,820 $ 30,217 $ 558,037
======== ======= ========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable......................... $ 358 $ 358
Accounts payable...................... 36,074 $ 451 36,525
Accrued liabilities................... 32,966 2,253 35,219
Accrued merger and related costs...... 34,300 $ 8,000(1) 42,300
Income taxes payable.................. 9,867 9,867
Other................................. 22,124 22,124
-------- ------- ------ --------
Total current liabilities..... 135,689 2,704 8,000 146,393
-------- ------- ------ --------
Long-term debt, less current
maturities............................ 6,572 6,572
Deferred compensation and pensions...... 8,583 8,583
Deferred income taxes................... 607 607
Deferred revenue........................ 10,350 10,350
-------- --------
Total stockholders' equity.... 366,019 27,512 (8,000) 385,531
-------- ------- ------ --------
Total liabilities and
stockholders' equity........ $527,820 $ 30,216 $ 0 $ 558,036
======== ======= ====== ========
</TABLE>
- ---------------
(1) Pro forma adjustment as described in Note 3.
52
<PAGE> 67
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE-MONTHS ENDED
------------------------------ --------------------
JULY 2, JULY 3, JULY 4, MARCH 31, APRIL 2,
1995 1994(1) 1993 1996(2) 1995
-------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
Net revenue................................ $623,066 $564,132 $536,935 $506,625 $454,248
Cost of goods sold......................... 312,970 284,159 268,302 247,539 229,306
-------- -------- -------- -------- --------
Gross profit............................... 310,096 279,973 268,633 259,086 224,942
-------- -------- -------- -------- --------
Operating expenses:
Research and development................. 49,182 50,730 50,357 39,430 36,260
Selling, general and administrative...... 184,856 177,133 158,258 142,361 136,748
Restructuring charges.................... 2,654 43,669 0 92,618 0
-------- -------- -------- -------- --------
Income from operations..................... 73,404 8,441 60,018 (15,323 ) 51,934
-------- -------- -------- -------- --------
Litigation settlements, net................ 0 (13,000) 0 0 0
Interest income and other.................. 7,182 3,865 4,346 4,138 5,334
Interest expense........................... (5,830) (4,565) (3,720) (2,911 ) (3,312)
Costs associated with unsolicited offer.... (5,049) 0 0 0 (4,559)
-------- -------- -------- -------- --------
Total other income (expense)............... (3,697) (13,700) 626 1,227 (2,537)
-------- -------- -------- -------- --------
Income/(loss) before income taxes.......... 69,707 (5,259) 60,644 (14,096 ) 49,397
Provision for (benefit from) income
taxes.................................... 21,595 546 19,638 6,499 17,167
-------- -------- -------- -------- --------
Net income/(loss).......................... $ 48,112 $ (5,805) $ 41,006 $(20,595 ) $ 32,230
======== ======== ======== ======== ========
Net income/(loss) per common and common
equivalent shares........................ $ 1.66 ($ 0.20) $ 1.46 ($ 0.68 ) $ 1.12
======== ======== ======== ======== ========
Weighted average common and common
equivalent shares used in the calculation
of net income per share.................. 28,913 28,346 28,112 30,277 28,776
======== ======== ======== ======== ========
</TABLE>
- ---------------
(1) NPB accrued restructuring charges totaling approximately $43.2 million and
recorded litigation settlements totaling approximately $13 million during
the fiscal year ended July 3, 1994.
(2) In connection with the merger of Nellcor and Puritan-Bennett, one-time
merger and related costs of $92.6 million were recorded during the nine
months ended March 31, 1996.
53
<PAGE> 68
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS
1. The unaudited pro forma combined condensed financial statements of NPB
and Infrasonics 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 will become the
historical financial statements of NPB upon issuance of financial statements for
a period that includes the date of the acquisition. The unaudited pro forma
combined condensed financial statements reflect the issuance of 0.095 of a fully
paid and nonassessable share of NPB Common Stock for each share of Infrasonics
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 Infrasonics 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 Infrasonics incorporated by
reference in this Proxy Statement/Prospectus.
2. The unaudited pro forma combined condensed balance sheet combines NPB's
March 31, 1996 unaudited consolidated balance sheet with Infrasonics's March 31,
1996 unaudited 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 2, 1995 and the unaudited nine months ended March 31,
1996 and April 2, 1995 with the Infrasonics results for each of the three fiscal
years in the period ended June 30, 1995 and the unaudited nine months ended
March 31, 1996 and 1995, respectively. Note, to reflect the August 25, 1995
merger of Nellcor and Puritan-Bennett as a pooling of interests, NPB's
historical results for each of the three fiscal years in the period ended July
2, 1995 and the unaudited nine months ended April 2, 1995, have been prepared by
combining Nellcor's financial data for each of the three fiscal years in the
period ended July 2, 1995 and the nine months ended April 2, 1995 with
Puritan-Bennett's financial data for each of the three fiscal years in the
period ended January 31, 1995 and the unaudited nine months ended October 31,
1994.
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 Infrasonics's existing operations. NPB expects to incur charges to
operations currently estimated to be between $10 million and $15 million in the
quarter ended July 7, 1996, 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 $8 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 Infrasonics during the periods presented.
54
<PAGE> 69
COMPARISON OF STOCKHOLDER RIGHTS
GENERAL
As a result of the Merger, holders of Infrasonics Common Stock will become
stockholders of NPB and the rights of all such former Infrasonics 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 Infrasonics Common Stock are currently governed by the Infrasonics
Articles of Incorporation and Bylaws and the California Corporations Code
("CCC"). 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 Infrasonics, sets forth certain differences between
the NPB Restated Certificate of Incorporation and Bylaws and the DGCL, and the
Infrasonics Articles of Incorporation and Bylaws and the CCC. Accordingly,
Infrasonic's shareholders should carefully review the following summary, which
NPB and Infrasonics believe addresses all material differences in the rights of
Infrasonics 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 CCC. 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. Infrasonics 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, and 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
The NPB Bylaws provide that elections of directors are by written ballot
unless otherwise provided in the NPB Restated Certificate of Incorporation,
which provides that such elections need not be by written ballot unless the
Bylaws otherwise provide. 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 Infrasonics Articles of
Incorporation and Bylaws also provide for cumulative voting rights in elections
for directors and provide that written ballots are not required unless a
stockholder demands election by ballot at the meeting and before voting begins.
55
<PAGE> 70
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 Infrasonics Bylaws state that the number of directors is to
be no less than three and no more than five, with the exact number being fixed
within such limits by an amendment to the Bylaws duly adopted by the
shareholders or the Board of Directors. The Infrasonics 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 Infrasonics 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 CCC the holders of at least 10% of the number of outstanding
shares of any class of stock may initiate a court action to remove any director
for cause. In addition, any or all of the directors of a California corporation
may be removed without cause by the affirmative vote of a majority of the
outstanding shares entitled to vote. However, no director may be removed (unless
the entire board is removed) when the votes cast against removal would be
sufficient to elect the director if voted cumulatively at an election at which
the same total number of votes were cast and the entire number of the directors
authorized at the time of the director's most recent election were then being
elected.
Both the NPB Bylaws and the Infrasonics 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 Infrasonics Bylaws
require two or more directors.
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 CCC, a special meeting may be called by the board of directors or
such other persons as may be authorized by the articles of incorporation or the
bylaws. The Infrasonics Bylaws provide that special meetings of Infrasonics
shareholders may be called by the Chairman, Board of Directors or President, 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 Infrasonics Bylaws do not provide
a procedure for nominating directors. The Infrasonics Bylaws do, however,
provide certain procedures regarding shareholder proposals generally, including,
among other things, the requirement of not less than 10 nor more than 60 days'
notice prior to the scheduled meeting and the provision of certain information
about the proposal.
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 Infrasonics
Bylaws contain a similar provision.
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 charter contains no
provisions to the contrary. Under the CCC (unless otherwise provided in the
articles), except with respect to the election of directors, any action which
56
<PAGE> 71
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 Infrasonics Articles of Incorporation contain no provision to the contrary.
STOCKHOLDERS VOTE FOR BUSINESS COMBINATIONS
The NPB Restated Certificate of Incorporation contains 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 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
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
57
<PAGE> 72
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 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 Infrasonics Articles of Incorporation do not contain any such
restrictions.
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
Infrasonics 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 Infrasonics Articles of Incorporation
likewise provide that the Infrasonics Board is authorized, subject to the
limitations prescribed by law, to provide for the issuance of shares of
Infrasonics Preferred Stock in one or more series. However, Infrasonics has not
issued rights to purchase Infrasonics 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
58
<PAGE> 73
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 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.
Under the CCC, if a party that makes a tender offer or proposes to acquire
a corporation by a reorganization or certain sales of assets is controlled by
such corporation or is or is controlled by an officer or director of such
corporation, or if a director or executive officer of such corporation has a
material financial interest in such party (each an "Interested Party Proposal"),
(i) an affirmative opinion in writing as to the fairness of the consideration to
the shareholders of such corporation must be delivered to shareholders of such
corporation, and (ii) such shareholders must be (x) informed of certain later
tender offers or written proposals for a reorganization or sale of assets made
by other persons, and (y) afforded a reasonable opportunity to withdraw any
vote, consent or proxy previously given or shares previously tendered in
connection with the Interested Party Proposal.
In addition, in consideration with any merger transaction, the CCC
generally requires that, unless all shareholders of a class or series consent,
each share of such class or series must be treated equally with respect to any
distribution of cash, property, rights or securities. The CCC also provides
generally that if a corporation that is party to a merger, or its parent, owns
more than 50% but less than 90% of the voting power of the other corporation
that is party to such merger, the nonredeemable shares of common stock of the
controlled corporation may be converted only into nonredeemable shares of the
surviving corporation or a parent party unless all of the shareholders of the
class consent.
59
<PAGE> 74
LIMITATION OF LIABILITY OF DIRECTORS
Both the DGCL and the CCC permit a corporation to include a provision in
its charter eliminating or limiting the personal liability of a director to the
corporation or its stockholders or its shareholders 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. The Infrasonics
Articles of Incorporation contain a similar provision regarding the
corresponding section of the CCC.
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.
The CCC permits indemnification of expenses in a derivative or third-party
action except that with respect to derivative actions (i) no indemnification may
be made without court approval when a person is adjudged liable to the
corporation in the performance of that person's duty to the corporation and its
shareholders, and unless and only to the extent that the court determines that
the person is fairly and reasonably entitled to indemnity for expenses, and (ii)
no indemnification may be made in respect of amounts paid or expenses incurred
in settling or otherwise disposing of a threatened or pending action without
court approval or expenses incurred in an action settled or disposed of without
court approval. Indemnification is permitted by the CCC only for acts taken in
good faith and reasonably believed to be in the best interests of the
corporation and its shareholders, as determined by a majority vote of a
disinterested quorum of the directors, independent legal counsel (if a quorum of
independent directors is not obtainable), a majority vote of a quorum of the
shareholders (excluding shares owned by the indemnified party), or the court
handling the action and, in the case of a criminal proceeding, had no reasonable
cause to believe it was unlawful. The CCC requires indemnification when the
individual being indemnified has successfully defended the action on the merits.
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
60
<PAGE> 75
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 Infrasonics Bylaws provide that Infrasonics 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 Infrasonics, against
expenses, judgments, fines, settlements and other amounts incurred in connection
with such proceeding to the fullest extent permitted by the provisions of the
CCC. The Infrasonics Bylaws additionally provide that expenses incurred by any
agent of Infrasonics 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
Infrasonics Bylaws provide that the Board of Directors may authorize the
purchase and maintenance of insurance on behalf of any agent of Infrasonics
against any liability asserted against or incurred by the agent in such capacity
or arising out of the agent's status as such whether or not Infrasonics would
have the power to indemnify the agent against such liability under the
provisions of the CCC.
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 the CCC, in connection with the merger of a corporation for which the
approval of outstanding shares is required, dissenting shareholders of such
corporation who follow prescribed statutory procedures are entitled to receive
payment of the fair market value of their shares. No such rights are available,
however, if the shares are listed on a national securities exchange certified by
the California Commissioner of Corporations or appear on the Federal Reserve
Board list of over-the-counter margin stocks unless (i) such shares are subject
to certain restrictions on transfer, or (ii) the holders of at least 5% of such
shares elect dissenter's rights.
DIVIDENDS
Generally, under the CCC a California corporation may pay dividends out of
retained earnings or if, after giving effect thereto, the sum of (i) the assets
(excluding goodwill and certain other assets) of the corporation is at least
equal to 1 1/4 times its liabilities (excluding certain deferred credits), and
(ii) the current assets of such corporation is at least equal to (x) its current
liabilities or (y) if the average of the earnings of such corporation before
taxes and interest expense for the two preceding fiscal years was less than the
average of the interest expense of such corporation for such fiscal years, 1 1/4
times its current liabilities. In addition, the ability of a California
corporation to pay dividends is restricted by certain limitations for the
benefit of certain preference shares.
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.
61
<PAGE> 76
STOCKHOLDER VOTING
With certain exceptions, the CCC requires that a merger, sale of assets or
similar transaction be approved by a majority vote of each class of shares
outstanding. The DGCL does not require such class voting.
INSPECTION OF STOCKHOLDER LIST
The CCC provides for an absolute right of inspection of the shareholder
list for persons holding five percent (5%) or more of a corporation's voting
shares or persons holding one percent (1%) or more of such shares who have filed
a Schedule 14B with the Securities and Exchange Commission relating to the
election of directors. Both the CCC and the DGCL allow any stockholder to
inspect the stockholder list for a purpose reasonably related to such person's
interest as a stockholder. However, the DGCL contains no provision comparable to
the absolute right of inspection provided by the CCC to certain shareholders.
LOANS TO OFFICERS AND EMPLOYEES
Under 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. Under the CCC, such loans may be made only with
shareholder approval unless a bylaw permitting such loans is approved by the
shareholders.
DISSOLUTION
Under the CCC, shareholders holding fifty percent (50%) or more of the
total voting power may authorize a corporation's dissolution and this right may
not be modified by the articles of incorporation. By contrast, the DGCL allows a
Delaware corporation to include in its certificate of incorporation a
supermajority voting requirement in connection with dissolutions. The NPB
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.
PROPOSAL NO. 1
APPROVAL OF THE MERGER AGREEMENT
At the NPB Special Meeting, the holders of NPB Common Stock will vote upon
a proposal to approve the Merger Agreement and the issuance of additional shares
of NPB Common Stock. See "NPB Special Meeting" and "The Merger." At the
Infrasonics Special Meeting, the Infrasonics shareholders will vote upon a
proposal to approve the Merger Agreement. See "The Infrasonics Special Meeting"
and "The Merger."
PROPOSAL NO. 2
STOCK SPLIT PROPOSAL
GENERAL
On March 8, 1996 the NPB Board of Directors adopted resolutions to approve,
and submit to stockholders for approval, a proposed Certificate of Amendment to
NPB's Restated Certificate of Incorporation which will increase the number of
authorized shares of Common Stock from 50 million to 150 million and will effect
a two-for-one stock split of the presently issued and outstanding shares of NPB
Common Stock (the "Stock Split"). Under the proposed amendment, the par value of
NPB Common Stock will remain unchanged at $.001 per share. The Stock Split
leaves the issued and outstanding and authorized number of shares of Preferred
Stock unchanged, but increases the shares of total authorized capital stock to
155 million. The complete text of the proposed amendment is set forth as
Appendix D to this Joint Proxy Statement/Prospectus.
62
<PAGE> 77
If the Stock Split is approved by the NPB stockholders, each holder of
record of NPB Common Stock on the effective date of the Stock Split will
thereafter be deemed to hold two shares of NPB Common Stock for every one
presently issued and outstanding share of NPB Common Stock held of record on
that date. The Exchange Ratio for the Merger will be appropriately adjusted if
the Stock Split is effective prior to or concurrently with consummation of the
Merger.
PURPOSES AND EFFECTS OF THE AMENDMENT AND STOCK SPLIT
The proposed amendment increases the number of authorized shares of NPB
Common Stock from 50 million to 150 million. The number of shares of Preferred
Stock outstanding and the number of authorized shares of Preferred Stock, 5
million, is unaffected. The proposed amendment will not change NPB's
stockholders' equity. The Stock Split will increase the number of issued and
outstanding shares of NPB Common Stock from 28,790,761 shares at April 29, 1996
to approximately 57,581,522 shares (without regard to the shares of NPB Common
Stock to be issued in the Merger). The NPB Common Stock issued pursuant to the
Stock Split will be fully paid and nonassessable. The voting rights and other
rights that accompany the NPB Common Stock will not be altered by the Stock
Split.
The Stock Split should not result in any taxable gain or loss to NPB
stockholders for federal income tax purposes. If the Stock Split is approved,
the tax basis of NPB Common Stock received as a result of the Stock Split
(including any fractional share interests to which a stockholder is entitled)
will be equal, in the aggregate, to the basis of the shares exchanged for the
NPB Common Stock. For tax purposes, the holding period of the shares immediately
prior to the effective date of the Stock Split will be included in the holding
period of the Common Stock received as a result of the Stock Split. The laws of
jurisdictions other than the United States may impose income taxes on the
issuance of additional shares and stockholders are urged to consult their tax
advisors.
Under the terms of outstanding options and warrants, the Stock Split will
increase the number of shares reserved for such purposes by a factor of two,
will increase the number of shares purchasable under outstanding options and
warrants by a factor of two and will decrease the exercise price of outstanding
options and warrants by a factor of two.
The Board of Directors believes that the Stock Split is advisable and in
the best interests of NPB and its stockholders. The Board of Directors believes
that the increase in authorized shares is desirable to preserve the relative
proportions of issued and unissued shares, allow for sufficient authorized
shares for future changes in the NPB capitalization, and permit NPB to issue
shares in connection with future acquisitions.
The Board of Directors anticipates that the increase in the number of
outstanding shares of Common Stock of NPB resulting from a two-for-one stock
split will place the market price of the NPB Common Stock in a range more
attractive to individuals and may result in a broader market for the shares.
However, there can be no assurance that any or all of these effects will occur.
Further, there is no assurance that the market for NPB Common Stock will be
improved. Stockholders should note that the Board of Directors cannot predict
with any certainty what effect the Stock Split will have on the market price of
the NPB Common Stock.
If the holders of NPB Common Stock dispose of their shares subsequent to
the stock split, they may pay higher brokerage commissions on the same relative
interest in NPB because that interest is represented by a greater number of
shares. Stockholders may wish to consult their respective brokers to ascertain
the brokerage commission that would be charged for disposing of the greater
number of shares.
EFFECTIVENESS
If the Stock Split is approved by the NPB stockholders, NPB will file the
amendment to its Restated Certificate of Incorporation with the Secretary of
State of Delaware promptly after such approval. The Stock Split will become
effective on June 28, 1996 after the closing of the market, and the record date
for the determination of the owners of NPB Common Stock entitled to a
certificate or certificates representing the additional shares is June 6, 1996.
PLEASE DO NOT DESTROY OR SEND YOUR PRESENT STOCK CERTIFICATES TO NPB. IF THE
PROPOSED AMENDMENT IS ADOPTED, THOSE CERTIFI-
63
<PAGE> 78
CATES WILL REMAIN VALID FOR THE NUMBER OF SHARES SHOWN THEREON. YOU
WILL BE MAILED CERTIFICATES ONLY FOR THE ADDITIONAL SHARES TO WHICH YOU ARE
ENTITLED.
VOTING
The affirmative vote of the holders of a majority of the issued and
outstanding shares of NPB Common Stock is necessary for the adoption and
approval of the Stock Split.
The NPB Board of Directors recommends that NPB stockholders vote for the
approval of the Stock Split.
OTHER MATTERS
It is not expected that any matters other than those described in this
Joint Proxy Statement/Prospectus will be brought before the NPB Special Meeting.
If any other matters are presented, however, it is the intention of the persons
named in the NPB proxy to vote such proxies in accordance with their respective
discretion.
It is expected that representatives of Price Waterhouse LLP, NPB's
independent accountants, will be present at the NPB Special Meeting and
representatives of Ernst & Young LLP, Infrasonics's independent auditors, will
be present at the Infrasonics Special Meeting where they will have an
opportunity to respond to appropriate questions of stockholders of NPB and
shareholders of Infrasonics, respectively, and to make statements if they so
desire.
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 Infrasonics by Gray Cary Ware & Freidenrich.
EXPERTS
The consolidated financial statements incorporated in this Joint Proxy
Statement/Prospectus by reference to NPB's Annual Report on Form 8-K dated April
3, 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 Infrasonics, Inc. at June 30, 1994
and 1995 and for each of the three years in the period ended June 30, 1995,
incorporated by reference in Infrasonics Annual Report on Form 10-K which is
referred to and made part of this Joint Proxy Statement/Prospectus and
Registration Statement, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report appearing elsewhere herein, and are
included in reliance upon such report given upon the authority of such firm as
experts in accounting & auditing.
STOCKHOLDER PROPOSALS
The deadline for proposals of stockholders of NPB to be considered for
inclusion in the proxy statement of the 1996 Annual Meeting of Stockholders of
NPB, which is expected to be held in October 1996, is May 18, 1996.
Proposals of shareholders of Infrasonics to be considered for inclusion in
the proxy statement of the 1996 Annual Meeting of Shareholders of Infrasonics
(if the Merger is not consummated), must be received by the Corporate Secretary
of Infrasonics no later than May 18, 1996.
64
<PAGE> 79
APPENDIX A
AMENDED AND RESTATED AGREEMENT
AND PLAN OF MERGER
<PAGE> 80
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I THE MERGER
1.1 The Merger......................................................... A-1
1.2 Effective Time of the Merger....................................... A-1
ARTICLE II THE SURVIVING CORPORATION
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
3.1 Exchange Ratio..................................................... A-2
3.2 Exchange of Shares................................................. A-3
3.3 Dividends; Transfer Taxes.......................................... A-3
3.4 No Fractional Shares............................................... A-3
3.5 Closing of Infrasonics Transfer Books.............................. A-4
3.6 Closing............................................................ A-4
3.7 Supplementary Action............................................... A-4
3.8 Stock Split........................................................ A-4
3.9 Dissenting Shares.................................................. A-4
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF INFRASONICS
4.1 Organization....................................................... A-5
4.2 Capitalization..................................................... A-5
4.3 Authority Relative to this Agreement............................... A-6
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-7
4.7 Information in Registration Statement and Joint 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-10
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-12
4.16 Ownership of Shares of NPB Common Stock............................ A-12
4.17 Insurance.......................................................... A-12
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-15
4.22 Real Property...................................................... A-15
4.23 Complete Copies of Requested Documents............................. A-16
4.24 Share Ownership.................................................... A-16
</TABLE>
i
<PAGE> 81
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
4.25 Opinion of Financial Advisor....................................... A-16
4.26 Pooling of Interests............................................... A-16
4.27 Accounts Receivable................................................ A-17
4.28 Customers and Suppliers............................................ A-17
4.29 Representations Complete........................................... A-17
4.30 Takeover Statutes.................................................. A-17
4.31 Voting Arrangements................................................ A-17
ARTICLE V REPRESENTATIONS AND WARRANTIES OF NPB
5.1 Organization....................................................... A-17
5.2 Capitalization..................................................... A-18
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-19
5.6 Information in Registration Statement and Joint Proxy Statement.... A-19
5.7 Share Ownership.................................................... A-19
5.8 Opinion of Financial Advisor....................................... A-20
5.9 Compliance with Applicable Law..................................... A-20
5.10 Ownership of Shares of Infrasonics Common Stock.................... A-20
5.11 Complete Copies of Requested Documents............................. A-20
5.12 Pooling of Interests............................................... A-20
5.13 Representations Complete........................................... A-20
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER
6.1 Conduct of Business by Infrasonics and NPB Pending the Merger...... A-20
6.2 Compensation Plans................................................. A-23
6.3 Current Information................................................ A-23
6.4 Letters of Infrasonics' and NPB's Auditors......................... A-23
6.5 Legal Conditions to the Merger..................................... A-23
6.6 Affiliates......................................................... A-24
6.7 Advice of Changes; Government Filings.............................. A-24
6.8 Accounting Methods................................................. A-24
ARTICLE VII ADDITIONAL AGREEMENTS
7.1 Access and Information............................................. A-24
7.2 No Solicitation of Transactions.................................... A-25
7.3 Registration Statement............................................. A-25
7.4 Joint Proxy Statement; Stockholder Approval........................ A-25
7.5 Nasdaq National Market............................................. A-26
7.6 Antitrust Laws..................................................... A-26
7.7 Certain Employee Benefit Plans Matters............................. A-26
7.8 Stock Options and Warrants......................................... A-26
7.9 Director and Officer Indemnification, Etc.......................... A-27
7.10 Public Announcements............................................... A-27
7.11 Expenses........................................................... A-27
7.12 Additional Agreements.............................................. A-28
7.13 Infrasonics Accruals and Reserves.................................. A-28
</TABLE>
ii
<PAGE> 82
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
7.14 FIRPTA............................................................. A-28
7.15 Takeover Statutes.................................................. A-28
ARTICLE VIII CONDITIONS TO CONSUMMATION OF THE MERGER
8.1 Conditions to Each Party's Obligation to Effect the Merger......... A-29
8.2 Conditions to Obligation of Infrasonics to Effect the Merger....... A-30
8.3 Conditions to Obligation of NPB to Effect the Merger............... A-30
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER
9.1 Termination........................................................ A-31
9.2 Effect of Termination.............................................. A-32
9.3 Cancellation Fees; Expenses........................................ A-32
9.4 Amendment.......................................................... A-33
9.5 Extension; Waiver.................................................. A-33
ARTICLE X GENERAL PROVISIONS
10.1 Survival of Representations, Warranties and Agreements............. A-33
10.2 Brokers............................................................ A-33
10.3 Notices............................................................ A-34
10.4 Descriptive Headings............................................... A-34
10.5 Entire Agreement; Assignment....................................... A-34
10.6 Governing Law...................................................... A-34
10.7 Counterparts....................................................... A-34
10.8 Validity........................................................... A-35
10.9 Jurisdiction and Venue............................................. A-35
10.10 Investigation...................................................... A-35
10.11 Consents........................................................... A-35
</TABLE>
iii
<PAGE> 83
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of May 14, 1996
by and among Nellcor Puritan Bennett Incorporated, a Delaware corporation
("NPB"), and Infrasonics, Inc., a California corporation ("Infrasonics"). This
Agreement amends and restates that certain Agreement and Plan of Merger, dated
as of March 8, 1996, by and among NPB and Infrasonics.
WHEREAS, the Boards of Directors of NPB and Infrasonics each have
determined that a strategic business combination between NPB and Infrasonics 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 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), Infrasonics shall be
merged with and into NPB, NPB shall be the surviving corporation (the "Surviving
Corporation") and the separate existence of Infrasonics 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").
1.2 Effective Time of the Merger. The Merger shall become effective when a
properly executed Agreement of Merger is duly filed with the Secretary of State
of the State of Delaware and the Secretary of State of the State of California,
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 such Agreement of Merger is so filed in both Delaware and
California.
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, except
that such Certificate of Incorporation shall be amended as of the Effective Time
as set forth in Exhibit 2.1 hereto in the event that the NPB stockholders
approve the Stock Split described in Section 3.8, below.
2.2 By-laws. The By-laws of NPB as in effect at the Effective Time shall
be the By-laws of the Surviving Corporation.
2.3 Directors and Officers of Surviving Corporation.
(a) The directors of NPB shall be the initial directors of the Surviving
Corporation and shall hold office from the Effective Time until their respective
successors are duly elected or appointed and qualified in the manner provided in
the Certificate of Incorporation and By-laws 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 in the manner provided in the Certificate of Incorporation and By-laws
of the Surviving Corporation, or as otherwise provided by law.
A-1
<PAGE> 84
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 ("Infrasonics Common Stock"), of Infrasonics that is issued and
outstanding immediately prior to the Effective Time (other than shares of
Infrasonics Common Stock to be canceled pursuant to Section 3.1(b) and
Excluded Shares as defined in Section 3.9 below) shall be converted at the
Effective Time into the right to receive that fraction of a share 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 prior to giving effect to the Stock Split
described in Section 3.8 below (the "Exchange Ratio") shall be calculated as
follows:
1. If the Closing Market Value (as defined below) is greater than or
equal to $65.77 and less than or equal to $75.77, the exchange ratio will
be .095;
2. If the Closing Market Value is greater than $75.77, the Exchange
Ratio will be the quotient of (i) $7.20 divided by (ii) the Closing Market
Value, rounded to the nearest one-one thousandth of a share; and
3. If the Closing Market Value is less than $65.77, the Exchange Ratio
will be the quotient of (x) $6.25 divided by (y) the Closing Market Value,
rounded to the nearest one-one thousandth of a share.
For the purpose 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 Infrasonics shareholders meeting referred to in Section 7.4.
At the Effective Time, all such shares of Infrasonics Common Stock (other
than Excluded Shares) 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 Infrasonics 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
Infrasonics 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 (including the Stock Split), 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 Infrasonics Common Stock then outstanding shall be
assumed by NPB in accordance with Section 7.8.
(b) Each share of Infrasonics Common Stock held in the treasury of
Infrasonics and each share of Infrasonics 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
Infrasonics or any subsidiary of Infrasonics shall become treasury stock of
NPB.
A-2
<PAGE> 85
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 Infrasonics) with, a
bank or trust company to act as Exchange Agent hereunder (the "Exchange Agent").
Within a reasonable period of time after the Effective Time, NPB shall make
available, and each holder of shares of Infrasonics 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 Infrasonics Common Stock are converted in the Merger. The shares of
NPB Common Stock into which the shares of Infrasonics 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 Infrasonics 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 Infrasonics 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
reasonably direct as indemnity, or such other form of indemnity, as it shall
reasonably 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 Infrasonics 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 of Infrasonics Common Stock in respect of any fractional share of
A-3
<PAGE> 86
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 Market Value.
3.5 Closing of Infrasonics Transfer Books. At the Effective Time, the
stock transfer books of Infrasonics shall be closed and no transfer of shares of
Infrasonics 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 Infrasonics Common Stock to be
exchanged for shares of NPB Common Stock pursuant to this Agreement shall cease
to have any rights as stockholders of Infrasonics, except for the right to
surrender such Certificates in exchange for shares of NPB Common Stock as
provided hereunder or such rights as are provided under California law as to
dissenters' rights.
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") after the
later of (a) the date on which the Infrasonics and NPB stockholders' meetings
referred to in Section 7.4 hereof shall have occurred, and (b) the day on which
all of the conditions set forth in Article VIII hereof are satisfied or waived,
or at such other date, time and place as NPB and Infrasonics 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 Infrasonics, 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
Infrasonics, in the name of and on behalf of Infrasonics, 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 Stock Split. Prior to the Effective Time, it is contemplated that NPB
and its stockholders shall approve (a) an increase of NPB's authorized Common
Stock to an aggregate of 150,000,000 shares and (b) a 2:1 split of NPB Common
Stock (the "Stock Split") under the General Corporation Law of the State of
Delaware such that every share of NPB's Common Stock outstanding immediately
prior to the Stock Split shall become two outstanding shares of NPB Common
Stock. If the Stock Split is so approved, the Stock Split shall become effective
before or after the Effective Time as determined by NPB's Board of Directors. In
the event the effectiveness of the Stock Split is before the Effective Time, the
Exchange Ratio shall be appropriately adjusted as provided in Section 3.1(a).
3.9 Dissenting Shares. If holders of Infrasonics Common Stock are entitled
to dissent from the Merger and demand appraisal of any such Infrasonics Common
Stock in accordance with the provisions of Chapter 13 of the California
Corporations Code (the "CCC" and each person electing to exercise such rights, a
"Dissenting Holder"), any shares of Infrasonics 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 the CCC; provided,
however, that each share of Infrasonics Common Stock held by a Dissenting Holder
who shall, after the Effective Time, withdraw his demand for appraisal or lose
his right of appraisal with respect to such shares of Infrasonics Common Stock,
in either case pursuant to the CCC, 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.
A-4
<PAGE> 87
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF INFRASONICS
Except as set forth in the disclosure letter delivered to NPB at or prior
to the execution of this Agreement ("Infrasonics Disclosure Schedule"),
Infrasonics represents and warrants to NPB as follows:
4.1 Organization. Infrasonics is a corporation duly organized, validly
existing and in good standing under the laws of the State of California and has
the corporate power to carry on its business as it is now being conducted.
Infrasonics is duly qualified as a foreign corporation to do business, and is in
good standing (to the extent the concept of good standing exists), 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 or in good standing will not in the aggregate
have a Material Adverse Effect. Each subsidiary of Infrasonics is a corporation
duly organized, validly existing and in good standing (to the extent the concept
of good standing exists) 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 (to the extent the concept of good standing exists), 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. Infrasonics has delivered to NPB or
its counsel complete and correct copies of its Articles of Incorporation and
Bylaws.
As used in this Agreement, (a) the term "Material Adverse Effect" means,
with respect to Infrasonics 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 Infrasonics 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.
4.2 Capitalization.
(a) As of March 1, 1996, the authorized capital stock of Infrasonics
consisted of 50,000,000 shares of Infrasonics Common Stock and 10,000,000 shares
of Infrasonics Preferred Stock. As of March 1, 1996, 10,546,604 shares of
Infrasonics Common Stock were issued and outstanding, stock options to acquire
571,025 shares of Infrasonics Common Stock (the "Infrasonics Stock Options")
were outstanding under all stock option plans of Infrasonics, and 483,075
additional shares of Infrasonics Common Stock were reserved for issuance under
Infrasonics' stock option plans. No changes have occurred in such capitalization
since March 1, 1996 that, in the aggregate, would be material to Infrasonics,
except for option exercises in the ordinary course of business. All of the
issued and outstanding shares of Infrasonics 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 Infrasonics or
any agreement to which Infrasonics or any of its subsidiaries is a party or by
which Infrasonics or any of its subsidiaries is bound. Since March 1, 1996,
Infrasonics has not issued any shares of its capital stock, except upon the
exercise of Infrasonics Stock Options.
(b) Except as set forth above and pursuant to Infrasonics employee benefit
plans and as otherwise provided for in this Agreement, there are not now, and at
the Effective Time there will not be, any shares of capital stock of Infrasonics
issued or outstanding or any options, warrants, subscriptions, calls, rights,
convertible securities or other agreements or commitments obligating Infrasonics
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
Infrasonics were issued or outstanding, nor will there be any issued or
outstanding at the Effective Time. Except as provided in this Agreement, after
the Effective Time,
A-5
<PAGE> 88
Infrasonics will have no obligation to issue, transfer or sell any shares of its
capital stock pursuant to any employee benefit plan or otherwise. All
outstanding shares of the capital stock of Infrasonics' subsidiaries are validly
issued, fully paid, non-assessable and owned by Infrasonics or one of its
subsidiaries free and clear of any liens, security interest, pledges,
agreements, claims, charges or encumbrances of any nature whatsoever. None of
Infrasonics or its subsidiaries is required to redeem, repurchase or otherwise
acquire shares of capital stock of Infrasonics, 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 Infrasonics or any subsidiary of Infrasonics to
issue, deliver or sell, or cause to be issued, delivered or sold, any shares of
Infrasonics Common Stock or any Voting Debt, or obligating Infrasonics or any
subsidiary of Infrasonics to grant, extend or enter into any such option,
warrant, call, right or agreement.
4.3 Authority Relative to this Agreement. Infrasonics has the corporate
power to enter into this Agreement and to carry out its obligations hereunder.
The execution and delivery of this Agreement by Infrasonics and the consummation
by Infrasonics of the transactions contemplated hereby have been duly authorized
by Infrasonics' Board of Directors and, except for the favorable vote of a
majority of the shares of outstanding capital stock of Infrasonics entitled to
vote thereon in accordance with Section 1201 of the CCC, no other corporate
proceedings on the part of Infrasonics are necessary to approve this Agreement
or the transactions contemplated hereby. This Agreement has been duly and
validly executed and delivered by Infrasonics and constitutes a valid and
binding agreement of Infrasonics, enforceable against Infrasonics 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 an Agreement of Merger as required by
the CCC and the DGCL, no filing with, and no permit, authorization, consent or
approval of, any public or governmental body or authority is necessary for the
consummation by Infrasonics 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 Infrasonics, nor the consummation by Infrasonics of the transactions
contemplated hereby, nor compliance by Infrasonics 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 Infrasonics 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
Infrasonics 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 Infrasonics 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 Infrasonics, 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. Infrasonics has filed all reports
required to be filed with the Securities and Exchange Commission (the "SEC")
pursuant to the Exchange Act since November 4, 1984 including, without
limitation, Annual Reports on Form 10-K for the fiscal years ended June 30, 1994
and June 30, 1995 and Quarterly Reports on Form 10-Q for the quarters ended
September 30, 1995 and December 31, 1995 (all such reports and amendments
thereto, collectively, the "Infrasonics SEC Reports"), and has previously
furnished or made available to NPB true and complete copies of all Infrasonics
SEC Reports filed with respect to periods beginning after June 30, 1992
(including any exhibits thereto) and will promptly deliver to NPB any
Infrasonics SEC Reports filed between the date hereof and the Effective Time.
None of such Infrasonics SEC Reports, as of their respective dates (as amended
through the date hereof),
A-6
<PAGE> 89
contained or, with respect to the Infrasonics SEC Reports filed after the date
hereof, will contain any untrue statement of a material fact or omitted or, with
respect to the Infrasonics 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 Infrasonics SEC Reports fairly presents the consolidated
financial position of Infrasonics 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
Infrasonics 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 (i)
normal year end adjustments which would not in the aggregate be material in
amount or effect; and (ii) the permitted exclusion of all footnotes that would
otherwise be required by generally accepted accounting principles.
4.6 Absence of Certain Changes or Events. Except as disclosed in the
Infrasonics SEC Reports filed prior to the date of this Agreement, since June
30, 1995, neither Infrasonics nor any of its subsidiaries has: (a) taken any of
the actions prohibited in Section 6.1 or Section 6.2 hereof; (b) incurred any
material liability, except in the ordinary course of its business, consistent
with past practices; (c) 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 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 Infrasonics 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, conducted its business and operations other than in the ordinary course
of business and consistent with past practices.
4.7 Information in Registration Statement and Joint Proxy Statement. The
information relating to Infrasonics 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 joint proxy statement to be distributed in connection
with Infrasonics' and NPB's meetings of stockholders to vote upon this Agreement
and related matters (the "Joint 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 Infrasonics 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 Infrasonics, threatened against or involving Infrasonics 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
Infrasonics or any of its subsidiaries; and (c) Infrasonics 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 contracts, instruments, mortgages, notes, security
agreements, leases, agreements or understandings, whether written or oral, to
which Infrasonics or any of its subsidiaries is a party that relates to or
affects the assets or operations of Infrasonics or any of its subsidiaries or to
which Infrasonics or any of its subsidiaries or their respective assets or
operations may be bound or subject is a valid and binding obligation of
Infrasonics and in full force and effect with respect to Infrasonics or such
subsidiary and, to the knowledge of Infrasonics, 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 Infrasonics or any of its subsidiaries thereunder
or, to the knowledge of Infrasonics, by any other
A-7
<PAGE> 90
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
Infrasonics 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
Infrasonics 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 Infrasonics 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 Infrasonics 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
Infrasonics or its subsidiaries from engaging in a line of business, (y)
agreement with any executive officer or other employee of Infrasonics or any
subsidiary the benefits of which are contingent, or the terms of which are
altered, upon the occurrence of a transaction involving Infrasonics of the
nature contemplated by this Agreement, or (z) agreement with respect to any
executive officer of Infrasonics or any subsidiary providing any term of
employment or compensation guaranty. Infrasonics 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.
(c) Infrasonics 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 the business of
Infrasonics and its subsidiaries taken as a whole other than agreements and
arrangements for such sale, disposition, lease, acquisition or investment that
are in the ordinary course of Infrasonics' business.
4.10 Employee Benefit Plans.
(a) Section 4.10(a) of the Infrasonics Disclosure Schedule sets forth a
true and complete list of each material, written (i) 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")), (ii) policy or (iii) agreement (including, without limitation, any
employment agreement or severance agreement) that is maintained (all of the
foregoing, the "Infrasonics Plans"), or is or was contributed to by Infrasonics
or pursuant to which Infrasonics is still potentially liable for payments,
benefits or claims. A copy of each Infrasonics 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 Infrasonics Plan have heretofore been delivered to NPB or its
counsel. Neither Infrasonics nor any trade or business, whether or not
incorporated (an "ERISA Affiliate"), which together with Infrasonics 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 Infrasonics 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 Infrasonics 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 documents required to be filed with any
government entity since June 30, 1992 with respect to any Infrasonics 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 Infrasonics 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
A-8
<PAGE> 91
Code. Nothing has occurred since the date of the Internal Revenue Service's
favorable determination letter that could adversely affect the qualification of
the Infrasonics Plan and its related trust, except such adverse effects as would
not in the aggregate constitute a Material Adverse Effect. Infrasonics and each
ERISA Affiliate of Infrasonics have timely and properly applied for a written
determination by the Internal Revenue Service on the qualification of each such
Infrasonics 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 Infrasonics or its
subsidiaries as of the Effective Time with respect to each Infrasonics 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
Infrasonics in accordance with past practice and the recommended contribution in
any actuarial report.
(f) No Infrasonics 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 Infrasonics 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, if applicable) have been paid in full, subject only to
normal retrospective adjustments in the ordinary course, with regard to
Infrasonics Plans for plan years ending on or before the date hereof. except for
instances of non-payment that would not in the aggregate have a Material Adverse
Effect.
(h) As of the date hereof, no Infrasonics Plan subject to Title IV of
ERISA, and no employee benefit plan maintained by an ERISA Affiliate of
Infrasonics 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 Infrasonics Plan:
(1) 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;
(2) 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;
(3) no action or claims (other than routine claims for benefits made
in the ordinary course of Infrasonics Plan administration for which
Infrasonics Plan administrative review procedures have not been exhausted)
are pending or, to the knowledge of Infrasonics, threatened or imminent
against or with respect to any Infrasonics Plan, any employer who is
participating (or who has participated) in any Infrasonics Plan or any
fiduciary (as defined in Section 3(21) of ERISA), of any Infrasonics Plan,
except for actions or claims that would not in the aggregate have a
Material Adverse Effect; and
(4) neither Infrasonics nor any fiduciary of any Infrasonics Plan has
any knowledge of any facts which could give rise to any such action or
claim.
(j) Neither Infrasonics nor any ERISA Affiliate of Infrasonics 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, except in each case for such liabilities that would not in the
aggregate have a Material Adverse Effect.
A-9
<PAGE> 92
(k) Infrasonics 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 Infrasonics to any controlled group liability under
Section 4001(b) of ERISA.
(l) All of the Infrasonics 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. Infrasonics 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 "Infrasonics Group" shall mean, individually and
collectively, (A) Infrasonics and (B) any individual, trust, corporation,
partnership or any other entity as to which Infrasonics 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 Infrasonics Group is required to pay, withhold or collect.
(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 Infrasonics 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 material Taxes are payable by the Infrasonics 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 Infrasonics Group has withheld and paid over
all material 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 Infrasonics
Group with respect to Taxes, other than liens for Taxes not yet due and payable
or for Taxes that a member of the Infrasonics Group is contesting in good faith
through appropriate proceedings and for which appropriate reserves have been
established.
(c) Tax Reserves. The amount of Infrasonics' liability for unpaid Taxes
for all periods ending on or before the date of this Agreement does not in the
aggregate materially exceed the amount of the current liability accruals for
Taxes (excluding reserves for deferred Taxes) reflected on the consolidated
balance sheet of Infrasonics included in the Infrasonics SEC Report for the
quarter ending closest to the date of this Agreement, and the amount of
Infrasonics' 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
A-10
<PAGE> 93
sheet of Infrasonics included in the Infrasonics SEC Report for the quarter
ending closest to the Effective Time (plus additions thereto accrued through the
Effective Time which are consistent with past practices and in the ordinary
course).
(d) Consolidated Returns Furnished. NPB has been furnished by Infrasonics
true and complete copies of (i) income tax audit reports, statements of
deficiencies, closing or other agreements received by Infrasonics Group or on
behalf of the Infrasonics Group relating to federal income taxes, and (ii) all
federal income tax returns for the Infrasonics Group, in each case for all
periods ending on and after June 30, 1992. Infrasonics has never been a member
of an affiliated group filing consolidated returns other than a group of which
Infrasonics 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
Infrasonics Group that would cause Infrasonics' reserves for taxes to be
understated by an amount material to Infrasonics. No federal income tax returns
of the Infrasonics 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. Infrasonics 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 Infrasonics by reason of Section 1445 of
the Code. No member of the Infrasonics Group is a "consenting corporation" under
Section 341(f) of the Code.
(h) Section 6038A Compliance. (i) Infrasonics has filed all reports and
has created and/or retained all material 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 Infrasonics and the related foreign
person has maintained such material records; (iii) all material documents that
are required to be created and/or preserved by the related foreign person with
respect to transactions with Infrasonics are either maintained in the United
States, or Infrasonics is exempt from the record maintenance requirements of
Section 6038A with respect to such transactions under Treasury Regulation
section 1.6038A-1; (iv) Infrasonics 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 material transactions with
Infrasonics has authorized Infrasonics to act as its limited agent solely for
purposes of Sections 7602, 7603, and 7604 of the Code with respect to any
request by the Internal Revenue Service to examine records or produce testimony
related to any transaction with Infrasonics, and each such authorization remains
in full force and effect.
4.12 Compliance With Applicable Law. Except as disclosed in the
Infrasonics SEC Reports filed prior to the date of this Agreement, Infrasonics
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
Infrasonics 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
Infrasonics 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 Infrasonics' most recent Form 10-K
included in the Infrasonics SEC Reports lists all the subsidiaries of
Infrasonics 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 Infrasonics
SEC Documents, neither Infrasonics nor any of its subsidiaries is indebted to
any director, officer, employee or agent of Infrasonics or any of its
subsidiaries (except for amounts due as normal salaries and business and in
reimbursement of ordinary expenses), and no such person is indebted to
Infrasonics or any of its subsidiaries.
A-11
<PAGE> 94
4.15 Labor and Employment Matters.
(a) Except for such matters that would not in the aggregate have a Material
Adverse Effect: (i) Infrasonics 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 Infrasonics, threatened, nor has any such investigation occurred
during the last seven years, and no governmental entity has provided any notice
to Infrasonics 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 Infrasonics, threatened
against Infrasonics or any of its subsidiaries; (iv) no union representation
question or union organizational activity exists respecting the employees of
Infrasonics or any of its subsidiaries; (v) neither Infrasonics nor any of its
subsidiaries has experienced any work stoppage or other labor difficulty; and
(vi) no collective bargaining agreement exists which is binding on Infrasonics
or any of its subsidiaries.
(b) Except for benefits provided under agreements and plans described in
the Infrasonics SEC Reports, in the event of termination of the employment of
any officers, directors, employees or agents of Infrasonics or any of its
subsidiaries, neither Infrasonics, 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 Infrasonics 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 Infrasonics 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 (i) shares of NPB Common Stock
in the aggregate representing less than 1% of the outstanding shares of NPB
Common Stock and (ii) the "standstill" provisions of the Confidentiality
Agreement relating to the acquisition of NPB Common Stock.
4.17 Insurance. As of the date hereof, Infrasonics and each of its
subsidiaries are insured by insurers reasonably believed by Infrasonics 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 and fidelity or surety bonds insuring Infrasonics
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 Infrasonics 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. Infrasonics has made available to representatives of NPB a list of
all outstanding contracts, partnerships, joint ventures and other arrangements
or understandings (written or oral) that are material to Infrasonics' business
and that are between (a) Infrasonics or any of its subsidiaries and (b) any
physician, hospital, HMO, other managed care organization, 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 Infrasonics, Infrasonics' subsidiaries, or any Infrasonics
Property (as defined in sub-section (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").
A-12
<PAGE> 95
(b) Neither Infrasonics 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 Material, nor has Infrasonics or any of its subsidiaries received any
notices of spills or releases of Hazardous Materials. "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) To the knowledge of Infrasonics, there is no proceeding or
investigation pending or threatened by any governmental entity or other person
with respect to the presence of Hazardous Material on Infrasonics Properties or
the migration thereof from or to other property. Neither Infrasonics 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
from or on any Infrasonics Property.
(d) Neither Infrasonics, any current or former subsidiary of Infrasonics,
nor to Infrasonics' 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 Infrasonics or any of its
current or former subsidiaries now owns or leases or has previously owned or
leased or in which Infrasonics or any such subsidiary now holds or has
previously held any security interest, mortgage, or other lien or interest
("Infrasonics 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 Infrasonics, condition of actual or potential nuisance has occurred
on or from such Infrasonics Property, and to the knowledge of Infrasonics no
condition exists that could give rise to any suit, claim, action, proceeding or
investigation by any person or governmental entity against Infrasonics, any of
its subsidiaries or any other person or such Infrasonics 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) other than those that would
not have a Material Adverse Effect, any other violation of Environmental Laws.
(e) To the knowledge of Infrasonics, there are no substances or conditions
in or on Infrasonics 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 Infrasonics and (ii) any requirement that executive officers of NPB or
Infrasonics 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 Infrasonics 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
Infrasonics or any of Infrasonics' subsidiaries; (ii) other material
Intellectual Property Rights (as defined below) that are owned by Infrasonics or
Infrasonics' subsidiaries; (iii) unexpired licenses relating to Infrasonics
Intellectual Property Rights (as defined below) that have been granted to or by
Infrasonics or any of Infrasonics' subsidiaries; and (iv) other material
agreements relating to Intellectual Property Rights.
(b) Infrasonics and Infrasonics' subsidiaries collectively own and have the
right to use, and to license others to use, all Infrasonics 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.
A-13
<PAGE> 96
(c) Infrasonics has taken reasonable steps sufficient to safeguard and
maintain the secrecy and confidentiality of, or Infrasonics' proprietary rights
in, the unpatented know-how, technology, proprietary processes, formulae and
other information that is utilized in the conduct of Infrasonics' 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 Infrasonics Disclosure Schedule. Without limitation of the generality of the
foregoing, Infrasonics and Infrasonics' subsidiaries have obtained
confidentiality and inventions assignment agreements from all Infrasonics' past
and present employees and independent contractors involved in the creation or
development of Infrasonics Intellectual Property Rights (including, without
limitation, from all employees and contractors who are inventors, authors,
creators or developers of Infrasonics Intellectual Property Rights).
(d) There are no royalties, honoraria, fees or other payments payable by
Infrasonics or Infrasonics subsidiaries to any person by reason of the
ownership, use, license, sale or disposition of any of Infrasonics Intellectual
Property Rights.
(e) Neither Infrasonics nor any of Infrasonics' subsidiaries (i) is
infringing in the conduct of Infrasonics' business the right or claimed right of
any other party with respect to any Intellectual Property Rights known to
Infrasonics, or (ii) has knowledge of any alleged or claimed infringement by any
product or process manufactured, used, sold or under development by or for
Infrasonics or Infrasonics' subsidiaries in the conduct of Infrasonics'
business.
(f) To the knowledge of Infrasonics, no independent contractors who have
performed services related to Infrasonics' business have any right, title or
interest in Infrasonics Intellectual Property Rights.
(g) The execution, delivery and performance of this Agreement by
Infrasonics, and the consummation by Infrasonics of the transactions
contemplated hereby, will not breach, violate or conflict with any agreement
governing Infrasonics Intellectual Property Rights, will not cause the
forfeiture or termination or give rise to a right of forfeiture or termination
of Infrasonics' Intellectual Property Right or in any way impair the right of
Infrasonics to use, sell, license or dispose of, or bring any action for the
infringement of, Infrasonics 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 Agreement, the
term "Infrasonics Intellectual Property Rights" means all Intellectual Property
Rights that are part of the conduct of the business of Infrasonics.
A-14
<PAGE> 97
4.21 FDA and Related Matters.
(a) Section 4.21 of the Infrasonics Disclosure Schedule sets forth a
complete and accurate list, referencing relevant records and documents, for the
last five years, of (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 Infrasonics or its subsidiaries (hereafter in this Section 4.21
"Medical Device Regulatory Agency") to Infrasonics 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 Infrasonics or any of its subsidiaries and all Medical
Device Reports filed by Infrasonics 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 Infrasonics by
the FDA, (y) a litigation or arbitration claim or cause of action commenced, or
(z) a notice to any insurance carrier of Infrasonics tendering the defense or
giving any notice of a possible or actual claim against Infrasonics; (iii) all
product recalls and safety alerts conducted by or issued to Infrasonics or any
of its subsidiaries and any requests from the FDA or any Medical Device
Regulatory Agency requesting Infrasonics 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 Infrasonics or any of its
subsidiaries and known about by Infrasonics or any of its subsidiaries and all
consent decrees issued with respect to Infrasonics or Infrasonics' subsidiaries;
and (v) any other material written communications between Infrasonics or any of
its subsidiaries, on the one hand, and the FDA or any Medical Device Regulatory
Agency, on the other hand. Infrasonics has delivered to NPB copies of all
documents referred to in Section 4.21 of the Infrasonics Disclosure Schedule as
well as copies of all complaints and other information required to be maintained
by Infrasonics pursuant to 21 CFR Section 820.
(b) Except to the extent that such items would not, individually or in the
aggregate, have a Material Adverse Effect: (i) Infrasonics (or, if applicable, a
subsidiary of Infrasonics) 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 Infrasonics or any of its subsidiaries
and relating to its medical device business or otherwise applicable to
Infrasonics' or its subsidiaries' business; (ii) all representations made by
Infrasonics 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 Infrasonics' products, and the products of
Infrasonics' subsidiaries, comply with, and perform in accordance with the
specifications described in, such representation. Infrasonics and Infrasonics'
subsidiaries are in compliance with all applicable FDA laws, rules and
regulations, and all corresponding applicable state and foreign laws, rules and
regulations (including Good Manufacturing Practices and Medical Device Reporting
requirements) relating to medical device manufacturers and distributors or
otherwise applicable to Infrasonics' or Infrasonics' subsidiaries' business;
(iii) Infrasonics 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 (iv)
there are no investigations or inquiries pending or threatened relating to the
operation of Infrasonics' or Infrasonics' subsidiaries' business or Infrasonics'
compliance with applicable laws relating to its medical device business or
otherwise applicable to Infrasonics' or its subsidiaries' business.
4.22 Real Property.
(a) Section 4.22(a) of the Infrasonics Disclosure Schedule lists all of the
real property owned or currently used by Infrasonics in the course of
Infrasonics' business (the "Infrasonics Real Property"). Section 4.22(a) of the
Infrasonics Disclosure Schedule also lists all material real property owned or
used by Infrasonics' in the course of Infrasonics' business at any time since
June 30, 1992, other than Infrasonics Real Property.
A-15
<PAGE> 98
(b) All Infrasonics Real Property is in all material respects suitable and
adequate for the uses for which it is currently devoted. Infrasonics has good
and marketable title in fee simple absolute to Infrasonics Real Property
indicated on Section 4.22(a) of the Infrasonics Disclosure Schedule to be owned
by it, and to the buildings, structures and improvements thereon, and a valid
leasehold interest in all other Infrasonics 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 (i) any of the
foregoing which 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
Infrasonics Real Property are in good repair, to the knowledge of Infrasonics
free of defects (latent or patent), and fit for the uses to which they are
currently devoted. To the knowledge of Infrasonics, all such buildings,
structures, fixtures and improvements on Infrasonics' Real Property conform to
all applicable laws. To the knowledge of Infrasonics, the buildings, structures,
fixtures and improvements on each parcel of Infrasonics Real Property lie
entirely within the boundaries of such parcel of Infrasonics Real Property, and
no structures of any kind encroach on Infrasonics Real Property.
(d) To the knowledge of Infrasonics, none of the Infrasonics Real Property
is subject to any Other Agreement or other restriction of any nature whatsoever
(recorded or unrecorded) preventing or limiting Infrasonics' right to use it in
the manner such property is currently being used or that it is contemplated to
be used.
(e) No portion of the Infrasonics 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 Infrasonics has no knowledge that any of the
foregoing are, or will be, the subject of, or affected by, any such proceeding.
(f) The Infrasonics 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 Infrasonics Real Property is
currently devoted.
4.23 Complete Copies of Requested Documents. Infrasonics 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
Infrasonics and its subsidiaries. The minute books of Infrasonics 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 Infrasonics 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 Infrasonics SEC Reports, as
of the date hereof, to Infrasonics' knowledge there are no stockholders with
beneficial ownership (as defined in the Exchange Act) of more than 5% of
Infrasonics Common Stock.
4.25 Opinion of Financial Advisor. Infrasonics has received the opinion of
Alex. Brown & Sons Incorporated to the effect that, as of the date hereof, the
Exchange Ratio is fair to the holders of Infrasonics Common Stock from a
financial point of view.
4.26 Pooling of Interests. Based upon consultation with its independent
accountants, neither Infrasonics nor any of its subsidiaries, nor any of their
respective directors, officers or, to the knowledge of Infrasonics,
stockholders, has taken any action that would interfere with NPB's ability to
account for the Merger as a pooling of interests.
A-16
<PAGE> 99
4.27 Accounts Receivable. The accounts receivable disclosed in the
Infrasonics SEC Documents as of June 30, 1995, and, with respect to accounts
receivable created since such date, disclosed in any subsequently filed
Infrasonics SEC Documents, or as accrued on the books of Infrasonics in the
ordinary course of business consistent with past practices in accordance with
generally accepted accounting principles since the last filed Infrasonics SEC
Documents 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 as disclosed in Infrasonics SEC Documents or accrued on such books is
sufficient to provide for any losses that may be sustained or realized, except
when such insufficiency would not be material.
4.28 Customers and Suppliers. As of the date hereof, no customers that
individually accounted for more than 5% of Infrasonics' gross revenues during
the 12-month period preceding the date hereof has indicated to Infrasonics that
it will stop, or decease the rate of, buying services or products of
Infrasonics, or to the knowledge of Infrasonics, has at any time on or after
June 30, 1995 ceased materially its usage of the products of Infrasonics. As of
the date hereof, no material supplier of Infrasonics has indicated that it will
stop, or decease the rate of, supplying materials, products or services to
Infrasonics. Infrasonics has not knowingly breached, so as to provide a benefit
to Infrasonics that was not intended by the parties, any agreement with, or
engaged in any fraudulent conduct with respect to, any customer or supplier of
Infrasonics.
4.29 Representations Complete. None of the representations or warranties
made by Infrasonics herein or in any Schedule hereto, including the Infrasonics
Disclosure Schedule, or certificate furnished by Infrasonics pursuant to this
Agreement, or the Infrasonics SEC Documents, 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 Infrasonics,
such omissions in the aggregate would not and do not have a Material Adverse
Effect on Infrasonics.
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 Infrasonics and its Board of Directors to
permit the consummation of the Merger in accordance with the terms hereof.
4.31 Voting Arrangements. There are no outstanding stockholder agreements,
voting trusts, proxies or other arrangements or understandings among the
stockholders of Infrasonics relating to the voting of their respective shares.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF NPB
Except as set forth in the disclosure letter delivered to Infrasonics at or
prior to the execution of this Agreement ("NPB Disclosure Schedule"), NPB
represents and warrants to Infrasonics 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
(to the extent the concept of good standing exists), 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 or in good standing 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 (to the extent the concept of good standing exists) 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 (to the extent the concept of
good standing exists), 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
A-17
<PAGE> 100
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 Infrasonics or its counsel
complete and correct copies of its Certificate of Incorporation and Bylaws.
5.2 Capitalization.
(a) As of March 1, 1996, the authorized capital stock of NPB consisted of
50,000,000 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 March 1, 1996,
28,735,156 shares of NPB Common Stock were issued and outstanding, stock options
to acquire 2,870,128 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
2,683,288 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 March 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 By-Laws
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 March 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 Infrasonics 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 as set forth above and pursuant to NPB's employee benefit plans
described in the Nellcor SEC Reports (as defined below) and as otherwise
provided in this Agreement and that certain Rights Agreement dated September 1,
1992 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. Except as
provided in this Agreement, NPB will have no obligation to issue, transfer or
sell any shares of its capital stock pursuant to an employee benefit plan or
otherwise. All outstanding shares of the capital stock 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, or as required in connection with the Stock Split, 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 an Agreement of Merger as required by the CCC and the
DGCL,
A-18
<PAGE> 101
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 By-Laws 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 years ended July 3, 1994 and July 2, 1995 and Quarterly Reports on Form
10-Q for the quarters ended October 1, 1995 and January 7, 1996 (all such
reports and amendments thereto, collectively, the "NPB SEC Reports"), and has
previously furnished or made available to Infrasonics 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
Infrasonics 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 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, since July 2, 1995 there has not
been (i) any change or event having a Material Adverse Effect on NPB, (ii) any
declaration, setting aside or payment of any dividend or distribution with
respect to the NPB Common Stock other than consistent with past practice, or
(iii) any material change in NPB's accounting principles, practices or methods.
5.6 Information in Registration Statement and Joint Proxy Statement. The
information relating to NPB and its subsidiaries to be contained in the
Registration Statement and the Joint 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 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.
A-19
<PAGE> 102
5.8 Opinion of Financial Advisor. NPB has received the opinion of
Robertson, Stephens & Company, L.P. to the effect that, as of the date hereof,
the Exchange Ratio is fair to the holders of NPB Common Stock from a financial
point of view.
5.9 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.
5.10 Ownership of Shares of Infrasonics 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 Infrasonics Common Stock, except for (i) shares of
Infrasonics Common Stock in the aggregate representing less than 1% of the
outstanding shares of Infrasonics Common Stock and (ii) the "standstill"
provisions of the Confidentiality Agreement relating to the acquisition of
Infrasonics Common Stock.
5.11 Complete Copies of Requested Documents. NPB has delivered or made
available (through public sources or directly) true and complete copies of each
document that has been requested by Infrasonics or its counsel in connection
with their legal and accounting review of NPB and its subsidiaries.
5.12 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.
5.13 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 Documents, 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.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
6.1 Conduct of Business by Infrasonics and NPB Pending the Merger. During
the period from the date of this Agreement and continuing until the Effective
Time, except as set forth in this Agreement, as agreed to in writing by the
other party hereto or as set forth in Section 6.1 of the Infrasonics Disclosure
Schedule or NPB Disclosure Schedule:
(a) the respective businesses of Infrasonics and its subsidiaries
shall be conducted only in the ordinary and usual course of business and
consistent with past practices;
(b) neither Infrasonics 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
A-20
<PAGE> 103
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 Infrasonics 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 Infrasonics Common Stock reserved for issuance upon the
exercise of the stock options pursuant to Infrasonics' stock plans or
warrants described in the Infrasonics Disclosure Schedule; (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 or dispositions of obsolete or worthless
assets; (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 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 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; provided that this subsection (c) shall not prohibit
Infrasonics from granting automatic stock options to its nonemployee
Directors as contemplated under the 1995 Stock Option Plan ("Automatic
Grants"), nor from granting non-director, non-officer employees stock
options in the ordinary course of business consistent with past practices.
(d) Infrasonics shall use its best efforts to preserve intact the
business organization of Infrasonics 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 Infrasonics or the public announcement thereof;
(e) neither Infrasonics 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) Infrasonics 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 Infrasonics 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 Infrasonics or NPB, respectively, herein untrue or incorrect;
(h) Infrasonics 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, other than in the ordinary course of business
consistent with past practice;
(i) Infrasonics and its subsidiaries shall not transfer to any person
or entity any Infrasonics Intellectual Property Rights other than in the
ordinary course of business consistent with past practice;
(j) Infrasonics and its subsidiaries shall not enter into or amend any
agreements pursuant to which any other party is granted exclusive
distribution, marketing or other exclusive rights of any type or scope with
respect to any of its products or technology;
A-21
<PAGE> 104
(k) Infrasonics 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 $60,000;
(l) Infrasonics and its subsidiaries shall not pay, discharge or
satisfy in an amount in excess of $40,000 in any one case or $200,000 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 financial
statements included in the Infrasonics SEC Reports or reasonably incurred
in connection with the transactions contemplated by this Agreement;
(m) Infrasonics 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) Infrasonics and its subsidiaries shall not materially reduce the
amount of any material insurance coverage provided by existing insurance
policies;
(o) Infrasonics and its subsidiaries shall not (i) hire any new
director level or officer level employee (except that it may hire a
replacement for any current director level or officer level employee if NPB
is given advance notice regarding such hiring decision), (ii) pay any
special bonus or special remuneration to any employee or director other
than Automatic Grants, (iii) increase the salaries, wage rates, fringe
benefits or other compensation of its 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 practice, or
(iv) enter into any contract, commitment or arrangement to do any of the
foregoing (i), (ii) or (iii) 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) Infrasonics 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) Infrasonics 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) Infrasonics 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 other than raw materials necessary
to conduct its business and in the ordinary course of business consistent
with past practices;
(s) Infrasonics 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) Infrasonics and its subsidiaries shall give all notices and other
information required to be given to the employees of Infrasonics, any
collective bargaining unit representing any group of employees of
Infrasonics, and any applicable government authority under the WARN Act,
the National Labor Relations Act, the Internal Revenue Code, the
Consolidated Omnibus Budget Reconciliation Act, and other applicable law in
connection with the transactions provided for in this Agreement;
A-22
<PAGE> 105
(u) Infrasonics 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 other than in the ordinary course
of business;
(v) Infrasonics and its subsidiaries shall not enter into any
contract, agreement, commitment or arrangement with respect to any of the
foregoing; and
(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; provided that the Stock Split and increase in
authorized Common Stock is expressly permitted.
6.2 Compensation Plans. During the period from the date of this Agreement
and continuing until the Effective Time, Infrasonics 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 consistent 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 Infrasonics 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 written 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, Infrasonics 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. Infrasonics 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 Infrasonics' and NPB's Auditors. Infrasonics shall use all
reasonable efforts to cause to be delivered to NPB a letter of Ernst & Young LLP
("Ernst & Young"), Infrasonics' independent auditors, and NPB shall use all
reasonable efforts to cause to be delivered to Infrasonics a letter of Price
Waterhouse, LLP ("Price Waterhouse"), NPB's independent auditors, 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
Infrasonics, 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 Infrasonics 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 Infrasonics 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 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
A-23
<PAGE> 106
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) 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 Infrasonics 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. Not later than ten days prior to the date of the mailing
of the Joint Proxy Statement referred to in Section 7.4, each of the parties
shall deliver to the other party letters identifying all persons who are
"affiliates" of such party for purposes of Rule 145 under the Securities Act.
Each of the parties shall use all reasonable efforts to cause each person named
in the letter delivered by it to deliver to the other party on or before such
mailing date a written "affiliates" agreement, in customary form, restricting
the disposition by such person of the shares of NPB Common Stock held by 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 shall not be exchanged by the Exchange Agent
for shares of NPB Common Stock pursuant to Section 3.2 until the parties have
received such agreement described in the preceding sentence.
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 Infrasonics 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.
6.8 Accounting Methods. Except as otherwise contemplated by Section 7.13,
Infrasonics shall not change its methods of accounting in effect at June 30,
1995, except as required by changes in generally accepted accounting principles
as concurred in by such party's independent auditors. Infrasonics will not
change its fiscal year.
ARTICLE VII
ADDITIONAL AGREEMENTS
7.1 Access and Information.
(a) Infrasonics 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 Infrasonics to NPB or furnished by NPB to
Infrasonics 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.
A-24
<PAGE> 107
7.2 No Solicitation of Transactions. From the date hereof until the
earlier of termination of this Agreement or consummation of the Merger, neither
Infrasonics 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 Infrasonics 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"). Infrasonics 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 Infrasonics, 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 after resolving SEC
comments on the preliminary Joint Proxy Statement, NPB and Infrasonics 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. Infrasonics shall furnish NPB
with all information concerning Infrasonics 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 Joint Proxy Statement; Stockholder Approval. Each of Infrasonics and
NPB, acting through their respective Boards of Directors, shall, in accordance
with applicable law and their respective Certificates or Articles of
Incorporation and By-Laws:
(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 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 Infrasonics or NPB, as applicable, 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 Infrasonics or NPB, as applicable,
under applicable law as advised by independent counsel, recommend approval
and adoption of this Agreement by the stockholders of Infrasonics or NPB,
as applicable, and include in the Joint Proxy Statement such
recommendations, and take all lawful action to solicit such approvals.
In addition, NPB shall present to its stockholders the Stock Split and
increase in authorized NPB Common Stock for the stockholders' approval. The vote
of NPB stockholders required to approve this Agreement shall be the favorable
vote of a majority of the shares of outstanding capital stock of NPB casting
votes thereon, and the vote of NPB stockholders required to approve the Stock
Split and increase in authorized NPB Common Stock shall be the favorable vote of
a majority of the shares of outstanding capital stock of NPB entitled to vote
thereon.
As promptly as practicable, the parties shall prepare and file with the SEC
a preliminary Joint Proxy Statement and, after consultation with each other,
respond to any comments of the SEC with respect to the preliminary Joint Proxy
Statement and cause the definitive Joint Proxy Statement to be mailed to
Infrasonics and NPB stockholders. At the stockholders' meeting of Infrasonics,
NPB shall vote or cause to be voted in
A-25
<PAGE> 108
favor of approval and adoption of this Agreement all shares of Infrasonics
Common Stock which it beneficially owns at such time. At the stockholders'
meeting of NPB, Infrasonics shall vote or cause to be voted in favor of approval
and adoption of (i) this Agreement, (ii) the Stock Split, and (iii) the increase
in authorized NPB Common Stock, all shares of NPB Common Stock which it
beneficially owns at such time. Whenever any event occurs which should be set
forth in an amendment or a supplement to the Joint 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 stockholders such
amendment or supplement. The Joint Proxy Statement, and all amendments and
supplements thereto, shall comply in all material respects with applicable law
and be in form and substance satisfactory to NPB and Infrasonics.
7.5 Nasdaq National Market. NPB shall timely notify the Nasdaq National
Market of the (a) NPB Common Stock to be issued pursuant to the Merger, (b)
Stock Split, and (c) increase in authorized shares of NPB Common Stock, and
shall cause such additional issued shares to be approved for listing.
7.6 Antitrust Laws. As promptly as practicable, Infrasonics 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, Infrasonics will furnish to NPB, and NPB
will furnish to Infrasonics, 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, Infrasonics will provide NPB, and
NPB will provide Infrasonics, 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 Infrasonics 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 Infrasonics that it is NPB's present intent to provide
after the Effective Time to continuing employees of Infrasonics 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. 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. NPB
currently expects that it will cause the merger of Infrasonics' 401(k) Plan with
NPB's 401(k) Plan after the Merger.
(b) Infrasonics hereby confirms to NPB that (i) all Infrasonics Stock
Options under the Infrasonics 1983 Employee Stock Option Plan, 1991 Stock Option
Plan and the 1995 Stock Option Plan shall carry over and become options to
acquire NPB Common Stock, (ii) the vesting and exercisability thereof shall not
automatically accelerate as a result of the transactions contemplated hereby,
and (iii) Infrasonics' Board of Directors shall not cause such options vesting
or exercisability to be accelerated.
(c) Infrasonics 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.
(d) NPB shall offer Jim Hitchin employment pursuant to the terms of an
Employment Agreement substantially in the form of Exhibit 7.7(d).
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 (or new substitute
options, warrants or convertible securities, as the case may be, shall be
granted) to purchase the number of shares of NPB
A-26
<PAGE> 109
Common Stock (rounded up to the nearest whole share) equal to the number of
shares of Infrasonics 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 Infrasonics 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 Infrasonics 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 or substituted
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 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 Infrasonics Stock Options, and at or prior to the Effective
Time, NPB shall take all corporate action necessary to reserve for issuance a
sufficient number of shares of NPB Common Stock for delivery upon exercise of
the options substituted pursuant to this Section 7.8.
7.9 Director and Officer Indemnification, Etc.
(a) For a period of four 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 Infrasonics (the "Indemnified Parties")
under the provisions existing on the date hereof of the Articles of
Incorporation, Bylaws and indemnification agreements of Infrasonics 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
Infrasonics' Articles of Incorporation and Bylaws and indemnification agreements
of Infrasonics. The provisions of this Section 7.9 shall be binding on NPB's
successors and assigns.
(b) For a period of four years after the Effective Time, Nellcor 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 Infrasonics' 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 Infrasonics 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.
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
A-27
<PAGE> 110
Infrasonics shall share equally the expenses incurred in connection with filings
under the HSR Act, printing and mailing the Joint 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 actions 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 Infrasonics 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
documents 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
Infrasonics shall take all such necessary action.
(b) NPB and Infrasonics 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 Infrasonics Accruals and Reserves. Prior to the Closing Date,
Infrasonics 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 Infrasonics'
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, Infrasonics 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. Infrasonics 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
Infrasonics 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, Infrasonics shall have provided NPB, as
agent for Infrasonics, 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 NPB to deliver such notice form to the
Internal Revenue Service on behalf of Infrasonics upon the Closing of the
Merger.
7.15 Takeover Statutes. If any Takeover Statute shall become applicable to
the transaction contemplated hereby, Infrasonics and the members of the Board of
Directors of Infrasonics 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, as would not
be consistent with the fiduciary obligations of the Board of Directors as
determined by independent counsel.
A-28
<PAGE> 111
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 Infrasonics 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 Infrasonics stockholders in
connection with the Merger shall have been received.
(c) This Agreement and the transactions contemplated hereby shall have
been approved and adopted (i) by the favorable vote of a majority of the
shares of outstanding capital stock of Infrasonics entitled to vote thereon
at a stockholders meeting at which a quorum is present in accordance with
Section 1201 of the CCC, and (ii) by the favorable vote of a majority of
the shares outstanding capital stock of NPB casting votes thereon at a
stockholders meeting at which a quorum is present in accordance with the
DGCL.
(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 Articles of Merger
with the Secretary of State of Delaware and California, 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 Infrasonics 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 Infrasonics
or its 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 Infrasonics 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
Infrasonics, and (ii) a letter, dated the Closing Date, addressed to
Infrasonics from Ernst & Young, in response to a letter from Infrasonics
summarizing the relevant facts and in form and substance reasonably
satisfactory to
A-29
<PAGE> 112
Infrasonics, a copy of which shall be given to NPB, in each case to the
effect 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 Infrasonics 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 be 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 Infrasonics Common Stock at
the Effective Time.
8.2 Conditions to Obligation of Infrasonics to Effect the Merger. The
obligation of Infrasonics 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 Infrasonics:
(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 Infrasonics shall have received a
certificate of the President or an Executive Vice President of NPB as to
the satisfaction of this condition.
(b) Infrasonics shall have received an opinion of Gray Cary Ware &
Freidenrich, counsel to Infrasonics, 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 Infrasonics 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, Infrasonics, affiliates of the foregoing
and others. In addition, Infrasonics 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
Infrasonics 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.
(e) NPB shall have offered Jim Hitchin employment on the terms and
conditions set forth in Exhibit 7.7(d).
8.3 Conditions to Obligation of NPB to Effect the Merger. The obligation
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) Infrasonics 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 Infrasonics 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
A-30
<PAGE> 113
Agreement, and NPB shall have received a Certificate of the Chairman and
President or a Vice President of Infrasonics as to the satisfaction of this
condition.
(b) Infrasonics 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 Infrasonics 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 Infrasonics 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 Infrasonics, NPB affiliates of the foregoing and others. In addition,
NPB shall have received the opinion, dated the Closing Date, of Gray Cary
Ware & Freidenrich, counsel for Infrasonics, 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 Infrasonics' 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 Infrasonics 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 Infrasonics or NPB:
(a) by mutual written consent of NPB and Infrasonics;
(b) by either NPB or Infrasonics if the Merger shall not have been
consummated on or before October 5, 1996;
(c) by Infrasonics 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 Infrasonics 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;
(d) by NPB if there shall have been any material breach of a
representation or warranty or material obligation of Infrasonics hereunder
and, if such breach is curable, such default shall not have been remedied
within 10 days after receipt by Infrasonics 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 Infrasonics shall be
making all reasonable attempts to cure such breach, unless the breach is
not susceptible of a cure;
A-31
<PAGE> 114
(e) by NPB if the Board of Directors of Infrasonics 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 Infrasonics 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 or Infrasonics, upon written notice to the other party, if
any approval of the stockholders of Infrasonics 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 Infrasonics or NPB, upon written notice to the other party, if
any approval of the stockholders of NPB 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 meting of
stockholders or at any adjournment thereof;
(i) by Infrasonics, 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 Infrasonics; or
(j) [Intentionally omitted.]
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 Infrasonics or their respective officers or directors (except as set forth in
Section 7.1(b) hereof and except for Sections 7.11, 9.3, 10.2, 10.6, 10.7, 10.8,
10.9 and 10.11 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 documents, 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) Infrasonics 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)
Infrasonics 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 Infrasonics 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(i); then NPB shall be entitled to
be paid by Infrasonics a fee in cash or immediately available funds of One
Million Five Hundred Thousand U.S. Dollars ($1,500,000.00) (the "Cancellation
Fee"). The payment of the Cancellation Fee shall
A-32
<PAGE> 115
be conditioned on there being no material breach of the representations,
warranties or obligations of NPB hereunder.
(b) Infrasonics 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. If
Infrasonics fails to pay any amount due NPB pursuant to this Section 9.3 when
due, Infrasonics 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 Infrasonics.
(c) In the event that either Infrasonics 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.
9.4 Amendment. This Agreement may be amended by action taken by NPB and
Infrasonics at any time before or after approval hereof by the stockholders of
Infrasonics, 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 2.1, 2.2,
2.3, 3.1, 3.2, 3.3, 3.4, 3.5, 3.7, 7.7(a), 7.8, 7.9, 7.11, the last sentence of
7.12(a), 10.1, 10.3, 10.4, 10.5, 10.6, 10.7 and 10.8 hereof shall survive beyond
the Effective Time, and the agreements of the "affiliates" delivered pursuant to
Section 6.7 shall survive beyond the Effective Time.
10.2 Brokers.
(a) Infrasonics represents and warrants to NPB that, (i) except for its
financial advisor, Alex. Brown & Sons 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 Infrasonics and
(ii) a true and complete copy of all engagement letters or agreements between
Infrasonics and its subsidiaries and Alex. Brown & Sons Incorporated and between
Infrasonics 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 Infrasonics 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 all engagement letters
A-33
<PAGE> 116
or agreements among NPB and its subsidiaries and Robertson, Stephens & Company,
L.P. and between NPB and any third party for whom any amounts payable are
contingent upon consummation of the Merger, have previously been delivered to
Infrasonics.
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:
NPB Incorporated
4280 Hacienda Drive
Pleasanton, California 94288
Attention: Laureen DeBuono, Esq.
Vice President of Human Resources, General
Counsel and Corporate Secretary
with a copy to:
Morrison & Foerster
Twelfth Floor
19900 MacArthur Boulevard
Irvine, California 92715
Attention: Robert M. Mattson, Jr., Esq.
(b) If to Infrasonics, to:
Infrasonics, Inc.
3911 Sorrento Valley Boulevard
San Diego, California 92121
Attention: Jim Hitchin
with a copy to:
Gray Cary Ware & Freidenrich
4365 Executive Drive, Suite 1600
San Diego, California 92121
Attention: Douglas J. Rein, 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 Exhibit
and other documents and instruments referred to herein) and the Confidentiality
Agreement (a) constitute the entire agreement and supersede all other prior
agreements and understandings, both written and oral, among the parties or any
of them, with respect to the subject matter hereof and thereof; (b) except for
Sections 7.7(a) and (d), 7.8 and 7.9, 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, as the case may be, 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.
A-34
<PAGE> 117
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.
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 and warranties of NPB
and Infrasonics contained herein or in the certificates or other documents
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 Infrasonics, the written
consent of the Chief Executive Officer of NPB or Infrasonics, as the case may
be, shall be sufficient to constitute such consent.
IN WITNESS WHEREOF, each of NPB and Infrasonics 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/ MICHAEL DOWNEY
Name: Michael Downey
Title: Executive Vice President and Chief Financial Officer
INFRASONICS, INC.
By: /s/ JIM HITCHIN
Name: Jim Hitchin
Title: Chairman and President
A-35
<PAGE> 118
APPENDIX B
ROBERTSON, STEPHENS OPINION
<PAGE> 119
LOGO
May 14, 1996
PRIVILEGED AND CONFIDENTIAL
Board of Directors
Nellcor Puritan Bennett Incorporated
4280 Hacienda Drive
Pleasanton, CA 94588
Members of the Board:
You have asked our opinion with respect to the fairness to the shareholders
of Nellcor Puritan Bennett Incorporated ("NPB") from a financial point of view,
as of the date hereof and subject to the assumptions set forth below, of the
Exchange Ratio (as defined below), in the proposed merger of Infrasonics, Inc.
("Infrasonics") with and into NPB, pursuant to the Agreement and Plan of Merger,
dated as of March 8, 1996, and Amended as of May 14, 1996 (the "Agreement").
Under the terms of the Agreement, Infrasonics shall be merged with and into NPB.
NPB shall be the surviving corporation and the separate existence of Infrasonics
shall cease (the "Merger"). In the Merger, each outstanding share of the common
stock of Infrasonics will be converted into the right to receive a fraction of a
share of Common Stock of NPB (the "Exchange Ratio") determined in accordance
with the Agreement. The Initial Exchange Ratio is 0.095, which is subject to
adjustment. The NPB Board of Directors has agreed that if the Closing Market
Value, as defined in the Agreement, is materially below $39.77 (which equates to
an exchange ratio of 0.157) then NPB will resolicit proxies in connection with
the Merger. For purposes of this opinion, the "Exchange Ratio" refers to the
"Exchange Ratio" as defined in the Agreement up to a maximum 0.157. Outstanding
options to acquire shares of Infrasonics common stock will be converted into
options to acquire shares of NPB common stock, adjusted for the Exchange Ratio.
The Merger is intended to qualify as a tax-free reorganization and to be
accounted for as a "pooling of interests." The terms and conditions of the
Merger are set out more fully in the Agreement.
For purposes of this opinion we have: (i) reviewed financial information on
NPB and Infrasonics furnished to us by both companies, including certain
internal financial analyses and forecasts prepared by the management of NPB and
Infrasonics; (ii) reviewed publicly available information; (iii) held
discussions with the management of NPB and Infrasonics concerning the
businesses, past and current business operations, financial condition and future
prospects of both companies, independently and combined, including certain
information provided by the management of NPB concerning potential cost savings
and synergies that could result from the Merger; (iv) reviewed the Agreement;
(v) reviewed the stock price and trading histories of both companies; (vi)
reviewed the exchange ratio implied by historical stock prices of the two
companies; (vii) reviewed the contribution by each company to pro forma combined
revenue, gross income, operating income, pretax income and net income; (viii)
reviewed the valuations of publicly traded companies that we deemed comparable
to Infrasonics; (ix) compared the financial terms of the Merger with other
transactions that we deemed relevant; (x) prepared discounted cash flow analyses
of Infrasonics; (xi) analyzed the pro forma earnings per share of the combined
company; and (xii) made such other studies and inquiries, and reviewed such
other data, as we deemed relevant.
555 CALIFORNIA STREET SAN FRANCISCO 94104 415-781-9700
INVESTMENT BANKERS MEMBER OF ALL MAJOR EXCHANGES
A LIMITED LIABILITY COMPANY
B-1
<PAGE> 120
In connection with rendering our opinion, however, we have not
independently verified any of the foregoing information and have assumed that
all such information is complete and accurate in all material respects.
Furthermore, we did not obtain any independent appraisal of the properties or
assets and liabilities of Infrasonics or of any of its subsidiaries, nor were we
furnished with any such evaluations or appraisals. With respect to the financial
and operating forecasts (and the assumptions and bases therefor) of NPB and
Infrasonics that we have reviewed, we have assumed that such forecasts have been
reasonably prepared and reflect the best available estimates and judgments of
the respective managements and that such projections and forecasts will be
realized in the amounts and in the time periods currently estimated by the
managements of NPB and Infrasonics. In addition, we have relied upon estimates
and judgments of NPB and Infrasonics managements as to the future financial
performance of both companies, including the cost savings and synergies
resulting from the Merger. The forecasts, estimates and judgments of NPB and
Infrasonics on which we relied constitute forward-looking information, are based
on numerous factors and events beyond the control of the parties, and are
inherently subject to significant uncertainty. Accordingly, actual future
results may be materially different from those projected. We also have assumed,
with your consent, that the Merger will be accounted for as a pooling of
interests under generally accepted accounting principles. While we believe that
our review, as described within, is an adequate basis for the opinion that we
express, this opinion is necessarily based upon market, economic, and other
conditions that exist and can be evaluated as of the date of this letter, and on
information available to us as of the date hereof.
Robertson, Stephens & Company is familiar with NPB, having provided certain
investment banking services to NPB from time to time, including acting as an
underwriter for the initial public offering of shares of the common stock of
Nellcor (NPB's predecessor before the merger with Puritan-Bennett Corporation)
in May 1987, and acting as financial advisor to Nellcor in its merger with
Puritan-Bennett Corporation in August 1995. Robertson, Stephens & Company
maintains a market in shares of the common stock of NPB. Furthermore, Robertson,
Stephens & Company has acted as financial advisor to NPB in connection with the
Merger for which fees are due and payable contingent upon the closing of the
Merger.
Our opinion is directed to the Board of Directors of the Company and is not
intended to be and does not constitute a recommendation to any stockholder of
the Company as to how such stockholder should vote on the proposed Merger. We
hereby consent, however, to the inclusion of this opinion as an exhibit to any
proxy or registration statement distributed in connection with the Merger.
Based upon and subject to the foregoing considerations and assumptions, it
is our opinion, as investment bankers, that, as of the date hereof, the Exchange
Ratio is fair to the shareholders of NPB from a financial point of view.
Very truly yours,
ROBERTSON, STEPHENS & COMPANY, LLC
By: Robertson, Stephens & Company
Group, L.L.C.
B-2
<PAGE> 121
APPENDIX C
ALEX. BROWN OPINION
<PAGE> 122
LOGO
May 14, 1996
Board of Directors
Infrasonics, Inc.
3991 Sorrento Valley Boulevard
San Diego, CA 92121
Dear Board of Directors:
Infrasonics, Inc. (the "Company") and Nellcor Puritan Bennett Incorporated
(the "Buyer") have entered into an Agreement and Plan of Merger, dated as of
March 8, 1996, proposed to be amended as of May 14, 1996 (the "Agreement"),
pursuant to which the Company will be merged with the Buyer in a transaction
(the "Merger") in which each outstanding share of the Company's common stock, no
par value (the "Company Common Stock"), will be converted into the right to
receive shares of the common stock of the Buyer, par value $0.001 (the "Buyer
Common Stock").
Pursuant to the Agreement, each share of Company Common Stock shall be
converted into the right to receive that fraction of a share of Buyer 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 $65.77 and less than or equal to $75.77, the Exchange Ratio will be 0.095; 2)
if the Closing Market Value is greater than $75.77, the Exchange Ratio will be
the quotient of (i) $7.20 divided by (ii) the Closing Market Value, rounded to
the nearest one-one thousandth of a share; and 3) if the Closing Market Value is
less than $65.77 the Exchange Ratio will be the quotient of (i) $6.25 divided by
(ii) the Closing Market Value, rounded to the nearest one-one thousandth of a
share. 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
stockholders of the Company. You have requested our opinion as to whether the
Exchange Ratio is fair, from a financial point of view, to the Company's
stockholders.
Alex. Brown & Sons Incorporated ("Alex. Brown"), as a customary part of its
investment banking business, is engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, private placements and valuations for estate, corporate and other
purposes. We have acted as financial advisor to the Board of Directors of the
Company in connection with the transaction described above and will receive a
fee for our services, a portion of which is contingent upon the consummation of
the Merger. Alex. Brown regularly publishes research reports regarding the
medical equipment and devices industry and the businesses and securities of
publicly owned companies in that industry. In the ordinary course of business,
Alex. Brown may actively trade the securities of both the Company and the Buyer
for our own account and the account of our customers and, accordingly, may at
any time hold a long or short position in securities of the Company and the
Buyer.
In connection with our opinion, we have reviewed certain publicly available
financial information concerning the Buyer and the Company and internal
financial analyses and other information regarding the Company, furnished to us
by the Company. We have also held discussions with the senior management of the
Company regarding the business and prospects of the Company and the joint
prospects of the combined company. In addition, we have (i) reviewed reported
prices and trading activity for the Company Common
ALEX. BROWN & SONS INCORPORATED
48TH FLOOR - 101 CALIFORNIA STREET - SAN FRANCISCO, CALIFORNIA 94111
C-1
<PAGE> 123
Stock and for the Buyer Common Stock, (ii) compared certain financial and stock
market information for the Company and the Buyer with similar information for
certain comparable companies whose securities are publicly traded, (iii)
reviewed the financial terms of certain recent business combinations which we
deemed comparable in whole or in part, (iv) reviewed the terms of the Agreement
and a draft of an amendment to the Agreement dated May 14, and (v) performed
such other studies and analyses and considered such other factors as we deemed
appropriate.
We have not independently verified the information described above and for
purposes of this opinion have assumed the accuracy, completeness and fairness
thereof. With respect to information relating to the prospects of the Company,
we have assumed that such information reflects the best currently available
estimates and judgments of management of the Company as to the likely future
financial performance of the Company and of the combined company. In addition,
we have not made an independent evaluation or appraisal of the assets of the
Company and Buyer, nor have we been furnished with any such evaluations or
appraisals. Our opinion is based on market, economic and other conditions as
they exist and can be evaluated as of the date of this letter.
Our advisory services and the opinion expressed herein were prepared for
the use of the Board of Directors of the Company and do not constitute a
recommendation to the Company's stockholders as to how they should vote at the
stockholders' meeting in connection with the Merger. We hereby consent, however,
to the inclusion of this opinion as an exhibit to any proxy or registration
statement distributed in connection with the Merger.
Based upon and subject to the foregoing, it is our opinion that, as of the
date of this letter, the Exchange Ratio is fair, from a financial point of view,
to the Company's stockholders.
Very truly yours,
ALEX. BROWN & SONS INCORPORATED
C-2
<PAGE> 124
APPENDIX D
FORM OF AMENDMENT TO
NELLCOR PURITAN BENNETT
CERTIFICATE OF INCORPORATION
<PAGE> 125
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
Nellcor Puritan Bennett Incorporated, a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of Nellcor Puritan
Bennett Incorporated resolutions were duly adopted setting forth a proposed
amendment of the Restated Certificate of Incorporation of said corporation,
declaring said amendment to be advisable and calling a meeting of the
stockholders of said corporation for consideration thereof. The resolutions
setting forth the proposed amendment are as follows:
RESOLVED, that the Restated Certificate of Incorporation of this Company be
amended by changing the Article thereof numbered "Fourth" so that, as amended,
said Article shall be and read as follows:
A. The total number of shares of all classes of stock that the Company
is authorized to issue is one hundred fifty five million (155,000,000)
shares, consisting of one hundred fifty million (150,000,000) shares of
Common Stock, with a par value of one-tenth of one cent ($0.001), and five
million (5,000,000) shares of Preferred Stock, with a par value of
one-tenth of one cent ($0.001).
B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is authorized to fix the number of shares of
any series of Preferred Stock and to determine the designation of any such
series. The Board of Directors is also authorized to determine or alter the
rights, preferences, privileges and restrictions granted to or imposed upon
any wholly unissued series of Preferred Stock and, within the limits and
restrictions stated in any resolution or resolutions of the Board of
Directors originally fixing the number of shares constituting any series,
to increase or decrease (but not below the number of shares of such series
then outstanding) the number of shares of any such series subsequent to the
issue of shares of that series.
RESOLVED FURTHER, that upon the filing of the Certificate of Amendment with
the Secretary of State of the State of Delaware at 4:30 p.m. Eastern Time on
such date (the "Effective Date"), each share of the Company's Common Stock
issued and outstanding and each share of the Company's Common Stock issued and
held in the treasury of the Company as of the record date shall be converted
into two shares, fully paid and nonassessable, of Common Stock, with the same
rights and privileges, and each security exchangeable for or convertible into
one share of Common Stock shall be converted into the right to receive two
shares of Common Stock.
SECOND: That thereafter, pursuant to resolution of its Board of Directors,
a special meeting of the stockholders of said Corporation was duly called and
held, upon notice and in accordance with Section 222 of the General Corporation
Law of the State of Delaware at which meeting the necessary number of shares as
required by statute were voted in favor of the amendment.
THIRD: That said amendments were duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, Nellcor Puritan Bennett Incorporated has caused this
certificate to be signed by C. Raymond Larkin, Jr., its President and Chief
Executive Officer and authorized executive officer, this day of ,
1996.
By:
C. RAYMOND LARKIN, JR.,
President and Chief Executive
Officer
D-1
<PAGE> 126
APPENDIX E
CHAPTER 13 OF THE
CALIFORNIA CORPORATIONS CODE
<PAGE> 127
CHAPTER 13 OF THE CALIFORNIA CORPORATIONS CODE
SEC. 1300 CORPORATE PURCHASE OF DISSENTING SHARES
(a) If the approval of the outstanding shares (Section 152) of a
corporation is required for a reorganization under subdivisions (a) and (b) or
subdivision (e) or (f) of Section 1201, each shareholder of the corporation
entitled to vote on the transaction and each shareholder of a subsidiary
corporation in a short-form merger may, by complying with this chapter, require
the corporation in which the shareholder holds shares to purchase for cash at
their fair market value the shares owned by the shareholder which are dissenting
shares as defined in subdivision (b). The fair market value shall be determined
as of the date before the first announcement of the terms of the proposed
reorganization or short-form merger, excluding any appreciation or depreciation
in consequence of the proposed action, but adjusted for any stock split, reverse
stock split, or share dividend which becomes effective thereafter.
(b) As used in this chapter, "dissenting shares" means shares which come
within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or
short-form merger either (A) listed on any national securities exchange
certified by the Commission of Corporations under the subdivision (o) of
Section 25100 or (B) listed on the list of OTC margin stocks issued by the
Board of Governors of the Federal Reserve System, and the notice of meeting
of shareholders to act upon the reorganization summarizes this section and
Sections 1301, 1302, 1303 and 1304; provided, however, that his provision
does not apply to any shares with respect to which there exists any
restriction on transfer imposed by the corporation or by any law or
regulation; and provided, further, that this provision does not apply to
any class of shares described in subparagraph (A) or (B) if demands for
payment are filed with respect to 5 percent or more of the outstanding
shares of that class.
(2) Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (A) were not voted
in favor of the reorganization or, (B) if described in subparagraph (A) or
(B) of paragraph (1) (without regard to the provisos in that paragraph),
were voted against the reorganization, or which were held of record on the
effective date of a short-form merger; provided, however, that subparagraph
(A) rather than subparagraph (B) of this paragraph applies in any case
where the approval required by Section 1201 is sought by written consent
rather than at a meeting.
(3) Which the dissenting shareholder has demanded that the corporation
purchase at their fair market value, in accordance with Section 1301.
(4) Which the dissenting shareholder has submitted for endorsement, in
accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the
recordholder of dissenting shares and includes a transferee of record.
History: Amended by Stats 1993 Ch 543 sec. 13.
SEC. 1301 NOTICE TO DISSENTING SHAREHOLDERS; DEMAND FOR PURCHASE OF SHARES
(a) If, in the case of a reorganization, any shareholders of a corporation
have a right under Section 1300, subject to compliance with paragraphs (3) and
(4) of subdivision (b) thereof, to require the corporation to purchase their
shares for cash, such corporation shall mail to each such shareholder a notice
of the approval of the reorganization by its outstanding shares (Section 152)
within 10 days after the date of such approval, accompanied by a copy of
Sections 1300, 1302, 1303, 1304 and this section, a statement of the price
determined by the corporation to represent the fair market value of the
dissenting shares, and a brief description of the procedure to be followed if
the shareholder desires to exercise the shareholder's right under such sections.
The statement of price constitutes an offer by the corporation to purchase at
the price stated any
E-1
<PAGE> 128
dissenting shares as defined in subdivision (b) of Section 1300, unless they
lose their status as dissenting shares under Section 1309.
(b) Any shareholder who has a right to require the corporation to purchase
the share-holder's shares for cash under Section 1300, subject to compliance
with paragraphs (3) and (4) of subdivision (b) thereof, and who desires the
corporation to purchase such shares shall make written demand upon the
corporation for the purchase of such shares and payment to the shareholder in
cash of their fair market value. The demand is not effective for any purpose
unless it is received by the corporation or any transfer agent thereof (1) in
the case of shares described in clause (i) or (ii) of paragraph (1) of
subdivision (b) of Section 1300 (without regard to the provisos in that
paragraph), not later than the date of the shareholders' meeting to vote upon
the reorganization, or (2) in any other case within 30 days after the date on
which the notice of the approval by the outstanding shares pursuant to
subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder.
(c) The demand shall state the number and class of the shares held of
record by the shareholder which the shareholder demands that the corporation
purchase and shall contain a statement of what such shareholder claims to be the
fair market value of those shares as of the day before the announcement of the
proposed reorganization or short-form merger. The statement of fair market value
constitutes an offer by the shareholder to sell the shares at such price.
History: Amended by Stats 1980 Ch 1155.
SEC. 1302 SHAREHOLDER CERTIFICATES OR NOTICE; TIME LIMIT FOR SUBMISSION
Within 30 days after the date on which notice of the approval by the
outstanding shares or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder, the shareholder shall submit to the corporation at
its principal office or at the office of any transfer agent thereof, (a) if the
shares are certificated securities, the shareholder's certificates representing
any shares which the shareholder demands that the corporation purchase, to be
stamped or endorsed with a statement that the shares are dissenting shares or to
be exchanged for certificates of appropriate denomination so stamped or endorsed
or (b) if the shares are uncertificated securities, written notice of the number
of shares which the shareholder demands that the corporation purchase. Upon
subsequent transfers of the dissenting shares on the books of the corporation,
the new certificates, initial transaction statement, and other written
statements issued therefor shall bear a like statement, together with the name
of the original dissenting holder of the shares.
History: Amended by Stats 1986 Ch 766 sec. 23.
SEC. 1303 AGREED PRICE; INTEREST; FILING OF AGREEMENTS; TIME FOR PAYMENT
(a) If the corporation and the shareholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting
shareholder is entitled to the agreed price with interest thereon at the legal
rate on judgments from the date of the agreement. Any agreements fixing the fair
market value of any dissenting shares as between the corporation and the holders
thereof shall be filed with the secretary of the corporation.
(b) Subject to the provisions of Section 1306, payment of the fair market
value of dissenting shares shall be made within 30 days after the amount thereof
has been agreed or within 30 days after any statutory or contractual conditions
to the reorganization are satisfied, whichever is later, and in the case of
certificated securities, subject to surrender of the certificates therefor,
unless provided otherwise by agreement.
History: Amended by Stats 1987 Ch. 766 sec. 24.
SEC. 1304 ACTION TO DETERMINE WHETHER SHARES ARE DISSENTING OR TO DETERMINE FAIR
MARKET VALUE
(a) If the corporation denies that the shares are dissenting shares, or the
corporation and the shareholder fail to agree upon the fair market value of the
shares, then the shareholder demanding purchase of such shares as dissenting
shares or any interested corporation, within six months after the date on which
notice of the approval by the outstanding shares (Section 152) or notice
pursuant to subdivision (i) of Section 1110 was mailed to the shareholder, but
not thereafter, may file a complaint in the superior court of the proper county
E-2
<PAGE> 129
praying the court to determine whether the shares are dissenting shares or the
fair market value of the dissenting shares or both or may intervene in any
action pending on such a complaint.
(b) Two or more dissenting shareholders may join as plaintiffs or be joined
as defendants in any such action and two or more such actions may be
consolidated.
(c) On the trial of the action, the court shall determine the issues. If
the status of the shares as dissenting shares is an issue, the court shall first
determine that issue. If the fair market value of the dissenting shares is an
issue, the court shall determine, or shall appoint one or more impartial
appraisers to determine, the fair market value of the shares.
History: Enacted by Stats 1975 Ch 682.
SEC. 1305 APPRAISER'S REPORT
(a) If the court appoints an appraiser or appraisers, they shall proceed
forthwith to determine the fair market value per share. Within a time fixed by
the court, the appraisers, or a majority of them, shall make and file a report
in the office of the clerk of the court. Thereupon, on the motion of any party,
the report shall be submitted to the court and considered on such evidence as
the court considers relevant. If the court finds the report reasonable, the
court may confirm it.
(b) If a majority of the appraisers appointed fail to make and file a
report within 10 days from the date of their appointment or within such further
time as may be allowed by the court or the report is not confirmed by the court,
the court shall determine the fair market value of the dissenting shares.
(c) Subject to the provisions of Section 1306, judgment shall be rendered
against the corporation for payment of an amount equal to the fair market value
of each dissenting share multiplied by the number of dissenting shares which any
dissenting shareholder who is a party, or who has intervened, is entitled to
require the corporation to purchase, with interest thereon at a legal rate from
the date on which judgment was entered.
(d) Any such judgment shall be payable forthwith with respect to
uncertificated securities, and, with respect to certificated securities, only
upon the endorsement and delivery to the corporation of the certificates for the
shares described in the judgment. Any party may appeal from the judgment.
(e) The costs of the action, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable, but, if the appraisal costs exceeds the price offered
by the corporation, the corporation shall pay the costs (including in the
discretion of the court attorneys' fees, fees of expert witnesses and interest
at the legal rate on judgments from the date of compliance with Sections 1300,
1301 and 1302 if the value awarded by the court for the shares is more than 125
percent of the price offered by the corporation under subdivision (a) of Section
1301).
History: Amended by Stats 1986 Ch 766 sec. 25.
SEC. 1306 HOLDERS OF DISSENTING SHARES AS CREDITORS
To the extent that the provisions of Chapter 5 prevent the payment to any
holders of dissenting shares of their fair market value, they shall become
creditors of the corporation for the amount thereof together with interest at
the legal rate on judgments until the date of payment, but subordinate to all
other creditors in any liquidation proceeding, such debt to be payable when
permissible under the provisions of Chapter 5.
History: Enacted by Stats 1975 Ch 682.
SEC. 1307 DIVIDENDS ON DISSENTING SHARES AFTER APPROVAL DATE
Cash dividends declared and paid by the corporation upon the dissenting
shares after the date of approval of the reorganization by the outstanding
shares (Section 152) and prior to payment for the shares by the corporation
shall be credited against the total amount to be paid by the corporation
therefor.
History: Enacted by Stats 1975 Ch 682.
E-3
<PAGE> 130
SEC. 1308 RIGHTS IN DISSENTING SHARES PRIOR TO DETERMINATION OF FAIR MARKET
VALUE
Except as expressly limited in this chapter, holders of dissenting shares
continue to have all the rights and privileges incident to their shares, until
the fair market value of their shares is agreed upon or determined. A dissenting
shareholder may not withdraw a demand for payment unless the corporation
consents thereto.
History: Enacted by Stats 1975 Ch. 682.
SEC. 1309 TERMINATION OF DISSENTING SHAREHOLDER STATUS
Dissenting shares lose their status as dissenting shares and the holders
thereof cease to be entitled to require the corporation to purchase their shares
upon the happening of any of the following:
(a) The corporation abandons the reorganization. Upon abandonment of the
reorganization, the corporation shall pay on demand to any dissenting
shareholder who has initiated proceedings in good faith under this chapter all
necessary expenses incurred in such proceedings and reasonable attorneys' fees.
(b) The shares are transferred prior to their submission for endorsement in
accordance with Section 1302 or are surrendered for conversion into shares of
another class in accordance with the articles.
(c) The dissenting shareholder and the corporation do not agree upon the
status of the shares as dissenting shares or upon the purchase price of the
shares, and neither files a complaint or intervenes in a pending action as
provided in Section 1304, within six months after the date on which notice of
the approval by the outstanding shares or notice pursuant to subdivision (i) of
Section 1110 was mailed to the shareholder.
(d) The dissenting shareholder, with the consent of the corporation,
withdraws the shareholder's demand for purchase of the dissenting shares.
History: Enacted by Stats 1975 Ch 682.
SEC. 1310 LITIGATION; SUSPENSION OF PROCEEDINGS
If litigation is instituted to test the sufficiency or regularity of the
votes of the shareholders in authorizing a reorganization, any proceedings under
Sections 1304 and 1305 shall be suspended until final determination of such
litigation.
History: Enacted by Stats 1975 Ch 682.
SEC. 1311 SHARES SPECIFYING AMOUNT IN EVENT OF MERGER OR REORGANIZATION
This chapter, except Section 1312, does not apply to classes of shares
whose terms and provisions specifically set forth the amount to be paid in
respect to such shares in the event of a reorganization or merger.
History: Amended by Stats 1988 Ch 919 sec. 8.
E-4
<PAGE> 131
SEC. 1312 ATTACK ON VALIDITY OF MERGER OR REORGANIZATION
(a) No shareholder of a corporation who has a right under this chapter to
demand payment of cash for the shares held by the shareholder shall have any
right at law or in equity to attack the validity of the reorganization or
short-form merger, or to have the reorganization or short-form merger set aside
or rescinded, except in an action to test whether the number of shares required
to authorize or approve the reorganization have been legally voted in favor
thereof; but any holder of shares of a class whose terms and provisions
specifically set forth the amount to be paid in respect to them in the event of
a reorganization or short-form merger is entitled to payment in accordance with
those terms and provisions or, if the principal terms of the reorganization are
approved pursuant to subdivision (b) of Section 1202, is entitled to payment in
accordance with the terms and provisions of the approved reorganization.
(b) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, subdivision (a) shall not
apply to any shareholder of such party who has not demanded payment of cash for
such shareholder's shares pursuant to this chapter; but if the shareholder
institutes any action to attack the validity of the reorganization or short-form
merger or to have the reorganization or short-form merger set aside or
rescinded, the shareholder shall not thereafter have any right to demand payment
of cash for the shareholder's shares pursuant to this chapter. The court in any
action attacking the validity of the reorganization or short-form merger or to
have the reorganization or short-form merger set aside or rescinded shall not
restrain or enjoin the consummation of the transaction except upon 10 days'
prior notice to the corporation and upon a determination by the court that
clearly no other remedy will adequately protect the complaining shareholder or
the class of shareholders of which such shareholder is a member.
(c) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, in any action to attack the
validity of the reorganization or short-form merger or to have the
reorganization or short-form merger set aside or rescinded, (1) a party to a
reorganization or short-form merger which controls another party to the
reorganization or short-form merger shall have the burden of proving that the
transaction is just and reasonable as to the shareholders of the controlled
party, and (2) a person who controls two or more parties to a reorganization
shall have the burden of proving that the transaction is just and reasonable as
to the shareholders of any party so controlled.
History: Amended by Stats 1988 Ch 919 sec. 8.
E-5
<PAGE> 132
APPENDIX F
ILLUSTRATIVE CALCULATIONS OF EXCHANGE RATIO AND
TOTAL SHARES OF NPB STOCK
ISSUABLE IN MERGER
<PAGE> 133
APPENDIX F
Based on the April 29, 1996 capitalization of NPB and Infrasonics, 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 Infrasonic shareholders.
The information presented in this Appendix F is not intended as an estimate
or projection of the Closing Market Value or the number of shares of NPB Common
Stock that an Infrasonics 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
Special Meetings. 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 Infrasonics Common Stock. As a result, the market value of NPB Common
Stock that the shareholders of Infrasonics ultimately receive could be more or
less than its market value on the date of this Joint Proxy Statement/Prospectus
or on the date of the Special Meetings. NPB stockholders and Infrasonics
shareholders are advised to obtain current market quotations for Infrasonics
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.
<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 INFRASONICS
VALUE RATIO TO BE ISSUED(1) INFRASONIC SHAREHOLDERS(2) COMMON STOCK
------ -------- --------------- -------------------------- -----------------
<S> <C> <C> <C> <C>
$40.00 0.156x 1,652,819 5.4% $6.25
$42.00 0.149x 1,574,113 5.2% 6.25
$44.00 0.142x 1,502,563 5.0% 6.25
$46.00 0.136x 1,437,234 4.8% 6.25
$48.00 0.130x 1,377,349 4.6% 6.25
$50.00 0.125x 1,322,255 4.4% 6.25
$52.00 0.120x 1,271,399 4.2% 6.25
$54.00 0.116x 1,224,310 4.1% 6.25
$56.00 0.112x 1,160,585 3.9% 6.25
$58.00 0.108x 1,139,875 3.8% 6.25
$60.00 0.104x 1,101,879 3.7% 6.25
$62.00 0.101x 1,066,335 3.6% 6.25
$64.00 0.098x 1,033,012 3.5% 6.25
$66.00 0.095x 1,005,211 3.4% 6.27
$68.00 0.095x 1,005,211 3.4% 6.46
$70.00 0.095x 1,005,211 3.4% 6.65
$72.00 0.095x 1,005,211 3.4% 6.84
$74.00 0.095x 1,005,211 3.4% 7.03
$76.00 0.095x 1,002,130 3.4% 7.20
</TABLE>
- ---------------
(1) Based on 10,783,400 shares of Infrasonics Common Stock issued and
outstanding as of April 29, 1996. Excludes outstanding options to purchase
such stock.
(2) Based on 28,790,761 shares of NPB Common Stock issued and outstanding as of
April 29, 1996. Excludes outstanding options to purchase such stock.
<PAGE> 134
INFRASONICS, INC.
3911 SORRENTO VALLEY BOULEVARD
SAN DIEGO, CALIFORNIA 92121
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE SPECIAL
MEETING OF SHAREHOLDERS OF INFRASONICS, INC. TO BE HELD ON JUNE 27, 1996.
The undersigned hereby appoints Jim Hitchin and Fred McGee, each with full
power of substitution, as proxy of the undersigned, to attend the Special
Meeting of Shareholders of INFRASONICS, INC. (the "Company") to be held at the
offices of the Company, 3911 Sorrento Valley Boulevard, San Diego, California
92121, commencing at 11:00 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 Proposal 1. This Proxy
confers authority for the above named persons to vote in his or her 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.
[SEE REVERSE SIDE]
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE> 135
<TABLE>
<S> <C>
/X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE
</TABLE>
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
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.
<PAGE> 136
NELLCOR PURITAN BENNETT INCORPORATED
4280 HACIENDA DRIVE
PLEASANTON, CALIFORNIA 94588
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE
P SPECIAL MEETING OF STOCKHOLDERS OF NELLCOR PURITAN BENNETT
INCORPORATED TO BE HELD ON JUNE 27, 1996
R
The undersigned hereby appoints C. Raymond Larkin, Laureen DeBuono and
O Michael Downey, each with full power of substitution, as proxy of the
undersigned, to attend the Special Meeting of Stockholders of NELLCOR PURITAN
X BENNETT INCORPORATED (the "Company") to be held at the offices of the
Company, 4280 Hacienda Drive, Pleasanton, California 94588, commencing at
Y 11:00 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, THIS PROXY
WILL CONFER DISCRETIONARY AUTHORITY AND WILL BE VOTED FOR APPROVAL OF
PROPOSALS 1 AND 2. THIS PROXY CONFERS AUTHORITY FOR THE ABOVE NAMED PERSONS
TO VOTE IN HIS OR HER 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 THE MEETING. A STOCKHOLDER HAS
THE RIGHT TO APPOINT A PERSON, WHO NEED NOT BE A STOCKHOLDER, TO ATTEND AND
ACT ON HIS OR HER BEHALF AT THE MEETING, OTHER THAN THE PERSON DESIGNATED IN
THIS FORM OF PROXY. SUCH RIGHT MAY BE EXERCISED BY INSERTING THE NAME OF
SUCH PERSONS IN THE BLANK SPACE PROVIDED.
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
<PAGE> 137
DETACH HERE
/X/ Please mark
votes as in
this example.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS:
1. APPROVAL of the Merger Proposal pursuant to which Infrasonics, Inc. would
merge into the Company.
FOR AGAINST ABSTAIN
/ / / / / /
2. APPROVAL of an increase in the authorized number of shares and a
two-for-one stock split of the Company's Common Stock.
FOR AGAINST ABSTAIN
/ / / / / /
MARK HERE / /
FOR ADDRESS
CHANGE AND
NOTE AT LEFT
Please sign, date and return the proxy card promptly
in the enclosed envelope.
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
corporation 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.
Signature ___________________ Date _____________
Signature ___________________ Date _____________
