<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
----------------
INCONTROL, INC.
(NAME OF SUBJECT COMPANY)
PEGASUS ACQUISITIONS CORP.
AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF
GUIDANT CORPORATION
(BIDDERS)
----------------
COMMON STOCK, PAR VALUE $0.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
45336L103
(CUSIP NUMBER OF CLASS OF SECURITIES)
----------------
J.B. KING, ESQ.
GUIDANT CORPORATION
111 MONUMENT CIRCLE
INDIANAPOLIS, IN 46204-5129
(317) 971-2000
(NAMES, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF BIDDER)
----------------
COPIES OF COMMUNICATIONS TO:
BERNARD E. KURY, ESQ.
JONATHAN L. FREEDMAN, ESQ.
DEWEY BALLANTINE LLP
1301 AVENUE OF THE AMERICAS
NEW YORK, NY 10019
(212) 259-8000
----------------
CALCULATION OF FILING FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TRANSACTION VALUATION* AMOUNT OF FILING FEE*
- --------------------------------------------------------
$140,147,358 $28,029
- -------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
* Estimated for purposes of calculating the amount of the filing fee only. The
amount assumes the purchase of 23,357,893 shares of common stock, $0.01 par
value (the "Shares"), at a price per Share of $6.00 in cash. Such number of
Shares represents all the Shares outstanding as of August 6, 1998 and
assumes the exercise of all existing options, warrants, and other rights to
acquire Shares from the Company.
----------------
[_]Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
Amount Previously Paid: None Filing Party:
Not Applicable
Form or Registration no.:
Not Applicable Date Filed: Not Applicable
(EXHIBIT INDEX IS LOCATED ON PAGE 6)
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- -------------------------------------------------------------------------------
<PAGE>
CUSIP NO. 45336L103
1.
NAME OF REPORTING PERSONS
Pegasus Acquisitions Corp.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
Applied For
- -------------------------------------------------------------------------------
2.
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)[_]
(b)[_]
- -------------------------------------------------------------------------------
3.
SEC USE ONLY
- -------------------------------------------------------------------------------
4.
SOURCE OF FUNDS
AF
- -------------------------------------------------------------------------------
5.
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(E) OR 2(F) [_]
N/A
- -------------------------------------------------------------------------------
6.
CITIZENSHIP OR PLACE OF ORGANIZATION
State of Delaware
- -------------------------------------------------------------------------------
7.
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,962,198*
- -------------------------------------------------------------------------------
8.
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES
CERTAIN SHARES
[_]
- -------------------------------------------------------------------------------
9.
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
9.4%*
- -------------------------------------------------------------------------------
10.
TYPE OF REPORTING PERSON
CO
- --------
* On August 10, 1998, Guidant Corporation, an Indiana corporation ("Parent"),
and Pegasus Acquisitions Corp., a Delaware corporation and an indirect
wholly-owned subsidiary of Parent ("Purchaser"), entered into a Shareholder
Agreement (the "Shareholder Agreement") with certain stockholders of
InControl, Inc. (collectively, the "Selling Stockholders"), pursuant to
which the Selling Stockholders have agreed to validly tender (and not to
withdraw) pursuant to and in accordance with the terms of the Offer all of
the shares beneficially owned by them. The Selling Stockholders beneficially
own approximately 1,962,198 Shares, representing approximately 9.4% in the
aggregate of the Company's outstanding Shares (assuming the exercise of all
such Selling Stockholders' options subject to the Shareholder Agreement).
The Shareholder Agreement is described more fully in Section 12 of the Offer
to Purchase, dated August 17, 1998.
2
<PAGE>
CUSIP NO. 45336L103
NAME OF REPORTING PERSONS
1.
Cardiac Pacemakers, Inc.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
41-1344804
- --------------------------------------------------------------------------------
2.
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)[_]
(b)[_]
- --------------------------------------------------------------------------------
3.
SEC USE ONLY
- --------------------------------------------------------------------------------
4.
SOURCE OF FUNDS
AF
- --------------------------------------------------------------------------------
5.
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(E) OR 2(F) [_]
N/A
- --------------------------------------------------------------------------------
6.
CITIZENSHIP OR PLACE OF ORGANIZATION
State of Minnesota
- --------------------------------------------------------------------------------
7.
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,962,198*
- --------------------------------------------------------------------------------
8.
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES
CERTAIN SHARES
[_]
- --------------------------------------------------------------------------------
9.
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
9.4%*
- --------------------------------------------------------------------------------
10.
TYPE OF REPORTING PERSON
CO
- --------
* The footnote on page 2 is incorporated by reference herein.
3
<PAGE>
CUSIP NO. 45336L103
NAME OF REPORTING PERSONS
1.
Guidant Corporation
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
35-1931722
- --------------------------------------------------------------------------------
2.
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)[_]
(b)[_]
- --------------------------------------------------------------------------------
3.
SEC USE ONLY
- --------------------------------------------------------------------------------
4.
SOURCE OF FUNDS
WC / BK
- --------------------------------------------------------------------------------
5.
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(E) OR 2(F) [_]
N/A
- --------------------------------------------------------------------------------
6.
CITIZENSHIP OR PLACE OF ORGANIZATION
State of Indiana
- --------------------------------------------------------------------------------
7.
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,962,198 *
- --------------------------------------------------------------------------------
8.
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES
CERTAIN SHARES
[_]
- --------------------------------------------------------------------------------
9.
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
9.4%*
- --------------------------------------------------------------------------------
10.
TYPE OF REPORTING PERSON
CO
- --------
* The footnote on page 2 is incorporated by reference herein.
4
<PAGE>
TENDER OFFER
This Tender Offer Statement on Schedule 14D-1 is filed by Pegasus
Acquisitions Corp., a Delaware corporation ("Purchaser"), Cardiac Pacemakers,
Inc., a Minnesota corporation ("CPI") and the owner of all the outstanding
capital stock of Purchaser, and Guidant Corporation ("Parent"), an Indiana
corporation and the owner of all of the outstanding capital stock of CPI,
relating to the offer by Purchaser to purchase all outstanding shares of
common stock, $.01 par value (the "Shares"), of InControl, Inc. (the
"Company"), at a purchase price of $6.00 per Share, net to the seller in cash,
without interest, upon the terms and subject to the conditions set forth in
the Offer to Purchase, dated August 17, 1998 (the "Offer to Purchase"), and in
the related Letter of Transmittal, copies of which are attached hereto as
Exhibits (a)(1) and (a)(2), respectively, and any amendments or supplements
thereto (which collectively constitute the "Offer").
This Tender Offer Statement on Schedule 14D-1 also constitutes a Statement
on Schedule 13D with respect to the acquisition by Parent and Purchaser of
beneficial ownership of the Selling Stockholders' Shares. The item numbers and
responses thereto below are in accordance with the requirements of Schedule
14D-1.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is InControl, Inc., a Delaware
corporation. The address of the Company's principal executive offices is 6675
185th Avenue N.E., Redmond, WA 98052.
(b) The information set forth on the cover page and under "Introduction" in
the Offer to Purchase is incorporated herein by reference.
(c) The information set forth in Section 6 of the Offer to Purchase is
incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
This Statement is filed by Purchaser and Parent. The information set forth
on the cover page, under "Introduction," in Section 9 and in Schedule I of the
Offer to Purchase is incorporated herein by reference.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) The information set forth in Section 11 of the Offer to Purchase is
incorporated herein by reference.
(b) The information set forth under "Introduction" and in Sections 9, 11 and
12 of the Offer to Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATIONS.
(a)-(b) The information set forth in Section 10 of the Offer to Purchase is
incorporated herein by reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in Section 12 of the Offer to Purchase is
incorporated herein by reference.
(f)-(g) The information set forth in Sections 7 and 12 of the Offer to
Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth under "Introduction" and in Sections 9, 11
and 12 of the Offer to Purchase is incorporated herein by reference.
5
<PAGE>
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth under "Introduction" and in Sections 9, 11, 12 and
13 of the Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth under "Introduction" and in Section 16 of the
Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 9 of the Offer to Purchase is
incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth under "Introduction" and in Sections 11 and 12
of the Offer to Purchase is incorporated herein by reference.
(b)-(c) The information set forth in Section 15 of the Offer to Purchase is
incorporated herein by reference.
(d) The information set forth in Section 7 of the Offer to Purchase is
incorporated herein by reference.
(e) None.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal is incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
(a)(1) --Offer to Purchase dated August 17, 1998.
(a)(2) --Form of Letter of Transmittal.
(a)(3) --Form of Notice of Guaranteed Delivery.
(a)(4) --Form of Letter to Brokers, Dealers, Banks, Trust Companies and Other
Nominees.
(a)(5) --Form of Letter to Clients For Use by Brokers, Dealers, Banks, Trust.
Companies and Other Nominees.
(a)(6) --Guidelines for Certification of Taxpayer Identification Number on
Form W-9.
(a)(7) --Form of Summary of Advertisement dated August 17, 1998.
(a)(8) --Text of Joint Press Release dated August 11, 1998.
(b) --None.
(c)(1) --Agreement and Plan of Merger, dated August 10, 1998, among Parent,
Purchaser and the Company.
(c)(2) --Form of Shareholder Agreement among Parent, Purchaser and the
Selling Stockholders.
(c)(3) --Credit Agreement, dated August 10, 1998, between Parent and the
Company.
(c)(4) --Letter Agreement, dated August 14, 1998, among Parent, Purchaser and
Company.
(d) --None.
(e) --Not applicable.
(f) --None.
</TABLE>
6
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, each of the
undersigned certifies that the information set forth in this Statement is
true, complete and correct.
Dated: August 17, 1998
Pegasus Acquisitions Corp.
/s/ A. Jay Graf
By: _________________________________
A. Jay Graf
President
Cardiac Pacemakers, Inc.
/s/ A. Jay Graf
By: _________________________________
A. Jay Graf
President and Chief Executive
Officer
Guidant Corporation
/s/ A. Jay Graf
By: _________________________________
A. Jay Graf
Vice President
7
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
INCONTROL, INC.
AT
$6 NET PER SHARE
BY
PEGASUS ACQUISITIONS CORP.
AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF
GUIDANT CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, SEPTEMBER 14, 1998, UNLESS THE OFFER IS EXTENDED.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT THE
OFFER AND THE MERGER ARE FAIR TO, ADVISABLE AND IN THE BEST INTERESTS OF, THE
COMPANY AND ITS STOCKHOLDERS, HAS APPROVED THE MERGER AGREEMENT, THE
SHAREHOLDER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER
AGREEMENT AND THE SHAREHOLDER AGREEMENT, INCLUDING THE OFFER AND THE MERGER,
AND RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER ALL
OF THEIR SHARES PURSUANT THERETO.
PARENT AND PURCHASER HAVE ENTERED INTO A SHAREHOLDER AGREEMENT WITH CERTAIN
STOCKHOLDERS PURSUANT TO WHICH, AMONG OTHER THINGS, SUCH STOCKHOLDERS HAVE
AGREED TO TENDER IN THE OFFER, UPON THE TERMS AND SUBJECT TO THE CONDITIONS OF
THE SHAREHOLDER AGREEMENT, APPROXIMATELY 9.4% OF THE COMPANY'S OUTSTANDING
SHARES (ASSUMING THE EXERCISE OF SUCH STOCKHOLDERS' OPTIONS SUBJECT TO THE
SHAREHOLDER AGREEMENT).
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) A NUMBER OF THE
COMPANY'S SHARES OF COMMON STOCK, PAR VALUE $0.01 PER SHARE, REPRESENTING A
MAJORITY OF ALL OUTSTANDING SHARES ON A FULLY DILUTED BASIS BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER, (2) THE
COMPANY'S SERIES B PREFERRED STOCK, PAR VALUE $0.01 PER SHARE, BEING REDEEMED
BY THE COMPANY OR CONVERTED INTO SHARES OF COMMON STOCK AND (3) THE RECEIPT OF
CERTAIN REGULATORY CONSENTS AND APPROVALS. THE COMPANY HAS REPRESENTED TO
PARENT AND PURCHASER THAT AS OF AUGUST 14, 1998, ALL SHARES OF SERIES B
PREFERRED STOCK HAVE BEEN CONVERTED INTO COMMON STOCK AND THEREFORE CONDITION
(2) HAS BEEN SATISFIED. SEE INTRODUCTION AND SECTIONS 1, 14 AND 15 OF THIS
OFFER TO PURCHASE.
---------------
IMPORTANT
Any stockholder desiring to tender all or a portion of that stockholder's
Shares should either (1) complete and sign the Letter of Transmittal (or a
manually signed facsimile thereof) in accordance with the instructions in the
Letter of Transmittal, mail or deliver it and any other required documents to
the Depositary and either deliver the certificates for those Shares to the
Depositary along with the Letter of Transmittal or tender those Shares
pursuant to the procedures for book-entry transfer set forth in Section 3
hereof, or (2) request such stockholder's broker, dealer, commercial bank,
trust company or other nominee to effect the transaction for the stockholder.
Any stockholder whose Shares are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact that broker,
dealer, commercial bank, trust company or other nominee, if the stockholder
wishes to tender such Shares.
Any stockholder who wishes to tender Shares and whose certificates
representing those Shares are not immediately available or who cannot comply
with the procedure for book-entry transfer on a timely basis should tender
those Shares by following the procedures for guaranteed delivery set forth in
Section 3.
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone
numbers set forth on the back cover of this Offer to Purchase. Requests for
additional copies of this Offer to Purchase, the Letter of Transmittal, the
Notice of Guaranteed Delivery and other related materials may be directed to
the Information Agent, Dealer Manager or to brokers, dealers, commercial banks
and trust companies.
---------------
The Dealer Manager for the Offer is:
Piper Jaffray Inc.
August 17, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
INTRODUCTION............................................................ 1
1. Terms of the Offer............................................... 2
2. Acceptance for Payment and Payment for Shares.................... 4
3. Procedure for Tendering Shares................................... 5
4. Withdrawal Rights................................................ 8
5. Certain Federal Income Tax Consequences of the Offer and the
Merger.......................................................... 8
6. Price Range of the Shares, Dividends on the Shares............... 10
7. Effect of the Offer on the Market for the Shares, Stock Exchange
Listing and Exchange Act Registration and Margin Securities..... 10
8. Certain Information Concerning the Company....................... 11
9. Certain Information Concerning Purchaser and Parent.............. 13
10. Source and Amount of Funds....................................... 15
11. Background....................................................... 16
12. Purpose of the Offer and the Merger; Plans for the Company; the
Merger Agreement; the Shareholder Agreement; Other Agreements... 17
13. Dividends and Distributions...................................... 32
14. Certain Conditions of the Offer.................................. 32
15. Certain Legal Matters............................................ 34
16. Fees and Expenses................................................ 36
17. Miscellaneous.................................................... 36
</TABLE>
i
<PAGE>
TO THE HOLDERS OF COMMON STOCK OF INCONTROL, INC.:
INTRODUCTION
Pegasus Acquisitions Corp., a Delaware corporation ("Purchaser"), hereby
offers to purchase all the outstanding shares of common stock, $0.01 par value
(the "Shares"), of InControl, Inc., a Delaware corporation (the "Company"), at
a purchase price of $6 per Share (the "Offer Price"), net to the seller in
cash, upon the terms and subject to the conditions set forth in this Offer to
Purchase and in the related Letter of Transmittal (which, together with any
amendments or supplements hereto or thereto, collectively constitute the
"Offer"). Purchaser is a direct wholly-owned subsidiary of Cardiac Pacemakers,
Inc., a Minnesota corporation ("CPI"), which is in turn a direct wholly-owned
subsidiary of Guidant Corporation, an Indiana corporation ("Parent").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of August 10, 1998 (the "Merger Agreement"), among Parent, Purchaser and
the Company. The Merger Agreement provides, among other things, for the
commencement of the Offer by Purchaser and further provides that, after the
purchase of Shares pursuant to the Offer and subject to the satisfaction or
waiver of certain conditions set forth therein, Purchaser will be merged with
and into the Company (the "Merger"), with the Company surviving the Merger as
an indirect wholly-owned subsidiary of Parent (the "Surviving Corporation").
In the Merger, each Share issued and outstanding (excluding Shares owned,
directly or indirectly, by the Company or any wholly-owned subsidiary of the
Company or by Parent, Purchaser or any other wholly-owned subsidiary of Parent
and excluding Shares owned by stockholders of the Company who shall have
properly perfected their appraisal rights under Delaware law) immediately
prior to the effective time of the Merger (the "Effective Time") will be
converted at the Effective Time into the right to receive the Offer Price in
cash, without any interest thereon (the "Merger Consideration"). See Section
12.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") HAS UNANIMOUSLY
DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, ADVISABLE AND IN THE
BEST INTERESTS OF, THE COMPANY AND THE COMPANY'S STOCKHOLDERS (THE
"STOCKHOLDERS"), HAS APPROVED THE MERGER AGREEMENT, THE SHAREHOLDER AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT AND THE SHAREHOLDER
AGREEMENT, INCLUDING THE OFFER AND THE MERGER; AND RECOMMENDS THAT THE
STOCKHOLDERS ACCEPT THE OFFER AND TENDER ALL OF THEIR SHARES PURSUANT THERETO.
GOLDMAN, SACHS & CO., THE COMPANY'S FINANCIAL ADVISOR ("GOLDMAN SACHS"), HAS
DELIVERED TO THE COMPANY ITS WRITTEN OPINION THAT THE $6.00 PER SHARE IN CASH
TO BE RECEIVED BY HOLDERS OF SHARES IN THE TENDER OFFER AND MERGER IS FAIR,
FROM A FINANCIAL POINT OF VIEW, TO SUCH STOCKHOLDERS. A COPY OF THE WRITTEN
OPINION OF GOLDMAN SACHS IS CONTAINED IN THE COMPANY'S
SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 ("SCHEDULE 14D-9")
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") IN
CONNECTION WITH THE OFFER, A COPY OF WHICH IS BEING FURNISHED TO STOCKHOLDERS
CONCURRENTLY WITH THIS OFFER TO PURCHASE.
The Offer is conditioned upon, among other things, (i) a number of the
Shares representing a majority of all outstanding Shares on a fully diluted
basis being validly tendered and not withdrawn prior to the Expiration Date
(as defined in Section 1 hereof) (the "Minimum Tender Condition"), (ii) the
Company's Series B Preferred Stock, par value $0.01 per share (the "Series B
Stock"), being redeemed by the Company or converted into Shares (the
"Preferred Securities Condition") and (iii) the receipt of certain regulatory
consents and approvals. The Company has represented to Parent and Purchaser
that as of August 14, 1998, all of the issued and outstanding Series B Stock
has been converted into 844,884 Shares, and therefore Purchaser has deemed the
Preferred Securities Condition satisfied. See Sections 1 and 14, which set
forth the conditions of the Offer, and Section 15, which discusses certain
legal matters and regulatory consents and approvals.
The Company has represented and warranted to Purchaser that, as of the close
of business on August 6, 1998, 20,974,122 Shares were issued and outstanding,
1,442,217 Shares were issuable pursuant to outstanding stock options granted
by the Company ("Company Options"), 838,653 Shares were issuable upon
conversion
<PAGE>
of the Series B Stock and 102,901 Shares were reserved for issuance pursuant
to certain warrants to purchase Shares issued by the Company (the "Company
Warrants"). The Company has represented to Parent and Purchaser that as of
August 14, 1998, all of the issued and outstanding Series B Stock has been
converted into 844,884 Shares.
The consummation of the Merger is subject to the satisfaction or waiver of a
number of conditions, including, if required, the approval of the Merger by
the requisite vote or consent of the Stockholders. Under the Delaware General
Corporation Law (the "DGCL"), the stockholder vote necessary to approve the
Merger will be the affirmative vote of at least a majority of the outstanding
Shares, including Shares held by Purchaser and its affiliates. If the Minimum
Tender Condition is satisfied and Purchaser purchases at least a majority of
the outstanding Shares in the Offer, Purchaser will be able to effect the
Merger without the affirmative vote of any other Stockholders. If Purchaser
acquires at least 90% of the outstanding Shares pursuant to the Offer or
otherwise, Purchaser will be able to effect the Merger pursuant to the "short-
form" merger provisions of Section 253 of the DGCL, without prior notice to,
or any action by, any other Stockholder. In that event, Purchaser intends to
effect the Merger as promptly as practicable following the purchase of Shares
in the Offer. See Section 12.
The Merger Agreement is more fully described in Section 12. Certain federal
income tax consequences of the sale of Shares pursuant to the Offer and the
exchange of Shares for the Merger Consideration pursuant to the Merger are
described in Section 5.
Tendering Stockholders will not be obligated to pay brokerage fees or
commissions or, except as set forth in Instruction 6 to the Letter of
Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer or
the Merger. Purchaser will pay all charges and expenses of Piper Jaffray Inc.
("Piper Jaffray"), as the dealer manager (the "Dealer Manager"), First Chicago
Trust Company of New York as the depositary (the "Depositary"), and Georgeson
& Company Inc. as the information agent (the "Information Agent"), in
connection with the Offer. See Section 16.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION THAT SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS
MADE WITH RESPECT TO THE OFFER.
1. TERMS OF THE OFFER
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will accept for payment (and thereby purchase) all
Shares that are validly tendered and not withdrawn in accordance with Section
4 below prior to the Expiration Date. As used in the Offer, the term
"Expiration Date" means 12:00 midnight, New York City time, on Monday,
September 14, 1998, unless and until Purchaser, in accordance with the terms
of the Offer and the Merger Agreement, shall have extended the period of time
during which the Offer is open, in which event the term "Expiration Date"
means the latest time and date at which the Offer, as so extended, expires. As
used in this Offer to Purchase, "business day" has the meaning set forth in
Rule 14d-1(e)(6) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
In the event that the Offer is not consummated, Purchaser may seek to
acquire additional Shares through open market purchases, privately negotiated
transactions or otherwise, upon such terms and conditions and at such prices
as it shall determine, which may be more or less than the Offer Price and
could be for cash or other consideration.
The Offer is conditioned upon, among other things, satisfaction of the
Minimum Tender Condition and the Preferred Securities Condition and the
expiration or termination of all waiting periods imposed by the Hart-Scott-
Rodino Antitrust Improvement Act of 1976, as amended (the "HSR Act"), and the
receipt of all required regulatory consents and approvals. The Company has
represented that as of August 14, 1998, all issued and
2
<PAGE>
outstanding shares of Series B Stock have been converted into 844,884 Shares
and, therefore, Purchaser has deemed the Preferred Securities Condition
satisfied. See Section 15 for a full discussion of required regulatory
consents and approvals. The Offer is also subject to certain other conditions
that are set forth in Section 14 below. Pursuant to the terms of the Merger
Agreement, Purchaser expressly reserves the right (but will not be obligated)
to waive any or all of the conditions of the Offer. Purchaser may extend the
Offer as required by law or the applicable rules and regulations of the
Commission.
Subject to the terms of the Merger Agreement, Purchaser expressly reserves
the right, subject to applicable law, to extend the period of time during
which the Offer is open by giving oral or written notice of such extension to
the Depositary and by making a public announcement of such extension. There
can be no assurance that Purchaser will exercise its right to extend the
Offer. Purchaser also expressly reserves the right, subject to applicable law
(including applicable rules and regulations of the Commission promulgated
under the Exchange Act) and the terms of the Merger Agreement, at any time or
from time to time, to (i) delay acceptance for payment of, or payment for, any
Shares, regardless of whether the Shares were theretofore accepted for
payment, or to terminate the Offer and not accept for payment or pay for any
Shares not theretofore accepted for payment or paid for, upon the occurrence
of any of the conditions specified in Section 14 below, by giving oral or
written notice of such delay in payment or termination to the Depositary, and
(ii) waive any conditions or otherwise amend the Offer in any respect, by
giving oral or written notice to the Depositary. Any extension, delay in
payment, termination or amendment will be followed as promptly as practicable
by public announcement, the announcement in the case of an extension to be
issued no later than 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date. Without limiting the manner in
which Purchaser may choose to make any public announcement, Purchaser will
have no obligation to publish, advertise or otherwise communicate any such
announcement, other than by issuing a release to the Dow Jones News Service or
as otherwise required by law. The reservation by Purchaser of the right to
delay acceptance for payment of or payment for Shares is subject to the
provisions of Rule 14e-1(c) under the Exchange Act, which requires that
Purchaser pay the consideration offered or return the Shares deposited by or
on behalf of Stockholders promptly after the termination or withdrawal of the
Offer.
Subject to the terms of the Merger Agreement, Purchaser expressly reserves
the right to increase the price per Share payable in the Offer or to make any
other changes in the terms and conditions of the Offer, except that without
the prior written consent of the Company, Purchaser shall not (i) reduce the
number of Shares subject to the Offer, (ii) reduce the Offer Price, (iii)
amend or add to the conditions to the Offer, (iv) except as provided in the
next sentence, extend the Offer, (v) change the form of consideration payable
in the Offer or (vi) amend any other term of the Offer in any manner adverse
to the holders of the Shares. Notwithstanding the foregoing, Purchaser may,
without the consent of the Company, (i) extend the Offer, if at the scheduled
or extended expiration date of the Offer any of the conditions to the Offer
shall not be satisfied or waived, until such time as such conditions are
satisfied or waived, (ii) extend the Offer for any period required by any
rule, regulation, interpretation or position of the Commission or the staff
thereof applicable to the Offer and (iii) extend the Offer for any reason on
one or more occasions for an aggregate period of not more than 10 business
days beyond the latest expiration date that would otherwise be permitted under
clause (i) or (ii) of this sentence. Assuming the prior satisfaction or waiver
of the conditions to the Offer, Purchaser shall accept for payment, and pay
for, in accordance with the terms of the Offer, all Shares validly tendered
and not withdrawn pursuant to the Offer as soon as practicable after the
Expiration Date.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
Purchaser will disseminate additional tender offer materials and extend the
Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the
Exchange Act. The minimum period during which an offer must remain open
following material changes in the terms of the Offer or information concerning
the Offer, other than a change in price or a change in percentage of
securities sought, will depend upon the facts and circumstances then existing,
including the relative materiality of the changed terms or information. If
Purchaser decides to increase or, subject to the consent of the Company, to
decrease the
3
<PAGE>
consideration in the Offer, or to change or waive the Minimum Tender Condition
and if, at the time that notice of any such change or waiver is first
published, sent or given to Stockholders, the Offer is scheduled to expire at
any time earlier than the tenth business day after (and including) the date of
that notice, the Offer will be extended at least until the expiration of that
period of ten business days.
The Company has provided Purchaser with its stockholder list and security
position listings for the purpose of disseminating the Offer to Stockholders.
This Offer to Purchase, the related Letter of Transmittal and other relevant
materials will be mailed to record holders of Shares and will be furnished to
brokers, dealers, commercial banks, trust companies and similar persons whose
names, or the names of whose nominees, appear on the Company's stockholder
list or, if applicable, who are listed as participants in a clearing agency's
security position listing for subsequent transmittal to beneficial owners of
Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES
Upon the terms and subject to the conditions of the Merger Agreement and the
Offer (including, if the Offer is extended or amended, the terms and
conditions of any such extension or amendment), Purchaser will accept for
payment, and will pay for, all Shares that are validly tendered on or prior to
the Expiration Date, and not properly withdrawn in accordance with Section 4
below, as soon as practicable after the Expiration Date. All questions as to
the satisfaction of such terms and conditions will be determined by Purchaser
in its sole discretion, which determination will be final and binding. Subject
to the applicable rules of the Commission, Purchaser expressly reserves the
right to delay acceptance for payment of or payment for Shares in order to
comply, in whole or in part, with any applicable law or government regulation.
Any such delays will be effected in compliance with Rule 14e-1(c) under the
Exchange Act (relating to a bidder's obligation to pay for or return tendered
securities promptly after the termination or withdrawal of such bidder's
offer). See Section 15 below.
In all cases, payment for Shares purchased pursuant to the Offer will be
made only after timely receipt by the Depositary of (i) certificates
evidencing (or a timely Book-Entry Confirmation (as defined in Section 3
below) with respect to) such Shares, (ii) a Letter of Transmittal (or a
manually signed facsimile thereof), properly completed and duly executed with
any required signature guarantees, or, in the case of a book-entry transfer,
an Agent's Message (as defined below), and (iii) any other documents required
by the Letter of Transmittal. See Section 3 below.
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility (as defined in Section 3 below) to, and received by, the
Depositary and forming part of a Book-Entry Confirmation, which states that
(i) such Book-Entry Transfer Facility has received an express acknowledgment
from the participant in such Book-Entry Transfer Facility tendering Shares
that are the subject of such Book-Entry Confirmation, (ii) such participant
has received and agrees to be bound by the terms of the Letter of Transmittal,
and (iii) Purchaser may enforce such agreement against such participant.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares properly tendered to Purchaser and not
withdrawn, if and when Purchaser gives oral or written notice to the
Depositary of Purchaser's acceptance of such Shares. In all cases, payment for
Shares accepted for payment pursuant to the Offer will be made by deposit of
the purchase price therefor with the Depositary, which will act as agent for
tendering Stockholders for the purpose of receiving payment from Purchaser and
transmitting payment to tendering Stockholders.
If, for any reason, acceptance for payment of any Shares tendered pursuant
to the Offer is delayed, or Purchaser is unable to accept for payment Shares
tendered pursuant to the Offer, then, without prejudice to Purchaser's rights
under the Offer (but subject to Rule 14e-1(c) under the Exchange Act), the
Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares,
and such Shares may not be withdrawn, except to the extent that the tendering
Stockholders are entitled to exercise, and do exercise, withdrawal rights as
described in Section 4 below. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON
THE OFFER PRICE BY PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY
DELAY IN MAKING SUCH PAYMENT.
4
<PAGE>
If any tendered Shares are not purchased pursuant to the Offer for any
reason or if certificates are submitted for more Shares than are tendered,
certificates for Shares not purchased or tendered will be returned pursuant to
the instructions of the tendering Stockholder without expense to the tendering
Stockholder (or, in the case of Shares delivered by book-entry transfer into
the Depositary's account at the Book-Entry Transfer Facility pursuant to the
procedures set forth in Section 3 below, the Shares will be credited to an
account maintained at the Book-Entry Transfer Facility) as promptly as
practicable following the expiration or termination of the Offer.
If, prior to the Expiration Date, Purchaser increases the consideration to
be paid per Share pursuant to the Offer, Purchaser will pay the increased
consideration for all Shares purchased pursuant to the Offer, whether or not
the Shares were tendered prior to the increase in consideration.
Purchaser reserves the right to transfer or assign, in whole or from time to
time in part, to Parent or to one or more of its affiliates, the right to
purchase Shares tendered pursuant to the Offer, but any such transfer or
assignment will not relieve Purchaser of its obligations under the Offer and
will in no way prejudice the rights of tendering Stockholders to receive
payment for Shares validly tendered and accepted for payment pursuant to the
Offer.
3. PROCEDURE FOR TENDERING SHARES
Valid Tenders. For a Stockholder to tender validly pursuant to the Offer,
either (i) a Letter of Transmittal (or a manually signed facsimile thereof),
properly completed and duly executed, together with any required signature
guarantees, or, in the case of a book-entry transfer, an Agent's Message, and
any other required documents, must be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date and either (a) certificates evidencing Shares must be received
by the Depositary at any such address prior to the Expiration Date or (b) the
Shares must be delivered pursuant to the procedures for book-entry transfer
set forth below and a Book-Entry Confirmation (as defined below) must be
received by the Depositary prior to the Expiration Date; or (ii) the tendering
Stockholder must comply with the guaranteed delivery procedures set forth
below. No alternative, conditional or contingent tenders will be accepted.
Book-Entry Transfer. The Depositary will establish accounts with respect to
the Shares at The Depository Trust Company (the "Book-Entry Transfer
Facility") for purposes of the Offer within two business days after the date
of this Offer to Purchase. Any financial institution that is a participant in
the Book-Entry Transfer Facility system may make book-entry delivery of Shares
by causing the Book-Entry Transfer Facility to transfer the Shares into the
Depositary's account at the Book-Entry Transfer Facility in accordance with
the Book-Entry Transfer Facility's procedures for such transfer. However,
although delivery of the Shares may be effected through book-entry transfer
into the Depositary's account at the Book-Entry Transfer Facility, the Letter
of Transmittal (or a manually signed facsimile thereof), properly completed
and duly executed, with any required signature guarantees, or an Agent's
Message, and any other required documents, must, in any case, be transmitted
to, and received by, the Depositary at one of its addresses set forth on the
back cover of this Offer to Purchase prior to the Expiration Date, or the
tendering Stockholder must comply with the guaranteed delivery procedures
described below. The confirmation of a book-entry transfer of Shares into the
Depositary's account at the Book-Entry Transfer Facility as described above is
referred to as a "Book-Entry Confirmation." DELIVERY OF DOCUMENTS TO THE BOOK-
ENTRY TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-ENTRY TRANSFER FACILITY'S
PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
5
<PAGE>
THE METHOD OF DELIVERY OF CERTIFICATES FOR SHARES, THE LETTER OF TRANSMITTAL
AND ANY OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY
TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER AND
THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY
(INCLUDING, IN THE CASE OF BOOK-ENTRY TRANSFER, A BOOK-ENTRY CONFIRMATION). IF
DELIVERY IS MADE BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ENSURE TIMELY DELIVERY.
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal (i) if the Letter of Transmittal is signed by the registered
holder(s) (which term, for purposes of this Section, includes any participant
in the Book-Entry Transfer Facility's system whose name appears on a security
position listing as the owner of the Shares) of Shares tendered therewith and
such registered holder has not completed the box entitled "Special Payment
Instructions" on the Letter of Transmittal; or (ii) if such Shares are
tendered for the account of a financial institution (including most commercial
banks, savings and loan associations and brokerage houses) that is a
participant in the Security Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange
Medallion Program (an "Eligible Institution"). In all other cases, all
signatures on the Letter of Transmittal must be guaranteed by an Eligible
Institution. See Instruction 1 of the Letter of Transmittal. If the
certificates evidencing Shares are registered in the name of a person other
than the signer of the Letter of Transmittal or if payment is to be made and
certificates for Shares not tendered or not accepted for payment are to be
returned to a person other than the registered holder of the certificates
surrendered, then the tendered certificates evidencing Shares must be endorsed
or accompanied by appropriate stock powers, in each case signed exactly as the
name (or names) of the registered holder or owners appears on the
certificates, with the signatures on the certificates or stock powers
guaranteed as described above and as provided in the Letter of Transmittal.
See Instructions 1 and 5 of the Letter of Transmittal.
Guaranteed Delivery. If a Stockholder wishes to tender Shares pursuant to
the Offer and the Stockholder's certificates are not immediately available or
the procedures for book-entry transfer cannot be completed on a timely basis
or time will not permit all required documents to reach the Depositary prior
to the Expiration Date, such Stockholder's tender may be effected if all of
the following conditions are met:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Purchaser, is received by
the Depositary (as provided below) prior to the Expiration Date; and
(iii) the certificates for all tendered Shares in proper form for
transfer (or a Book-Entry Confirmation with respect to all such tendered
Shares), together with a properly completed and duly executed Letter of
Transmittal (or a manually signed facsimile thereof) with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message, and any other documents, are received by the Depositary within
three trading days after the date of execution of the Notice of Guaranteed
Delivery. A "trading day" is any day on which the New York Stock Exchange,
Inc. (the "NYSE") is open for business.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, facsimile transmission or mailed to the Depositary and must include
a guarantee by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery.
IN ALL CASES, SHARES SHALL NOT BE DEEMED VALIDLY TENDERED UNLESS A PROPERLY
COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL (OR A MANUALLY SIGNED
FACSIMILE THEREOF) IS RECEIVED BY THE DEPOSITARY.
Notwithstanding any other provision of this Offer to Purchase, payment for
Shares accepted for payment pursuant to the Offer will in all cases be made
only after timely receipt by the Depositary of certificates for (or a
6
<PAGE>
timely Book-Entry Confirmation with respect to) such Shares, a Letter of
Transmittal (or a manually signed facsimile), properly completed and duly
executed, with any required signature guarantees and any other documents
required by the Letter of Transmittal (or in the case of a book-entry
transfer, an Agent's Message).
Determination of Validity. All questions as to the form of documents and the
validity, eligibility (including time of receipt) and acceptance for payment
of any tender of Shares pursuant to any of the procedures described above will
be determined by Purchaser in its sole discretion, which determination shall
be final and binding on all parties. Purchaser reserves the absolute right to
reject any or all tenders of Shares determined not to be in proper form or the
acceptance of or payment for which may, in the opinion of Purchaser's counsel,
be unlawful. Purchaser also reserves the absolute right to waive any defect or
irregularity in any tender of any Shares of any particular Stockholder whether
or not similar defects or irregularities are waived in the case of other
Stockholders. Purchaser's interpretation of the terms and conditions of the
Offer (including the Letter of Transmittal and its instructions) will be final
and binding on all parties. No tender of Shares will be deemed to have been
validly made until all defects and irregularities have been cured or waived.
None of Parent, Purchaser, the Dealer Manager, the Depositary, the Information
Agent or any other person will be under any duty to give notification of any
defects or irregularities in tenders or incur any liability for failure to
give any such notification.
Backup Federal Income Tax Withholding. To prevent backup federal income tax
withholding of 31% of the payments made to Stockholders with respect to the
purchase price of Shares purchased pursuant to the Offer or the Merger, a
Stockholder must provide the Depositary with his or her correct taxpayer
identification number ("TIN") and certify that he or she is not subject to
backup federal income tax withholding by completing the substitute Form W-9
included in the Letter of Transmittal. See Instruction 10 of the Letter of
Transmittal; see Section 5 below.
A tender of Shares pursuant to any of the procedures described above will
constitute the tendering Stockholder's acceptance of the terms and conditions
of the Offer, as well as the tendering Stockholder's representation and
warranty to Purchaser that (i) the Stockholder has a net long position in the
Shares being tendered, within the meaning of Rule 14e-4 under the Exchange
Act, and (ii) the tender of the Shares complies with Rule 14e-4. It is a
violation of Rule 14e-4 for a person, directly or indirectly, to tender Shares
for his or her own account, unless, at the time of tender, the person so
tendering (i) has a net long position equal to or greater than the amount of
(a) Shares tendered or (b) other securities immediately convertible into or
exchangeable or exercisable for the Shares tendered and that person will
acquire the Shares for tender by conversion, exchange or exercise and (ii)
will cause Shares to be delivered in accordance with the terms of the Offer.
Rule 14e-4 provides a similar restriction applicable to the tender or
guarantee of a tender on behalf of another person. Purchaser's acceptance for
payment of Shares tendered pursuant to the Offer will constitute a binding
agreement between the tendering Stockholder and Purchaser upon the terms and
conditions of the Offer.
Appointment as Proxy. By executing a Letter of Transmittal, a tendering
Stockholder irrevocably appoints designees of Purchaser as his or her
attorneys-in-fact and proxies, with full power of substitution, in the manner
set forth in the Letter of Transmittal, to the full extent of the
Stockholder's rights with respect to the Shares tendered by the Stockholder
and purchased by Purchaser and with respect to any and all other Shares or
other securities issued or issuable in respect of those Shares, on or after
the date of the Offer. All such powers of attorney and proxies will be
considered coupled with an interest in the tendered Shares. Such appointment
will be effective when, and only to the extent that, Purchaser accepts the
Shares for payment. Upon acceptance for payment, all prior powers of attorney
and proxies given by the Stockholder with respect to the Shares (and any other
Shares or other securities so issued in respect of such purchased Shares) will
be revoked, without further action, and no subsequent powers of attorney and
proxies may be given (and, if given, will not be deemed effective) by the
Stockholder. The designees of Purchaser will be empowered to exercise all
voting and other rights of the Stockholder with respect to such Shares (and
any other Shares or securities so issued in respect of such purchased Shares)
as they in their sole discretion may deem proper, including, without
limitation, in respect of any annual or special meeting of the Stockholders,
or any adjournment or postponement of any such meeting, or in connection with
any action by written consent in lieu of any such meeting or otherwise
(including any such
7
<PAGE>
meeting or action by written consent to approve the Merger). Purchaser
reserves the absolute right to require that, in order for Shares to be validly
tendered, immediately upon Purchaser's acceptance for payment of the Shares,
Purchaser must be able to exercise full voting and other rights with respect
to the Shares, including voting at any meeting of Stockholders then scheduled.
4. WITHDRAWAL RIGHTS
Tenders of Shares made pursuant to the Offer are irrevocable, except as
otherwise provided in this Section 4. Shares tendered pursuant to the Offer
may be withdrawn pursuant to the procedures set forth below at any time prior
to the Expiration Date and, unless theretofore accepted for payment and paid
for by Purchaser pursuant to the Offer, may also be withdrawn at any time
after Thursday, October 15, 1998. If Purchaser extends the Offer, is delayed
in its purchase of or payment for Shares or is unable to purchase or pay for
Shares for any reason, then, without prejudice to the rights of Purchaser,
tendered Shares may be retained by the Depositary on behalf of Purchaser and
may not be withdrawn, except to the extent that tendering Stockholders are
entitled to withdrawal rights as set forth in this Section 4. The reservation
by Purchaser of the right to delay the acceptance or purchase of or payment
for Shares is subject to the provisions of Rule 14e-1(c) under the Exchange
Act, which requires Purchaser to pay the consideration offered or return
Shares deposited by or on behalf of Stockholders promptly after the
termination or withdrawal of the Offer.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase.
Any such notice of withdrawal must specify the name of the persons who
tendered the Shares to be withdrawn, the number of Shares to be withdrawn and
the name of the registered holder, if different from that of the person who
tendered the Shares. If certificates evidencing Shares have been delivered or
otherwise identified to the Depositary, then, prior to the physical release of
the certificates, the tendering Stockholder must also submit to the Depositary
the serial numbers shown on the particular certificates that evidence the
Shares to be withdrawn, and the signature on the notice of withdrawal must be
guaranteed by an Eligible Institution (except in the case of Shares tendered
for the account of an Eligible Institution). If Shares have been tendered
pursuant to the procedure for book-entry transfer set forth in Section 3
above, the notice of withdrawal must also specify the name and number of the
account at the Book-Entry Transfer Facility to be credited with the withdrawn
Shares and otherwise comply with the Book-Entry Transfer Facility procedures.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by Purchaser, in its sole discretion,
whose determination will be final and binding on all parties. No withdrawal of
Shares will be deemed to have been properly made until all defects and
irregularities have been cured or waived. None of Parent, Purchaser, the
Dealer Manager, the Depositary, the Information Agent or any other person will
be under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failing to give such
notification.
Any Shares properly withdrawn will be deemed not validly tendered for
purposes of the Offer, but may be tendered at any subsequent time prior to the
Expiration Date by following any of the procedures described in Section 3
above.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE OFFER AND THE MERGER
The following discussion summarizes the material federal income tax
consequences of the Offer and the Merger that are generally applicable to
Stockholders whose Shares are purchased pursuant to the Offer or whose Shares
are converted into the right to receive the Merger Consideration in the Merger
(including any cash amounts received by dissenting Stockholders pursuant to
the exercise of appraisal rights). The discussion is based upon current
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
currently applicable Treasury regulations, and judicial and administrative
decisions and rulings. Future legislative, judicial or administrative changes
or interpretations could alter or modify the statements and conclusions set
forth herein, and any such changes or interpretations could be retroactive and
could affect the tax consequences to the Stockholders of the Company.
8
<PAGE>
The discussion below does not purport to deal with all aspects of federal
income taxation that may affect particular Stockholders in light of their
individual circumstances, and is not intended for Stockholders subject to
special treatment under the federal income tax law (including, without
limitation, insurance companies, tax-exempt organizations, financial
institutions, broker-dealers, foreign persons, Stockholders who hold their
stock as part of a hedge, appreciated financial position, straddle or
conversion transaction, Stockholders who do not hold their stock as capital
assets, Stockholders who hold more than 5 percent of the stock of the Company
and Stockholders who have acquired their stock upon the exercise of employee
options or otherwise as compensation). In addition, the discussion below does
not address any aspect of foreign, state, local, or estate and gift taxation
that may be applicable to a Stockholder.
EACH STOCKHOLDER OF SHARES IS STRONGLY URGED AND EXPECTED TO CONSULT WITH
SUCH STOCKHOLDER'S TAX ADVISOR TO DETERMINE THE PARTICULAR FEDERAL INCOME TAX
CONSEQUENCES OF THE OFFER AND THE MERGER TO SUCH STOCKHOLDER IN LIGHT OF SUCH
STOCKHOLDER'S SPECIFIC CIRCUMSTANCES AS WELL AS THE APPLICABILITY AND EFFECT
OF STATE, LOCAL AND FOREIGN TAX LAWS.
Consequences of the Offer and the Merger to Stockholders. The receipt of the
Offer Price and the Merger Consideration (including any cash amounts received
by dissenting Stockholders pursuant to the exercise of appraisal rights) will
be a taxable transaction for federal income tax purposes. A Stockholder who,
pursuant to the Offer or the Merger, exchanges all of its Shares for cash will
recognize gain or loss equal to the difference between (i) the amount of cash
such Stockholder receives in the Offer or the Merger and (ii) the
Stockholder's adjusted tax basis in such Shares. Such gain or loss will be
capital gain or loss and will be long-term gain or loss if, on the date of
sale (or, if applicable, the date of the Merger), the Shares were held for
more than one year (except amounts, if any, with respect to the exercise of
appraisal rights, which are or are deemed to be interest for federal income
tax purposes). In the case of individuals, "net capital gain," i.e., the
excess of net long-term capital gain over net short-term capital loss, is
generally subject to a reduced rate of federal income tax.
Backup Withholding. A Stockholder may be subject, under certain
circumstances, to "backup withholding" at a 31% rate with respect to payments
made in connection with the Offer or the Merger. Backup withholding generally
applies if the Stockholder (i) has provided either an incorrect tax
identification number or no number at all, (ii) is subject to backup
withholding by the Internal Revenue Service for failure to report the receipt
of interest or dividend income properly, or (iii) has failed to certify to the
Company that such Stockholder is not subject to backup withholding or that
such Stockholder is an "exempt recipient." Certain persons generally are
exempt from backup withholding, including corporations and financial
institutions. Backup withholding is not an additional tax, but rather may be
credited against the taxpayer's tax liability for the year. Certain penalties
apply for failure to furnish correct information and for failure to include
the reportable payments in income. Each Stockholder should consult with his or
her own tax advisor as to his or her qualifications for exemption from
withholding and the procedure for obtaining such exemption.
9
<PAGE>
6. PRICE RANGE OF THE SHARES, DIVIDENDS ON THE SHARES
According to the Company's Annual Report on Form 10-K for the year ended
December 31, 1997 (the "Company 10-K"), the principal trading market for the
Shares is the Nasdaq National Market (the "NNM"), where the trading symbol is
"INCL." The following table sets forth, for the periods indicated, the high
and low sales prices per Share, as reported by the NNM:
High and low sale prices per Share as reported by the NNM for the periods
indicated:
<TABLE>
<CAPTION>
HIGH LOW
-------- -------
<S> <C> <C>
1996:
First Quarter........................................... 18 13 3/4
Second Quarter.......................................... 17 1/4 11 1/4
Third Quarter........................................... 12 1/8 8
Fourth Quarter.......................................... 10 1/2 7 1/8
1997:
First Quarter........................................... 10 3/8 6 3/4
Second Quarter.......................................... 10 5/8 7 1/16
Third Quarter........................................... 10 3/16 8 7/8
Fourth Quarter.......................................... 10 5 1/2
1998:
First Quarter........................................... 8 3/8 4
Second Quarter.......................................... 7 3/4 2 1/16
Third Quarter (through August 14, 1998)................. 5 15/16 2 5/16
</TABLE>
On August 10, 1998, the last full trading day before the public announcement
by Parent and the Company of the execution of the Merger Agreement and
Purchaser's intention to commence the Offer, the last reported sale price on
the NNM was $5.28125 per Share. On August 14, 1998, the last full trading day
before the commencement of the Offer, the last reported sale price on the NNM
was $5.75 per Share. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET
QUOTATIONS FOR THE SHARES.
According to published financial sources, the Company has not paid any
dividends on the Shares for the periods presented above.
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, STOCK EXCHANGE LISTING
AND EXCHANGE ACT REGISTRATION AND MARGIN SECURITIES
The purchase of Shares pursuant to the Offer will reduce the number of
Shares that might otherwise trade publicly and may reduce the number of
holders of Shares, which could adversely affect the liquidity and market value
of the remaining Shares held by Stockholders other than Purchaser. Purchaser
cannot predict whether the reduction in the number of Shares that might
otherwise trade publicly would have an adverse or beneficial effect on the
market price for, or marketability of, the Shares or whether such reduction
would cause future market prices to be greater or less than the Offer Price.
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the requirements of the NNM for continued listing
and may, therefore, be delisted from such exchange. According to the NNM's
published guidelines, the NNM would consider delisting the Shares if, among
other things, the number of publicly held Shares (excluding Shares held by
officers, directors, their immediate families and other concentrated holdings
of 10% or more) were less than 500,000, there were less than 300 holders of at
least 100 Shares or the aggregate market value of the publicly held Shares
were less than $1 million. The Company has represented in the Merger Agreement
that, as of the close of business on August 6, 1998, there were 20,974,122
10
<PAGE>
Shares outstanding. In addition, the Company has represented that as of August
14, 1998, all issued and outstanding shares of Series B Stock have been
converted into 844,884 Shares. If, as a result of the purchase of Shares
pursuant to the Offer, the Shares no longer meet the requirements of the NNM
for continued listing and the listing of Shares is discontinued, the market
for the Shares could be adversely affected.
If the NNM were to delist the Shares (which Purchaser intends to cause the
Company to seek if it acquires control of the Company and the Shares no longer
meet the NNM listing requirements), it is possible that the Shares would trade
on another securities exchange or in the over-the-counter market and that
price quotations for the Shares would be reported by such exchange or through
the Nasdaq or other sources. The extent of the public market for the Shares
and availability of such quotations would, however, depend upon such factors
as the number of holders and/or the aggregate market value of the publicly
held Shares at such time, the interest in maintaining a market in the Shares
on the part of securities firms, the possible termination of registration of
the Shares under the Exchange Act and other factors.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application of the Company to the
Commission if the Shares are neither listed on a national securities exchange
nor held by 300 or more holders of record. Termination of the registration of
the Shares under the Exchange Act would substantially reduce the information
required to be furnished by the Company to holders of Shares and to the
Commission and would make certain of the provisions of the Exchange Act, such
as the short-swing profit recovery provisions of Section 16(b), the
requirement of furnishing a proxy statement pursuant to Section 14(a) in
connection with a shareholders' meeting and the related requirement of an
annual report to stockholders and the requirements of Rule 13e-3 under the
Exchange Act with respect to "going private" transactions, no longer
applicable to the Company. Furthermore, "affiliates" of the Company and
persons holding "restricted securities" of the Company may be deprived of the
ability to dispose of such securities pursuant to Rule 144 promulgated under
the Securities Act of 1933, as amended (the "Securities Act"). If registration
of the Shares under the Exchange Act were terminated, the Shares would no
longer be eligible for listing or NASDAQ reporting. Purchaser intends to seek
to cause the Company to terminate registration of the Shares under the
Exchange Act as soon after consummation of the Offer as the requirements for
termination of registration of the Shares are met.
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"), which has the effect, among other things, of allowing brokers to
extend credit on the collateral of such Shares. If the registration of the
Shares under the Exchange Act were terminated, they would no longer be "margin
securities". In addition, if certain factors similar to those described in the
preceding paragraph regarding listing and market quotations were no longer
met, the Shares might no longer constitute "margin securities" for the
purposes of the Federal Reserve Board's margin regulations and, therefore,
could no longer be used as collateral for loans made by brokers.
8. CERTAIN INFORMATION CONCERNING THE COMPANY
The Company is a Delaware corporation with its principal executive offices
located at 6675 185th Avenue N.E., Redmond, WA 98052. According to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998
(the "Company 10-Q"), the Company is engaged in the design, development and
manufacture of implantable atrial defibrillators and related products,
including transvenous defibrillation leads, and temporary defibrillation
catheters.
Set forth below is certain selected consolidated financial data with respect
to the Company and its subsidiaries excerpted from the Company 10-K and the
Company 10-Q. More comprehensive financial information is included in such
reports and other documents filed by the Company with the Commission, and the
following summary is qualified in its entirety by reference to such reports
and other documents and all the financial information (including any related
notes) contained therein. Such reports and other documents are available for
inspection and copies are obtainable in the manner set forth below under
"Available Information."
11
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF INCONTROL, INC.
(IN MILLIONS, EXCEPT PER-SHARE AND OTHER DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31
------------------ --------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- ------ ------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net sales............... $ 1.9 $ 0.6 $ 2.0 $ 0.3 -- -- --
Cost of sales........... 1.2 0.5 1.5 -- -- -- --
-------- -------- ------ ------ ------ ------ ------
Gross profit............ 0.7 0.1 0.5 0.3 -- -- --
Research and
development............ 13.2 11.0 24.9 23.1 20.1 16.4 9.1
Sales, marketing and
administrative......... 6.0 4.8 10.2 7.1 4.6 2.8 1.5
Compensation charge..... -- -- -- 8.6 -- -- --
Restructuring charge.... 1.4 -- -- -- -- -- --
Interest income
(expense), net......... -- 0.7 1.1 1.7 1.0 0.4 0.3
Net loss................ (19.9) (15.0) (33.5) (36.8) (23.7) (18.8) (10.3)
Preferred dividend...... 0.5 -- -- -- -- -- --
Net loss applicable to
common shareholders.... (20.4) (15.0) (33.5) (36.8) (23.7) (18.8) (10.3)
Net loss per share...... $ (1.08) $ (0.88) $(1.88) $(2.31) $(1.83) $(4.00) N/A
Weighted average shares
outstanding............ 18.98 17.01 17.77 15.97 12.93 4.70 N/A
OTHER DATA
Working capital......... $ 4.4 $ 20.5 $ 13.7 $ 36.6 $ 18.8 $ 29.3 $ 19.0
Current ratio........... 1.6:1 5.6:1 3.2:1 11.5:1 7.2:1 12.3:1 14.4:1
Capital expenditures,
net.................... 1.4 3.3 5.7 2.2 2.3 2.6 2.5
Total assets............ 20.8 32.8 28.9 45.9 27.5 37.2 24.4
Borrowings.............. 3.8 3.5 4.2 2.6 3.3 3.3 2.3
Borrowings as a
percentage of total
capitalization......... 23.0% 11.7% 16.0% 6.0% 12.9% 9.3% 9.7%
Shareholders' equity.... 5.2 26.3 22.1 41.0 22.2 32.3 21.3
Redeemable preferred
stock.................. 7.5 -- -- -- -- -- --
Book value per share.... $ 0.27 $ 1.55 $ 1.24 $ 2.57 $ 1.72 $ 6.87 N/A
</TABLE>
Except as otherwise stated in this Offer to Purchase, the information
concerning the Company contained in this Offer to Purchase has been taken from
or based upon publicly available documents on file with the Commission and
other publicly available information. Although Purchaser and Parent do not
have any knowledge that any such information is untrue, neither Purchaser nor
Parent takes any responsibility for the accuracy or completeness of such
information or for any failure by the Company to disclose events that may have
occurred and may affect the significance or accuracy of any such information.
Available Information. The Company is subject to the informational filing
requirements of the Exchange Act. In accordance with the Exchange Act, the
Company files periodic reports, proxy statements and other information with
the Commission that relates to its business, financial condition and other
matters. The Company is required to disclose in such proxy statements certain
information, as of particular dates, concerning the Company's directors and
officers, their remuneration, stock options granted to them, the principal
holders of the Company's securities and any material interest of those persons
in transactions with the Company. Such reports, proxy statements and other
information may be inspected at the Commission's office at 450 Fifth Street,
N.W., Washington, D.C. 20549, and also are available for inspection and
copying at the regional offices of the Commission located at Citicorp Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511; and
7 World Trade Center, 13th Floor, New York, New York 10048. Copies may be
obtained upon payment of the Commission's prescribed fees by writing to its
principal office at 450 Fifth Street, N.W., Washington, D.C.
12
<PAGE>
20549. The Commission also maintains a website at http://www.sec.gov which
contains reports, proxy statements and other information regarding registrants
(including Parent and the Company) that file electronically with the
Commission. Material filed by the Company can also be inspected at the offices
of the National Association of Securities Dealers, Inc., Reports Section, 1735
K Street, N.W., Washington D.C. 20006.
9. CERTAIN INFORMATION CONCERNING PURCHASER AND PARENT
Purchaser, a Delaware corporation, was organized to acquire all of the
outstanding Shares pursuant to the Offer and has not conducted any unrelated
activities since its organization. All of the outstanding capital stock of
Purchaser is owned by CPI. The principal executive offices of Purchaser are
located at 4100 Hamline Avenue North, St. Paul, Minnesota 55112.
CPI, a Minnesota corporation, is part of the Cardiac Rhythm Management
business group of Parent and is a worldwide leader in automatic implantable
cardioverter defibrillator systems. CPI also designs, manufactures, and
markets a full line of implantable pacemaker systems used in the treatment of
slow or irregular arrhythmias. All of the issued and outstanding capital stock
of CPI is owned directly by Parent. The principal executive offices of CPI are
located at 4100 Hamline Avenue North, St. Paul, Minnesota 55112.
Parent is an Indiana corporation which, together with its subsidiaries, is a
multinational company that designs, develops, manufactures and markets a broad
range of high-quality therapeutic devices for use in cardiac rhythm
management, vascular intervention, and cardiac and vascular surgery. The
principal executive offices of Parent are located at 111 Monument Circle, 29th
Floor, Indianapolis, Indiana 46204.
Except as described in this Offer to Purchase, during the last five years,
neither Purchaser nor CPI nor Parent or, to the best knowledge of Purchaser,
CPI and Parent, any of the persons listed in Schedule I hereto (i) has been
convicted in a criminal proceeding (excluding traffic violations and similar
misdemeanors) or (ii) was a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of such laws. The name, business
address, present principal occupation or employment, five-year employment
history and citizenship of each director and executive officer of Purchaser,
CPI and Parent are set forth in Schedule I.
Set forth below is certain selected consolidated financial information with
respect to Parent and its subsidiaries excerpted from Parent's Annual Report
on Form 10-K for the fiscal year ended December 31, 1997 and Parent's
Quarterly Reports on Form 10-Q for the quarterly periods ended June 30, 1998
and June 30, 1997, in each case filed with the Commission by Parent. More
comprehensive financial information is included in such reports and other
documents filed with the Commission by Parent, and the following summary is
qualified in its entirety by reference to such reports and other documents and
all financial information (including any related notes) contained therein.
Such reports and other documents should be available for inspection and copies
should be obtainable in the manner set forth with respect to information about
the Company in Section 8. Material filed by Parent can also be obtained at the
offices of the NYSE, 20 Broad Street, New York, New York 10005.
13
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF GUIDANT CORPORATION AND SUBSIDIARIES
(IN MILLIONS, EXCEPT PER-SHARE AND OTHER DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
--------------------- -------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net sales:
Cardiac rhythm
management............ $ 400.5 $ 313.4 $ 669.6 $ 574.6 $ 452.4 $ 378.6 $ 336.5
Vascular intervention.. 523.4 201.9 591.4 425.6 447.9 464.5 451.6
Cardiac & vascular
surgery............... 34.2 32.9 67.2 49.5 31.0 19.3 6.6
-------- -------- -------- -------- -------- -------- --------
Total net sales........ 958.1 548.2 1,328.2 1,049.7 931.3 862.4 794.7
Cost of products sold... 217.4 139.8 320.8 315.9(1) 283.4 270.9 236.2
-------- -------- -------- -------- -------- -------- --------
Gross profit........... 740.7 408.4 1,007.4 733.8(1) 647.9 591.5 558.5
Research and
development............ 127.8 92.0 208.3 164.6 142.8 138.3 132.6
Purchased research and
development(2)......... 28.7 57.4 57.4 -- -- -- --
Sales, marketing, and
administrative......... 276.2 175.8 439.7 328.4 292.8 269.8 255.8
Special charges(3)...... -- -- 22.6 -- -- -- 81.5
-------- -------- -------- -------- -------- -------- --------
Income from operations.. 308.0(11) 83.2(11) 279.4 240.8(1) 212.3 183.4 88.6
Other expenses, net..... 40.8 10.3 30.6(4) 104.8(5) 50.8 35.4 5.7
Litigation settlement
charge................. 60.0(12) -- -- -- -- -- --
Net income.............. $ 134.0(13) $ 42.9(14) $ 145.3(6) $ 52.3(7) $ 92.8 $ 84.2 $ 46.5
Earnings per share...... $ 0.91(13) $ 0.29(14) $ 0.99(6) $ 0.36(7) $ 0.64
Earnings per share--
assuming dilution...... $ 0.89(13) $ 0.29(14) $ 0.97(6) $ 0.35(7) $ 0.63
Pro forma net
income(8).............. $ 68.3
Pro forma earnings per
share(8)............... $ 0.47
Cash dividends declared
per share.............. $ 0.025 $ 0.025 $ 0.05 $ 0.05 $ 0.025 --
Weighted average shares
outstanding............ 147.28 147.06 147.15 146.73 145.75 145.50(8)
OTHER DATA:
Working capital......... $ 222.0 $ 168.6 $ 83.8(9) $ 127.6 $ 119.7 $ 134.1 $ 153.8
Current ratio........... 1.5:1 1.5:1 1.2:1(9) 1.4:1 1.4:1 1.4:1 1.7:1
Capital expenditures,
net.................... 49.5 37.2 76.8 63.6 64.9 51.8 43.7
Total assets............ 1,305.9 1,075.8 1,225.0 1,024.9 1,069.1 1,122.5 1,300.4
Borrowings.............. 283.7 381.9 292.2 363.5 455.0 473.0 --
Borrowings as a
percentage of total
capitalization......... 28.7% 43.3% 33.4% 43.8% 53.6% 62.6% --
Shareholders' equity.... 704.4 500.8 581.8 466.9 394.4 282.6(10) 1,059.6
Book value per share.... $ 4.78 $ 3.41 $ 3.95 $ 3.18 $ 2.71 $ 1.94
</TABLE>
- --------
(1) Includes the impact of special obsolescence charges of $28.8 million
reported in the second quarter of 1996. Excluding the effect of these
charges, cost of products sold was $287.1 million, gross profit was
$762.6 million, and income from operations was $269.6 million.
(2) In conjunction with the asset acquisition of NeoCardia, LLC., the initial
purchase price of $57.4 million paid in 1997 and the additional
consideration of $28.7 million paid in 1998 were charged to expense.
These amounts represent the appraised value of in-process research and
development.
(3) Represents merger-related costs of $11.1 million in connection with the
acquisition of EndoVascular Technologies, Inc. and a special contribution
to the Guidant Foundation, Inc., of $11.5 million in 1997, and
restructuring charges in 1993.
(4) Includes a one-time gain of $23.2 million on the sale of the Company's
equity investment in Gynecare, Inc., and a corporate legal reserve of
$11.5 million recorded in the fourth quarter of 1997.
(5) Includes the impact of impairment charges on atherectomy-related goodwill
and other intangible assets of $66.9 million. Without the effect of these
special charges, other expenses were $37.9 million for the year ended
December 31, 1996.
(6) In addition to the special items mentioned in (3) and (4) above, reported
net income includes a cumulative effect of a change in accounting
principle of ($4.7 million), net of tax, recorded by the Company pursuant
to its adoption of EITF consensus on Issue 97-13. Excluding the effect of
these special items, net income
14
<PAGE>
was $197.4 million, earnings per share was $1.34, and earnings per share-
assuming dilution was $1.32 for the year ended December 31, 1997.
(7) Excluding the effect of the aforementioned special obsolescence and
impairment charges, net income, earnings per share, and earnings per
share--assuming dilution were $136.4 million, $0.93, and $0.92,
respectively, for the year ended December 31, 1996.
(8) Pursuant to the formation of Guidant, its Initial Public Offering (IPO),
and resultant transfer of assets from Eli Lilly and Company (Lilly), the
Company reported 1994 earnings on a pro forma basis, which give effect to
the following transactions as if they occurred on January 1, 1994: (i)
borrowings under certain credit agreements, (ii) dividends to Lilly, and
(iii) receipt of IPO proceeds.
(9) The decline in working capital and current ratio primarily resulted from
the classification of $212.2 million of the Company's commercial paper
and bank borrowings as a current liability.
(10) The decline in shareholders' equity from December 31, 1993, to December
31, 1994, was primarily attributable to dividends to Lilly. See (8)
above.
(11) Includes the impact of purchased research and development charges of
$28.7 million in 1998 and $57.4 million in 1997 related to the
acquisition of NeoCardia, LLC. Excluding these charges, income from
operations would have been $336.7 million and $140.6 million for the six
months ended June 30, 1998 and 1997, respectively.
(12) In the first quarter of 1998, Guidant recorded a charge of $60 million
related to an April 6, 1998 agreement with C.R. Bard, Inc. that granted
Guidant licenses to certain patents and settled two patent infringement
lawsuits.
(13) Excluding the effect of the aforementioned litigation and purchased
research and development charges, net income, earnings per share, and
earnings per share-assuming dilution were $191.4 million, $1.30, and
$1.27, respectively, for the six months ended June 30, 1998.
(14) Excluding the impact of the aforementioned purchased research and
development charge, net income, earnings per share, and earnings per
share assuming dilution were $79.3 million, $0.54, and $0.53,
respectively, for the six months ended June 30, 1997.
Except as set forth below or as otherwise described in this Offer to
Purchase, (i) neither Purchaser nor CPI nor Parent or, to the best knowledge
of Purchaser, CPI and Parent, any of the persons listed in Schedule I or any
associate or majority-owned subsidiary of any such person, beneficially owns
or has a right to acquire any equity security of the Company and (ii) neither
Purchaser nor CPI nor Parent or, to the best knowledge of Parent, CPI and
Purchaser, any of the other persons referred to above, or any of the
respective directors, executive officers or subsidiaries of any of the
foregoing, has effected any transaction in any equity security of the Company
during the past 60 days. Mr. Eugene L. Step, a director of Parent,
beneficially owns 5,994 Shares.
10. SOURCE AND AMOUNT OF FUNDS
The Offer is not conditioned upon any financing arrangements. Purchaser
estimates that the total amount of funds required to consummate the Offer and
the Merger, to pay related fees and expenses and to pay outstanding
indebtedness of the Company that may become due as a result of the Offer and
the Merger is approximately $138.0 million. Purchaser expects to obtain these
funds in the form of capital contributions from Parent. Parent expects to fund
the capital contributions and/or loans provided to Purchaser from existing
available working capital, bank borrowings and/or from existing commercial
paper programs.
15
<PAGE>
11. BACKGROUND
Background of the Offer
In January 1998, the Company engaged in preliminary discussions with Goldman
Sachs concerning the possibility of entering into a strategic relationship
with another company for the purpose of raising capital to fund ongoing
operations.
In February and March 1998, the Company and Goldman Sachs had informal
discussions with several companies, including Parent, concerning the
possibility of entering into a strategic relationship with the Company. During
this time the Company and Goldman Sachs also explored the possibility of
raising additional capital through public and private offerings of debt or
equity.
By letter dated March 20, 1998, the Company formally engaged Goldman Sachs
to explore strategic alternatives, including the possible sale of all or a
portion of the Company. The services to be provided by Goldman Sachs included
providing financial advice and assistance in connection with a potential
transaction, including performing financial analyses, searching for a
purchaser acceptable to the Company, coordinating visits of potential
purchasers and assisting the Company in negotiating the financial aspects of
any transaction. Pursuant to the engagement, Goldman Sachs contacted several
companies thought to possibly have an interest in either acquiring the Company
or entering into a strategic relationship. Although the Company received
certain preliminary indications of interest as a result of these efforts, no
company other than Parent was willing to enter into meaningful discussions
with the Company concerning an acquisition or a strategic relationship.
On July 9, 1998, the Company received a non-binding written indication of
interest from Parent to acquire all of the Company's outstanding Shares for
$110,000,000, or approximately $5.00 per share. Also on July 9, 1998, the
Board of Directors of the Company met to discuss Parent's offer. Based in part
on discussions with Goldman Sachs, the Company determined that the offer of
approximately $5.00 per share was insufficient. The Board of Directors of the
Company instructed selected officers and Goldman Sachs to engage in further
discussions with Parent to explore a potential sale of the Company to Parent
on terms acceptable to the Company.
On July 13, 14, 20, 21 and 22, 1998, the Company presented to
representatives of Parent information regarding research and development,
intellectual property, clinical, regulatory, financial, personnel, legal,
contract and tax matters which had been previously requested by Parent. After
this meeting, representatives of the Company, Parent and Goldman Sachs had
further discussions clarifying information previously delivered to Parent and
additional requested information was sent to Parent.
On July 30, 1998, Parent's Board of Directors authorized Parent to make an
offer to acquire the Company.
On July 31, 1998, the Company received a written offer from Parent to
acquire all of the Company's outstanding Shares for $132,000,000. On August 3,
1998, the Board of Directors of the Company met and instructed selected
officers of the Company to advise Parent of its willingness to discuss a
transaction substantially on the terms offered, subject to certain conditions.
Thereafter, the Company and Goldman Sachs began discussions with Parent in
anticipation of negotiating the Merger Agreement.
On August 3, 1998, Parent delivered to the Company a proposed form of Merger
Agreement and Shareholder Agreement, and the parties commenced negotiations.
On August 6, 1998, representatives of the Company and Parent met to conduct
further negotiations. Parent agreed to increase the offer price of its offer
to acquire all of the Company's outstanding shares to $6.00 per share for all
such shares, for an aggregate purchase price of approximately $135,000,000.
Parent also agreed to make the loan reflected in the Credit Agreement. After
this meeting, representatives of the Company, Parent and Goldman Sachs had
further discussions regarding the drafting of the definitive Merger Agreement
and Parent delivered to the Company a proposed form of Credit Agreement.
16
<PAGE>
On August 9 and 10, 1998, representatives of Parent and the Company met in
New York to complete the negotiations of the Merger Agreement, the
Shareholders Agreement and the Credit Agreement.
On August 10, 1998, the Board of Directors met to discuss the final terms of
the proposed transaction. Following a presentation by Goldman Sachs and
Company counsel, and after discussion, Goldman Sachs delivered to the Board of
Directors of the Company its oral opinion, subsequently confirmed in writing,
that the $6.00 in cash per common share to be received by the Stockholders in
the Offer and the Merger is fair from a financial point of view to such
holders. The Board of Directors of the Company unanimously approved and
adopted the Merger Agreement, the Shareholder Agreement and the Credit
Agreement. The Company also amended its shareholder rights plan pursuant to
which the Offer and the Merger were excepted out of the effects of the
shareholder rights plan.
Following the meeting of the Board of Directors, Parent, Purchaser and the
Company finalized the terms of, and executed and delivered, the Merger
Agreement and the Credit Agreement, and Parent, Purchaser and the Selling
Stockholders delivered the Shareholder Agreement.
On August 11, 1998, the Company and Parent announced the transaction
publicly by issuing the press release attached as Exhibit (a)(8) to the
Schedule 14D-1.
12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY; THE MERGER
AGREEMENT; THE SHAREHOLDER AGREEMENT; THE CREDIT AGREEMENT; OTHER MATTERS
Purpose of the Offer and the Merger
The purpose of the Offer is for the Purchaser to acquire complete control
of, and an equity interest in, the Company. The Purchaser intends to acquire
all outstanding Shares not tendered and purchased pursuant to the Offer. The
acquisition of the entire equity interest in the Company has been structured
as a cash tender offer followed by a cash merger in order to provide a prompt
and orderly transfer of ownership of the Company from the public Stockholders
to Parent and to provide Stockholders with cash for all of their Shares. The
Offer is intended to increase the likelihood that the Merger will be completed
promptly.
17
<PAGE>
THE OFFER DOES NOT CONSTITUTE A SOLICITATION OF PROXIES FOR ANY MEETING OR A
SOLICITATION OF CALLS FOR A SPECIAL MEETING OF THE COMPANY'S STOCKHOLDERS. ANY
SUCH SOLICITATION WHICH PARENT OR PURCHASER MIGHT MAKE WOULD BE MADE ONLY
PURSUANT TO SEPARATE PROXY OR SOLICITATION MATERIALS COMPLYING WITH THE
REQUIREMENTS OF SECTION 14(A) OF THE EXCHANGE ACT, AND THE RULES AND
REGULATIONS PROMULGATED THEREUNDER.
Parent believes that the Company's business will strengthen Parent's
position as a global leader in providing products for the treatment of
cardiovascular disease by providing Parent with an enhanced ability to create
advanced devices designed to provide physicians with maximum flexibility in
treating heart rhythm disorders.
Plans for the Company
Following the completion of the Merger, Parent intends to integrate the
operations of the Company into Parent's Cardiac Rhythm Management business
group and to evaluate and review the Company's operations and consider what,
if any, changes would be desirable in light of circumstances that then exist.
In that regard, Parent has notified a substantial number of employees of the
Company that their employment will be terminated by the Company following the
Effective Time and has offered them severance packages. In addition, the
directors of Purchaser will be the directors of the Surviving Corporation and
the officers of the Company immediately prior to the Effective Time will be
the officers of the Surviving Corporation. Except as described in this Offer
to Purchase, neither Parent nor Purchaser currently has any present specific
plans or proposals that would relate to or would result in (i) an
extraordinary corporate transaction, such as a merger, reorganization or
liquidation, involving the Company or any of its subsidiaries, (ii) a sale or
transfer of a material amount of assets of the Company or any of its
subsidiaries, (iii) any other material change in the Company's corporate
structure or business, (iv) a class of securities of the Company being
delisted from a national securities exchange or ceasing to be authorized to be
quoted in an inter-dealer quotation system of a registered national securities
association or (v) a class of equity securities of the Company becoming
eligible for termination of registration pursuant to Section 12(g)(4) of the
Exchange Act.
The Merger Agreement
The following is a summary of the material terms of the Merger Agreement.
This summary is not a complete description of the terms and conditions of the
Merger Agreement and is qualified in its entirety by reference to the full
text of the Merger Agreement, which is incorporated by reference and a copy of
which has been filed with the Commission as an exhibit to the Schedule 14D-1.
The Offer. The Merger Agreement provides for the making of the Offer by
Purchaser. The obligation of Purchaser to, and of Parent to cause Purchaser
to, commence the Offer and accept for payment, and pay for any Shares tendered
pursuant to the Offer is subject to the satisfaction of the Minimum Tender
Condition, the Preferred Securities Condition, the receipt of regulatory
approvals and consents and certain other conditions that are described in
Section 14. Purchaser has expressly reserved the right to make changes in the
terms and conditions of the Offer, except that without the prior written
consent of the Company, Purchaser has agreed that it will not (i) reduce the
number of Shares subject to the Offer, (ii) reduce the Offer Price, (iii)
amend or add to the Offer Conditions, (iv) extend the Offer (except, (x) if,
at the scheduled or extended expiration date of the Offer any of the Offer
Conditions shall not be satisfied or waived, until such time as such condition
are satisfied or waived, (y) as required by law or the applicable rules and
regulations of the Commission or the interpretation or position of the
Commission staff applicable to the Offer and (z) for any reason on one or more
occasions for an aggregate period of not more than 10 business days beyond the
latest expiration date that would otherwise be permitted under clause (x) or
(y) of this sentence), (v) change the form of consideration payable in the
Offer or (vi) amend any other term of the Offer in any manner adverse to the
holders of the Shares; provided, however, that Purchaser may waive any
condition (other than the Minimum Tender Condition) to the Offer in its sole
discretion; provided, further, that in the event that the redemption notice
for the Series B Stock has been given, but the redemption notice period has
not expired, Purchaser will extend the expiration date of the Offer until
18
<PAGE>
such time as the redemption notice period has expired. Assuming the prior
satisfaction or waiver of the Offer Conditions, Purchaser shall, and Parent
shall cause Purchaser to, accept for payment, and pay for, all Shares validly
tendered pursuant to the Offer that Purchaser becomes obligated to accept for
payment, and pay for, pursuant to the Offer as soon as practical after the
expiration date thereof. Parent shall provide or cause to be provided to
Purchaser on a timely basis the funds necessary to accept for payment, and pay
for, any Shares that Purchaser becomes obligated to accept for payment, and
pay for, pursuant to the Offer.
Board Representation. The Merger Agreement provides that promptly upon the
acceptance for payment pursuant to the Offer by Purchaser of such number of
Shares that represents at least a majority of the Shares outstanding, and from
time to time thereafter, Purchaser will be entitled to designate such number
of directors on the Company's Board of Directors as will give Purchaser (i)
subject to compliance with Section 14(f) of the Exchange Act, a majority of
such directors, and the Company shall, at such time, cause Purchaser's
designees to be so elected by its existing Board of Directors and (ii) each
subsidiary of the Company and each committee of the Board of Directors of the
Company and each such subsidiary as will give Purchaser a majority of such
directors or committee, and the Company shall, at such time, cause Purchaser's
designees to be so elected. In the event that Purchaser's designees are
elected to the Board of Directors of the Company, until the Effective Time
such Board of Directors shall have at least two directors who are directors on
the date of the Merger Agreement and who are not officers of the Company (the
"Independent Directors"); and provided that, in such event, if the number of
Independent Directors shall be reduced below two for any reason whatsoever,
the remaining Independent Director shall designate a person to fill such
vacancy who shall be deemed to be an Independent Director, or if no
Independent Director then remains, the other directors shall designate two
persons to fill such vacancies who shall not be officers of affiliates of the
Company, or officers or affiliates of Parent or any of its subsidiaries, and
such persons shall be deemed to be Independent Directors. At the request of
Parent, and subject to applicable law, the Company will take all action
necessary to effect any such election, including, mailing to the Stockholders
the information required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder, and the Company agreed to make such mailing with the
mailing of the Schedule 14D-9 (as defined in the Merger Agreement). In
connection with the foregoing, the Company will promptly, at the option of
Parent, either increase or decrease the size of the Company's and each
subsidiary's Board of Directors and each committee thereof and/or obtain the
resignation of such number of its current directors as is necessary to enable
Purchaser's designees to be elected or appointed to, and to constitute a
majority of the Company's and each subsidiary's Board of Directors and each
committee thereof as provided above. Following the election or appointment of
Purchaser's designees pursuant to the Merger Agreement and prior to the
Effective Time, any amendment or termination of the Merger Agreement,
extension of the time for the performance of the obligations or other acts of
Parent or Purchaser, the exercise or waiver of the Company's rights or
remedies under the Merger Agreement, or, following the termination of the
Merger Agreement in accordance with its terms, the entrance into any other
merger or consolidation between the Company and Parent or any subsidiary of
Parent will require the affirmative vote of a majority of Independent
Directors then in office.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions set forth in the Merger Agreement, and in accordance with
the DGCL, Purchaser will be merged with and into the Company at the Effective
Time. At the Effective Time, the separate corporate existence of Purchaser
will cease, and the Company will continue as the Surviving Corporation. At the
Effective Time, by virtue of the Merger, each Share issued and outstanding
immediately prior to the Effective Time (excluding Shares owned, directly or
indirectly, by the Company or any wholly-owned subsidiary of the Company or by
Parent, Purchaser or any other subsidiary of Parent and excluding Dissenting
Shares (as defined below)) will be converted into the right to receive the
Merger Consideration, without any interest thereon, upon surrender and
exchange of a certificate which immediately prior to the Effective Time
represented such Shares (each, a "Certificate"). Each share of the capital
stock of Purchaser issued and outstanding immediately prior to the Effective
Time will be converted into one fully paid and nonassessable share of common
stock, par value $.01 per share, of the Surviving Corporation, which will
thereupon become an indirect, wholly-owned subsidiary of Parent. Each Share
that is owned by the Company or any subsidiary of the Company and all Shares
owned by Parent or any subsidiary or Purchaser will be cancelled and retired
and shall cease to exist and no consideration will be delivered or deliverable
in exchange therefor. The Merger will become effective upon the filing of a
Certificate of Merger (as
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defined in the Merger Agreement) with the Secretary of State of the State of
Delaware or at such time thereafter as is provided in the Certificate of
Merger. Pursuant to the Merger Agreement, the certificate of incorporation of
Purchaser as in effect immediately prior to the Effective Time will be the
initial certificate of incorporation of the Surviving Corporation and the by-
laws of Purchaser, as in effect immediately prior to the Effective Time, shall
be the initial by-laws of the Surviving Corporation.
Dissenting Shares. Shares that are outstanding immediately prior to the
Effective Time and which are held by Stockholders ("Dissenting Stockholders")
who shall have not voted in favor of the Merger or consented thereto in
writing and who shall have complied with all the provisions of the DGCL
concerning the right of holders of Shares to dissent from the Merger and
require payment of fair value (as defined in the DGCL) for their Shares
("Dissenting Shares") will not be converted into or represent the right to
receive the Merger Consideration. Such Shares instead will, from and after the
Effective Time, represent only the right to receive payment of such
consideration as may be determined to be due to such Dissenting Stockholder
pursuant to the DGCL. If, after the Effective Time, such Dissenting
Stockholder withdraws his demand or fails to perfect or otherwise loses his
rights as a Dissenting Stockholder to payment of fair value, in any case
pursuant to the DGCL, his Shares shall be deemed to be converted as of the
Effective Time into the right to receive the Merger Consideration. The Company
has agreed to give Parent (i) prompt notice of any demands for fair value for
Shares received by the Company and (ii) the opportunity to participate in and
direct all negotiations and proceedings with respect to any such demands. The
Company has also agreed that it will not, without the prior written consent of
Parent, make any payment with respect to, or settle, offer to settle or
otherwise negotiate, any such demands.
Payment for Shares. Parent has agreed that prior to the Effective Time it
will designate an Exchange Agent (as defined in the Merger Agreement) to act
as Exchange Agent in the Merger and, from time to time, prior to or after the
Effective Time, Parent will make available, or shall cause the Surviving
Corporation to make available, to the Exchange Agent cash in such amounts and
at such times as is necessary for the prompt payment of the Merger
Consideration to holders of Shares upon surrender of their Certificates (other
than the Company or any wholly-owned subsidiary of the Company or Parent,
Purchaser or any other wholly-owned Subsidiary of Parent, or holders of
Dissenting Shares (as defined above)).
Any portion of the cash provided to the Exchange Agent which remains
undistributed to the holders of Shares for six months after the Effective Time
shall be returned to the Parent and any holders of Shares who have not
theretofore complied with the Merger Agreement and the instructions set forth
in the Letter of Transmittal mailed to such holder after the Effective Time
shall thereafter look only to the Surviving Corporation for payment of the
Merger Consideration to which they are entitled. All interest and other income
accrued in respect of the cash provided to the Exchange Agent shall inure to
the benefit of and be paid to Parent.
Options. The Company has taken all necessary action so that effective as of
the Effective Time, (i) each outstanding stock option (the "Options") to
purchase Shares granted under the Company's stock option or similar plans (the
"Company Option Plans"), whether or not then exercisable or vested, will
become fully exercisable and vested, (ii) each Option that is then outstanding
will be cancelled and (iii) in consideration of such cancellation, and except
to the extent that Parent or Purchaser and the holder of any such Option
otherwise agree, the Company (or, at Parent's option, Purchaser) will pay to
each holder of an Option an amount in respect thereof equal to the product of
(x) the excess, if any, of the Offer Price over the exercise price of each
such Option and (y) the number of Shares previously subject to the Option
immediately prior to its cancellation (such payment to be net of any
withholding taxes required by the Code or other applicable law). Following the
Effective Time no holder of an Option shall have any rights thereunder other
than to receive cash as contemplated by the Merger Agreement and following the
Effective Time no person shall have any right to acquire any security of the
Surviving Corporation (or any subsidiary thereof) as a result of any agreement
or obligation of the Company or any subsidiary.
Company Stockholders' Meeting. The Merger Agreement provides that the
Company will, if adoption of the Merger Agreement by a majority of the
outstanding Shares ("Company Stockholder Approval") is required by law, as
soon as practicable following the expiration of the Offer, duly call, give
notice of, convene and hold a
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Stockholders' meeting (the "Company Stockholders Meeting") for the purpose of
obtaining Company Stockholder Approval. At the Company Stockholders' Meeting,
the Board will recommend to its stockholders that the Company Stockholder
Approval be given. If the Company Stockholder Approval is required by law, the
Company shall, as soon as practicable following the expiration of the Offer,
prepare and file a preliminary proxy statement (the "Proxy Statement") with
the Commission and shall use all reasonable efforts to respond to any comments
of the Commission or its staff and to cause the Proxy Statement to be mailed
to the Company's Stockholders as promptly as practicable.
Notwithstanding the preceding paragraph, in the event that Purchaser or any
other subsidiary of Parent has acquired at least 90% of the outstanding
Shares, the parties to the Merger Agreement have agreed, at the option and
request of Parent, to take all necessary and appropriate action to cause the
Merger to become effective, as soon as practicable after the expiration of the
Offer, without a Company Stockholders' Meeting, in accordance with the short
form merger provisions of the DGCL. Parent has agreed that it will cause all
shares owned by Parent or any subsidiary of Parent to be voted in favor of the
Company Stockholder Approval.
Representations and Warranties. The Merger Agreement contains various
representations and warranties of the parties. These include representations
and warranties by the Company to Parent and Purchaser with respect to (i) due
organization and good standing, (ii) capitalization, (iii) authority to enter
into the Merger Agreement, (iv) consents and approvals required for
consummation of the Merger; no violations; (v) Commission reports and
financial statements, (vi) absence of certain changes or events, (vii) no
undisclosed liabilities, (viii) information supplied, (ix) employee benefit
plans and labor matters; (x) contracts, (xi) litigation, (xii) compliance with
applicable law, (xiii) tax matters, (xiv) environmental matters, (xv) state
takeover statutes, (xvi) intellectual property matters, (xvii) Food and Drug
Administration and product matters, (xviii) year 2000 compliance, (xix)
insurance, (xx) absence of questionable payments, (xxi) opinion of financial
advisor and (xxii) brokers and finders.
Parent and Purchaser also have made certain representations and warranties
to the Company with respect to (i) due organization and good standing, (ii)
authority to enter into the Merger Agreement, (iii) consents and approvals; no
violations; (iv) information supplied; (v) interim operations of Purchaser,
(vi) brokers and (vii) financing.
Conduct of Business Pending the Merger. The Company has agreed that during
the period from the date of the Merger Agreement and continuing until such
time as Parent's designees shall constitute a majority of the Company's Board
of Directors, the Company and its subsidiaries will carry on their businesses
in the ordinary course in substantially the same manner as previously
conducted, and will use all reasonable efforts to preserve intact their
present business organizations and relationships with third parties, keep
available the services of its current officers and employees and preserve
their relationships with customers, consultants, doctors, clinical
investigators, suppliers and others having business dealings with them. Except
as provided in the Merger Agreement, the Company has further agreed that
neither it, nor any of its subsidiaries will: (i) declare or pay any dividends
on or make other distributions in respect of any of its capital stock, except
for dividends by a wholly-owned subsidiary of the Company to its Parent and
cash dividends on the Series B Stock in accordance with the Certificate of
Designations of the Series B Stock; (ii) split, combine or reclassify any of
its capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for, shares of its
capital stock; (iii) repurchase, redeem or otherwise acquire any shares of
capital stock of the Company or any of its subsidiaries or any other
securities thereof or any rights, warrants or options to acquire any such
shares or other securities (except for the redemption of the Series B Stock in
accordance with the Certificate of Designations of the Series B Stock and the
acquisition of Common Stock of the Company that was held as collateral for the
Company's Alternative Minimum Tax Loans ("AMT Loans")); (iv) issue, deliver,
sell, pledge, encumber, grant, confer or award or authorize or propose the
issuance, delivery, sale, pledge, encumberance, grant, conferring or award of,
any shares of its capital stock or any other security or any option, warrant,
conversion right or other right to acquire any capital stock or other
security, other than the issuance of Shares upon the exercise of Options or
Warrants or the conversion of Series B Stock outstanding as of the date of the
Merger Agreement and in accordance with the terms of such Options, Warrants or
Series B Stock, as
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applicable; (v) amend or propose to amend its certificate of incorporation or
by-laws or similar organizational documents; (vi) except as permitted in the
Merger Agreement, authorize, propose, or enter into, or announce an intention
to authorize, propose, or enter into, an agreement with respect to any merger,
consolidation or business combination (other than the Merger), any acquisition
of assets not in the ordinary course of business or any securities, any
disposition, lease or license of assets not in the ordinary course of business
or any disposition of any securities, or relinquishment of any material
contract rights; (vii) (a) change any significant practice with respect to
taxes, (b) make, revoke or change any significant election with respect to
taxes or (c) settle or compromise any significant tax liability except in any
situation described in clauses (a)-(c) in which a delay in such action would
result in material penalties or material detriment to the Company and its
subsidiaries taken as a whole; (viii) except pursuant to the Credit Agreement
(a) incur or suffer to exist any indebtedness for borrowed money or guarantee
any such indebtedness, enter into any "keep-well" or other agreement to
maintain any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing, except for
working capital borrowings incurred in the ordinary course of business, (b)
make any loans, advances or capital contributions to, or investments in, any
other person, other than to the Company or any wholly owned subsidiary of the
Company or (c) incur any liability other than in the ordinary course of
business; (ix) make or agree to make any capital expenditures out of the
ordinary course of business; (x) except pursuant to the Credit Agreement, pay,
discharge, settle or satisfy any claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge, settlement or satisfaction, in the ordinary course of
business or in accordance with their terms, of claims, liabilities or
obligations recognized or disclosed in the most recent financial statements
(or the notes thereto) of the Company included in the Company Filed SEC
Documents (as defined in the Merger Agreement) or incurred since the date of
such financial statements in the ordinary course of business; (xi) (a) modify,
amend or terminate any material contract, (b) waive, release or assign any
material rights or claims, (c) waive the benefits of, or agree to modify in
any manner, any confidentiality, standstill or similar agreement or (d) except
in the ordinary course of business, enter into any material contracts or
transactions; (xii) except for the transaction relating to the AMT Loans
disclosed in the Company Disclosure Schedule (a) increase the compensation or
benefits of any director, officer, employee or consultant, except for
increases in the ordinary course of business, (b) adopt any new Company Plan
(as defined in the Merger Agreement) or any amendment to an existing Company
Plan, (c) enter into any employment or consulting agreement with any director,
officer, employee or consultant or (d) accelerate the payment of compensation
or benefits to any director, officer, employee or consultant; or (xiii)
authorize any of, or commit or agree to take any of, the foregoing actions or
any action which would result in a breach of any representation or warranty of
the Company contained in the Merger Agreement as of the date when made or as
of any future date or would result in any of the Offer Conditions not being
satisfied.
No Solicitation. The Merger Agreement provides that the Company will, and
will cause its officers, directors, employees, representatives and agents to,
immediately cease any discussions or negotiations with any parties that may be
ongoing with respect to a Takeover Proposal (as hereinafter defined). The
Company has agreed that it will not, and will cause its officers, directors,
employees, representatives and agents not to, directly or indirectly, (i)
solicit, initiate or encourage (including by way of furnishing information),
or take any other action designed or reasonably likely to facilitate or
encourage, any inquiries or the making of any proposal which constitutes, or
may reasonably be expected to lead to, any Takeover Proposal or (ii)
participate in any discussions or negotiations regarding any Takeover
Proposal. For purposes of the Merger Agreement, "Takeover Proposal" means any
inquiry, proposal, offer or expression of interest by any third party relating
a merger, consolidation or other business combination involving the Company or
any subsidiary, or any purchase of more than 15% of the consolidated assets of
the Company or more than 15% of the Shares, or any similar transaction. The
Merger Agreement also provides that any material modification of a Takeover
Proposal shall constitute a new Takeover Proposal.
The Company has also agreed that neither the Board of Directors of the
Company nor any committee thereof will (i) withdraw or modify, or propose to
withdraw or modify, the approval, recommendation or statement as to
advisability by such Board of Directors or such committee of the Offer, the
Merger or the Merger Agreement, (ii) approve or recommend or take no position
with respect to, or propose to approve or recommend or take no
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position with respect to, any Takeover Proposal, (iii) cause the Company to
enter into any agreement related to any Takeover Proposal (other than a
confidentiality agreement as described in the next paragraph) or (iv) take or
fail to take any action (including amending the Rights Plan or the Rights
(each as defined in the Merger Agreement) which is designed to or which has
the effect of making all or any part of the Rights, the Rights Plan, Section
203 of the DGCL or Article 12.1.1. of the Company's Certificate of
Incorporation not applicable to or not triggered by any Takeover Proposal.
The Parent and Purchaser have agreed that prior to the purchase of at least
a majority of the outstanding Shares pursuant to the Offer, the Company may,
to the extent the Board of Directors of the Company determines, in good faith,
after consultation with and based upon the advice of outside legal counsel,
that its fiduciary duties under applicable law require it to do so,
participate in discussions or negotiations with, and furnish information to,
any person, entity or group after such person, entity or group has delivered
to the Company, in writing, an unsolicited bona fide Takeover Proposal (which
may be subject to customary conditions, including a "due diligence" condition)
if such person, group or entity enters into a confidentiality agreement
substantially identical to the Confidentiality Agreement (as defined in the
Merger Agreement) and the Board of Directors of the Company in its good faith
reasonable judgment determines, after consultation with its independent
financial advisors, that (i) such Takeover Proposal would result in a
transaction more favorable than the transactions contemplated hereby to the
Stockholders from a financial point of view, (ii) the person making such
Takeover Proposal is financially capable of consummating such Takeover
Proposal or that the financing necessary to consummate such Takeover Proposal,
to the extent required, is then committed or is capable of being obtained by
such person and (iii) such Takeover Proposal is otherwise as likely to be
consummated as are the transactions contemplated hereby (such a Takeover
Proposal being hereinafter referred to as a "Superior Proposal"). In addition
the parties have agreed that notwithstanding the above provisions, in
connection with a possible Takeover Proposal, the Company may refer a third
party to the section of the Merger Agreement regarding non-solicitation or
make a copy of such section available to a third party. In the event the
Company receives a Superior Proposal, nothing contained in the Merger
Agreement (but subject to the terms thereof, including without limitation
Section 8.5 (relating to expenses)) will prevent the Board of Directors of the
Company from recommending such Superior Proposal to its stockholders, if the
Board determines, in good faith, after consultation with and based upon the
advice of outside legal counsel, that such action is required by its fiduciary
duties under applicable law; in such case, the Board of Directors of the
Company may withdraw, modify or refrain from making the recommendation called
for by the Merger Agreement if Company Stockholder Approval is required, and,
to the extent it does so, the Company may refrain from soliciting proxies to
secure the vote of the Stockholders as may be required by the relevant
sections of the Merger Agreement and the Board of Directors of the Company may
amend the Schedule 14D-9 to reflect the withdrawal of its recommendation set
forth therein and file a new Schedule 14D-9 setting forth its recommendation
with respect to such Superior Proposal; provided however, that the Company
will (i) provide Parent at least twenty-four (24) hours' prior notice of any
Company Board of Directors meeting at which it is reasonably expected to
contemplate a Superior Proposal and (ii) not accept or recommend to the
Stockholders a Superior Proposal for a period of not less than five (5)
business days after Parent's receipt of a copy of such Superior Proposal; and
provided further that, unless the Merger Agreement has been terminated in
accordance with its provisions, nothing in the section regarding non-
solicitation will limit the Company's obligation to call, give notice of, hold
or convene the Company Stockholders Meeting (regardless of whether the
recommendation of the Board of Directors of the Company shall have been
withdrawn, modified or not yet made) or to provide the Stockholders with
material information relating to such meeting.
The Company has agreed that it will immediately advise Parent orally and in
writing of any request for information or of any Takeover Proposal, the
material terms and conditions of such request or Takeover Proposal and the
identity of the person making such request or Takeover Proposal. The Company
has also agreed that it will immediately inform Parent of any material change
in the details (including amendments or proposed amendments) of any such
request or Takeover Proposal.
Nothing contained in the section regarding non-solicitation of the Merger
Agreement will prohibit the Company from taking and disclosing to the
Stockholders a position contemplated by Rule 14e-2(a) promulgated
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under the Exchange Act or from making any disclosure to the Stockholders if,
in the good faith judgment of the Board of Directors of the Company, after
consultation with outside counsel, failure so to disclose would be
inconsistent with applicable law, provided, however, that except as set forth
above, the Company has agreed that neither the Company nor its Board of
Directors nor any committee thereof shall withdraw or modify, or propose to
withdraw or modify, its position with respect to the Offer, the Merger or the
Merger Agreement or approve or recommend, or propose to approve or recommend,
or state to be advisable, a Takeover Proposal.
Access to Information. The Merger Agreement provides that the Company will,
and will cause each of its subsidiaries to, afford to Parent and its officers,
employees, accountants, counsel, agents and other representatives reasonable
access to all of the properties, personnel, books and records of the Company
and its subsidiaries, and shall furnish promptly all information concerning
the business, properties and personnel of the Company and its subsidiaries as
Parent may reasonably request. All such information will be kept confidential
in accordance with the terms of the Confidentiality Agreement (as defined in
the Merger Agreement).
Updating. The Company has agreed to supplement or amend the Company
Disclosure Schedule with respect to any material matter arising or any
material information obtained after the date of the Merger Agreement which, if
existing, occurring or known at or prior to the date of the Merger Agreement,
would have been required to be set forth or described in the Company
Disclosure Schedule or which would be necessary to complete or correct any
information in such schedule or in any representation and warranty of the
Company which has been rendered inaccurate thereby. The Company has also
agreed that it shall promptly inform Parent of (a) claims for breach of
contract, and defaults, non-renewals or any consents that would be required
under any contracts because of the transactions contemplated by the Merger
Agreement or the Shareholder Agreement, (b) any Material Adverse Effect (as
defined in the Merger Agreement) on the Company, (c) any litigation or
governmental entity complaint, investigation or hearing (or communications
indicating the same may be contemplated) against or affecting the Company or
any subsidiary or (d) any written notice from any taxing authority proposing
any tax adjustments relating to the Company or any subsidiary and provide to
Parent a copy of such notice. The Company has also agreed to promptly deliver
to Parent copies of any filings made by the Company or any subsidiary with the
Commission subsequent to the date of the Merger Agreement.
Reasonable Efforts. The parties have agreed to assist each other in
consummating and making effective the transactions contemplated by the Merger
Agreement and the Shareholder Agreement as promptly as practicable. This
cooperation will include, (i) the preparation and filing of all forms,
registrations and notices required to be filed to consummate such transactions
and the taking of commercially reasonable actions as are necessary to obtain
any requisite approvals, consents, orders, exemptions or waivers by any third
party or governmental entity, including making filings pursuant to the HSR Act
and (ii) using all reasonable efforts to cause the satisfaction of all
conditions to Closing. In this regard, each has agreed to promptly consult
with, and inform the other with respect to and provide copies to each other of
all filings made with government entities and of any communication from any
governmental entity regarding any of the transactions contemplated by the
Merger Agreement or the Shareholder Agreement and to endeavor to consult with
each other with respect to, comply with and respond to any requests for
additional information or documentary material from any such governmental
entity with respect to the transactions contemplated by the Merger Agreement
or the Shareholder Agreement
In addition, nothing in the Merger Agreement requires, or will be construed
to require, Parent or any of its affiliates to proffer to, or agree to (i)
license, sell, hold separate, discontinue or limit, before or after the
Effective Time, any assets, businesses, or interest in any assets or
businesses of Parent, the Company or any of their respective affiliates (or to
consent to any license, sale, holding separate, or discontinuance or
limitation by the Company of any of its assets or businesses) or (ii) any
conditions relating to, or changes or restriction in, the operations of any
such asset or businesses which, in either case, could, in the judgment of the
Board of Directors of Parent, materially and adversely impact the economic or
business benefits to Parent of the transactions contemplated by the Merger
Agreement. Lastly, Parent shall cause Purchaser to comply with its obligations
under the Merger Agreement.
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Indemnification; Insurance. Parent and Purchaser have agreed to continue to
indemnify the current or former directors or officers (the "Indemnified
Parties") of the Company and its subsidiaries pursuant to any provisions now
existing in their favor in their respective certificates of incorporation or
bylaws (or similar organizational documents) for the period of all applicable
statutes of limitations from the Effective Time for their acts or omissions
occurring prior to the Effective Time.
In addition, Parent has agreed that, for the period of all applicable
statutes of limitations from the Effective Time, unless it guaranties the
indemnification obligations described above, it will maintain in effect the
Company's current directors' and officers' liability insurance covering those
persons who are currently covered by the Company's directors' and officers'
liability insurance (or, substitute coverage under another insurance policy
with terms that are no less advantageous to the intended beneficiaries thereof
than those of the Company's policy), subject to certain annual premium
limitations.
The above-mentioned indemnification obligations will survive the
consummation of the Merger and will be binding on all successors and assigns
of Parent and the Surviving Corporation. Parent, Purchaser, the Company and
the Surviving Corporation have agreed to reimburse each of the Indemnified
Parties for all costs and expenses (including attorneys' fees and
disbursements) incurred by any such Indemnified Party against Parent,
Purchaser, the Company or the Surviving Corporation to enforce to the fullest
extent the rights to indemnification set forth in the Merger Agreement,
provided that there is a finding that such Indemnified Party was entitled to
such indemnification.
Certain Litigation. The Company has agreed that it shall not settle any
litigation commenced after the date of the Merger Agreement against the
Company or any of its directors by any Stockholder of the Company relating to
the Offer, the Merger, the Merger Agreement, or the Shareholder Agreement,
without the prior written consent of Parent. In addition, except as provided
in the Merger Agreement, the Company has agreed not to voluntarily cooperate
with any third party that may hereafter seek to restrain or prohibit or
otherwise oppose the Offer or the Merger and shall cooperate with Parent and
Purchaser to resist any such effort to restrain or prohibit or otherwise
oppose the Offer or the Merger.
Certain Transaction Related Fees. The Company has agreed not to, and will
not permit any subsidiary to, spend or otherwise become liable or obligated
for any fees, costs or other expenses arising out of or related to the
transactions contemplated by the Merger Agreement and by the Shareholder
Agreement, in excess of $4,000,000, and has also agreed not to amend its
arrangements with Goldman Sachs without the consent of Parent.
Benefit Arrangements. Parent has agreed that for a period of at least one
year following the Effective Time, Parent will provide benefits to employees
of the Company and its subsidiaries that are substantially equivalent to the
benefits currently provided to similarly situated employees of Parent and its
subsidiaries. In addition, subject to certain exceptions, from and after the
Effective Time, Parent and its subsidiaries will grant all employees of the
Company and its subsidiaries who were employed by the Company or any
subsidiary of the Company immediately before the Effective Time credit for all
service (to the same extent as service with Parent is taken into account with
respect to similarly situated employees of Parent or its subsidiaries) with
the Company or its Subsidiaries prior to the Effective Time for (i) vesting
purposes and (ii) for purposes of vacation accrual after the Effective Time as
if such service with the Company or its subsidiaries were service with Parent
or its subsidiaries. Parent has also agreed to waive, subject to certain
exceptions, for all employees of the Company or any subsidiary of the Company
immediately before the Effective Time, certain conditions generally applicable
to Parent's medical or dental benefit plans. The Merger Agreement does not
prevent, prohibit, restrict or limit in any way Parent's ability to terminate
the employment of any employee of the Company or any of its subsidiaries and
any agreements to provide to such employee benefits pursuant to the Merger
Agreement will terminate with respect to such employee at the time such
employee's employment is terminated. The Parent and the Company have agreed
that they will negotiate in good faith the terms and conditions of severance
arrangements with respect to employees of the Company.
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Takeover Statutes. The parties have agreed that if any "fair price,"
"moratorium," "control share acquisition" or other form of antitakeover law is
or shall become applicable to the Merger Agreement or the Shareholder
Agreement or any transaction contemplated thereby then, unless the Board of
Directors recommends a Superior Proposal in accordance with the Merger
Agreement, the Company and the Board of Directors of the Company will grant
such approvals and take such actions as are necessary so that such
transactions may be consummated as promptly as practicable on the terms set
forth therein and have agreed to act to eliminate or minimize the effects of
such law on such transactions.
Redemption of Series B Stock; Expiration of Warrants. The Company has agreed
to take all action necessary to redeem, including, without limitation,
providing notices of redemption required pursuant to the Certificate of
Designations governing the Series B Stock promptly following the satisfaction
of all conditions to such redemption as provided in the Certificate of
Designations for the Series B Stock and shall redeem if permitted to do so
pursuant to the terms of the Certificate of Designations any and all
outstanding shares of Series B Stock (other than shares of Series B Stock
converted by the holders thereof into shares of Common Stock) prior to the
Effective Time in accordance with the Certificate of Designations of the
Series B Stock. Purchaser has agreed that it will make an offer to each holder
of the outstanding Series B Stock held by such holder at the price per share
of Series B Stock contemplated by Section 5(d) of the Certificate of
Designations of the Series B Stock. The Company has represented that as of
August 14, 1998, all issued and outstanding shares of Series B Stock have been
converted into 844,884 Shares and no shares of Series B Stock remain issued or
outstanding; therefore, the Company, the Parent and the Purchaser have waived
these covenants. The Company has also agreed to take all action necessary to
cause the expiration of the Warrants as of the Effective Time in accordance
with the terms of the Warrants, including, without limitation, providing
notice of the Offer and the Merger as contemplated by the terms of the
Warrants promptly following the date of the Merger Agreement.
Conditions to the Merger. Pursuant to the Merger Agreement, the respective
obligation of each party to effect the Merger shall be subject to the
satisfaction of the following conditions: (i) if required by applicable law,
the Company Stockholder Approval shall have been obtained, (ii) no law or
order issued by any court of competent jurisdiction or other governmental
entity or other legal restraint or prohibition preventing the consummation of
the Merger shall be in effect, provided, however, that each of the parties
shall have used reasonable efforts to prevent the entry of any such order and
to appeal as promptly as possible any order that may be entered, (iii)
Purchaser shall have previously accepted for payment and paid for all Shares
validly tendered and not withdrawn pursuant to the Offer, and (iv) all
authorizations, consents, orders or approvals of, or declarations or filings
with, or expirations of waiting periods imposed by, any governmental entity or
third party necessary for the consummation of the transactions contemplated by
the Merger Agreement shall have been filed, occurred or been obtained, with
such exceptions as would not individually or in the aggregate have a Material
Adverse Effect (as defined in the Merger Agreement) on the Company.
Termination. The Merger Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of its terms by the
stockholders of the Company by: (a) mutual written consent of Parent and the
Company; (b) either Parent or the Company: (i) if (x) the Offer shall have
expired without the acceptance for payment of Shares thereunder or (y)
Purchaser shall not have accepted for payment any Shares pursuant to the Offer
prior to March 31, 1999, provided, however, that the right to terminate the
Merger Agreement as described in this (b)(i) will not be available to any
party whose failure to perform any of its obligations under the Merger
Agreement results in the failure of any such condition or if the failure of
such condition results from facts or circumstances that constitute a breach of
representation or warranty under the Merger Agreement by such party; or (ii)
if any governmental entity shall have issued an order or taken any other
action permanently enjoining, restraining or otherwise prohibiting the
acceptance for payment of, or payment for, Shares pursuant to the Offer or the
Merger and such order or other action shall have become final and
nonappealable; (c) Parent prior to the purchase of Shares pursuant to the
Offer if the Company shall have in any material respect breached or failed to
perform any representation, warranty, covenant or other agreement contained in
the Merger Agreement; (d) by Parent or Purchaser if either (i) Parent or
Purchaser is entitled to terminate the Offer as a result of a withdrawal or
modification of the Board of Directors of the Company's recommendation
statement of advisability of the Offer or the Merger or (ii) the Company has
breached in any
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material respect its covenants described above under the heading "No
Solicitation"; (e) the Company prior to the purchase of Shares pursuant to the
Offer if Parent or Purchaser shall have breached or failed to perform any of
their respective representations, warranties, covenants or other agreements
contained in the Merger Agreement, except, in any case, such breaches and
failures which are not reasonably likely to materially and adversely affect
Parent's or Purchaser's ability to consummate the Offer or the Merger; (f)
Parent if any person, entity or group (as such terms are defined or used in
Section 13d-3 of the Exchange Act) other than Parent or Purchaser acquires
beneficial ownership (as such term is defined or used in Rule 13d-3 under the
Exchange Act) of 30% or more of the outstanding Shares; or (g) the Company if
prior to the purchase of at least a majority of the outstanding Shares
pursuant to the Offer, the Board of Directors of the Company shall have
withdrawn or modified its approval or recommendation of the Offer, the Merger
Agreement or the Merger to permit the Company to negotiate or execute a
definitive agreement relating to a Superior Proposal or to approve a Superior
Proposal, or the Board of Directors of the Company shall have recommended such
Superior Proposal, in each case in accordance with the Merger Agreement.
Termination Fee. If the Merger Agreement is terminated (i) by Parent prior
to the purchase of Shares pursuant to the Offer if the Company shall have in
any material respect breached or failed to perform any representation,
warranty, covenant or other agreement contained in the Merger, (ii) by Parent
or Purchaser if either (A) Parent or Purchaser is entitled to terminate the
Offer as a result of a withdrawal or modification of the Board of Directors of
the Company's recommendation or statement of advisability of the Offer or the
Merger, (B) the Company has materially breached its "No Solicitation"
covenant, (iii) by the Company if prior to the purchase of at least a majority
of the outstanding Shares pursuant to the Offer, the Board of Directors of the
Company shall have withdrawn or modified its approval or recommendation of the
Offer, the Merger Agreement or the Merger to permit the Company to negotiate
or execute a definitive agreement relating to a Superior Proposal or to
approve a Superior Proposal, or the Board of Directors of the Company shall
have recommended such Superior Proposal in accordance with the terms of the
Merger Agreement, or (iv) at any time on or prior to six months from the date
of any termination of the Merger Agreement for any reason other than any
termination by the Company prior to the purchase of Shares pursuant to the
Offer if Parent or Sub shall have breached or failed to perform any of their
respective representations, warranties, covenants or other agreements
contained in the Merger Agreement, except, in any case, such breaches or
failures which are not reasonably likely to materially and adversely affect
Parent's or Purchaser's ability to consummate the Offer or the Merger, there
shall occur a Change of Control (as hereinafter defined), then the Company
shall pay to Parent a fee of $5,000,000 by wire transfer of immediately
available funds. Such fee shall be paid prior to and as a condition to any
termination in the event of any termination by the Company if prior to the
purchase of at least a majority of the outstanding Shares pursuant to the
Offer, the Board of Directors of the Company shall have withdrawn or modified
its approval or recommendation of the Offer, the Merger Agreement or the
Merger to permit the Company to negotiate or execute a definitive agreement
relating to a Superior Proposal or to approve a Superior Proposal, or the
Board of Directors of the Company shall have recommended such Superior
Proposal, and in any other event within one business day following such
termination. The Company has agreed that if it fails to pay the amount due
pursuant to the termination provisions in the Merger Agreement when it is
required to be paid, and, in order to obtain such payment, Parent commences a
suit which results in a judgment against the Company for such fee, the Company
will pay to the Parent its costs and expenses (including attorneys' fees) in
connection with such suit, including any costs of collection together with
interest on the amount of the fee at the rate of 12% per annum from the date
such fee was required to be paid.
For purposes of the Merger Agreement, "Change of Control" means the
occurrence of any of the following events: the Company is merged or
consolidated with or into another corporation (other than as contemplated by
the Merger Agreement) with the effect that the common stockholders immediately
prior to such merger or consolidation hold less than fifty percent (50%) of
the ordinary voting power of the outstanding securities of the surviving
corporation of such merger or the corporation resulting from such
consolidation; a change in the composition of the Board of Directors of the
Company after the date of the Merger Agreement (other than as contemplated by
the Merger Agreement) as a result of which fewer than a majority of the
incumbent directors are directors who either (i) had been directors of the
Company 12 months prior to such change, or (ii) were
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elected, or nominated for election, to the Board of Directors with the
affirmative votes of a majority of the directors who had been directors of the
Company 12 months prior to such change and who were still in office at the
time of the election or nomination; any person or persons, entity or group (as
such terms are defined or used in Section 13d-3 under the Exchange Act) shall,
as a result of a tender or exchange offer, open market purchases, merger,
privately negotiated purchases or otherwise, have become, directly or
indirectly, the beneficial owner (as such term is defined or used in Rule 13d-
3 under the Exchange Act) of thirty percent (30%) or more of the Shares;
commence, or announce the intention to commence, any tender offer or exchange
offer for thirty percent (30%) or more of the Shares; or the Company shall
enter into any agreement, including, without limitation, an agreement in
principle, regarding any Takeover Proposal.
Effect of Termination. The Merger Agreement provides that except as
specifically provided therein, in the event of a termination of the Merger
Agreement by either the Company or Parent, the Merger Agreement shall
forthwith become void and there shall be no liability or obligation on the
part of Parent, Purchaser or the Company or their respective officers or
directors, provided, however, that (i) nothing therein shall relieve any party
for liability for any willful breach of the Merger Agreement and (ii) the
Confidentiality Agreement, including the standstill provisions therein, the
Credit Agreement and the agreements relating to expenses contained in Section
8.5 of the Merger Agreement (regarding expenses) shall survive any termination
thereof.
Amendment. The Merger Agreement may be amended in a writing signed by each
of the parties at any time before or after obtaining the Company Stockholder
Approval, but, after the purchase of Shares pursuant to the Offer, no
amendment may be made which decreases the Merger Consideration and after the
Stockholder Approval is obtained, any amendment which by law requires
stockholder approval must receive such approval to be effective.
Extension; Waiver. The parties may, to the extent legally allowed, pursuant
to an amendment to the Merger Agreement, extend the time for the performance
of any of the obligations or other acts required therein, waive inaccuracies
in the representations and warranties contained therein or in any document
delivered pursuant thereto, or waive compliance with any of the agreements or
conditions contained therein.
Expenses. The Merger Agreement provides that except as otherwise provided
therein, each party shall bear its own expenses in connection with the
transactions contemplated by the Merger Agreement.
The Shareholder Agreement
As an inducement and a condition to entering into the Merger Agreement,
Parent and Purchaser have required that certain Stockholders (the "Selling
Stockholders") agree, and the Selling Stockholders have agreed, to enter into
the Shareholder Agreement.
The following is a summary of the material terms of the Shareholder
Agreement. This summary is not a complete description of the terms and
conditions thereof and is qualified in its entirety by reference to the full
text thereof which is incorporated herein by reference and a copy of which has
been filed with the Commission as an exhibit to the Schedule 14D-1.
Tender of Shares. Upon the terms and subject to the conditions of the
Shareholder Agreement, each Selling Stockholder has agreed to validly tender
(and not to withdraw) pursuant to and in accordance with the terms of the
Offer, the number of Shares set forth opposite such Stockholder's name on
Schedule A to the Shareholder Agreement constituting all of the Shares held by
such Stockholders, as such Shares may be adjusted by stock dividend, stock
split, recapitalization, combination or exchange of shares, merger,
consolidation, reorganization or other change or transaction of or by the
Company, together with Shares that may be acquired after the date of the
Shareholder Agreement by such Selling Stockholder, including shares issuable
upon the exercise of options to purchase Company Common Stock (as the same may
be adjusted as aforesaid).
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Voting. Each Selling Stockholder has agreed that at any Company Stockholder
Meeting or at any adjournment thereof or in any other circumstances upon which
a vote, consent or other approval (including by written consent) with respect
to the Merger and the Merger Agreement is sought, each Selling Stockholder
shall, including by initiating a written consent solicitation if requested by
Parent, vote (or cause to be voted) such Selling Stockholder's Shares in favor
of the Merger, the adoption by the Company of the Merger Agreement and the
approval of the other transactions contemplated by the Merger Agreement. At
any meeting of stockholders of the Company or at any adjournment thereof or in
any other circumstances upon which the Stockholder's vote, consent or other
approval is sought, such Selling Stockholder shall vote (or cause to be voted)
such Selling Stockholder's Shares against (i) any merger agreement or merger
(other than the Merger Agreement and the Merger), consolidation, combination,
sale of assets, reorganization, recapitalization, dissolution, liquidation or
winding up of or by the Company or any other Takeover Proposal or (ii) any
amendment of the Company's Certificate of Incorporation or By-laws or other
proposal or transaction involving the Company or any of its subsidiaries,
which amendment or other proposal or transaction would in any manner impede,
frustrate, prevent or nullify the Offer, the Merger, the Merger Agreement or
any of the other transactions contemplated by the Merger Agreement.
Representations and Warranties, Covenants and Other Agreements. Each Selling
Stockholder has made certain representations, warranties and covenants,
including with respect to (i) authority, (ii) absence of liens and
encumbrances with respect to the Shares, (iii) brokers, (iv) the Merger
Agreement, (v) absence of conflicts, (vi) absence of liens and encumbrances
with respect to the Shares and (vii) non-solicitation of Takeover Proposals.
The Credit Agreement
Parent has agreed to provide the Company with a line of credit as set forth
in the Credit Agreement (the "Credit Agreement"). The following is a summary
of the material terms of the Credit Agreement. This summary is not a complete
description of the terms and conditions thereof and is qualified in its
entirety by reference to the full text thereof which is incorporated herein by
reference and a copy of which has been filed with the Commission as an exhibit
to the Schedule 14D-1.
Amount, Interest and Term. Pursuant to the terms of the Credit Agreement,
Parent has agreed to loan the Company up to $10,000,000, or, upon the
occurrence of a Loan Extension Event (as hereinafter defined), up to
$15,000,000. Interest on the loan accrues at the rate of 7% per annum (or 9%
if an Event of Default (as hereinafter defined) occurs). Interest outstanding
on the loan is added to the principal balance thereof on the last day of each
calendar month. The Company is obligated to pay the outstanding principal
balance of the loan, plus interest accrued and not so added to principal, on
February 19, 1999, or, if a Loan Extension Event occurs, on August 19, 1999. A
"Loan Extension Event" occurs if Parent shall at any time breach in any
material respect or fail to perform in any material respect any of its
covenants or other agreements contained in the Merger Agreement. If an Event
of Default occurs, the entire principal balance of the loan, plus interest
accrued and not added to principal, immediately becomes due and payable by the
Company and Parent has no further obligations to make any disbursements.
Monthly Disbursement Limits. The Company may request disbursements of up to
$3,000,000 per month from Parent (the "Monthly Disbursement Limit"), provided
that certain customary conditions are satisfied, and provided further that the
Monthly Disbursement Limit may be exceeded to the extent the Company requires
funds to (i) redeem shares of Series B Stock, (ii) pay certain taxes imposed
on amounts other than operating income and not normally incurred in the
ordinary course of business or (iii) to pay fees and expenses owed to Goldman
Sachs.
Prepayment. The Company may prepay any or all of the outstanding principal
balance on the loan without penalty at any time, provided, however, that (i)
all interest accrued on such prepaid amount (and not added to the principal
amount as described above) must be paid in full at the time of prepayment and
(ii) if the Company prepays the entire outstanding principal balance of the
loan, Parent is not required to make any further disbursements to the Company.
The Company must repay the entire principal balance outstanding on the loan on
the occurrence of either (i) a sale, lease, exchange or transfer of all or
substantially all of the assets of the
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Company or (ii) a Change of Control. A "Change of Control" is defined as the
occurrence of any of the following events: (1) the Company is merged or
consolidated with or into another corporation (other than as contemplated by
the Merger Agreement) with the effect that the common stockholders immediately
prior to such merger or consolidation hold less than fifty percent (50%) of
the ordinary voting power of the outstanding securities of the surviving
corporation of such merger or the corporation resulting from such
consolidation; (2) a change in the composition of the Board of Directors of
the Company occurs after August 10, 1998 (other than as contemplated by the
Merger Agreement) as a result of which fewer than a majority of the incumbent
directors are directors who either (i) had been directors of the Company 12
months prior to such change, or (ii) were elected, or nominated for election,
to the Board of Directors with the affirmative votes of a majority of the
directors who had been directors of the Company 12 months prior to such change
and who were still in office at the time of the election or nomination; (3)
any person or persons, entity or group (within the meaning of Rule 13d-5 under
the Exchange Act) shall (i) as a result of a tender or exchange offer, open
market purchases, merger, privately negotiated purchases or otherwise, have
become, directly or indirectly, the beneficial owner (within the meaning of
Rule 13d-3 under the Exchange Act) of thirty percent (30%) or more of the
Shares or (ii) commence, or announce the intention to commence, any tender
offer or exchange offer for thirty percent (30%) or more of the Shares; (4)
the Merger Agreement is terminated (A) by Parent or Purchaser as a result of a
withdrawal or modification of the Board of Directors of the Company's
recommendation or statement of advisability of the Offer or the Merger, (B) by
the Parent or the Purchaser if the Company has breached its "No Solicitation"
covenant or (c) by the Company if prior to the purchase of at least a majority
of the outstanding Shares pursuant to the Offer, the Board of Directors of the
Company shall have withdrawn or modified its approval or recommendation of the
Offer, the Merger Agreement or the Merger to permit the Company to negotiate
or execute a definitive agreement relating to a Superior Proposal or to
approve a Superior Proposal, or the Board of Directors of the Company shall
have recommended such Superior Proposal; or (5) the Company enters into any
agreement, including without limitation an agreement in principle, regarding
any Takeover Proposal.
Representations and Warranties. The Company and Parent have made customary
representations and warranties to each other in the Credit Agreement.
Covenants. The Company has covenanted in the Credit Agreement to do the
following: (i) to provide certain financial statements to Parent; (ii) to
provide Parent with reasonable access to Company records; (iii) to maintain
its continued existence; (iv) to maintain its existing facilities; (v) to
comply with all laws; (vi) to comply with its agreements; (vii) to maintain
usual and customary amounts of insurance; (viii) to pay taxes and other
liabilities and (ix) to obtain any governmental approvals as may be necessary
from time to time.
In addition, the Company has covenanted and agreed that so long as the loan
is outstanding and Parent has not failed to make a disbursement of the loan
which Parent was required to make, the Company will comply with and, if
applicable, cause any of its subsidiaries to comply with, the following
provisions: (i) the Company shall not, directly or indirectly, take (and shall
cause its subsidiaries not to take) any actions inconsistent with the ordinary
course of its business as contemplated by Section 6.1 of the Merger Agreement;
(ii) the Company shall not engage in any business other than the design,
development, manufacture and sale of implantable atrial defibrillators and
related products, including transvenous defibrillation leads and temporary
defibrillation catheters; (iii) the Company shall not, and shall not allow any
of its subsidiaries to, create, incur, assume, or permit to exist any Lien (as
defined in the Merger Agreement) of any kind upon any of the property or
assets of the Company or such subsidiary now owned or hereafter acquired
subject to certain limited exceptions for permitted encumbrances; (iv) subject
to certain limited exceptions, neither the Company nor any of its subsidiaries
shall enter into or become liable in connection with any sale-leaseback
transaction; (v) except on terms no less favorable to the Company than would
be obtainable if no such relationship existed, the Company shall not purchase,
acquire or lease any property from, or sell, transfer or lease any property
to, or loan or advance money to, or otherwise deal with any affiliate or
subsidiary; (vi) subject to certain limited exceptions, neither the Company
nor any of its subsidiaries shall make or permit to remain outstanding any
Investment (as defined in the Merger Agreement); (vii) neither the Company nor
any of its subsidiaries shall enter into or
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otherwise become liable in connection with any contracts, agreements or
understandings which, individually or in the aggregate, obligate the Company
or any of its subsidiaries to pay or otherwise give consideration which is
equal to or greater than (A) if a Loan Extension Event has occurred, two
million dollars ($2,000,000) or (B) if no Loan Extension Event has occurred,
one million dollars ($1,000,000), in each case per year; (ix) the Company
shall not make any grants or gifts to any person or enter into any commitments
to do the same; and (x) neither the Company nor any of its subsidiaries shall
sell, assign, transfer, convey or grant any license or any other right in or
to any intellectual property.
Events of Default. Each of the following constitutes an "Event of Default"
under the Credit Agreement: (1) the Company fails to pay when due (whether due
when scheduled or as a result of a mandatory prepayment) any payment of
principal or premium in respect of the loan; (2) the Company fails to pay when
due any payment of interest or other sum payable under the Credit Agreement or
other loan documents or in the Merger Agreement and such default continues for
fifteen (15) Banking Days after notice thereof to the Company from Parent; (3)
the Company defaults in the performance of any of its respective agreements in
the Credit Agreement, in any other loan document or in the Merger Agreement
(and not constituting an Event of Default under any of the other clauses of
Section 7.1), such default continues for thirty (30) days after notice thereof
to the Company from Parent, and with respect to certain covenants only such
default shall have a Material Adverse Effect; (4) any representation or
warranty contained in the Credit Agreement or in certain certificates made by
the Company provided pursuant to the Credit Agreement or in the Merger
Agreement shall be untrue in any material respect as of the date on which the
facts set forth are stated or certified; (5) any final judgment, order or
decree is rendered against the Company in an amount equal to or greater than
$500,000, and either (i) enforcement proceedings are commenced by any person
upon such judgment or order or (ii) there is any period of thirty (30)
consecutive days during which a stay of enforcement of such judgment or order,
by reason of a pending appeal or otherwise, is not in effect, unless such
judgment, order or decree is, within such 30-day period, vacated or discharged
(other than by satisfaction thereof); (6) subject to certain exceptions for
existing defaults, the Company (i) fails to pay when due, by stated maturity,
acceleration or otherwise, any indebtedness for borrowed money of, or any
guaranty of indebtedness for borrowed money by, the Company (not arising under
the Credit Agreement or any related loan documents) outstanding in aggregate
principal amount greater than $500,000, and such failure continues after the
applicable grace period, if any, specified in the document relating thereto,
or (ii) fails to perform or observe (subject to any applicable grace period)
any agreement, covenant or condition with respect to any such indebtedness or
guaranty if the effect of such failure is to accelerate the maturity of any
such indebtedness or to permit the holder or holders of any such indebtedness
or guaranty, or any trustee or agent for such holders, to cause such
indebtedness to become due and payable prior to its expressed maturity or to
call upon such guaranty in advance of nonpayment of the guaranteed
indebtedness; (7) the Company or any subsidiary is the subject of any
bankruptcy, insolvency, liquidation or similar proceeding (whether voluntary
or involuntary) or the Company makes a general assignment for the benefit of
creditors; or (8) any of the related loan documents shall cease for any reason
to be in full force and effect and Parent is substantially deprived of any of
its rights under the loan documents or any party thereto (other than Parent)
shall purport to disavow its obligations thereunder, shall declare that it
does not have any further obligation thereunder or shall contest the validity
or enforceability thereof.
Other Matters
Appraisal Rights. No appraisal rights are available to Stockholders in
connection with the Offer. However, if the Merger is consummated, a
Stockholder will have certain rights under Section 262 of the DGCL to dissent
and to demand appraisal of, and payment in cash for the fair value of, that
Stockholder's Shares. Those rights, if the statutory procedures are complied
with, could lead to a judicial determination of the fair value (excluding any
value arising from the Merger) required to be paid in cash to dissenting
Stockholders for their Shares. Any judicial determination of the fair value of
Shares could be based upon considerations other than or in addition to the
Offer Price and the market value of the Shares, including asset values and the
investment value of the Shares. The value so determined could be more or less
than the Offer Price or the Merger Consideration.
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If a Stockholder who demands appraisal under Section 262 of the DGCL fails
to perfect, or effectively withdraws or loses, his or her right to appraisal,
as provided in the DGCL, the Shares of that Stockholder will be converted into
the Merger Consideration in accordance with the Merger Agreement. A
Stockholder may withdraw his or her demand for appraisal by delivering to
Purchaser a written withdrawal of such demand for appraisal and acceptance of
the Merger.
Failure to follow the steps required by Section 262 of the DGCL for
perfecting appraisal rights may result in the loss of those rights.
Going Private Transactions. Rule 13e-3 under the Exchange Act is applicable
to certain "going-private" transactions. Purchaser does not believe that Rule
13e-3 will be applicable to the Merger unless, among other things, the Merger
is completed more than one year after termination of the Offer. If applicable,
Rule 13e-3 would require, among other things, that certain financial
information regarding the Company and certain information regarding the
fairness of the Merger and the consideration offered to minority Stockholders
be filed with the Commission and disclosed to minority Stockholders prior to
consummation of the Merger.
13. DIVIDENDS AND DISTRIBUTIONS
If, on or after the date of the Merger Agreement, the Company should (i)
split, combine or otherwise change the Shares or its capitalization, (ii)
acquire currently outstanding Shares or otherwise cause a reduction in the
number of outstanding Shares or (iii) issue or sell additional Shares, shares
of any other class of capital stock, other voting securities or any securities
convertible into, or rights, warrants or options, conditional or otherwise, to
acquire, any of the foregoing, then, subject to the provisions of Section 14
below, Purchaser, in its sole discretion, may make such adjustments as it
deems appropriate in the Offer Price and other terms of the Offer, including,
without limitation, the number or type of securities offered to be purchased.
If, on or after the date of the Merger Agreement, the Company declares or pays
any cash dividend on the Shares, makes other distributions on the Shares or
issues, with respect to the Shares, any additional Shares, shares of any other
class of capital stock, other voting securities or any securities convertible
into, or rights, warrants or options, conditional or otherwise, to acquire,
any of the foregoing, payable or distributable to Stockholders of record prior
to the transfer of the Shares purchased pursuant to this Offer to Purchase or
its nominee or transferee on the Company's stock transfer records, then,
subject to Section 14 below, (i) the Offer Price may, in the sole discretion
of Purchaser, be reduced by the amount of any cash dividend or cash
distribution and (ii) the whole of any non-cash dividend, distribution or
issuance to be received by the tendering Stockholders will (a) be received and
held by the tendering Stockholders for the account of Purchaser and will be
required to be remitted promptly and transferred by each tendering Stockholder
to the Depositary for the account of Purchaser, accompanied by appropriate
documentation of transfer or (b) at the direction of Purchaser, exercised for
the benefit of Purchaser, in which case the proceeds of exercise promptly will
be remitted to Purchaser. Pending the remittance and subject to applicable
law, Purchaser will be entitled to all rights and privileges as owner of any
non-cash dividend, distribution, issuance or proceeds and may withhold the
entire Offer Price or deduct from the Offer Price the amount or value of the
non-cash dividend, distribution, issuance or proceeds, as determined by
Purchaser in its sole discretion.
Pursuant to the terms of the Merger Agreement, the Company is prohibited
from taking any of the actions described in the preceding paragraph and
nothing in this Offer to Purchase shall constitute a waiver by Purchaser or
Parent of any of its rights under the Merger Agreement or a limitation of
remedies available to Purchaser or Parent for any breach of the Merger
Agreement, including termination of the Merger Agreement.
14. CERTAIN CONDITIONS OF THE OFFER
Notwithstanding any other term of the Offer, Purchaser shall not be required
to accept for payment or, subject to any applicable rules and regulations of
the Commission, including Rule 14e-1(c) under the Exchange Act (relating to
Purchaser's obligation to pay for or return tendered Shares after the
termination or withdrawal of the Offer), to pay for any Shares tendered
pursuant to the Offer unless prior to the Expiration Date (as defined in the
Offer) (i) the Minimum Tender Condition shall have been satisfied, (ii) the
Preferred Securities Condition shall have been satisfied and (iii) any waiting
period under the HSR Act applicable to the purchase of Shares
32
<PAGE>
pursuant to the Offer shall have expired or been terminated. Furthermore,
notwithstanding any other term of the Offer or the Merger Agreement, Purchaser
shall not be required to accept for payment or, subject as aforesaid, to pay
for any Shares not theretofore accepted for payment or paid for, and may
terminate the Offer if, at any time on or after the date of the Merger
Agreement and prior to the Expiration Date, any of the following conditions
exists:
(a) there shall be threatened, instituted or pending by any governmental
entity any suit, action or proceeding (i) challenging the acquisition by
Parent or Purchaser of any Shares under the Offer, seeking to restrain or
prohibit the making or consummation of the Offer or the Merger or seeking
to obtain from the Company, Parent or Purchaser any damages that are
material in relation to the Company and its subsidiaries taken as a whole,
(ii) seeking to prohibit or materially limit the ownership or operation by
the Company, Parent or any of their respective subsidiaries of a material
portion of the business or assets of the Company and its subsidiaries,
taken as a whole, or Parent and its subsidiaries, taken as a whole, or to
compel the Company and its subsidiaries, taken as a whole or Parent to
dispose of or hold separate any material portion of the business or assets
of the Company or Parent and its subsidiaries, taken as a whole, in each
case as a result of the Offer or any of the other transactions contemplated
by the Merger Agreement or the Shareholder Agreement, (iii) seeking to
impose material limitations on the ability of Parent or Purchaser to
acquire or hold, or exercise full rights of ownership of, any Shares to be
accepted for payment pursuant to the Offer including, without limitation,
the right to vote such Shares on all matters properly presented to the
Stockholders of the Company, (iv) seeking to prohibit Parent or any of its
subsidiaries from effectively controlling in any material respect any
material portion of the business or operations of the Company or its
subsidiaries or (v) which otherwise is reasonably likely to have a Material
Adverse Effect (as defined in the Merger Agreement) on the Company;
(b) there shall be any law or order enacted, entered, enforced,
promulgated or deemed applicable to the Offer or the Merger, by any
governmental entity, other than the routine application to the Offer or the
Merger of applicable waiting periods under the HSR Act, that is reasonably
likely to result, directly or indirectly, in any of the consequences
referred to in clauses (i) through (v) of paragraph (a) above;
(c) there shall have occurred any Material Adverse Effect with respect to
the Company;
(d)(i) the Board of Directors of the Company or any committee thereof
shall have (x) withdrawn or modified in a manner adverse to Parent or
Purchaser its approval, recommendation or statement as to advisability of
the Offer or the Merger or its adoption of the Merger Agreement or the
Shareholder Agreement, (y) approved, recommended, stated to be advisable or
taken a neutral position (or failed to or was otherwise unable to take a
position) with respect to any Takeover Proposal, (z) failed to reaffirm its
approval, recommendation or statement as to advisability of the Offer or
the Merger or its adoption of the Merger Agreement or the Shareholder
Agreement within five business days of being requested by Parent to do so
or (ii) the Board of Directors of the Company or any committee thereof
shall have resolved to take any of the foregoing actions, except any taking
or disclosing to the shareholders a position contemplated by Rule 14e-
2(a)(2) or (3) promulgated under the Exchange Act with respect to any
Takeover Proposal if within five (5) business days of taking or disclosing
to the Stockholders the aforementioned position, the Board of Directors
publicly reconfirms its recommendation of the transactions contemplated by
the Merger Agreement as set forth therein;
(e) any of the representations and warranties of the Company set forth in
the Merger Agreement shall not be true and correct (except where such
failure to be true and correct would not have a Material Adverse Effect on
the Company (except with respect to any representation or warranty which is
already qualified by a materiality standard in which case such
representation or warranty shall not be true and correct in all respects)),
in each case at the date of the Merger Agreement and at the scheduled or
extended expiration of the Offer;
(f) the Company shall have failed to perform or comply with any
agreement, obligation or covenant to be performed or complied with by it
under the Merger Agreement in all material respects, which failure to
perform or comply has not been cured within five business days after the
giving of written notice to the Company; or
(g) the Merger Agreement shall have been terminated in accordance with
its terms.
33
<PAGE>
The foregoing conditions are for the sole benefit of Parent and Purchaser
and may, subject to the terms of the Merger Agreement, be waived by Parent and
Purchaser in whole or in part at any time and from time to time in their
reasonable discretion. The failure by Parent or Purchaser at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right, the waiver of any such right with respect to particular facts and
circumstances shall not be deemed a waiver with respect to any other facts and
circumstances and each such right shall be deemed an ongoing right that may be
asserted at any time and from time to time.
The Company has represented to Parent and Purchaser that as of August 14,
1998, all outstanding shares of the Series B Stock have been converted into
Shares, and therefore, Purchaser has deemed the Preferred Securities Condition
satisfied.
15. CERTAIN LEGAL MATTERS
Except as described in this Section 15, based on a review of publicly
available filings made by the Company with the Commission and other publicly
available information concerning the Company, but without any independent
investigation, neither Purchaser nor Parent is aware of any license or
regulatory permit that appears to be material to the business of the Company
and its subsidiaries, taken as a whole, that might be adversely affected by
Purchaser's acquisition of Shares as contemplated in this Offer to Purchase or
of any approval or other action by any governmental authority that would be
required for the acquisition or ownership of Shares by Purchaser as
contemplated in this Offer to Purchase. Should any such approval or other
action be required, Purchaser and Parent presently contemplate that such
approval or other action will be sought, except as described below under
"State Takeover Laws." There can be no assurance that any such approval or
other action, if needed, would be obtained or would be obtained without
substantial conditions; or that failure to obtain any such approval or other
action might not result in consequences adverse to the Company's business; or
that certain parts of the Company's business might not have to be disposed of
if such approvals were not obtained or other actions were not taken or in
order to obtain any such approval or other action. If certain types of adverse
action are taken with respect to the matters discussed below, Purchaser could
decline to accept for payment or pay for any Shares tendered. See Section 14
above for certain conditions to the Offer.
State Takeover Laws. A number of states throughout the United States have
enacted takeover statutes that purport, in varying degrees, to be applicable
to attempts to acquire securities of corporations that are incorporated or
have assets, stockholders, executive offices or places of business in those
states. In Edgar v. MITE Corp., the Supreme Court of the United States held
that the Illinois Business Takeover Act, which involved state securities laws
that made the takeover of certain corporations more difficult, imposed a
substantial burden on interstate commerce and was therefore unconstitutional.
In CTS Corp. v. Dynamics Corp. of America, however, the Supreme Court of the
United States held that a state may, as a matter of corporate law and, in
particular, those laws concerning corporate governance, constitutionally
disqualify a potential acquiror from voting on the affairs of a target
corporation without prior approval of the remaining stockholders, provided
that the laws were applicable only under certain conditions.
Section 203 of the DGCL limits the ability of a Delaware corporation to
engage in business combinations with "interested stockholders" (defined as any
beneficial owner of 15% or more of the outstanding voting stock of the
corporation) unless, among other things, the corporation's board of directors
has given its prior approval of either the business combination or the
transaction that resulted in the stockholder becoming an "interested
stockholder." The Company has represented in the Merger Agreement that the
Board of Directors of the Company has adopted, approved and found advisable
the Merger Agreement, the Offer, the Shareholder Agreement, the acquisition of
Shares by Purchaser pursuant to the Offer and the Shareholder Agreement and
the other transactions contemplated by the Merger Agreement and the
Shareholder Agreement, and such adoptions, approvals and findings are
sufficient to render inapplicable to the Offer, the Merger, the Merger
Agreement, the Shareholder Agreement, the acquisition of Shares by Purchaser
pursuant to the Offer and the Shareholder Agreement and the other transactions
contemplated by the Merger Agreement and the Shareholder Agreement the
provisions of Section 203 of the DGCL, and that no other "fair price",
"moratorium", "control share
34
<PAGE>
acquisition" or other form of anti-takeover statute or regulation or similar
law, or any other provision of the Company's Certificate of Incorporation or
Bylaws, applies or purports to apply to the Offer, the Merger, the Merger
Agreement, the Shareholder Agreement, the acquisition of Shares by Purchaser
pursuant to the Offer and the Shareholder Agreement or any of the transactions
contemplated by the Merger Agreement or the Shareholder Agreement.
Based on information supplied by the Company and the Company's
representations in the Merger Agreement, Purchaser does not believe that any
state takeover statutes apply to the Offer or the Merger. Neither Purchaser
nor Parent has currently complied with any state takeover statute or
regulation. Purchaser reserves the right to challenge the applicability or
validity of any state law purportedly applicable to the Offer or the Merger
and nothing in this Offer to Purchase or any action taken in connection with
the Offer or the Merger is intended to be a waiver of that right. If it is
asserted that any state takeover statute is applicable to the Offer or the
Merger and an appropriate court does not determine that it is inapplicable or
invalid as applied to the Offer or the Merger, Purchaser might be required to
file certain information with, or to receive approvals from, the relevant
state authorities, and Purchaser might be unable to accept for payment or pay
for Shares tendered pursuant to the Offer, or be delayed in consummating the
Offer or the Merger. In such case, Purchaser may not be obligated to accept
for payment or pay for any Shares tendered pursuant to the Offer.
Antitrust. Under the provisions of the HSR Act applicable to the Offer, the
purchase of Shares under the Offer may be consummated following the expiration
of a 15-calendar day waiting period that follows the filing by Purchaser of a
Notification and Report Form with respect to the Offer, unless Purchaser
receives a request for additional information or documentary material from the
Antitrust Division or the Federal Trade Commission (the "FTC") or unless early
termination of the waiting period is granted. Such filing was made on August
17, 1998 and such waiting period will expire at 11:59 p.m. on Tuesday,
September 1, 1998. If, within the initial 15-day waiting period, either the
Antitrust Division or the FTC requests additional information or documentary
material from Purchaser concerning the Offer, the waiting period will be
extended and would expire 11:59 P.M., New York City time, on the tenth
calendar day after the date of substantial compliance by Purchaser with such
request. Only one extension of the waiting period pursuant to a request for
additional information is authorized by the HSR Act. Thereafter, the waiting
period may be extended only by court order or with the consent of Purchaser.
In practice, complying with a request for additional information or
documentary material can take a significant amount of time. In addition, if
the Antitrust Division or the FTC raises substantive issues in connection with
a proposed transaction, the parties frequently engage in negotiations with the
relevant governmental agency concerning possible means of addressing those
issues and may agree to delay consummation of the transaction while the
negotiations continue.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as Purchaser's proposed acquisition of
the Company. At any time before or after Purchaser's purchase of Shares
pursuant to the Offer, the Antitrust Division or the FTC could take such
action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the purchase of Shares pursuant
to the Offer or the consummation of the Merger or seeking the divestiture of
Shares acquired by Purchaser or the divestiture of substantial assets of
Purchaser or its subsidiaries, or of the Company or its subsidiaries. Private
parties may also bring legal action under the antitrust laws under certain
circumstances. There can be no assurance that a challenge to the Offer on
antitrust grounds will not be made or, if such a challenge is made, of the
result of that challenge. The Merger Agreement provides that Parent is not
required to proffer to, or agree to (i) license, sell, hold separate,
discontinue or limit, before or after the Effective Time, any assets,
businesses, or interest in any assets or businesses of Parent, the Company or
any of their respective affiliates (or to consent to any license, sale,
holding separate, or discontinuance or limitation by the Company of any of its
assets or businesses) or (ii) agree to any conditions relating to, or changes
or restriction in, the operations of any such asset or businesses which, in
either case, could, in the judgment of the Board of Directors of Parent,
materially and adversely impact the economic or business benefits to Parent of
the transactions contemplated by the Merger Agreement.
35
<PAGE>
16. FEES AND EXPENSES
Piper Jaffray Inc. is acting as Dealer Manager in connection with the Offer
and has provided certain financial advisory services to Parent in connection
with the proposed acquisition of the Company. Parent has agreed to pay Piper
Jaffray a fee of approximately $1.5 million, which will become payable upon
consummation of the transaction. The fee is based on a percentage of the total
purchase price paid in connection with the Merger. The term "total purchase
price" is defined in the letter agreement between Piper Jaffray and the
Company to be an amount equal to the sum of the cash, fair market value of
equity securities or interests, face amount of straight and convertible debt
instruments or obligations issued or issuable by the Company, indebtedness for
borrowed money of the Company assumed by Parent, any dividends, and any
amounts paid or payable in respect of any outstanding stock options or
warrants. In addition, Parent has agreed to reimburse Piper Jaffray for all
reasonable out-of-pocket expenses incurred by Piper Jaffray in connection with
the transaction, including the fees and reasonable expenses of counsel, and to
indemnify Piper Jaffray and certain related persons against certain losses,
claims, damages, liabilities and expenses, including certain liabilities under
the federal securities laws. Piper Jaffray and Piper Capital Management Inc.,
a division of Piper Jaffray Inc., may hold Shares on behalf of clients and
other accounts over which it may have discretionary authority.
Purchaser has retained Georgeson & Company Inc. to act as the Information
Agent, and First Chicago Trust Company of New York to act as the Depositary,
in connection with the Offer. The Information Agent and the Depositary each
will receive reasonable and customary compensation for their services, will be
reimbursed for certain reasonable out-of-pocket expenses and will be
indemnified against certain liabilities and expenses in connection therewith,
including certain liabilities under the federal securities laws.
Except as set forth above, Purchaser will not pay any fees or commissions to
any broker or dealer or other person for soliciting tenders of Shares pursuant
to the Offer. Brokers, dealers, commercial banks and trust companies will be
reimbursed by Purchaser for customary mailing and handling expenses incurred
by them in forwarding the offering materials to their customers.
17. MISCELLANEOUS
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares who reside in any jurisdiction in which the
making of the Offer or the acceptance thereof would not be in compliance with
the securities, blue sky or other laws of the jurisdiction. However, Purchaser
may, in its discretion, take such action as it may deem necessary to make the
Offer in any jurisdiction and to extend the Offer to holders of Shares in that
jurisdiction. In any jurisdiction where the securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer will be
deemed to be made on behalf of Purchaser by one or more registered brokers or
dealers that are licensed under the laws of the jurisdiction.
Purchaser has filed the Schedule 14D-1 with the Commission containing
certain additional information with respect to the Offer pursuant to Rule 14d-
1 under the Exchange Act. The Schedule and any amendments to the Schedule,
including exhibits, may be examined and copies may be obtained from the
principal office of the Commission in the manner set forth in Section 8 above
(except that they will not be available at the regional offices of the
Commission).
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER THAT IS NOT CONTAINED IN THIS OFFER TO
PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, THE
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
Pegasus Acquisitions Corp.
August 17, 1998
36
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
signed, will be accepted. The Letter of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each
stockholder of the Company or his broker, dealer, commercial bank, trust
company or other nominee to the Depositary, at one of the addresses set forth
below:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By Mail: By Overnight Delivery: By Hand:
First Chicago Trust First Chicago Trust First Chicago Trust
Company Company Company
of New York of New York of New York
Tenders & Exchanges Tenders & Exchanges Tenders & Exchanges
Suite 4660 c/o Securities Transferred Suite 4680
P.O. Box 2569 Reporting Services Inc. 14 Wall Street, 8th
Jersey City, NJ 07303-2569 One Exchange Plaza Floor
Third Floor New York, NY 10005
New York, NY 10006
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone
numbers listed below. Additional copies of this Offer to Purchase, the Letter
of Transmittal and other tender offer materials may be obtained from the
Information Agent as set forth below and will be furnished promptly at
Purchaser's expense. You may also contact your broker, dealer, commercial
bank, trust company or other nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
LOGO
Wall Street Plaza
New York, NY 10005
Banks and Brokers Call: (212) 440-9800 (collect)
or
All Others Call: (800) 223-2064 (toll free)
The Dealer Manager for the Offer is:
Piper Jaffray Inc.
Piper Jaffray Tower
222 South Ninth Street
Minneapolis, MN 55402
(800) 333-6000
Extension 6220
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
INCONTROL, INC.
PURSUANT TO THE OFFER TO PURCHASE DATED AUGUST 17, 1998
BY
PEGASUS ACQUISITIONS CORP.
AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF
GUIDANT CORPORATION
- -----------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON MONDAY, SEPTEMBER 14, 1998, UNLESS THE OFFER IS EXTENDED.
- ------------------------------------------------------------------------------
THE DEPOSITARY FOR THE OFFER IS:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By Mail: By Overnight Delivery: By Hand:
First Chicago Trust First Chicago Trust First Chicago Trust
Company Company Company
of New York of New York of New York
Tenders & Exchanges Tenders & Exchanges Tenders & Exchanges
Suite 4660 c/o Securities Transfer and
Reporting Services Inc.
Suite 4680
P.O. Box 2569 One Exchange Plaza-- 14 Wall Street, 8th
Jersey City, NJ 07303- Third Floor Floor
2569 New York, NY 10006 New York, NY 10005
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF
TRANSMITTAL IN THE APPROPRIATE SPACE THEREFOR PROVIDED BELOW AND COMPLETE THE
SUBSTITUTE FORM W-9 SET FORTH BELOW.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by holders of Shares (as
defined below) of InControl, Inc. (the "Stockholders") if certificates
evidencing Shares ("Certificates") are to be forwarded with this Letter of
Transmittal or if delivery of Shares is to be made by book-entry transfer to
an account maintained by First Chicago Trust Company of New York (the
"Depositary") at The Depository Trust Company ("DTC"), (the "Book-Entry
Transfer Facility") pursuant to the procedures set forth in Section 3 of the
Offer to Purchase (as defined below).
Stockholders whose Certificates are not immediately available or who cannot
deliver either their Certificates for, or a Book-Entry Confirmation (as
defined in Section 3 of the Offer to Purchase) with respect to, their Shares
and all other required documents to the Depositary prior to the Expiration
Date (as defined in Section 1 of the Offer to Purchase) may tender their
Shares according to the guaranteed delivery procedure set forth in Section 3
of the Offer to Purchase. See Instruction 2 hereof. Delivery of documents to
the Book-Entry Transfer Facility does not constitute delivery to the
Depositary.
<PAGE>
[_] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY TRANSFER
FACILITY, AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A BOOK-ENTRY
TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER).
Name of Tendering Institution: ____________________________________________
Account Number: ___________________________________________________________
Transaction Code Number: __________________________________________________
[_] CHECK HERE IF SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING.
PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY.
Name(s) of Registered Holder(s): ______________________________________________
Window Ticket Number (if any): ________________________________________________
Date of Execution of Notice of Guaranteed Delivery: ___________________________
Name of Institution that Guaranteed Delivery: _________________________________
If delivered by book-entry transfer through The Depository Trust Company,
complete the following: _______________________________________________________
Account Number: ___________________________________________________________
Transaction Code Number: __________________________________________________
- -------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- -------------------------------------------------------------------------------
NAME(S) AND
ADDRESS(ES) OF
REGISTERED
HOLDER(S)
(PLEASE FILL
IN, IF BLANK,
EXACTLY AS
NAME(S)
APPEAR(S) ON SHARE NUMBER OF SHARES NUMBER
THE CERTIFICATE REPRESENTED BY OF SHARES
CERTIFICATE(S)) NUMBER(S)(1) CERTIFICATE(S)(1) TENDERED(2)
- -------------------------------------------------------------------
- -------------------------------------------------------------------
- -------------------------------------------------------------------
- -------------------------------------------------------------------
- -------------------------------------------------------------------
- -------------------------------------------------------------------
- -------------------------------------------------------------------
TOTAL SHARES
- -------------------------------------------------------------------------------
(1) Need not be completed by Stockholders delivering Shares by Book-Entry
Transfer.
(2) Unless otherwise indicated, it will be assumed that all Shares
represented by Certificates delivered to the Depositary are being
tendered. See Instruction 4.
- -------------------------------------------------------------------------------
2
<PAGE>
NOTE: SIGNATURE(S) MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
Ladies and Gentlemen:
The undersigned hereby tenders to Pegasus Acquisitions Corp., a Delaware
corporation ("Purchaser"), and an indirect wholly-owned subsidiary of Guidant
Corporation, an Indiana corporation ("Parent"), the above-described shares of
common stock, $.01 par value (the "Shares"), of InControl, Inc., a Delaware
corporation (the "Company"), for $6 per Share, net to the seller in cash,
without interest, upon the terms and subject to the conditions set forth in
the Offer to Purchase, dated August 17, 1998 (the "Offer to Purchase"),
receipt of which is hereby acknowledged, and in this Letter of Transmittal
(which together constitute the "Offer"). The undersigned understands that
Purchaser reserves the right to transfer or assign, in whole or from time to
time in part, to any direct or indirect wholly-owned subsidiary of Purchaser,
the right to purchase all or any portion of the Shares tendered pursuant to
the Offer, but any such transfer or assignment will not relieve Purchaser of
its obligations under the Offer or prejudice the rights of tendering
Stockholders to receive payment for Shares validly tendered and accepted for
payment pursuant to the Offer.
Subject to, and effective upon, acceptance for payment of, or payment for,
Shares tendered with this Letter of Transmittal in accordance with the terms
and subject to the conditions of the Offer (including, if the Offer is
extended or amended, the terms or conditions of any such extension or
amendment), the undersigned hereby sells, assigns and transfers to, or upon
the order of, Purchaser all right, title and interest in and to all of the
Shares that are being tendered hereby and any and all other Shares or other
assets, property or securities issued or issuable in respect of such Shares on
or after August 17, 1998 (a "Distribution") and irrevocably constitutes and
appoints the Depositary as the true and lawful agent and attorney-in-fact of
the undersigned with respect to such Shares (and any Distributions), with full
power of substitution (such power of attorney being deemed to be an
irrevocable power coupled with an interest), to (i) deliver Certificates
evidencing such Shares (and any Distributions), or transfer ownership of such
Shares (and all Distributions) on the account books maintained by a Book-Entry
Transfer Facility together, in any such case, with all accompanying evidences
of transfer and authenticity to, or upon the order of, Purchaser, upon receipt
by the Depositary as the undersigned's agent, of the purchase price with
respect to such Shares; (ii) present such Shares (and any Distributions) for
transfer on the books of the Company; and (iii) receive all benefits and
otherwise exercise all rights of beneficial ownership (including, without
limitation, the right to sell, assign, convey or transfer) of such Shares (and
any Distributions), all in accordance with the terms and subject to the
conditions of the Offer.
The undersigned hereby irrevocably appoints each designee of Purchaser as
the attorney-in-fact and proxy of the undersigned, each with full power of
substitution, to the full extent of the undersigned's rights with respect to
all Shares tendered hereby and accepted for payment and paid for by Purchaser
(and any Distributions) including, without limitation, the right to vote such
Shares (and any Distributions) in such manner as each such attorney and proxy
or his substitute shall, in his sole discretion, deem proper. All such powers
of attorney and proxies, being deemed to be irrevocable, shall be considered
coupled with an interest in the Shares tendered with this Letter of
Transmittal. Such appointment will be effective when, and only to the extent
that, Purchaser accepts such Shares for payment. Upon such acceptance for
payment, all prior powers of attorney and proxies given by the undersigned
with respect to such Shares (and any Distributions) will be revoked, without
further action, and no subsequent powers of attorneys and proxies may be given
with respect thereto (and, if given, will be deemed ineffective). The
designees of Purchaser will, with respect to the Shares (and any
Distributions) for which such appointment is effective, be empowered to
exercise all voting and other rights of the undersigned with respect to such
Shares (and any Distributions) as they in their sole discretion may deem
proper. Purchaser reserves the absolute right to require that, in order for
Shares to be deemed validly tendered, immediately upon the acceptance for
payment of such Shares, Purchaser or its designees are able to exercise full
voting rights with respect to such Shares (and any Distributions), including
voting at any meeting of Stockholders then scheduled.
All authority conferred or agreed to be conferred by this Letter of
Transmittal shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned and shall not be
3
<PAGE>
affected by, and shall survive, the death or incapacity of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby (and any Distributions) and that, when the same are accepted for
payment and paid for by Purchaser, Purchaser will acquire good, marketable and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances, and that the Shares tendered hereby (and any Distributions)
will not be subject to any adverse claim. The undersigned, upon request, will
execute and deliver any additional documents deemed by the Depositary or
Purchaser to be necessary or desirable to complete the sale, assignment and
transfer of Shares tendered hereby (and any Distributions). In addition, the
undersigned shall promptly remit and transfer to the Depositary for the
account of Purchaser any and all Distributions issued to the undersigned on or
after August 17, 1998 in respect of the Shares tendered hereby, accompanied by
appropriate documentation of transfer, and pending such remittance and
transfer or appropriate assurance thereof, Purchaser shall be entitled to all
rights and privileges as owner of any such Distributions and may withhold the
entire purchase price or deduct from the purchase price the amount of value
thereof, as determined by Purchaser in it sole discretion.
The undersigned understands that the valid tender of Shares pursuant to any
one of the procedures described in Section 3 of the Offer to Purchase and in
the instructions to this Letter of Transmittal will constitute a binding
agreement between the undersigned and Purchaser with respect to such Shares,
upon the terms and subject to the conditions of the Offer.
The undersigned recognizes that, under certain circumstances set forth in
the Offer to Purchase, Purchaser may not be required to accept for payment any
of the Shares tendered hereby.
Unless otherwise indicated in this Letter of Transmittal under "Special
Payment Instructions," please issue the check for the purchase price and
return any Certificates evidencing Shares not tendered or not accepted for
payment in the name(s) of the registered holder(s) appearing under
"Description of Shares Tendered." Similarly, unless otherwise indicated under
"Special Delivery Instructions," please mail the check for the purchase price
and return any Certificates evidencing Shares not tendered or not accepted for
payment (and accompanying documents, as appropriate) to the address(es) of the
registered holder(s) appearing under "Description of Shares Tendered." In the
event that both the "Special Payment Instructions" and the "Special Delivery
Instructions" are completed, please issue the check for the purchase price and
return any such Certificates evidencing Shares not tendered or not accepted
for payment (and accompanying documents, as appropriate) in the name(s) of,
and deliver such check and return such Certificates (and accompanying
documents, as appropriate) to, the person(s) so indicated. Unless otherwise
indicated in this Letter of Transmittal under "Special Payment Instructions,"
in the case of a book-entry delivery of Shares, please credit the account
maintained at the Book-Entry Transfer Facility with respect to any Shares not
accepted for payment. The undersigned recognizes that Purchaser has no
obligation pursuant to the "Special Payment Instructions" to transfer any
Shares from the name of the registered holder if Purchaser does not accept for
payment any of the Shares tendered hereby.
4
<PAGE>
- ----------------------------------- ----------------------------------------
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6, AND (SEE INSTRUCTIONS 1, 5, 6 AND 7)
7)
To be completed ONLY if Certif-
To be completed ONLY if Certif- icates for Shares not tendered
icates for Shares not tendered or not accepted for payment and
or not accepted for payment and the check for the purchase price
the check for the purchase price of Shares accepted for payment
of Shares accepted for payment are to be sent to someone other
are to be issued in the name of than the undersigned or to the
someone other than the under- undersigned at an address other
signed. than that shown above.
Issue Check/Certificate(s) to:
Mail Check/Certificate(s) to:
Name: ___________________________
(PLEASE TYPE OR PRINT) Name:_____________________________
(PLEASE TYPE OR PRINT)
Address: ________________________
Address:__________________________
_________________________________
(INCLUDE ZIP CODE) __________________________________
(INCLUDE ZIP CODE)
_________________________________
(TAX IDENTIFICATION OR SOCIAL __________________________________
SECURITY NO.) (TAX IDENTIFICATION OR SOCIAL
(SEE SUBSTITUTE FORM W-9) SECURITY NO.)
5
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, no signature
guarantee is required on this Letter of Transmittal (a) if this Letter of
Transmittal is signed by the registered holder(s) (which term, for the
purposes of this document, includes any participant in the Book-Entry
Facility's system whose name appears on a security position listing as the
owner of the Shares) of Shares tendered herewith and such registered holder
has not completed either the box entitled "Special Payment Instructions" on
this Letter of Transmittal or (b) if such Shares are tendered for the account
of a financial institution (including most commercial banks, savings and loan
associations and brokerage houses) that is a participant in the Security
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Guarantee Program or the Stock Exchange Medallion Program (an
"Eligible Institution"). In all other cases, all signatures on the Letter of
Transmittal must be guaranteed by an Eligible Institution. See Instruction 5.
If the Certificates are registered in the name of a person other than the
signer of this Letter of Transmittal, or if payment is to be made to, or
Certificates evidencing unpurchased Shares are to be issued to, a person other
than the registered owner, then the tendered Certificates must be endorsed or
accompanied by duly executed stock powers, in either case signed exactly as
the name or names of the registered owner or owners appear on the
Certificates, with the signatures on the Certificates or stock powers
guaranteed by an Eligible Institution as provided in this Letter of
Transmittal. See Instruction 5.
2. REQUIREMENTS OF TENDER. This Letter of Transmittal is to be completed by
Stockholders if Certificates evidencing Shares are to be forwarded with this
Letter of Transmittal or if delivery of Shares is to be made pursuant to the
procedures for book-entry transfer set forth in Section 3 of the Offer to
Purchase. For a Stockholder to validly tender Shares pursuant to the Offer,
either (a) a properly completed and duly executed Letter of Transmittal (or a
manually signed facsimile), with any required signature guarantees and any
other required documents, must be received by the Depositary at one of its
addresses set forth in this Letter of Transmittal on or prior to the
Expiration Date (as defined in the Offer to Purchase) and either (i)
Certificates for tendered Shares must be received by the Depositary at one of
those addresses on or prior to the Expiration Date or (ii) Shares must be
delivered pursuant to the procedures for book-entry transfer set forth in
Section 3 of the Offer to Purchase and a Book-Entry Confirmation (as defined
in the Offer to Purchase) must be received by the Depositary on or prior to
the Expiration Date or (b) the tendering Stockholder must comply with the
guaranteed delivery procedures set forth below and in Section 3 of the Offer
to Purchase.
Stockholders whose Certificates are not immediately available or who cannot
deliver their Certificates and all other required documents to the Depositary
or complete the procedures for book-entry transfer on or prior to the
Expiration Date may tender their Shares by properly completing and duly
executing a Notice of Guaranteed Delivery pursuant to the guaranteed delivery
procedures set forth in Section 3 of the Offer to Purchase. Pursuant to such
procedure: (i) tender must be made by or through an Eligible Institution, (ii)
a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form made available by Purchaser, must be received by the
Depositary prior to the Expiration Date, and (iii) Certificates representing
all tendered Shares in proper form for transfer, or a Book-Entry Confirmation
with respect to all the tendered Shares, together with a Letter of Transmittal
(or a manually signed facsimile thereof), properly completed and duly
executed, with any required signature guarantees or an Agent's Message (as
defined in Section 2 of the Offer to Purchase) in connection with a book-entry
transfer and any other documents required by this Letter of Transmittal, must
be received by the Depositary within three New York Stock Exchange trading
days after the date of such Notice of Guaranteed Delivery. If Certificates are
forwarded separately to the Depositary, a properly completed and duly executed
Letter of Transmittal (or a manually signed facsimile) must accompany each
delivery.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ANY
OTHER REQUIRED DOCUMENTS, IS AT THE OPTION AND SOLE RISK OF THE TENDERING
STOCKHOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED
BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
6
<PAGE>
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering Stockholders, by execution
of this Letter of Transmittal (or a facsimile thereof), waive any right to
receive any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided in this Letter of Transmittal is
inadequate, the information required under "Description of Shares Tendered"
should be listed on a separate signed schedule attached to this Letter of
Transmittal.
4. PARTIAL TENDERS. If fewer than all of the Shares represented by any
Certificates delivered to the Depositary with this Letter of Transmittal are
to be tendered, fill in the number of Shares that are to be tendered in the
box entitled "Number of Shares Tendered." In such cases, a new Certificate for
the remainder of the Shares that were evidenced by your old Certificate(s)
will be sent, without expense, to the person(s) signing this Letter of
Transmittal, unless otherwise provided in the box entitled "Special Payment
Instructions" or the box entitled "Special Delivery Instructions" on this
Letter of Transmittal, as soon as practicable after the Expiration Date. All
Shares represented by Certificate(s) delivered to the Depositary will be
deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, INSTRUMENTS OF TRANSFER AND
ENDORSEMENTS. If this Letter of Transmittal is signed by the registered
holder(s) of the Shares tendered hereby, the signature(s) must correspond
exactly with the name(s) as written on the face of the Certificate(s) without
alteration, enlargement or any change whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all the owners must sign this Letter of Transmittal.
If any of the tendered Shares are registered in different names on several
Certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
Certificates.
If this Letter of Transmittal or any Certificates or instruments of transfer
are signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or
representative capacity, that person should so indicate when signing, and
proper evidence satisfactory to Purchaser of that person's authority to so act
must be submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and transmitted hereby, no endorsements of Certificates or
separate instruments of transfer are required unless payment is to be made, or
Certificates not tendered or not purchased are to be issued or returned, to a
person other than the registered holder(s). Signatures on the Certificates or
instruments of transfer must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares evidenced by the Certificate(s) listed and
transmitted hereby, the Certificate(s) must be endorsed or accompanied by
appropriate instruments of transfer, in either case signed exactly as the
name(s) of the registered holder(s) appear on the Certificate(s). Signatures
on the Certificate(s) or instruments of transfer must be guaranteed by an
Eligible Institution.
6. TRANSFER TAXES. Except as set forth in this Instruction 6, Purchaser will
pay or cause to be paid any transfer taxes with respect to the transfer and
sale of Shares to it or its order pursuant to the Offer. If, however, payment
of the purchase price is to be made to, or (in the circumstances permitted
hereby) if Certificates for Shares not tendered or not purchased are to be
registered in the name of, any person other than the registered holder(s), or
if tendered Certificates are registered in the name of any person other than
the person(s) signing this Letter of Transmittal, the amount of any transfer
taxes (whether imposed on the registered holder(s) or such person) payable on
account of the transfer to such person will be deducted from the purchase
price unless satisfactory evidence of the payment of such taxes or exemption
therefrom is submitted.
7
<PAGE>
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Certificate(s) listed in this Letter
of Transmittal.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check and Certificates
for unpurchased Shares are to be issued in the name of a person other than the
signer of this Letter of Transmittal, the appropriate box on this Letter of
Transmittal should be completed. If any tendered Shares are not purchased for
any reason and the Shares are delivered by Book-Entry Transfer Facility, the
Shares will be credited to an account maintained at the appropriate Book-Entry
Transfer Facility.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance may be directed to the Information Agent (as defined below) at its
address or telephone number set forth below and requests for additional copies
of the Offer to Purchase, this Letter of Transmittal and the Notice of
Guaranteed Delivery may be directed to the Information Agent or brokers,
dealers, commercial banks and trust companies and such materials will be
furnished at Purchaser's expense.
9. WAIVER OF CONDITIONS. The conditions of the Offer may be waived by
Purchaser (subject to certain limitations in the Merger Agreement (as defined
in the Offer to Purchase)), in whole or in part, at any time or from time to
time, in Purchaser's sole discretion.
10. 31% BACKUP WITHHOLDING. In order to avoid backup withholding of Federal
income tax on the payment received upon the surrender of Certificate(s), a
former Stockholder must, unless an exemption applies, provide the Depository
with his or her correct taxpayer identification number ("TIN") on Substitute
Form W-9 on this Letter of Transmittal and certify, under penalties of
perjury, that such number is correct. If the correct TIN is not provided, a
$50 penalty may be imposed by the Internal Revenue Service and payments made
in exchange for the surrendered Shares may be subject to backup withholding of
31%.
Backup withholding is not an additional Federal income tax. Rather, the
amount of such tax withheld will be credited against the Federal income tax
liability of persons subject to backup withholding. If backup withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
If the former Stockholder is an individual, the TIN is his or her social
security number. The box in Part II of the Substitute Form W-9 may be checked
if the person surrendering the Certificate(s) has not been issued a TIN and
has applied for a TIN or intends to apply for a TIN in the near future. If the
box in Part 3 is checked and the Depository is not provided with a TIN, the
Depository will withhold 31% on all payments until it is provided with a TIN.
Exempt persons (including, among others, corporations) are not subject to
backup withholding and should indicate their exempt status on Substitute Form
W-9. A foreign individual may qualify as an exempt person by submitting a
statement, signed under penalties of perjury, certifying such individual's
foreign status. Such statements can be obtained from the Depository. A former
Stockholder should consult his or her tax advisor about his or her
qualification for exemption from backup withholding and the procedure for
obtaining such exemption. For additional guidance, see the enclosed Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9.
11. LOST OR DESTROYED CERTIFICATES. If any Certificate(s) representing
Shares has been lost, destroyed or stolen, the Stockholder should promptly
notify the transfer agent for the Company, ChaseMellon Shareholder Services at
(800) 522-6645. The Stockholders will then be instructed as to the steps that
must be taken in order to replace the Certificate(s). This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost or destroyed Certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE THEREOF
(TOGETHER WITH CERTIFICATES OR A BOOK-ENTRY CONFIRMATION FOR SHARES AND ANY
OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED BY THE DEPOSITARY, OR A NOTICE OF
GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY, ON OR PRIOR TO THE
EXPIRATION DATE.
8
<PAGE>
--------------------------------------------------------------------------
PAYER'S NAME: FIRST CHICAGO TRUST COMPANY OF NEW YORK
--------------------------------------------------------------------------
PART 1--PLEASE PROVIDE YOUR
SUBSTITUTE TIN IN THE BOX AT RIGHT AND -----------------
FORM W-9 CERTIFY BY SIGNING AND Social Security
DATING BELOW. Number(s)
----------------------------------------------------
Name (Please Print) _____________ OR
DEPARTMENT OF THE -----------------
TREASURY Address__________________________ Employee
INTERNAL REVENUE Identification
SERVICE City_______ State___ Zip Code___ Number(s)
PART II--Awaiting TIN [_]
--------------------------------------------------------
PAYER'S REQUEST
FOR
TAXPAYER --------------------------------------------------------
IDENTIFICATION Certifications--Under the penalties of perjury, I
NUMBER (TIN) certify that:
(1) The number shown on this form is my correct
Taxpayer Identification Number (or I am waiting
for a number to be issued to me),
(2) I am not subject to backup withholding because
(a) I am exempt from backup withholding; (b) I
have not been notified by the Internal Revenue
Service (the "IRS") that I am subject to backup
withholding as a result of a failure to report
all interest or dividends; or (c) the IRS has
notified me that I am no longer subject to
backup withholding; and
(3) Any other information provided on this form is
true, correct and complete.
--------------------------------------------------------
Certification Instructions--You must cross out item
(2) above if you have been notified by the IRS that
you are currently subject to backup withholding
because of underreporting interest or dividends on
your tax return. However, if after being notified by
the IRS that you were subject to backup withholding
you receive another notification from the IRS
stating that you are no longer subject to backup
withholding, do not cross out item (2).
------------------------------------------------------------------------
SIGN SIGNATURE: __________________________________ DATE ___________ , 199_
HERE
--------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR
ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECKED THE BOX IN PART II OF SUBSTITUTE FORM W-9.
--------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer
identification number has not been issued to me, and either (1) I
have mailed or delivered an application to receive a taxpayer
identification number to the appropriate Internal Revenue Service
Center or Social Security Administration Office, or (2) I intend to
mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number by the time of
payment, 31% of all reportable payments made to me will be withheld
until I provide this number.
Signature ____________________________________ Date ____________
--------------------------------------------------------------------------
9
<PAGE>
The Information Agent for the Offer is:
LOGO
Wall Street Plaza
New York, NY 10005
Banks and Brokers Call: (212) 440-9800 (collect)
or
All Others Call: (800) 223-2064 (toll free)
The Dealer Manager for the Offer is:
Piper Jaffray Inc.
Piper Jaffray Tower
222 South Ninth Street
Minneapolis, MN 55402
(800) 333-6000
Extension 6220
10
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
INCONTROL, INC.
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON MONDAY, SEPTEMBER 14, 1998, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
This Notice of Guaranteed Delivery or a notice substantially equivalent
hereto must be used to accept the Offer (as defined below) if certificates
representing the common stock, $.01 par value (the "Shares"), of InControl,
Inc., a Delaware corporation, are not immediately available or the procedure
for book-entry transfer cannot be completed on a timely basis or time will not
permit all required documents to reach First Chicago Trust Company of New York
(the "Depositary") prior to the Expiration Date (as defined in the Offer to
Purchase). This Notice of Guaranteed Delivery may be delivered by hand or mail
or transmitted by facsimile transmission to the Depositary. See Section 3 of
the Offer to Purchase.
The Depositary for the Offer is:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By Mail: By Overnight Delivery: By Hand:
First Chicago Trust First Chicago Trust First Chicago Trust
Company Company Company
of New York of New York of New York
Tenders & Exchanges Tenders & Exchanges Tenders & Exchanges
Suite 4660 c/o Securities Transfer Suite 4680
P.O. Box 2569 and Reporting Services 14 Wall Street, 8th
Jersey City, NJ 07303- Inc. Floor
2569 One Exchange Plaza--Third New York, NY 10005
Floor
New York, NY 10006
If By Facsimile Transmission:
(For Eligible Institutions Only)
(201) 222-4720
or
(201) 222-4721
Confirmation of Facsimile Transmission Only
(201) 222-4707
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION TO
A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares to the Depositary within the time period shown herein.
Failure to do so could result in a financial loss to the Eligible Institution.
THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Pegasus Acquisitions Corp., a Delaware
corporation ("Purchaser") and an indirect wholly-owned subsidiary of Guidant
Corporation, an Indiana corporation ("Parent"), upon the terms and subject to
the conditions set forth in the Offer to Purchase, dated August 17, 1998 (the
"Offer to Purchase"), and in the related Letter of Transmittal (which together
constitute the "Offer"), receipt of each of which is hereby acknowledged, the
number of Shares indicated below pursuant to the guaranteed delivery
procedures set forth in Section 3 of the Offer to Purchase.
- ------------------------------------ -----------------------------------
Number of Shares: _________________ Names(s) of Record Holder(s): _____
Certificate Nos. (if available): __ ___________________________________
___________________________________ ___________________________________
(Please Type or Print)
[_]Check this box if Shares will be Address(es): ______________________
tendered by book-entry transfer
through The Depository Trust ___________________________________
Company. (Zip Code)
Area Code and Tel. No.: ___________
Account Number: ___________________
Signature(s): _____________________
Transaction Code Number: __________
___________________________________
Date: _______________________, 1998
Date: _______________________, 1998
- ------------------------------------ -----------------------------------
THE GUARANTEE SET FORTH BELOW MUST BE COMPLETED
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, an Eligible Institution (as such term is defined in Section
3 of the Offer to Purchase), hereby guarantees to deliver to the Depositary
the certificates representing the Shares tendered hereby, in proper form for
transfer, or a Book-Entry Confirmation (as defined in Section 3 of the Offer
to Purchase) with respect to such Shares, in either case together with a
properly completed and duly executed Letter of Transmittal (or a manually
signed facsimile thereof), with any required signature guarantees or an
Agent's Message (as defined in Section 2 of the Offer to Purchase) in
connection with a book-entry transfer, and any other documents required by the
Letter of Transmittal, all within three New York Stock Exchange trading days
after the date hereof.
- ------------------------------------ -----------------------------------
Name of Firm: _____________________ ___________________________________
(Authorized Signature)
Address: __________________________
Name: _____________________________
___________________________________ (Please Type or Print)
(Zip Code)
Title: ____________________________
Area Code and Tel. No.: ___________
Date: _____________________________
- ------------------------------------ -----------------------------------
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE OF GUARANTEED
DELIVERY. CERTIFICATES FOR SHARES SHOULD ONLY BE SENT TOGETHER WITH YOUR
LETTER OF TRANSMITTAL.
2
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
INCONTROL, INC.
AT
$6 NET PER SHARE
BY
PEGASUS ACQUISITIONS CORP.
AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF
GUIDANT CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON MONDAY, SEPTEMBER 14, 1998, UNLESS THE OFFER IS
EXTENDED.
August 17, 1998
To: Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been engaged by Pegasus Acquisitions Corp., a Delaware corporation
and an indirect wholly-owned subsidiary of Guidant Corporation ("Purchaser"),
to act as Dealer Manager in connection with Purchaser's offer to purchase for
cash all of the outstanding shares of common stock, $.01 par value (the
"Shares"), of InControl, Inc., a Delaware corporation (the "Company"), for $6
per Share, net to the seller in cash, without interest, upon the terms and
subject to the conditions set forth in the Offer to Purchase, dated August 17,
1998 (the "Offer to Purchase"), and in the related Letter of Transmittal
(which, together with the Offer to Purchase, constitute the "Offer") enclosed.
Please furnish copies of the enclosed materials to those of your clients for
whose accounts you hold Shares in your name or in the name of your nominee.
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. The Offer to Purchase, dated August 17, 1998.
2. The Letter of Transmittal to tender Shares for your use and for the
information of your clients. Facsimile copies of the Letter of Transmittal
may be used to tender Shares.
3. A letter to stockholders of the Company from Kurt C. Wheeler, Chairman
of the Board, President and Chief Executive Officer of the Company,
together with a Solicitation/Recommendation Statement on Schedule 14D-9
filed with the Securities and Exchange Commission by the Company and mailed
to stockholders of the Company.
4. The Notice of Guaranteed Delivery for Shares to be used to accept the
Offer if neither of the two procedures for tendering Shares set forth in
the Offer to Purchase can be completed on a timely basis.
5. A printed form of letter which may be sent to your clients for whose
accounts you hold Shares registered in your name or in the name of your
nominee, with space provided for obtaining such client's instructions
regarding the Offer.
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
7. A return envelope addressed to First Chicago Trust Company of New
York, the Depositary.
<PAGE>
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, SEPTEMBER 14, 1998, UNLESS
THE OFFER IS EXTENDED.
Please note the following:
1. The tender price is $6.00 per Share, net to the seller in cash.
2. The Offer is subject to there being validly tendered and not properly
withdrawn prior to the Expiration Date (as defined in the Offer to
Purchase) a majority of the outstanding Shares (on a fully diluted basis)
and certain other conditions. See the Introduction and Sections 1, 14 and
15 of the Offer to Purchase.
3. The Offer is being made for all of the outstanding Shares.
4. Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as otherwise provided in Instruction 6 of the Letter
of Transmittal, transfer taxes on the purchase of Shares by Purchaser
pursuant to the Offer. However, backup federal income tax withholding at a
rate of 31% may be required, unless an exemption applies or unless the
required taxpayer identification information is provided. See Instruction
10 of the Letter of Transmittal.
5. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on September 14, 1998, unless the Offer is extended.
6. The board of directors of the Company has unanimously determined that
the Offer and the Merger (as defined in the Offer to Purchase) are fair to,
advisable and in the best interests of, the Company and its stockholders;
has approved the Merger Agreement (as defined in the Offer to Purchase),
the Shareholder Agreement (as defined in the Offer to Purchase) and the
transactions contemplated by the Merger Agreement and the Shareholder
Agreement, including the Offer and the Merger; and recommends that the
Company's stockholders accept the Offer and tender all of their Shares
pursuant thereto.
7. Notwithstanding any other provision of the Offer, payment for Shares
accepted for payment pursuant to the Offer will in all cases be made only
after timely receipt by the Depositary of (a) certificates for (or a timely
Book-Entry Confirmation (as defined in Section 3 of the Offer to Purchase)
with respect to) such Shares, (b) the Letter of Transmittal (or a manually
signed facsimile thereof), properly completed and duly executed with any
required signature guarantees or an Agent's Message (as defined in the
Offer to Purchase) in connection with a book-entry transfer, and (c) any
other documents required by the Letter of Transmittal. Accordingly, payment
to all tendering stockholders may not be made at the same time depending
upon when certificates for Shares or Book-Entry Confirmation with respect
to Shares are actually received by the Depositary.
In order to take advantage of the Offer, (a) a duly executed and properly
completed Letter of Transmittal (or a manually signed facsimile thereof) and
any required guarantees or other required documents should be sent to the
Depositary and (b) certificates representing the tendered Shares or a timely
Book-Entry Confirmation (as defined in Section 3 of the Offer to Purchase)
with respect to such Shares should be delivered to the Depositary in
accordance with the instructions set forth in the Letter of Transmittal and in
the Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them to
forward their certificates or other required documents or complete the
procedures for book-entry transfer prior to the Expiration Date (as defined in
the Offer to Purchase), a tender may be effected by following the guaranteed
delivery procedures specified in Section 3 of the Offer to Purchase.
Neither Purchaser nor Parent will pay any fees or commissions to any broker
or dealer or other person for soliciting tenders of Shares pursuant to the
Offer (other than the Dealer Manager, the Depositary and the Information Agent
as described in the Offer to Purchase). Purchaser will, however, upon request,
reimburse you for customary mailing and handling expenses incurred by you in
forwarding any of the enclosed materials to your clients. Purchaser will pay
or cause to be paid any transfer taxes payable on the transfer of Shares to
it, except as otherwise provided in Instruction 6 of the Letter of
Transmittal.
2
<PAGE>
Any inquiries you may have with respect to the Offer should be addressed to
Piper Jaffray Inc., the Dealer Manager for the Offer, at Piper Jaffray Tower,
222 South Ninth Street, Minneapolis, MN 55402, (800) 333-6000 Extension 6220,
or Georgeson & Company Inc., the Information Agent for the Offer, at Wall
Street Plaza, New York, NY 10005, (212) 440-9800 (call collect).
Requests for copies of the enclosed materials may also be directed to the
Dealer Manager or the Information Agent at the above addresses and telephone
numbers.
Very truly yours,
PIPER JAFFRAY INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON, THE AGENT OF GUIDANT CORPORATION, CARDIAC PACEMAKERS,
INC. OR PURCHASER, THE COMPANY, THE DEALER MANAGER, THE DEPOSITARY, THE
INFORMATION AGENT OR ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY
OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT ON BEHALF OF ANY OF
THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE
STATEMENTS CONTAINED THEREIN.
3
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
INCONTROL, INC.
AT
$6 NET PER SHARE
BY
PEGASUS ACQUISITIONS CORP.
AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF
GUIDANT CORPORATION
- -------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON MONDAY, SEPTEMBER 14, 1998, UNLESS THE OFFER IS
EXTENDED.
- -------------------------------------------------------------------------------
August 17, 1998
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated August 17,
1998 (the "Offer to Purchase"), and the related Letter of Transmittal (which
together constitute the "Offer") relating to the offer by Pegasus Acquisitions
Corp., a Delaware corporation ("Purchaser") and an indirect wholly-owned
subsidiary of Guidant Corporation, an Indiana corporation ("Parent"), to
purchase all of the outstanding shares of common stock, $.01 par value (the
"Shares"), of InControl, Inc., a Delaware corporation (the "Company"), at a
purchase price of $6 per Share, net to the seller in cash, without interest,
upon the terms and subject to the conditions set forth in the Offer. Holders
of Shares whose certificates for such Shares are not immediately available or
who cannot deliver their certificates and all other required documents to the
depositary (the "Depositary") or complete the procedures for book-entry
transfer prior to the Expiration Date (as defined in the Offer to Purchase)
must tender their Shares according to the guaranteed delivery procedures set
forth in Section 3 of the Offer to Purchase.
WE ARE (OR OUR NOMINEE IS) THE HOLDER OF RECORD OF SHARES HELD BY US FOR
YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF
RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS
FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER
SHARES HELD BY US FOR YOUR ACCOUNT.
Accordingly, we request instruction as to whether you wish to have us
tender, on your behalf, any or all Shares held by us for your account pursuant
to the terms and conditions set forth in the Offer.
Please note the following:
1. The tender price is $6.00 per Share, net to the seller in cash,
without interest.
2. The Offer is subject to there being validly tendered and not properly
withdrawn prior to the Expiration Date a majority of the outstanding Shares
(on a fully diluted basis) and certain other conditions. See the
Introduction and Sections 1, 14 and 15 of the Offer to Purchase.
3. The Offer is being made for all of the outstanding Shares.
4. Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as otherwise provided in Instruction 6 of the Letter
of Transmittal, transfer taxes on the purchase of Shares by Purchaser
pursuant to the Offer. However, backup federal income tax withholding at a
rate of 31% may be
<PAGE>
required, unless an exemption applies or unless the required taxpayer
identification information is provided. See Instruction 10 of the Letter of
Transmittal.
5. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on Monday, September 14, 1998, unless the Offer is
extended.
6. The board of directors of the Company has unanimously determined that
the Offer and the Merger (as defined in the Offer to Purchase) are fair to,
advisable and in the best interests of, the Company and its stockholders;
has approved the Merger Agreement (as defined in the Offer to Purchase),
the Shareholder Agreement (as defined in the Offer to Purchase) and the
transactions contemplated by the Merger Agreement and the Shareholder
Agreement, including the Offer and the Merger; and recommends that the
Company's stockholders accept the Offer and tender all of their Shares
pursuant thereto.
7. Notwithstanding any other provision of the Offer, payment for Shares
accepted for payment pursuant to the Offer will in all cases be made only
after timely receipt by the Depositary of (a) certificates for (or a timely
Book-Entry Confirmation (as defined in Section 3 to the Offer to Purchase)
with respect to) such Shares, (b) the Letter of Transmittal (or a manually
signed facsimile thereof), properly completed and duly executed with any
required signature guarantees or an Agent's Message (as defined in the
Offer to Purchase) in connection with a book-entry transfer, and (c) any
other documents required by the Letter of Transmittal. Accordingly, payment
to all tendering stockholders may not be made at the same time depending
upon when certificates for Shares or Book-Entry Confirmation with respect
to Shares are actually received by the Depositary.
If you wish to have us tender any or all of the Shares held by us for your
account, please so instruct us by completing, executing, detaching and
returning to us the instruction form set forth below. If you authorize the
tender of your Shares, all such Shares will be tendered unless otherwise
specified below. An envelope to return your instructions to us is enclosed
herewith. Your instructions should be forwarded to us in ample time to permit
us to submit a tender on your behalf prior to the expiration of the Offer.
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares residing in any jurisdiction in which the making
of the Offer or the acceptance thereof would not be in compliance with the
securities, blue sky or other laws of such jurisdiction. However, Purchaser
may, in its discretion, take such action as it may deem necessary to make the
Offer to holders of Shares in such jurisdiction.
In any jurisdiction where the securities, blue sky or other laws require the
Offer to be made by a licensed broker or dealer, the Offer will be deemed to
be made on behalf of the Purchaser by one or more registered brokers or
dealers that are licensed under the laws of such jurisdiction.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
INCONTROL, INC.
The undersigned acknowledge(s) receipt of your letter, the enclosed Offer to
Purchase, dated August 17, 1998, and the related Letter of Transmittal (which
together constitute the "Offer") in connection with the offer by Pegasus
Acquisitions Corp., a Delaware corporation ("Purchaser") and an indirect
wholly-owned subsidiary of Guidant Corporation, to purchase all outstanding
shares of common stock, par value $.01 per share ("Shares"), of InControl,
Inc., a Delaware corporation.
This will instruct you to tender to Purchaser the number of Shares indicated
below (or if no number is indicated below, all Shares) which are held by you
for the account of the undersigned, upon the terms and subject to the
conditions set forth in the Offer.
- -------------------------------------------------------------------------------
Number of Shares to be Tendered*: ___________________________________________
Date: _______________________________________________________________________
_____________________________________________________________________________
SIGN HERE
Signature(s): _______________________________________________________________
(Print Name(s)): ____________________________________________________________
(Print Address(es)): ________________________________________________________
Account Number: _____________________________________________________________
(Area Code and Telephone Number(s)): ________________________________________
(Taxpayer Identification or Social Security Number(s): ______________________
- --------------------------------------------------------------------------------
* Unless otherwise indicated, it will be assumed that all Shares held by us
for your account are to be tendered.
THIS FORM MUST BE RETURNED TO THE BROKERAGE
FIRM MAINTAINING YOUR ACCOUNT
3
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER. -- Social Security numbers have nine digits separated by two hyphens:
i.e., 000-00-0000. Employer identification numbers have nine digits separated
by only one hyphen: i.e., 00-0000000. The table below will help determine the
number to give the payer.
- -------------------------------------- -------------------------------------
<TABLE>
<CAPTION>
FOR THIS TYPE OF ACCOUNT: GIVE THE
SOCIAL
SECURITY
NUMBER OF --
- -------------------------------------- -------------------------------------
<S> <C>
1. An individual's account The individual
The actual owner
of the account
or, if combined
funds, any
2. Two or more individuals one of the
(joint account) individuals(1)
The actual owner
of the account
or, if joint
3. Husband and wife (joint funds, either
account) person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
The adult or, if
the minor is the
only contributor,
5. Adult and minor (joint account) the minor(1)
6. Account in the name of
guardian or committee for a The ward, minor,
designated ward, minor, or or incompetent
incompetent person person(3)
7. a. The usual revocable
savings trust account The grantor-
(grantor is also trustee) trustee(1)
b. So-called trust account The actual
that is not a legal or valid owner(1)
trust under State law
8. Sole proprietorship account The owner(4)
</TABLE>
- -------------------------------------- -------------------------------------
- -------------------------------------- -------------------------------------
<TABLE>
<CAPTION>
FOR THIS TYPE OF ACCOUNT: GIVE THE
EMPLOYER
IDENTIFICATION
NUMBER OF --
- -------------------------------------- -------------------------------------
<S> <C>
9. A valid trust, estate, The legal entity
or pension trust (Do not furnish
the identifying
number of the
personal
representative or
trustee unless
the legal entity
itself is not
designated in the
account
title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization account
12. Partnership account held in The partnership
the name of the business
13. Association, club, or other The organization
tax-exempt organization
14. A broker or registered The broker or
nominee nominee
15. Account with the Department of The public
Agriculture in the name of a entity
public entity (such as a State
or local government, school
district, or prison) that
receives agricultural program
payments
</TABLE>
- -------------------------------------- -------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your num-
ber, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of
the Social Security Administration or the Internal Revenue Service and apply
for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a), or an individual re-
tirement plan.
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
. An international organization or any agency, or instrumentality thereof.
. A dealer in securities or commodities required to be registered in the U.S.
or a possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a)
. An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
. An entity registered at all times under the Investment Company Act of 1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals.
Note: You may be subject to backup withholding if this interest is $600 or
more and is paid in the course of the payer's trade or business and you have
not provided your correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to non-resident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Exempt payees described above must still complete substitute Form W-9 to avoid
possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM,
AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PAT-
RONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6042, 6044, 6045, 6049, 6050A and 6050N.
PRIVACY ACT NOTICE. -- Section 6109 requires most recipients of dividend, in-
terest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes and to help verify the accuracy of the recipient's tax return. Payers
must be given the numbers whether or not recipients are required to file tax
returns. Payers must generally withhold 31% of taxable interest, dividend, and
certain other payments to a payee who does not furnish a taxpayer identifica-
tion number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you
fail to furnish your taxpayer identification number to a payer, you are sub-
ject to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Falsifying certifications
or affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
EXHIBIT (A)(7)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase, dated August
17, 1998, and the related Letter of Transmittal and any amendments or
supplements thereto, and is being made to all holders of Shares. The Offer is
not being made to (nor will tenders be accepted from or on behalf of) holders of
Shares in any jurisdiction in which the making of the Offer or the acceptance
thereof would not be in compliance with the laws of such jurisdiction. In any
jurisdiction where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made on
behalf of Pegasus Acquisitions Corp., by Piper Jaffray Inc. or one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
Notice of Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
INCONTROL, INC.
at
$6 Net Per Share
by
Pegasus Acquisitions Corp.
an indirect wholly-owned subsidiary of
GUIDANT CORPORATION
Pegasus Acquisitions Corp., a Delaware corporation ("Purchaser") and an
indirect wholly-owned subsidiary of Guidant Corporation, an Indiana corporation
("Parent"), is offering to purchase all outstanding shares of common stock, $.01
par value (the "Shares"), of InControl, Inc., a Delaware corporation (the
"Company"), at a price of $6 per Share (the "Offer Price"), net to the seller in
cash, upon the terms and subject to the conditions set forth in the Offer to
Purchase, dated August 17, 1998, and in the related Letter of Transmittal
(which, together with any amendments or supplements thereto, collectively
constitute the "Offer"). Tendering stockholders will not be obligated to pay
brokerage fees or commissions or, except as set forth in Instruction 6 of the
Letter of Transmittal, transfer taxes on the purchase of Shares pursuant to the
Offer. The purpose of the Offer is to acquire for cash as many outstanding
Shares as possible as a first step in acquiring the entire equity interest in
the Company. Following consummation of the Offer, Purchaser intends to effect
the merger described below.
- --------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON MONDAY, SEPTEMBER 14, 1998, UNLESS THE OFFER IS EXTENDED.
- --------------------------------------------------------------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) A NUMBER OF THE
COMPANY'S SHARES OF COMMON STOCK, PAR VALUE $0.01 PER SHARE (THE "SHARES")
REPRESENTING A MAJORITY OF ALL OUTSTANDING SHARES ON A FULLY DILUTED BASIS BEING
VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER, (2) THE
COMPANY'S SERIES B PREFERRED STOCK, PAR VALUE $0.01 PER SHARE, BEING REDEEMED BY
THE COMPANY OR CONVERTED INTO SHARES OF COMMON STOCK AND (3) THE RECEIPT OF
CERTAIN REGULATORY CONSENTS AND APPROVALS.
The Offer is being made pursuant to an Agreement and Plan of Merger,
dated August 10, 1998 (the "Merger Agreement"), among Parent, Purchaser and the
Company. The Merger Agreement provides, among other things, for the commencement
of the Offer by Purchaser and further provides that after the purchase of Shares
pursuant to the Offer, subject to the satisfaction or waiver of certain
conditions, Purchaser will be merged with and into the Company (the "Merger"),
with the Company surviving the Merger as an indirect wholly-owned subsidiary of
Parent. At the effective time of the Merger, each outstanding Share (other than
Shares owned by the Company or any wholly-owned subsidiary of the Company or by
Parent, Purchaser or any other wholly-owned subsidiary of Parent, and Shares
owned by stockholders who shall have properly exercised their appraisal rights
under Delaware law) will be converted into the right to receive $6 in cash or
any greater amount paid pursuant to the Offer, without interest.
Concurrently with the execution of the Merger Agreement, Parent and
Purchaser entered into a Shareholder Agreement, dated August 10, 1998 (the
"Shareholder Agreement"), with certain stockholders of the Company (the "Selling
Stockholders"), pursuant to which such Selling Stockholders have agreed to
validly tender (and not to withdraw) in the Offer Shares beneficially owned by
such Selling Stockholders representing, in the aggregate, approximately 9.4% of
the Company's outstanding Shares (assuming the exercise of all such Selling
Stockholders' options subject to the Shareholder Agreement). The Board of
Directors of the Company (the "Board") has unanimously determined that the Offer
and the Merger are fair to, advisable and in the best interests of, the Company
and its stockholders, has approved the Merger Agreement, the Shareholder
Agreement and the transactions contemplated by the Merger Agreement and the
Shareholder Agreement, including the Offer and the Merger, and recommends that
the Company's stockholders accept the Offer and tender all of their Shares
pursuant thereto.
1
<PAGE>
For purposes of the Offer, Purchaser will be deemed to have accepted
for payment (and thereby purchased) tendered Shares as, if and when Purchaser
gives oral or written notice to First Chicago Trust Company of New York (the
"Depositary") of its acceptance of such Shares for payment pursuant to the
Offer. Upon the terms and subject to the conditions of the Offer, payment for
Shares purchased pursuant to the Offer will be made by deposit of the purchase
price therefor with the Depositary, which will act as agent for tendering
stockholders for the purposes of receiving payment from Purchaser and
transmitting payment to tendering stockholders whose Shares have theretofore
been accepted for payment. In all cases, payment for Shares purchased pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
certificates for (or a timely Book-Entry Confirmation (as defined in Section 3
of the Offer to Purchase) with respect to) such Shares (ii) the Letter of
Transmittal (or a manually signed facsimile thereof), properly completed and
duly executed with all required signature guarantees or an agent's message, and
(iii) all other documents required by the Letter of Transmittal. Under no
circumstances will interest be paid on the purchase price for Shares to be paid
by Purchaser, regardless of any delay in making such payment.
The term "Expiration Date" shall mean 12:00 midnight, New York City
time, on Monday, September 14, 1998, unless and until Purchaser, in accordance
with the terms of the Offer and the Merger Agreement, shall have extended the
period of time during which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date at which the Offer, as so
extended by Purchaser, shall expire. Subject to the terms of the Merger
Agreement and applicable law, Purchaser expressly reserves the right, at any
time or from time to time, to extend the period of time during which the Offer
is open and thereby delay acceptance for payment of, or payment for, any Shares
by giving oral or written notice of such extension to the Depositary and by
making a public announcement of such extension. Purchaser shall not have any
obligation to pay interest on the purchase price for tendered Shares whether or
not Purchaser exercises its right to extend the period of time during which the
Offer is open. Any such extension will be followed by a public announcement
thereof by no later than 9:00 a.m., New York City time, on the next business day
after the previously scheduled Expiration Date. During any such extension, all
Shares previously tendered and not withdrawn will remain subject to the Offer,
subject to the right of a tendering stockholder to withdraw such stockholder's
Shares. Without limiting the manner in which Purchaser may choose to make any
public announcement, Purchaser will have no obligation to publish, advertise or
otherwise communicate any such announcement other than by issuing a release to
the Dow Jones News Service or as otherwise may be required by law.
Except as otherwise provided in the Offer to Purchase, tenders of
Shares are irrevocable. Shares tendered pursuant to the Offer may be withdrawn
at any time prior to the Expiration Date and, unless theretofore accepted for
payment by Purchaser as provided for in the Offer to Purchase, may also be
withdrawn at any time after Thursday, October 15, 1998. For a withdrawal to be
effective, a written, telegraphic or facsimile transmission notice of withdrawal
must be timely received by the Depositary at its address set forth on the back
cover of the Offer to Purchase. Any such notice of withdrawal must specify the
name of the person who tendered the Shares to be withdrawn, the number of Shares
to be withdrawn and the name of the registered holder, if different from that of
the person who tendered such Shares. If certificates evidencing Shares have been
delivered or otherwise identified to the Depositary, then, prior to the release
of such certificates, the tendering stockholder must also submit the serial
numbers shown on the particular certificates evidencing the Shares to be
withdrawn, and the signature on the notice of withdrawal must be guaranteed by
an Eligible Institution, as defined in Section 3 of the Offer to Purchase
(except in the case of Shares tendered for the account of an Eligible
Institution). If Shares have been tendered pursuant to the procedure for
book-entry transfer set forth in Section 3 of the Offer to Purchase, the notice
of withdrawal must specify the name and number of the account at the applicable
Book-Entry Transfer Facility (as defined in Section 3 of the Offer to Purchase)
to be credited with the withdrawn Shares. All questions as to the form and
validity (including time of receipt) of notices of withdrawal will be determined
by Purchaser, in its sole discretion, whose determination shall be final and
binding on all parties. Any Shares properly withdrawn will be deemed not validly
tendered for purposes of the Offer, but may be tendered at any subsequent time
prior to the Expiration Date by following any of the procedures described in
Section 3 of the Offer to Purchase.
The Company has provided Purchaser with the Company's stockholder list
and security position listings for the purpose of disseminating the Offer to
holders of Shares. The Offer to Purchase, the related Letter of Transmittal and,
if required, any other relevant materials will be mailed to record holders of
Shares and will be furnished to brokers, dealers, commercial banks, trust
companies and similar persons whose names, or the name of whose nominees, appear
on the Company's stockholders list or, if applicable, who are listed as
participants in a clearing agency's security position listing, for subsequent
transmittal to beneficial owners of Shares by Purchaser.
The information required to be disclosed by paragraph (e)(1)(vii) of
Rule 14d-6 of the General Rules and Regulations under the Securities Exchange
Act of 1934, as amended, is contained in the Offer to Purchase and is
incorporated herein by reference.
The Offer to Purchase and the related Letter of Transmittal contain
important information which should be read carefully before any decision is made
with respect to the Offer.
Requests for copies of the Offer to Purchase, the Letter of Transmittal
and other tender offer documents may be directed to the Information Agent as set
forth below, and copies will be furnished promptly at Purchaser's expense.
Questions or requests for assistance may be directed to the Information Agent or
the Dealer Manager. Neither Purchaser nor Parent will pay any fees or
2
<PAGE>
commissions to any broker or dealer or other person (other than the Dealer
Manager, the Depositary and the Information Agent) in connection with the
solicitation of tenders of Shares pursuant to the Offer.
The Information Agent for the Offer is:
[LOGO OF GEORGESON & COMPANY INC.]
Wall Street Plaza
New York, NY 10005
Banks and Brokers Call: (212) 440-9800 (collect)
or
All Others Call: (800) 223-2064 (toll free)
The Dealer-Manager for the Offer is:
[LOGO OF PIPER JAFFRAY]
Piper Jaffray Tower
222 South Ninth Street
Minneapolis, MN 55402
(612) 342-6000
August 17, 1998
3
<PAGE>
Exhibit (a)(8)
<PAGE>
GUIDANT TO ACQUIRE INCONTROL FOR
APPROXIMATELY $135 MILLION IN CASH
INDIANAPOLIS, Ind. and REDMOND, Wash.--(BW HealthWire)--Aug. 11, 1998--Guidant
Corporation (NYSE:GDT - news; PCX:GDT), a world leader in the treatment of
--- ----
cardiovascular disease through innovative medical devices, and InControl Inc.,
(NASDAQ:INCL - news), a pioneer in the development of device technology for the
---- ----
treatment of atrial arrhythmias, today announced that a definitive agreement has
been signed, setting the stage for Guidant to acquire InControl.
"The acquisition of InControl, with its unmatched understanding of device
treatment for atrial arrhythmias, complements our leadership position in the
treatment of ventricular arrhythmias and creates exciting new opportunities for
Guidant's future product portfolio," explained James M. Cornelius, Guidant
chairman of the board of directors.
Pursuant to the terms of the agreement, each outstanding share of InControl
common stock will be purchased for $6.00 in cash, for a total purchase price in
excess of $135 million. To implement the agreement, Guidant will commence a
cash tender offer within five business days. The completion of the tender offer
is subject to a number of customary conditions, including the acquisition of a
majority of InControl's outstanding common stock on a fully diluted basis and
the expiration of the waiting period under the Hart-Scott-Rodino Act. Shares
not purchased under the tender offer will be acquired in a subsequent merger at
the same price as soon as practicable after completion of the tender offer. The
acquisition will be accounted for under the purchase method and will result in a
one-time charge of approximately $90 million, which represents the value
assigned to purchased research and development. Excluding this one-time charge,
the acquisition is not expected to be materially dilutive to Guidant's earnings.
Ron Dollens, Guidant president and CEO, commented, "With the acquisition of
InControl we gain access to the pre-eminent intellectual property portfolio in
the field of device-based delivery of atrial therapies. Moreover, we gain an
organization whose knowledge of atrial arrhythmias is without equal. We plan to
merge operations of InControl into our Cardiac Rhythm Management business
group."
"Atrial arrhythmias represent an enormous unmet clinical need," according to Jay
Graf, president of the Guidant CRM Group. "The acquisition of InControl will
substantially enhance our on-going work in creating devices that treat multiple
heart rhythm disorders. We believe that a variety of pacing, defibrillation and
ablation therapies will be used to treat atrial heart rhythm disorders in the
future. The InControl patent portfolio provides us with the freedom to create
advanced devices designed to provide physicians with maximum flexibility to
match therapy to patient need."
"Guidant was clearly our first choice as a business partner," noted Kurt C.
Wheeler, chairman, CEO and president of InControl. "We match up well
technologically, culturally and in a common view of how
<PAGE>
patients with atrial arrhythmias will be managed." InControl's main product is
the Metrix(TM), an implantable atrial defibrillator. The Metrix has CE mark
approval and is being sold in Europe. It is in clinical investigation in the
United States. Guidant intends to complete that clinical trial and seek FDA
approval to market in the United States.
A global leader in the medical device industry, Guidant provides innovative,
minimally invasive and cost-effective products and services for the treatment of
cardiovascular and vascular disease.
InControl designs, develops and manufactures devices for the treatment of atrial
arrhythmias.
For more information about Guidant's products and services, visit the company's
Web site at http://www.guidant.com.
----------------------
For more information about InControl, visit InControl's Web site at
http://www.incontrol.com.
- ------------------------
- --------------------
Contact:
Guidant Corporation
Todd McKinney, Investor Relations, 317/971-2094
Carol A. Lindahl, Media Relations, 651/582-4461
Rob Allen, Media Relations, 317/971-2031
or
InControl Inc.
Phil M. Okeson, 425/861-9800. Ext. 157
Sean M. Cleary, 425/861-9800, ext. 660
<PAGE>
Exhibit (c)(1)
<PAGE>
================================================================================
AGREEMENT AND PLAN OF MERGER
among
GUIDANT CORPORATION
PEGASUS ACQUISITIONS CORP.
and
INCONTROL, INC.
Dated as of August 10, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I. THE OFFER............................................................................... 1
SECTION 1.1 The Offer............................................................................ 1
SECTION 1.2 Company Actions...................................................................... 3
SECTION 1.3 Directors............................................................................ 4
ARTICLE II. THE MERGER............................................................................. 5
SECTION 2.1 The Merger........................................................................... 5
SECTION 2.2 Effective Time....................................................................... 5
SECTION 2.3 Certificate of Incorporation and By-laws............................................. 6
SECTION 2.4 Directors and Officers............................................................... 6
ARTICLE III. EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES............................................................. 6
SECTION 3.1 Effect on Capital Stock.............................................................. 6
SECTION 3.2 Exchange of Certificates............................................................. 7
SECTION 3.3 Options.............................................................................. 9
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................................... 9
SECTION 4.1 Organization......................................................................... 9
SECTION 4.2 Capitalization....................................................................... 10
SECTION 4.3 Authority............................................................................ 11
SECTION 4.4 Consents and Approvals; No Violations................................................ 11
SECTION 4.5 SEC Reports and Financial Statements................................................. 12
SECTION 4.6 Absence of Certain Changes or Events................................................. 13
SECTION 4.7 No Undisclosed Liabilities........................................................... 13
SECTION 4.8 Information Supplied................................................................. 13
SECTION 4.9 Employee Benefit Plans; Labor Matters................................................ 13
SECTION 4.10 Contracts............................................................................ 16
SECTION 4.11 Litigation........................................................................... 16
SECTION 4.12 Compliance with Applicable Law....................................................... 16
SECTION 4.13 Tax Matters.......................................................................... 17
SECTION 4.14 Environmental........................................................................ 19
SECTION 4.15 State Takeover Statutes.............................................................. 20
SECTION 4.16 Intellectual Property................................................................ 20
SECTION 4.17 FDA and Product Matters.............................................................. 21
SECTION 4.18 Year 2000............................................................................ 21
SECTION 4.19 Insurance............................................................................ 22
SECTION 4.20 Absence of Questionable Payments..................................................... 22
SECTION 4.21 Opinion of Financial Advisor......................................................... 23
SECTION 4.22 Brokers and Finders.................................................................. 23
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB........................................ 23
SECTION 5.1 Organization......................................................................... 23
SECTION 5.2 Authority............................................................................ 23
SECTION 5.3 Consents and Approvals; No Violations................................................ 24
SECTION 5.4 Information Supplied................................................................. 24
SECTION 5.5 Interim Operations of Sub............................................................ 25
SECTION 5.6 Brokers.............................................................................. 25
SECTION 5.7 Financing............................................................................ 25
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
ARTICLE VI. COVENANTS.............................................................................. 25
SECTION 6.1 Covenants of the Company............................................................. 25
SECTION 6.2 No Solicitation...................................................................... 27
SECTION 6.3 Shareholder Approval; Preparation of Proxy Statement................................. 29
SECTION 6.4 Access to Information................................................................ 30
SECTION 6.5 Updating............................................................................. 30
SECTION 6.6 Reasonable Efforts................................................................... 31
SECTION 6.7 Indemnification; Insurance........................................................... 32
SECTION 6.8 Certain Litigation................................................................... 33
SECTION 6.9 Certain Transaction Related Fees..................................................... 33
SECTION 6.10 Benefit Arrangements................................................................. 33
SECTION 6.11 Takeover Statutes.................................................................... 34
SECTION 6.12 Shareholder Agreement Legend......................................................... 34
SECTION 6.13 Loan Agreement....................................................................... 34
SECTION 6.14 Redemption of Series B Stock......................................................... 35
ARTICLE VII. CONDITIONS............................................................................ 35
SECTION 7.1 Conditions to Each Party's Obligation To Effect the Merger........................... 35
ARTICLE VIII. TERMINATION AND AMENDMENT............................................................ 36
SECTION 8.1 Termination.......................................................................... 36
SECTION 8.2 Effect of Termination................................................................ 37
SECTION 8.3 Amendment............................................................................ 37
SECTION 8.4 Extension; Waiver.................................................................... 37
SECTION 8.5 Expenses............................................................................. 38
ARTICLE IX. MISCELLANEOUS.......................................................................... 39
SECTION 9.1 Nonsurvival of Representations and Warranties........................................ 39
SECTION 9.2 Notices.............................................................................. 39
SECTION 9.3 Interpretation....................................................................... 40
SECTION 9.4 Counterparts......................................................................... 41
SECTION 9.5 Entire Agreement; No Third Party Beneficiaries....................................... 41
SECTION 9.6 Governing Law........................................................................ 41
SECTION 9.7 Publicity............................................................................ 41
SECTION 9.8 Assignment........................................................................... 41
SECTION 9.9 Enforcement.......................................................................... 41
SECTION 9.10 Severability......................................................................... 42
Conditions to the Offer ......................................................................Exhibit A
</TABLE>
ii
<PAGE>
AGREEMENT AND PLAN OF MERGER dated as of August 10, 1998, among GUIDANT
CORPORATION, an Indiana corporation ("Parent"), PEGASUS ACQUISITIONS CORP., a
Delaware corporation and an indirect wholly-owned subsidiary of Parent ("Sub"),
and INCONTROL, INC., a Delaware corporation (the "Company").
WHEREAS, Parent proposes to cause Sub to make a tender offer (as it may be
amended from time to time as permitted under this Agreement, the "Offer") to
purchase all the outstanding shares of Common Stock, par value $0.01 per share
(the "Common Stock"), including shares of Common Stock issued from time to time
upon conversion of the Series B Convertible Preferred Stock, par value $0.01 per
share (the "Series B Stock") or upon the exercise of any Options (as defined in
Section 3.3) (the "Shares") (which shall include all related rights (the
"Rights") issued pursuant to the Rights Plan dated as of February 27, 1996
between the Company and First Interstate Bank of Washington, N.A. (the "Rights
Plan")), of the Company at a purchase price (the "Offer Price") of $6.00 per
Share, net to the seller in cash, without interest thereon, or such higher price
as Sub may offer upon the terms and subject to the conditions set forth in this
Agreement; and the Board of Directors of the Company has adopted resolutions
approving the Offer and recommending that holders of Shares accept the Offer;
WHEREAS, the merger of Sub with and into the Company (the "Merger") upon
the terms and subject to the conditions set forth in this Agreement has been
authorized by all necessary corporate action on behalf of Parent and Sub and has
been adopted by the Board of Directors of the Company;
WHEREAS, concurrently with the execution of this Agreement and as an
inducement to Parent to enter into this Agreement, Parent, Sub and certain
shareholders of the Company are entering into a Shareholder Agreement (the
"Shareholder Agreement") pursuant to which such shareholders have, among other
things, agreed to sell all such shareholders' Shares to Sub at the price per
Share paid in the Offer, upon the terms and subject to the conditions set forth
in the Shareholder Agreement; and the Shareholder Agreement has been approved by
the Board of Directors of the Company; and
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger.
NOW, THEREFORE, Parent, Sub and the Company hereby agree as follows:
ARTICLE I.
THE OFFER
SECTION 1.1 The Offer.
----------
(a) Subject to the provisions of this Agreement, as promptly as
practicable but in no event later than five business days after the date of the
public
<PAGE>
announcement by Parent and the Company of this Agreement, Sub shall commence the
Offer. Sub shall purchase for cash all Shares tendered at the highest price
offered (which shall in no event be less than the Offer Price) if they are
validly tendered and not withdrawn prior to the expiration of the Offer as set
forth in the Offer Documents (as defined in Section 1.1(b)). The obligation of
Sub to, and of Parent to cause Sub to, commence the Offer and accept for
payment, and pay for, any Shares tendered pursuant to the Offer shall be subject
only to the conditions set forth in Exhibit A (the "Offer Conditions") (any of
which may be waived in whole or in part by Sub in its reasonable discretion,
except that Sub shall not waive the Minimum Condition (as defined in Exhibit A)
without the consent of the Company) and to the terms and conditions of this
Agreement.
Sub expressly reserves the right to modify the terms of the Offer, except
that, without the consent of the Company, Sub shall not (i) reduce the number of
Shares subject to the Offer, (ii) reduce the Offer Price, (iii) amend or add to
the Offer Conditions, (iv) except as provided in the next sentence, extend the
Offer, (v) change the form of consideration payable in the Offer or (vi) amend
any other term of the Offer in any manner adverse to the holders of the Shares.
Notwithstanding the foregoing, Sub may, without the consent of the Company, (i)
extend the Offer, if at the scheduled or extended expiration date of the Offer
any of the Offer Conditions shall not be satisfied or waived, until such time as
such conditions are satisfied or waived, (ii) extend the Offer for any period
required by any rule, regulation, interpretation or position of the Securities
and Exchange Commission (the "SEC") or the staff thereof applicable to the Offer
and (iii) extend the Offer for any reason on one or more occasions for an
aggregate period of not more than 10 business days beyond the latest expiration
date that would otherwise be permitted under clause (i) or (ii) of this
sentence. In the event that (i) the redemption notice period provided in the
Certificate of Designations of the Series B Stock shall not have expired and
(ii) the Company shall have given a notice of redemption of the Series B Stock
in accordance with the Certificate of Designations, Sub shall extend the
Expiration Date until such time as such notice period shall have expired.
Subject to the terms and conditions of the Offer and this Agreement, Sub shall,
and Parent shall cause Sub to, accept for payment, and pay for, all Shares
validly tendered pursuant to the Offer that Sub becomes obligated to accept for
payment, and pay for, pursuant to the Offer as promptly as practicable after the
expiration of the Offer.
(b) On the date of commencement of the Offer, Parent and Sub shall
file with the SEC a Tender Offer Statement on Schedule 14D-1 (the "Schedule 14D-
1") with respect to the Offer, which shall contain an offer to purchase and a
related letter of transmittal (such Schedule 14D-1 and the documents included
therein pursuant to which the Offer will be made, together with any supplements
or amendments thereto, the "Offer Documents"). Parent and Sub agree that the
Offer Documents shall comply in all material respects with the Securities
Exchange Act of 1934 (the "Exchange Act"), and the rules and regulations
promulgated thereunder and the Offer Documents, on the date first published,
sent or given to the Company's shareholders, shall not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, except that no
covenant is made by Parent or Sub
2
<PAGE>
with respect to information supplied by the Company or any of its shareholders
specifically for inclusion or incorporation by reference in the Offer Documents.
Each of Parent, Sub and the Company agree promptly to correct any information
provided by it for use in the Offer Documents if and to the extent that such
information shall have become false or misleading in any material respect, and
Parent and Sub further agree to take all steps necessary to cause the Schedule
14D-1 as so corrected to be filed with the SEC and the other Offer Documents as
so corrected to be disseminated to the Company's shareholders, in each case as
and to the extent required by applicable federal securities laws. The Company
and its counsel shall be given reasonable opportunity to review and comment upon
the Offer Documents prior to their filing with the SEC or dissemination to the
shareholders of the Company. Parent and Sub agree to provide the Company and its
counsel any comments Parent, Sub or their counsel may receive from the SEC or
its staff with respect to the Offer Documents promptly after the receipt of such
comments.
(c) Parent shall provide or cause to be provided to Sub on a timely
basis the funds necessary to accept for payment, and pay for, any Shares that
Sub becomes obligated to accept for payment, and pay for, pursuant to the Offer.
SECTION 1.2 Company Actions.
----------------
(a) The Company hereby approves of and consents to the Offer and
represents that the Board of Directors of the Company, at a meeting duly called
and held, duly and unanimously adopted resolutions (i) approving this Agreement
and the Shareholder Agreement, approving the Offer and the Merger (and effecting
the other actions referred to in Section 4.15), determining that the terms of
the Offer and the Merger are fair to, advisable and in the best interests of,
the Company and its shareholders, recommending that the Company's shareholders
accept the Offer, tender their shares pursuant to the Offer and approve this
Agreement (if required) and approving the acquisition of Shares by Sub pursuant
to the Offer, the Merger and the Shareholder Agreement and the other
transactions contemplated by this Agreement and the Shareholder Agreement. The
Company has been advised by each of its directors and executive officers that
each such person intends to tender all Shares owned by such person pursuant to
the Offer.
(b) On the date the Offer Documents are filed with the SEC, the
Company shall file with the SEC a Solicitation/Recommendation Statement on
Schedule 14D-9 with respect to the Offer (such Schedule 14D-9, and the documents
included therein, together with any supplements or amendments thereto, the
"Schedule 14D-9") containing, subject to the fiduciary duties of the Board of
Directors as determined in good faith following receipt of advice of legal
counsel, the recommendation described in paragraph (a) and shall mail the
Schedule 14D-9 to the shareholders of the Company. The Company agrees that the
Schedule 14D-9 shall comply in all material respects with the requirements of
the Exchange Act and the rules and regulations promulgated thereunder and, on
the date filed with the SEC and on the date first published, sent or given to
the Company's shareholders, shall not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not
3
<PAGE>
misleading, except that no covenant is made by the Company with respect to
information supplied by Parent or Sub specifically for inclusion in the Schedule
14D-9. Each of the Company, Parent and Sub agrees promptly to correct any
information provided by it for use in the Schedule 14D-9 if and to the extent
that such information shall have become false or misleading in any material
respect, and the Company further agrees to take all steps necessary to amend or
supplement the Schedule 14D-9 and to cause the Schedule 14D-9 as so amended or
supplemented to be filed with the SEC and disseminated to the Company's
shareholders, in each case as and to the extent required by applicable federal
securities laws. Parent and its counsel shall be given reasonable opportunity to
review and comment upon the Schedule 14D-9 prior to its filing with the SEC or
dissemination to shareholders of the Company. The Company agrees to provide
Parent and its counsel any comments the Company or its counsel may receive from
the SEC or its staff with respect to the Schedule 14D-9 promptly after the
receipt of such comments.
(c) In connection with the Offer and the Merger, the Company shall
cause its transfer agent to furnish Sub promptly with mailing labels containing
the names and addresses of the record holders of Shares as of a recent date and
of those persons becoming record holders subsequent to such date, together with
copies of all lists of shareholders, security position listings and computer
files and all other information in the Company's possession or control regarding
the beneficial owners of Shares, and shall furnish to Sub such information and
assistance (including updated lists of shareholders, security position listings
and computer files) as Parent may reasonably request in communicating the Offer
to the Company's shareholders. Parent and Sub shall use such information only in
connection with the Offer and the Merger, and if this Agreement is terminated in
accordance with its terms, each of them shall, upon the Company's request,
deliver to the Company all of such information and any copies or excerpts
thereof in its possession or under its control.
SECTION 1.3 Directors.
----------
(a) Promptly upon the acceptance for payment of Shares by Sub
pursuant to the Offer, Sub shall be entitled to designate such number of
directors on the Board of Directors of (i) the Company as will give Sub, subject
to compliance with Section 14(f) of the Exchange Act, a majority of such
directors, and the Company shall, at such time, cause Sub's designees to be so
elected by its existing Board of Directors and (ii) each subsidiary of the
Company and each committee of the Board of Directors of the Company and each
such subsidiary as will give Sub a majority of such directors or committee, and
the Company shall, at such time, cause Sub's designees to be so elected. In the
event that Sub's designees are elected to the Board of Directors of the Company,
until the Effective Time such Board of Directors shall have at least two
directors who are directors on the date of this Agreement and who are not
officers of the Company (the "Independent Directors"); and provided that, in
such event, if the number of Independent Directors shall be reduced below two
for any reason whatsoever, the remaining Independent Director shall designate a
person to fill such vacancy who shall be deemed to be an Independent Director
for purposes of this Agreement or, if no Independent Directors then remain, the
other directors shall designate two persons to fill such vacancies who shall not
be officers or affiliates of the Company, or officers or affiliates
4
<PAGE>
of Parent or any of its subsidiaries, and such persons shall be deemed to be
Independent Directors for purposes of this Agreement.
(b) Subject to applicable law, the Company shall take all action
requested by Parent necessary to effect any such election, including mailing to
its shareholders the Information Statement (as hereinafter defined) containing
the information required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder, and the Company agrees to make such mailing with the
mailing of the Schedule 14D-9 (provided that Sub shall have provided to the
Company on a timely basis all information required to be included in the
Information Statement with respect to Sub's designees). In connection with the
foregoing, the Company will promptly, at the option of Parent, either increase
the size of the Company's and each subsidiary's Board of Directors and each
committee thereof and/or obtain the resignation of such number of its current
directors as is necessary to enable Sub's designees to be elected or appointed
to, and to constitute a majority of the Company's and each subsidiary's Board of
Directors and each committee thereof as provided above.
(c) Following the election or appointment of Sub's designees pursuant
to this Section 1.3 and prior to the Effective Time, the affirmative vote of a
majority of the Independent Directors then in office shall be required by the
Company to (i) amend or terminate this Agreement by the Company, (ii) exercise
or waive any of the Company's rights or remedies under this Agreement, (iii)
extend the time for performance of Parent's and Sub's respective obligations
under this Agreement or (iv) following the termination of this Agreement in
accordance with its terms enter into any other merger or consolidation between
the Company and Parent or any subsidiary of Parent.
ARTICLE II.
THE MERGER
SECTION 2.1 The Merger.
-----------
Upon the terms and subject to the conditions set forth herein, at the
Effective Time, Sub shall be merged with and into the Company (the "Merger"),
the separate existence of Sub shall cease and the Company shall continue as the
surviving corporation (hereinafter sometimes referred to as the "Surviving
Corporation"). The Merger shall have the effects set forth in the Delaware
General Corporation Law (the "DGCL").
SECTION 2.2 Effective Time.
---------------
As promptly as practicable (but in no event more than two business
days) after the satisfaction or waiver of the conditions to the Merger (other
than conditions which by their nature are to be satisfied at the closing, but
subject to such conditions) the parties shall (a) file a certificate of merger
or, if applicable, a certificate of ownership and merger (the "Certificate of
Merger") in such form as is required by and executed in accordance with the
relevant provisions of the DGCL and (b) make all other filings or recordings
required under the DGCL. The Merger shall become effective at such time as
5
<PAGE>
the Certificate of Merger is duly filed with the Delaware Secretary of State or
at such subsequent time as Parent and the Company shall agree and as shall be
specified in the Certificate of Merger (the date and time the Merger becomes
effective being the "Effective Time"). Prior to such filing, a closing (the
"Closing") shall be held at the offices of Dewey Ballantine LLP, New York, New
York.
SECTION 2.3 Certificate of Incorporation and By-laws.
-----------------------------------------
(a) The Certificate of Incorporation of Sub as in effect immediately
prior to the Effective Time shall be the initial certificate of incorporation of
the Surviving Corporation.
(b) The By-laws of Sub, as in effect immediately prior to the
Effective Time, shall be the initial By-laws of the Surviving Corporation.
SECTION 2.4 Directors and Officers.
-----------------------
(a) The directors of Sub immediately prior to the Effective Time
shall be the initial directors of the Surviving Corporation.
(b) The officers of the Company immediately prior to the Effective
Time shall be the initial officers of the Surviving Corporation.
ARTICLE III.
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS;
EXCHANGE OF CERTIFICATES
SECTION 3.1 Effect on Capital Stock.
------------------------
As of the Effective Time, by virtue of the Merger and without any
action on the part of any holder thereof:
(a) Capital Stock of Sub. Each issued and outstanding share of common
-----------------------
stock of Sub shall be converted into and become one fully paid and nonassessable
share of common stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent Owned Stock. Each
-----------------------------------------------------
Share that is owned by the Company or any subsidiary and each Share that is
owned by Parent or any subsidiary or Sub shall be canceled and retired and shall
cease to exist, and no consideration shall be delivered in exchange therefor.
(c) Conversion of Capital Stock. Subject to SECTION 3.1 (d), each
---------------------------
issued and outstanding Share (other than Shares to be canceled in accordance
with SECTION 3.1 (b) hereof) shall be converted into the right to receive in
cash, without interest, the highest price per share paid in the Offer (the
"Merger Consideration"). As of the Effective Time, all such Shares shall no
longer be outstanding and shall automatically be canceled and retired and shall
cease to exist, and each holder of a certificate
6
<PAGE>
representing any such Shares shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration.
(d) Dissenting Shares. Notwithstanding anything in this Agreement
-----------------
to the contrary, any Shares held by a person (a "Dissenting Shareholder") who
does not vote to approve the Merger and complies with all the provisions of the
DGCL concerning the right of holders of Shares to dissent from the Merger and
require payment of fair value (as defined in the DGCL) for their Shares
("Dissenting Shares") shall not be converted as described in SECTION 3.1 (c),
but shall be converted into the right to receive such consideration as may be
determined to be due to such Dissenting Shareholder pursuant to the DGCL. If,
after the Effective Time, such Dissenting Shareholder withdraws his demand or
fails to perfect or otherwise loses his rights as a Dissenting Shareholder to
payment of fair value, in any case pursuant to the DGCL, his Shares shall be
deemed to be converted as of the Effective Time into the right to receive the
Merger Consideration. The Company shall give Parent (i) prompt notice of any
demands for fair value for Shares received by the Company and (ii) the
opportunity to participate in and direct all negotiations and proceedings with
respect to any such demands. The Company shall not, without the prior written
consent of Parent, make any payment with respect to, or settle, offer to settle
or otherwise negotiate, any such demands.
(e) Withholding Tax. The right of any shareholder to receive the
---------------
Merger Consideration shall be subject to and reduced by the amount of any
required tax withholding obligation required by the Code (as hereinafter
defined) or other applicable law.
SECTION 3.2 Exchange of Certificates.
-------------------------
(a) Exchange Agent. Prior to the Effective Time, Parent shall
--------------
designate a bank or trust company reasonably acceptable to the Company to act as
Exchange Agent in the Merger (the "Exchange Agent"), and, from time to time, on,
prior to or after the Effective Time, Parent shall make available, or cause the
Surviving Corporation to make available, to the Exchange Agent cash in amounts
and at the times necessary for the prompt payment of the Merger Consideration
upon surrender of certificates that immediately prior to the Effective Time
represented outstanding Shares ("Certificates").
(b) Exchange Procedure. As soon as reasonably practicable after
------------------
the Effective Time, the Exchange Agent shall mail to each holder of record of a
Certificate, (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 a
form and have such other provisions as Parent may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for the Merger Consideration. Upon surrender of a Certificate to the Exchange
Agent, together with a duly executed letter of transmittal and such other
documents as may reasonably be required by the Exchange Agent, the holder of
such Certificate shall be entitled to receive in exchange therefor the Merger
Consideration for each Share theretofore represented by such Certificate, and
the Certificate so surrendered shall forthwith be canceled.
7
<PAGE>
(c) No Further Ownership Rights in Shares. All Merger Consideration
-------------------------------------
delivered upon the surrender of Certificates in accordance with the terms of
this Article III shall be deemed to have been paid in full satisfaction of all
rights pertaining to the Shares theretofore represented by such Certificates.
Until surrendered as contemplated by this Section 3.2, each Certificate shall be
deemed at all times after the Effective Time to represent only the right to
receive upon such surrender the Merger Consideration into which the Shares
theretofore represented by such Certificate shall have been converted pursuant
to Section 3.1. No interest will be paid or will accrue on the cash payable upon
the surrender of any Certificate.
(d) Stock Transfer Books. At the Effective Time, the stock transfer
--------------------
books of the Company shall be closed, and there shall be no further registration
of transfers on the stock transfer books of the Surviving Corporation of the
Shares that were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation or
the Exchange Agent for any reason, they shall be canceled and exchanged as
provided in this Article III.
(e) Lost Certificates. If 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 and the posting by
such person of a bond or other surety in such amount as the Exchange Agent and
Parent may reasonably direct as indemnity against any claim that may be made
with respect to such Certificate and subject to such other reasonable conditions
as the Exchange Agent and Parent may impose, the Exchange Agent shall deliver in
exchange for such Certificate the Merger Consideration into which the Shares
theretofore represented by such Certificate shall have been converted pursuant
to Section 3.1.
(f) Transferred Certificates. If any payment under this Article III
------------------------
is to be made to a person other than the person in whose name the Certificate
surrendered in exchange therefor is registered, it shall be a condition of
payment that the Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that the person requesting such
payment shall pay any transfer or other taxes required by reason of the payment
to a person other than the registered holder of the Certificate surrendered or
such person shall establish to the satisfaction of the Surviving Corporation
that such tax has been paid or is not applicable.
(g) Investment. The Exchange Agent shall invest any funds held by
----------
it for purposes of this Section 3.2 as directed by Parent, on a daily basis. Any
interest and other income resulting from such investments shall be paid to
Parent.
(h) No Liability. None of Parent, Sub, the Company or the Exchange
------------
Agent shall be liable to any person in respect of any cash delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
Any portion of the cash that has been made available to the Exchange Agent
pursuant to this Section 3.2 that remains unclaimed by the holder of any
Certificate six months after the Effective Time, shall be returned to Parent and
any such holder who has not exchanged such holder's
8
<PAGE>
Certificate prior to such time shall thereafter look only to the Surviving
Corporation for any claim for Merger Consideration hereunder.
SECTION 3.3 Options.
--------
(a) The Company has taken all necessary action so that effective as
of the Effective Time, (i) each outstanding stock option (the "Options") to
purchase Shares granted under the Company's stock option or similar Plans (the
"Company Option Plans"), whether or not then exercisable or vested, will become
fully exercisable and vested, (ii) each Option that is then outstanding will be
cancelled and (iii) in consideration of such cancellation, and except to the
extent that Parent or Sub and the holder of any such Option otherwise agree, the
Company (or, at Parent's option, Sub) will pay to each holder of an Option an
amount in respect thereof equal to the product of (x) the excess, if any, of the
Offer Price over the exercise price of each such Option and (y) the number of
Shares previously subject to the Option immediately prior to its cancellation
(such payment to be net of any withholding taxes required by the Code or other
applicable law). The Company represents that (i) no consent of any holder of any
option is necessary for the transactions contemplated by this Section 3.3(a),
(ii) following the Effective Time no holder of an Option shall have any rights
thereunder other than to receive cash as contemplated by this Section and (iii)
following the Effective Time no person shall have any right to acquire any
security of the Surviving Corporation (or any subsidiary thereof) as a result of
any agreement or obligation of the Company or any subsidiary.
(b) The Company Option Plans shall terminate as of the Effective
Time, and the provisions in any other plan or arrangement of the Company
providing for the offering, issuance, purchase, transfer or grant of any capital
stock of the Company or any interest in respect of any capital stock of the
Company shall be deleted as of the Effective Time, and the Company shall ensure
that following the Effective Time no holder of any Option or Warrant or any
participant in any Company Option Plan or other plan or arrangement of the
Company shall have any right thereunder to acquire any capital stock of the
Company or the Surviving Corporation.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedule delivered by the
Company to Parent prior to the execution of this Agreement (the "Company
Disclosure Schedule"), which Company Disclosure Schedule identifies the Section
(or, if applicable, subsection) to which such exception relates, the Company
represents and warrants to Parent and Sub as follows:
SECTION 4.1 Organization.
-------------
Each of the Company and its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has all requisite corporate power and
authority to own, lease or operate its properties
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and to carry on its business as now being conducted. Each of the Company and its
subsidiaries is duly qualified or licensed to do business and in good standing
in each jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification or licensing
necessary, except in such jurisdictions where the failure to be so duly
qualified or licensed and in good standing would not have a Material Adverse
Effect on the Company. For purposes of this Agreement, a "Material Adverse
Effect" means, with respect to any person, a fact, event or effect which has
had, or is reasonably likely to have, together with all similar or related
facts, events and effects, a material adverse effect on the financial condition,
business, assets, prospects or results of operations of such person and its
subsidiaries taken as a whole or on the ability of such person to perform its
obligations hereunder or which would prevent or materially delay the
consummation of the transactions contemplated hereby. The Company has made
available to Parent complete and correct copies of its Certificate of
Incorporation and Bylaws and the certificate of incorporation and by-laws (or
similar organizational documents) of each of its subsidiaries.
SECTION 4.2 Capitalization.
---------------
(a) The authorized capital stock of the Company consists of
40,000,000 Shares and 10,000,000 shares of preferred stock (400,000 of which are
designated as Series A Participating Cumulative Preferred Stock issuable upon
exercise of the Rights and 8,710 of which are designated Series B Stock. At the
close of business on August 6, 1998, (i) 20,974,122 Shares were issued and
outstanding, (ii) 2,999 shares of Series B Stock were issued and outstanding
held beneficially and of record by two owners and (iii) 1,442,217 Shares were
issuable upon the exercise of Options to purchase Shares under the Company
Option Plans, 102,901 Shares were issuable upon exercise of the outstanding
warrants to purchase Shares (the "Warrants") and 838,653 Shares are issuable
upon conversion of the Series B Stock. All outstanding shares of capital stock
of Company have been duly authorized and validly issued and are fully paid and
nonassessable. The Shares issuable upon exercise of the Options and Warrants and
conversion of the Series B Stock are duly authorized, and when issued in
accordance with the terms of the Options, Warrants or Series B Stock, as
applicable, will be validly issued and fully paid and nonassessable. Except as
set forth above, and for changes since such date resulting from (i) the exercise
of Options or Warrants, outstanding on such date in accordance with their terms,
(ii) fluctuations in the price of the Common Stock and the applicable conversion
percentage for the Series B Stock or (iii) conversion of any shares of Series B
Stock, there are outstanding (x) no shares of capital stock or other voting
securities of the Company, (y) no securities of the Company convertible into or
exchangeable for shares of capital stock or other securities of the Company, and
(z) no options or other rights to acquire from the Company, and no obligation of
the Company to issue, any capital stock or other securities. There are no
outstanding obligations of the Company or any subsidiary to repurchase, redeem
or otherwise acquire any securities of the Company or to vote or to dispose of
any shares of the capital stock of any of the Company's subsidiaries.
(b) Section 4.2(b) of the Company Disclosure Schedule lists each
outstanding Option and Warrant as of August 6, 1998, the holder thereof, the
number of
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Shares issuable thereunder and the exercise price thereof. Subject to providing
the notice required pursuant to the terms of the Warrants and as contemplated by
Section 6.14(c) hereof, at the Effective Time all of the Warrants will have
expired and be of no further force or effect in accordance with their terms.
(c) Section 4.2(c) of the Company Disclosure Schedule lists each
subsidiary of the Company. All the outstanding shares of capital stock of each
such subsidiary are owned by the Company, by another wholly owned subsidiary of
the Company or by the Company and another wholly owned subsidiary of the
Company, free and clear of all pledges, claims, liens, charges, encumbrances and
security interests of any kind or nature (collectively, "Liens"), and are duly
authorized, validly issued, fully paid and nonassessable. Except for the capital
stock of its subsidiaries, the Company does not own, directly or indirectly, any
capital stock or other ownership interest in any entity.
SECTION 4.3 Authority.
----------
The Company has all requisite corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement and the
consummation by the Company of the Merger and of the other transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Company and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate such
transactions, other than, with respect to the Merger, the adoption of this
Agreement by the holders of a majority of the outstanding Shares (the "Company
Shareholder Approval") (if required). This Agreement has been duly executed and
delivered by the Company and constitutes a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, subject
to applicable bankruptcy, insolvency, moratorium or other similar laws relating
to creditors' rights and general principles of equity (the "Enforceability
Exceptions").
SECTION 4.4 Consents and Approvals; No Violations.
--------------------------------------
(a) The execution, delivery and performance by the Company of this
Agreement and the consummation by the Company of the transactions contemplated
by this Agreement do not and will not require any filing or registration with,
notification to, or authorization, permit, consent or approval of, or other
action by or in respect of, any United States federal, state, local, foreign,
supranational or other governmental body, court, agency, official or regulatory
or other authority (collectively, "Governmental Entities") other than (i) the
filing of the Certificate of Merger as contemplated by Article I hereof, (ii)
compliance with any applicable requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (iii) compliance with any
applicable requirements of the Exchange Act and (iv) any filing, registration or
notification the failure of which to make or any authorization, permit, consent
or approval the failure of which to obtain would not reasonably be expected to
have a Material Adverse Effect on the Company.
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(b) The execution, delivery and performance by the Company of this
Agreement and the consummation by the Company of the transactions contemplated
by this Agreement do not and will not (i) conflict with or result in any breach
of any provision of the Certificate of Incorporation or Bylaws of the Company or
any similar organizational documents of any of its subsidiaries, (ii) result in
a violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default under, or give rise to any right of termination,
amendment, cancellation, acceleration or loss of benefits under, or result in
the creation of any Lien upon any of the properties or assets of the Company or
any of its subsidiaries under, or require consent pursuant to, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease, license,
permit, concession, franchise, contract, agreement or other instrument or
obligation (a "contract") to which the Company or any of its subsidiaries is a
party or by which any of its properties or assets may be bound or (iii) violate
any judgment, order, writ, preliminary or permanent injunction or decree (each
an "Order") or any statute, law, ordinance, rule or regulation of any
Governmental Entity (each, a "Law") applicable to the Company, any of its
subsidiaries or any of their properties or assets, except in the case of clauses
(ii) or (iii) for violations, breaches, defaults, rights, or Liens that would
not reasonably be expected to have a Material Adverse Effect on the Company.
SECTION 4.5 SEC Reports and Financial Statements.
-------------------------------------
(a) The Company has filed with the SEC all forms (including, without
limitation, the Company's Registration Statement on Form S-3, Registration No.
333-53117, as amended by Form S-3/A No. 1, Form S-3/A No. 2 and Form S-3/A No.
3), reports, schedules, statements and other documents required to be filed by
it since January 1, 1995 (collectively, the "Company SEC Documents"). The
Company SEC Documents (a) do not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading and (b) comply in all material respects with the
applicable requirements of the Exchange Act and the Securities Act, as the case
may be, and the applicable rules and regulations of the SEC thereunder. No
subsidiary of the Company is required to make any filings with the SEC.
(b) The financial statements of the Company included in the Company
SEC Documents comply in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly present
(subject, in the case of the unaudited statements, to normal, recurring audit
adjustments not material in amount) the consolidated financial position of the
Company and its consolidated subsidiaries as at the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended.
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SECTION 4.6 Absence of Certain Changes or Events.
-------------------------------------
Except as disclosed in the Company SEC Documents filed and publicly
available prior to the date of this Agreement (the "Company Filed SEC
Documents"), since December 31, 1997, (i) the Company and its subsidiaries have
conducted their respective business only in the ordinary course, (ii) there has
not been any Material Adverse Effect with respect to the Company and (iii)
neither the Company nor any subsidiary has taken any action contemplated by
Section 6.1.
SECTION 4.7 No Undisclosed Liabilities.
---------------------------
Except as and to the extent set forth in the Company Filed SEC
Documents, neither the Company nor any of its subsidiaries has any liabilities
of any nature, whether or not accrued, contingent or otherwise, that would have
a Material Adverse Effect on the Company.
SECTION 4.8 Information Supplied.
---------------------
None of the information supplied or to be supplied by the Company for
inclusion or incorporation by reference in (i) the Offer Documents, (ii) the
Schedule 14D-9, (iii) the information to be filed by the Company in connection
with the Offer pursuant to Rule 14f-1 promulgated under the Exchange Act (the
"Information Statement") or (iv) the Proxy Statement (as hereinafter defined),
will, in the case of the Offer Documents, the Schedule 14D-9 and the Information
Statement, at the respective times the Offer Documents, the Schedule 14D-9 and
the Information Statement are filed with the SEC or first published, sent or
given to the Company's shareholders, or, in the case of the Proxy Statement, at
the time the Proxy Statement is first mailed to the Company's shareholders or at
the time of the Shareholders Meeting (as defined in Section 7.1), 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. The
Schedule 14D-9, the Information Statement and the Proxy Statement (the
"Specified Documents") will comply in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder. No
representation or warranty is made by the Company in this Section 4.8 with
respect to statements made or incorporated by reference in the Specified
Documents based on information supplied by Parent or Sub for inclusion or
incorporation by reference therein.
SECTION 4.9 Employee Benefit Plans; Labor Matters.
--------------------------------------
(a) Section 4.9(a) of the Company Disclosure Schedule sets forth each
material plan, agreement, arrangement or commitment that is an employment or
consulting agreement; executive or incentive compensation plan, bonus plan,
deferred compensation plan or agreement; employee pension, profit sharing,
savings or retirement plan; employee stock option or stock purchase plan; group
life, health, or accident insurance or other employee benefit plan, agreement,
arrangement or commitment, including, without limitation, any severance,
holiday, vacation, Christmas or other bonus plans (including, but not limited
to, "employee benefit plans", as defined in Section 3(3)
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of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
currently maintained by the Company or any of its subsidiaries for any of its
present or former employees, consultants, officers or directors ("the Company
Personnel") or with respect to which the Company or any of its subsidiaries has
material liability or makes (or has an obligation to make) contributions
("Company Plans").
(b) The Company has provided Parent with (i) copies of all the
Company Plans or in the case of an unwritten plan, a written description
thereof, (ii) copies of any annual reports (Form 5500 Series), annual financial
or actuarial reports and Internal Revenue Service determination letters relating
to such Company Plans and (iii) copies of all summary plan descriptions (whether
or not required to be furnished under ERISA) and employee communications
relating to such Company Plans and distributed to the Company Personnel, in each
case under this subsection (b), existing or in effect during or within the past
three years.
(c) There are no Company Personnel who are entitled to (i) any
pension benefit or deferred compensation that is unfunded or (ii) any pension or
other benefit to be paid after termination of employment, except as referred by
law, involving 4980(B) and 601-609 of ERISA or pursuant to plans intended to be
qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended
(the "Code") and listed on Section 4.9(c) of the Company Disclosure Schedule,
and no other benefits whatsoever are payable to any Company Personnel after
termination of employment (including retiree medical and death benefits).
(d) Each Company Plan that is an employee welfare benefit plan under
Section 3(l) of ERISA is either (i) funded through an insurance company contract
and is not a "welfare benefit fund" within the meaning of Section 419 of the
Code or (ii) is unfunded.
(e) All contributions or payments owed with respect to any
periods prior to the Effective Time under any Company Plan have been or will be
made or accrued prior to the Effective Time. Each Company Plan by its terms and
operation is in material compliance with all applicable laws (including, but not
limited to, ERISA, the Code and the Age Discrimination in Employment Act of
1967, as amended).
(f) There are no actions, suits or claims (other than routine claims
for benefits) pending or, to the Company's knowledge, threatened against any
Company Plan or, to the Company's knowledge, against any administrator or
fiduciary of any Company Plan with respect to such Company Plan that would, if
adversely decided with respect to the Company Plan, administrator or fiduciary,
have a Material Adverse Effect on the Company. As to each Company Plan for which
an annual report is required to be filed under ERISA or the Code, all such
filings, including schedules, have been made on a timely basis and with respect
to the most recent report regarding each such Company Plan, liabilities do not
exceed assets, and no material adverse change has occurred with respect to the
financial matters covered thereby.
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(g) Neither the Company nor any entity required to be aggregated with
the Company pursuant to Sections 414(b), (c), (m) or (o) of the Code contributes
to, maintains or has any material liability with respect to a plan subject to
Title IV of ERISA, Section 412 of the Code or Section 302 of ERISA. Neither the
Company nor any entity required to be aggregated with the Company pursuant to
Sections 414(b) or (c) of the Code contributes to or has ever contributed to or
been obligated to contribute to a plan that is a "multiemployer plan" (as
defined in Section 3(37) of ERISA.)
(h) Each Company Plan that is intended to be qualified under Section
401(a) of the Code is the subject of a favorable determination letter from the
Internal Revenue Service stating that such plan is so qualified and nothing has
occurred since the date of the most recent such letter issued with respect to
such Company Plan to cause such letter to be no longer valid or effective.
(i) Neither the Company, any subsidiary nor any other person,
including any fiduciary, has engaged in any "prohibited transaction" (as defined
in Section 4975 of the Code or Section 406 of ERISA), which could subject any of
the Company Plans (or their trusts), the Company, or any person who the Company
has an obligation to indemnify, to any material tax or penalty imposed under
Section 4975 of the Code or Section 502 of ERISA.
(j) The events contemplated by this Agreement and the Shareholder
Agreement (either alone or together with any other event) will not (i) entitle
any Company Personnel to severance pay, unemployment compensation, or other
similar payments under any Company Plan, law or otherwise, (ii) accelerate the
time of payment or vesting or increase the amount of benefits due under any
Company Plan or compensation to any Company Personnel, (iii) result in any
payments (including parachute payments) under any Company Plan, law or otherwise
becoming due to any Company Personnel or other person, or (iv) terminate or
modify or give a third party a right to terminate or modify the provisions or
terms of any Company Plan.
(k) The Company, its subsidiaries and each member of their respective
business enterprises have complied with the Worker Adjustment and Retraining
Notification Act in all material respects.
(l) Neither the Company nor any of its subsidiaries is a party to, or
bound by, any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization. There is no unfair labor
practice or labor arbitration proceeding pending or, to the knowledge of the
Company, threatened against the Company or its subsidiaries relating to their
business, except for any such proceeding that would not have a Material Adverse
Effect on the Company. To the knowledge of the Company, there are no
organizational efforts with respect to the formation of a collective bargaining
unit currently being made or threatened involving employees of the Company or
any of its subsidiaries. The Company and its subsidiaries are in compliance in
all material respects with all applicable laws regarding employment consulting,
employment practices, wages, hours and terms and conditions of employment.
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SECTION 4.10 Contracts.
---------
Except as disclosed in the Company Filed SEC Documents, there are no
contracts that are material to the financial condition, business, assets,
prospects or results of operations of the Company and its subsidiaries taken as
a whole. Neither the Company nor any of its subsidiaries, or to the best
knowledge of the Company, any other party, is in violation or breach of or in
default (nor does there exist any condition which upon the passage of time or
the giving of notice would result in a violation or breach of, or constitute a
default under, or give rise to any right of termination, amendment,
cancellation, acceleration or loss of benefits, or result in the creation of any
Lien upon any of the properties or assets of the Company or any of its
subsidiaries) under any contract to which it is a party or by which it or any of
its properties or assets is bound, except as disclosed in the Company Filed SEC
Documents and except for violations, breaches or defaults that would not have a
Material Adverse Effect on the Company. Except as disclosed in the Company Filed
SEC Documents, no other party to any such contract has, to the best knowledge of
the Company, alleged that the Company or any subsidiary is in violation or
breach of or in default under any such contract or has notified the Company or
any subsidiary of an intention to modify any material terms of or not to renew
any such contract, where such events would have a Material Adverse Effect on the
Company. To the knowledge of the Company, there are no facts, circumstances or
conditions which would reasonably be expected to result in the loss of any
customer accounting for more than 5% of the consolidated revenues of the Company
and its subsidiaries.
SECTION 4.11 Litigation.
----------
Except as disclosed in the Company Filed SEC Documents, there is no
suit, claim, action, proceeding or investigation pending before any Governmental
Entity or, to the best knowledge of the Company, threatened against the Company
or any of its subsidiaries that would have a Material Adverse Effect. Except as
disclosed in the Company Filed SEC Documents, neither the Company nor any of its
subsidiaries is subject to any outstanding Order that would have a Material
Adverse Effect on the Company
SECTION 4.12 Compliance with Applicable Law.
------------------------------
The Company and its subsidiaries hold all permits, licenses,
variances, exemptions, orders and approvals of all Governmental Entities
necessary for the lawful conduct of their respective businesses (the "Company
Permits"), except for failures to hold such Company Permits that would not have
a Material Adverse Effect on the Company. The Company and its subsidiaries are
in compliance with the terms of the Company Permits, except where the failure so
to comply would not have a Material Adverse Effect on the Company. The
businesses of the Company and its subsidiaries have not been, and are not being,
conducted in violation of any Law, except for violations that would not have a
Material Adverse Effect. No investigation or review by any Governmental Entity
with respect to the Company or any of its subsidiaries is pending or, to the
best knowledge of the Company, threatened, nor has any Governmental Entity
16
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indicated an intention to conduct any such investigation or review, other than,
in each case, where the outcome would not have a Material Adverse Effect on the
Company.
SECTION 4.13 Tax Matters.
-----------
(a) Definitions:
"Tax" or "Taxes" means all taxes, charges, fees, levies or other
assessments, including, without limitation, income, gross receipts, employment,
excise, withholding, property, sales, use, transfer, license, payroll and
franchise taxes, together with any interest and any penalties, additions to tax
or additional amounts with respect thereto, imposed by the United States, or
state, local or foreign government or subdivision or agency thereof, together
with any liability under Treas. Reg. (S) 1.1502-6 (or any similar provision of
state, local or foreign law) or as transferee to assets or as a successor, or
pursuant to any agreement to share liability for Taxes.
"Taxable Period" means any tax year or any other period that is treated as
a taxable year (or other period, or portion thereof, in the case of a Tax
imposed with respect to such period or portion thereof, e.g., a quarter) with
respect to which any Tax may be imposed under any applicable statute, rule, or
regulation.
"Tax Reserve" shall have the meaning set forth in Section 4.13(d).
"Tax Return" shall mean any report, return, election, notice or other
information required by applicable law to be supplied to a taxing authority in
connection with Taxes.
All citations to provisions of the Code, or to the Treasury Regulations
promulgated thereunder, shall include any amendments thereto and any substitute
or successor provisions thereto.
(b) All Tax Returns required to be filed by or with respect to the
Company and each of its subsidiaries on or before the Effective Time have been
or will be timely filed. All such Tax Returns (i) were prepared in the manner
required by applicable law, (ii) are true, correct, and complete in all material
respects, and (iii) reflect the liability for Taxes of the Company and each of
its subsidiaries except to the extent that a proper reserve for Taxes has been
reflected on the financial statements as of and for the year ended December 31,
1997 included in the Company Filed SEC Documents, in accordance with GAAP. All
Taxes shown to be payable on such Tax Returns, and all assessments of Tax made
against the Company and each of its subsidiaries with respect to such Tax
Returns, have been paid when due except to the extent that a proper reserve for
Taxes has been reflected on the financial statements as of and for the year
ended December 31, 1997 included in the Company Filed SEC Documents, in
accordance with GAAP. No adjustment relating to any such Tax Return has been
proposed by any taxing authority.
(c) The Company and each of its subsidiaries have made (or there has
been made on its behalf) all required current estimated Tax payments sufficient
to avoid any material estimated tax underpayment penalties.
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(d) The Company and each of its subsidiaries have (i) timely paid or
caused to be paid or will cause to be timely paid all Taxes that are or were due
on or prior to the date hereof or the Effective Time, whether or not shown (or
required to be shown) on a Tax Return and (ii) provided a sufficient reserve in
accordance with GAAP for the payment of all Taxes not yet due and payable (the
"Tax Reserve") on the financial statements as of and for the year ended December
31, 1997 included in the Company Filed SEC Documents. There are no Taxes that
would be due if asserted by a taxing authority, except with respect to which the
Company and each of its subsidiaries are maintaining adequate reserves in
accordance with GAAP on such financial statements included in the Company Filed
SEC Documents.
(e) The Company and each of its subsidiaries have complied (and until
the Effective Time will comply) in all material respects with the provisions of
the Code relating to the withholding and payment of Taxes, including, without
limitation, the withholding and reporting requirements under Code sections 1441
through 1464, 3401 through 3406, and 6041 through 6049, as well as similar
provisions under any other laws, and have, within the time and in the manner
prescribed by law, withheld from employee wages and paid over to the proper
governmental authorities all amounts required.
(f) None of the Tax Returns have been examined by the Internal
Revenue Service or relevant state, local or foreign taxing authorities and no
statute of limitations has been extended for any period. There are no threatened
actions, suits, proceedings, investigations or claims relating to or asserted
for Taxes of the Company and/or any of its subsidiaries to the Company's
knowledge and to the Company's knowledge, there is no basis for any such claim.
(g) No claim has ever been made in writing by any taxing authority
with respect to the Company or any of its subsidiaries in a jurisdiction where
the Company and/or any of its subsidiaries do not file reports and returns that
the Company or any such subsidiary is or may be subject to taxation by that
jurisdiction. Except for liens for real and personal property Taxes that are not
yet due and payable, there are no liens for any Tax upon any asset of the
Company or any of its subsidiaries.
(h) Neither the Company nor any of its subsidiaries has agreed or is
required to include in income or make any material adjustment under either
Section 481(a) or Section 482 of the Code (or an analogous provision of state,
local, or foreign law) by reason of a change in accounting or otherwise. Neither
the Company nor any of its subsidiaries has disposed of any material property in
a transaction being accounted for under the installment method pursuant to
Section 453 of the Code.
(i) Neither the Company nor any of its subsidiaries is a party to any
agreement to share Taxes with respect to any Taxable Period.
(j) There is no contract, agreement, plan or arrangement covering any
person that, individually or collectively, could give rise to the payment of any
amount that would not be deductible by the Company or any subsidiary thereof by
reason of Section 280G of the Code.
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(k) Neither the Company nor any of its subsidiaries has at any time
distributed the stock of any corporation in a transaction satisfying the
requirements of Section 355 of the Code since April 16, 1997.
(l) Neither the Company nor any of its subsidiaries has an overall
foreign loss within the meaning of Section 904(f) of the Code.
SECTION 4.14 Environmental.
--------------
(a) Except to the extent that any of the following, individually or
in the aggregate, would not result in a Material Adverse Effect on the Company
(i) the Company and its subsidiaries comply and have complied with all
applicable Environmental Laws (as defined below), (ii) no Hazardous Substances
(as defined below) are present at or have been disposed on or released or
discharged from, onto or under any of the properties currently owned, leased,
operated or otherwise used by the Company or its subsidiaries (including soils,
groundwater, surface water, buildings or other structures), (iii) no Hazardous
Substances were present at or disposed on or released or discharged from, onto
or under any of the properties formerly owned, leased, operated or otherwise
used by the Company or its subsidiaries during the period of ownership, lease,
operation or use by Company or its subsidiaries, (iv) neither the Company nor
any subsidiary is subject to any liability or obligation in connection with
Hazardous Substances present at any location owned, leased, operated or
otherwise used by any third party, (v) neither the Company nor any subsidiary
has received any written notice, demand, letter, claim or request for
information alleging that the Company or any subsidiary is or may be in
violation of or liable under any Environmental Law, (vi) neither the Company nor
any subsidiary is subject to any order, decree, injunction or other written
directive of any Governmental Authority or is subject to any indemnity or other
agreement with any person or entity relating to Hazardous Substances and (vii)
there are no circumstances or conditions involving the Company and its
subsidiaries, any assets (including real property) or businesses previously
owned, leased, operated or otherwise used by Company or its subsidiaries, or any
of the assets (including real property) or businesses of any predecessors of
Company or its subsidiaries that could reasonably be expected to result in any
damages or liabilities to the Company or any subsidiary arising under or
pursuant to Environmental Law or in any restriction on the ownership, use or
transfer of any of the assets of the Company or any subsidiary arising under or
pursuant to any Environmental Law.
(b) As used herein, the term "Environmental Law" means any
international, national, provincial, regional, federal, state, municipal or
local law, regulation, order, judgement, decree, permit, authorization, common
or decisional law (including, without limitation, principles of negligence and
strict liability) or agency requirement relating to the protection,
investigation or restoration of the environment (including, without limitation,
natural resources) or the health or safety of human or other living organisms,
including, without limitation, the manufacture, introduction into commerce,
export, import, handling, use, presence, disposal, release or threatened release
of any Hazardous Substance or noise, odor, wetlands, pollution, contamination or
any injury or threat of injury to persons or property.
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(c) As used herein, the term "Hazardous Substance" means any element,
compound, substance or other material (including any pollutant, contaminant,
hazardous waste, hazardous substance, chemical substance, or product) that is
listed, classified or regulated pursuant to any Environmental Law, including,
without limitation, any petroleum product, by-product or additive, asbestos,
presumed asbestos-containing material, asbestos-containing material, medical
waste, chlorofluorocarbon, hydrochlorofluorocarbon, lead-containing paint or
plumbing, polychlorinated biphenyls, radioactive material or radon.
SECTION 4.15 State Takeover Statutes.
-----------------------
The Board of Directors of the Company has adopted, approved and found
advisable this Agreement, the Offer, the Shareholder Agreement, the acquisition
of Shares by Sub pursuant to the Offer and the Shareholder Agreement and the
other transactions contemplated by this Agreement and the Shareholder Agreement,
and such adoptions, approvals and findings are sufficient to render inapplicable
to the Offer, the Merger, this Agreement, the Shareholder Agreement, the
acquisition of Shares by Sub pursuant to the Offer and the Shareholder Agreement
and the other transactions contemplated by this Agreement and the Shareholder
Agreement the provisions of Section 203 of the DGCL, the Rights Plan, the Rights
and Article 12.2.1. of the Company's Certificate of Incorporation. No other
"fair price", "moratorium", "control share acquisition" or other form of anti-
takeover statute or regulation or similar Law, or any other provision of the
Company's Certificate of Incorporation or By-Laws, applies or purports to apply
to the Offer, the Merger, this Agreement, the Shareholder Agreement, the
acquisition of Shares by Sub pursuant to the Offer and the Shareholder Agreement
or any of the transactions contemplated by this Agreement or the Shareholder
Agreement.
SECTION 4.16 Intellectual Property.
---------------------
(a) Section 4.16(a) of the Company Disclosure Schedule contains a
complete list of all United States and foreign patents and patent applications,
copyrights (whether registered or as to which registration has been applied
for), trademarks (whether registered or not), trade names and service marks
owned by or licensed to the Company or any of its subsidiaries as of the date
hereof.
(b) Except as set forth in the Company Filed SEC Documents, (i) to
the knowledge of the Company, except as otherwise disclosed orally to Parent,
there is no existing or threatened infringement, misuse or misappropriation by
others, of any United States or foreign patents, patent applications,
trademarks, whether registered or not, tradenames, service marks, copyrights,
processes, designs, formulae, inventions, know-how, trade secrets, proprietary
information or concepts (the "Intellectual Property") of the Company or any of
its subsidiaries that is reasonably likely to be material to the Company's
operation, (ii) there are no pending or threatened claims by the Company or any
of its subsidiaries against others for infringement, misuse or misappropriating,
of any Intellectual Property of the Company or its subsidiaries that are
reasonably likely to be material to the Company's operation and (iii) to the
knowledge of the Company, neither the Company nor any of its subsidiaries is
infringing, misusing or misappropriating any
20
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Intellectual Property of any third party and, to the Company's knowledge, no
claim of such infringement, misuse or misappropriation is pending or threatened.
(c) The Company and its subsidiaries own or possess adequate licenses
or other valid rights to use all of the Intellectual Property used by the
Company and its subsidiaries or set forth on Schedule 4.16(a) of the Company
Disclosure Schedule. The Company has no knowledge of any facts or claims which
may bring the validity or enforceability of its issued patents into question.
SECTION 4.17 FDA and Product Matters.
-----------------------
There are no products now being manufactured, sold or distributed by
the Company or any subsidiaries which at the date hereof would require any
approval of the United States Food and Drug Administration (the "FDA") or any
other Governmental Entity that regulates the safety, effectiveness, market
clearances, market or post-market surveillance of the products of the Company
and its subsidiaries, for which such approval has not been obtained. All
products now being commercially distributed by the Company or any subsidiary in
any jurisdiction meet, in all material respects, the applicable legal
requirements of such jurisdiction with respect to their safety, effectiveness,
market clearance, marketing, and post-market surveillance and all requisite
governmental approvals have been duly obtained and are in full force and effect,
and there is no basis known to the Company for the FDA or any other Governmental
Entity to rescind any approval for any of their commercially distributed
products. There is no action or proceeding by the FDA or any other Governmental
Entity claiming that any product now being commercially distributed or used in
any clinical trials by the Company or any subsidiary is defective or fails to
meet any applicable regulatory standards or that the Company or any subsidiary
have violated any applicable Laws governing the marketing or post-market
surveillance requirements for any product. There are no recall procedures
pending or, to the knowledge of the Company, threatened against the Company or
any subsidiary, and no such proceeding was brought at any time in the past,
relating to the safety or efficacy of any of its or their products, and, to the
knowledge of the Company, there is no basis of any such action or proceeding.
No institutional review board or institutional review committee or other similar
group has terminated or recommended termination of a clinical study of any
product of the Company or any subsidiary.
SECTION 4.18 Year 2000.
---------
All information technology currently used and expected to be used by
the Company and each subsidiary following December 31, 1999 in the
administration and the business operations of the Company and its subsidiaries,
including, without limitation, in all products and services (i) provided by the
Company and each subsidiary, whether to third parties or for internal use or
(ii) to the best of the Company's knowledge after reasonable investigation,
currently used and expected to be used in combination with any information
technology of its or any subsidiary's clients, customers, suppliers or vendors,
accurately processes or will process date and time data (including but not
limited to calculating, comparing and sequencing) from, into and between the
years 1999 and 2000 and the twentieth century and the twenty-first century,
including leap year calculations
21
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(the "Y2K Calculations"), and neither performance nor functionality of such
technology will be affected by dates prior to, during or after the year 2000.
Neither the Company nor any subsidiary has any obligations under warranty
agreements, service agreements or otherwise to remedy any information technology
defect relating to or arising out of Y2K Calculations. The aggregate costs,
expenses and liabilities incurred prior to the date hereof and reasonably
expected by the Company to be incurred in the future in connection with assuring
the accuracy of the two immediately preceding sentences will not be material to
the Company. The Company Filed SEC Documents contain disclosure (the "Y2K
Disclosure") which is responsive in all material respects to the requirements of
Staff Legal Bulletin No. 5 (CF/IM) issued by the SEC, and the Y2K Disclosure is
true and correct in all material respects.
SECTION 4.19 Insurance.
---------
The Company and each subsidiary maintains (a) insurance on all of its
property that insures against loss or damage by fire or other casualty and (b)
insurance against liabilities, claims and risks of a nature and in such amounts
as are normal and customary in its industry for companies of similar size and
financial condition. All insurance policies of the Company and each subsidiary
are in full force and effect, all premiums with respect thereto cover all
periods up to and including the date this representation is made have been paid,
and no written notice of cancellation or termination has been received with
respect to any such policy. Such policies are sufficient for compliance with
all requirements of law currently applicable to the Company and each subsidiary
and of all agreements to which the Company and each subsidiary is a party, will
remain in full force and effect through the respective expiration dates of such
policies without the payment of additional premiums, and will not in any way be
affected by, or terminate or lapse by reason of, the transactions contemplated
by this Agreement or the Shareholder Agreement. Neither the Company nor any
subsidiary has been refused any insurance with respect to its assets or
operations, nor has its coverage been limited, by any insurance carrier to which
it has applied for any such insurance or with which it has carried insurance.
SECTION 4.20 Absence of Questionable Payments.
--------------------------------
Neither the Company nor any subsidiary nor, to the Company's
knowledge, any director, officer, agent, employee or other person acting on
behalf of the Company or any subsidiary, has used any Company or subsidiary
funds for improper or unlawful contributions, payments, gifts or entertainment,
or to induce any person or entity to do business with the Company or any
subsidiary, or made any improper or unlawful expenditures relating to political
activity to domestic or foreign government officials or others. The Company and
its subsidiaries have adequate financial controls to prevent such improper or
unlawful contributions, payments, gifts, entertainment or expenditures. Neither
the Company nor any subsidiary nor, to the Company's knowledge, any current
director, officer, agent, employee or other person acting on behalf of the
Company or any subsidiary, has accepted or received any improper or unlawful
contributions, payments, gifts or expenditures. The Company and its
subsidiaries at all times complied, and are in compliance, in all material
respects with the Foreign Corrupt
22
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Practices Act and, in all material respects with all other Laws and regulations
relating to prevention of corrupt practices.
SECTION 4.21 Opinion of Financial Advisor.
----------------------------
The Company has received the opinion of Goldman, Sachs & Co. (the
"Financial Advisor"), dated the date of this Agreement, to the effect that, as
of the date of this Agreement, the consideration to be received in the Offer and
the Merger by the Company's shareholders is fair to the Company's shareholders
from a financial point of view, and a complete and correct signed copy of such
opinion has been, or promptly upon receipt thereof will be, made available to
Parent.
SECTION 4.22 Brokers and Finders.
-------------------
No broker, investment banker, financial advisor or other person, other
than the Financial Advisor, the fees and expenses of which will be paid by the
Company (as reflected in an agreement between such firm and the Company, a copy
of which has been delivered to Parent), is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub jointly and severally represent and warrant to the
Company as follows:
SECTION 5.1 Organization.
------------
Each of Parent and Sub is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to carry on
its business as now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power and authority
would not be reasonably expected to prevent or materially delay the consummation
of the Offer or the Merger.
SECTION 5.2 Authority.
---------
Each of Parent and Sub has all requisite corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and Sub and
no other corporate proceedings on the part of Parent and Sub are necessary to
authorize this Agreement or to consummate such transactions. No vote of Parent
shareholders is required to approve this Agreement or the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Parent and Sub, as the case may be, and constitutes a valid and
23
<PAGE>
binding obligation of each of Parent and Sub enforceable against them in
accordance with its terms, subject to the Enforceability Exceptions.
SECTION 5.3 Consents and Approvals; No Violations.
--------------------------------------
(a) The execution, delivery and performance by Parent and Sub of this
Agreement and the consummation by Parent and Sub of the transactions
contemplated by this Agreement do not and will not require any filing or
registration with, notification to, or authorization, permit, consent or
approval of, or other action by or in respect of, any Governmental Entities
other than (i) the filing of the Certificate of Merger as contemplated by
Article I hereof, (ii) compliance with any applicable requirements of the HSR
Act and (iii) compliance with any applicable requirements of the Exchange Act.
(b) The execution, delivery and performance by Parent and Sub of this
Agreement and the consummation by Parent and Sub of the transactions
contemplated by this Agreement do not and will not (i) conflict with or result
in any breach of any provision of the Certificate of Incorporation or By-laws of
Parent and Sub, (ii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default under, or give rise to
any right of termination, amendment, cancellation, acceleration or loss of
benefits under, or result in the creation of any Lien upon any of the properties
or assets of Parent or Sub or any of their subsidiaries under, or require
consent pursuant to, any of the terms, conditions or provisions of contract to
which Parent or Sub or any of their subsidiaries is a party or by which any of
its properties or assets may be bound or (iii) violate any Order or any Law
applicable to Parent or Sub, any of their subsidiaries or any of their
properties or assets, except in the case of clauses (ii) or (iii) for
violations, breaches or defaults that would not reasonably be expected have a
Material Adverse Effect on Parent.
SECTION 5.4 Information Supplied.
--------------------
None of the information supplied or to be supplied by Parent or Sub
specifically for inclusion or incorporation by reference in (i) the Offer
Documents, (ii) the Schedule 14D-9, (iii) the Information Statement or (iv) the
Proxy Statement will, in the case of the Offer Documents, the Schedule 14D-9 and
the Information Statement, at the respective times the Offer Documents, the
Schedule 14D-9 and the Information Statement are filed with the SEC or first
published, sent or given to the Company's shareholders, or, in the case of the
Proxy Statement, at the time the Proxy Statement is first mailed to the
Company's shareholders or at the time of the Shareholders Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The Offer
Documents will comply in all material respects with the requirements of the
Exchange Act and the rules and regulations thereunder. No representation or
warranty is made by Parent or Sub in this Section 5.4 with respect to statements
made or incorporated by reference in the Offer Documents based on information
supplied by the Company or any subsidiary specifically for inclusion or
incorporation by reference therein.
24
<PAGE>
SECTION 5.5 Interim Operations of Sub.
-------------------------
Sub was formed solely for the purpose of engaging in the transactions
contemplated hereby, has engaged in no other business activities and has
conducted its operations only as contemplated hereby.
SECTION 5.6 Brokers.
-------
Except for Piper Jaffray Inc., no broker, investment banker, financial
advisor or other person is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Parent or Sub.
SECTION 5.7 Financing.
---------
Parent has, or will have, sufficient funds available to purchase, or
to cause Sub to purchase, all the Shares pursuant to the Offer and the Merger
and to pay all fees and expenses related to the transactions contemplated by
this Agreement.
ARTICLE VI.
COVENANTS
SECTION 6.1 Covenants of the Company.
------------------------
Until such time as Parent's designees shall constitute a majority of
the members of the Board of Directors of the Company, except as provided in the
Company Disclosure Schedule, the Company shall, and shall cause its subsidiaries
to, conduct their business in the ordinary course and use all reasonable efforts
to preserve intact their business organizations and relationships with third
parties and to keep available the services of their present officers and
employees and preserve their relationships with customers, consultants, doctors,
clinical investigators, suppliers and others having business dealings with the
Company and its subsidiaries. Without limiting the generality of the foregoing,
except as expressly permitted in this Agreement, from the date hereof until such
time as Parent's designees shall constitute a majority of the members of the
Board of Directors of the Company, the Company shall not, and shall cause its
subsidiaries not to:
(a) Dividends; Changes in Stock. (i) declare or pay any dividends on
---------------------------
or make other distributions in respect of any of its capital stock (except for
dividends by a wholly owned subsidiary of the Company to its parent and cash
dividends on the Series B Stock in accordance with the Certificate of
Designations of the Series B Stock), (ii) split, combine or reclassify any of
its capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock or (iii) repurchase, redeem or otherwise acquire any shares of
capital stock of the Company or any of its subsidiaries or any other securities
thereof or any rights, warrants or options to acquire any such shares or other
securities (except for the redemption of the Series B Stock in accordance with
the Certificate of Designations of the Series B Stock
25
<PAGE>
and the acquisition of Common Stock of the Company that was held as collateral
for the Company's Alternative Minimum Tax Loans (the "AMT Loans"), as disclosed
in Section 4.6 of the Company Disclosure Schedule);
(b) Issuance of Securities. Issue, deliver, sell, pledge, encumber,
----------------------
grant, confer or award, or authorize or propose the issuance, delivery, sale,
pledge, encumbrance, grant, conferring, or award of, any shares of its capital
stock or any other security or any option, warrant, conversion right or other
right to acquire any capital stock or other security other than the issuance of
Shares upon the exercise of Options or Warrants or the conversion of Series B
Stock outstanding on the date of this Agreement and in accordance with the terms
of such Options, Warrants or Series B Stock, as applicable;
(c) Governing Documents. Amend or propose to amend its certificate of
-------------------
incorporation or by-laws (or similar organizational documents);
(d) Acquisitions. Subject to Section 6.2, authorize, propose, or
------------
enter into, or announce an intention to authorize, propose, or enter into, an
agreement with respect to any merger, consolidation or business combination
(other than the Merger), any acquisition of assets not in the ordinary course of
business or any securities, any disposition, lease or license of assets not in
the ordinary course of business or any disposition of any securities, or
relinquishment of any material contract rights;
(e) Taxes. (x) change any significant practice with respect to Taxes,
-----
(y) make, revoke or change any significant election with respect to Taxes or (z)
settle or compromise any significant tax liability except in any situation
described in clauses (x) - (z) in which a delay in such action would result in
material penalties or material detriment to the Company and its subsidiaries
taken as a whole;
(f) Indebtedness. except pursuant to the Loan Agreement (as
------------
hereinafter defined) (i) incur or suffer to exist any indebtedness for borrowed
money or guarantee any such indebtedness, enter into any "keep-well" or other
agreement to maintain any financial statement condition of another person or
enter into any arrangement having the economic effect of any of the foregoing,
except for working capital borrowings incurred in the ordinary course of
business, (ii) make any loans, advances or capital contributions to, or
investments in, any other person, other than to the Company or any wholly owned
subsidiary of the Company or (iii) incur any liability other than in the
ordinary course of business;
(g) Capital Expenditures. make or agree to make any capital
--------------------
expenditures out of the ordinary course of business;
(h) Discharge of Liabilities. except pursuant to the Loan Agreement,
------------------------
pay, discharge, settle or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge, settlement or satisfaction, in the ordinary course of
business or in accordance with their terms, of claims, liabilities or
obligations recognized or disclosed in the most recent
26
<PAGE>
financial statements (or the notes thereto) of the Company included in the
Company Filed SEC Documents or incurred since the date of such financial
statements in the ordinary course of business;
(i) Material Contracts. (i) modify, amend or terminate any material
------------------
contract, (ii) waive, release or assign any material rights or claims, (iii)
waive the benefits of, or agree to modify in any manner, any confidentiality,
standstill or similar agreement or (iv) except in the ordinary course of
business, enter into any material contracts or transactions;
(j) Benefits Changes. except for the transactions relating to the AMT
----------------
Loans described in Section 4.6 of the Company Disclosure Schedule, (i) increase
the compensation or benefits of any director, officer, employee or consultant,
except for increases in the ordinary course of business, (ii) adopt any new
Company Plan or any amendment to an existing Company Plan, (iii) enter into any
employment or consulting agreement with any director, officer, employee or
consultant or (iv) accelerate the payment of compensation or benefits to any
director, officer, employee or consultant; or
(k) General. authorize any of, or commit or agree to take any of, the
-------
foregoing actions or any action which would result in a breach of any
representation or warranty of the Company contained in this Agreement as of the
date when made or as of any future date or would result in any of the Offer
Conditions not being satisfied.
SECTION 6.2 No Solicitation.
----------------
(a) The Company shall, and shall cause its officers, directors,
employees, representatives and agents to, immediately cease any discussions or
negotiations with any parties that may be ongoing with respect to a Takeover
Proposal (as hereinafter defined). The Company shall not, and shall cause its
officers, directors, employees, representatives and agents not to, directly or
indirectly, (i) solicit, initiate or encourage (including by way of furnishing
information), or take any other action designed or reasonably likely to
facilitate or encourage, any inquiries or the making of any proposal which
constitutes, or may reasonably be expected to lead to, any Takeover Proposal or
(ii) participate in any discussions or negotiations regarding any Takeover
Proposal. For purposes of this Agreement, "Takeover Proposal" means any inquiry,
proposal, offer or expression of interest by any third party relating a merger,
consolidation or other business combination involving the Company or any
subsidiary, or any purchase of more than 15% of the consolidated assets of the
Company or more than 15% of the Shares, or any similar transaction. Any material
modification of a Takeover Proposal shall constitute a new Takeover Proposal.
(b) Neither the Board of Directors of the Company nor any committee
thereof shall (i) withdraw or modify, or propose to withdraw or modify, the
approval, recommendation or statement as to advisability by such Board of
Directors or such committee of the Offer, the Merger or this Agreement, (ii)
approve or recommend or take no position with respect to, or propose to approve
or recommend or take no position with respect to, any Takeover Proposal, (iii)
cause the Company to enter into any agreement
27
<PAGE>
related to any Takeover Proposal (other than a confidentiality agreement
contemplated by paragraph (a) above) or (iv) take or fail to take any action
(including amending the Rights Plan or the Rights) which is designed to or which
has the effect of making all or any part of the Rights, the Rights Plan, Section
203 of the DGCL or Article 12.1.1. of the Company's Certificate of Incorporation
not applicable to or not triggered by any Takeover Proposal.
(c) Notwithstanding the provisions of paragraphs (a) and (b) above,
prior to the purchase of at least a majority of the outstanding Shares pursuant
to the Offer, the Company may, to the extent the Board of Directors of the
Company determines, in good faith, after consultation with and based upon the
advice of outside legal counsel, that its fiduciary duties under applicable law
require it to do so, participate in discussions or negotiations with, and
furnish information to, any person, entity or group after such person, entity or
group has delivered to the Company, in writing, an unsolicited bona fide
Takeover Proposal (which may be subject to customary conditions, including a
"due diligence" condition) if such person, group or entity enters into a
confidentiality agreement substantially identical to the Confidentiality
Agreement (as hereinafter defined) and the Board of Directors of the Company in
its good faith reasonable judgment determines, after consultation with its
independent financial advisors, that (i) such Takeover Proposal would result in
a transaction more favorable than the transactions contemplated hereby to the
shareholders from a financial point of view, (ii) the person making such
Takeover Proposal is financially capable of consummating such Takeover Proposal
or that the financing necessary to consummate such Takeover Proposal, to the
extent required, is then committed or is capable of being obtained by such
person and (iii) such Takeover Proposal is otherwise as likely to be consummated
as are the transactions contemplated hereby (such a Takeover Proposal being
hereinafter referred to as a "Superior Proposal"). In addition, notwithstanding
the provisions of paragraph (a) above, in connection with a possible Takeover
Proposal, the Company may refer a third party to this Section 6.2 or make a copy
of this Section 6.2 available to a third party. In the event the Company
receives a Superior Proposal, nothing contained in this Agreement (but subject
to the terms hereof, including without limitation Section 8.5) will prevent the
Board of Directors of the Company from recommending such Superior Proposal to
its shareholders, if the Board determines, in good faith, after consultation
with and based upon the advice of outside legal counsel, that such action is
required by its fiduciary duties under applicable law; in such case, the Board
of Directors of the Company may withdraw, modify or refrain from making its
recommendation set forth in Section 6.3, and, to the extent it does so, the
Company may refrain from soliciting proxies to secure the vote of its
shareholders as may be required by Section 6.3 and the Board of Directors of the
Company may amend the Schedule 14D-9 to reflect the withdrawal of its
recommendation set forth therein and file a new Schedule 14D-9 setting forth its
recommendation with respect to such Superior Proposal; provided however, that
the Company shall (i) provide Parent at least twenty-four (24) hours' prior
notice of any Company Board of Directors meeting at which it is reasonably
expected to contemplate a Superior Proposal and (ii) not accept or recommend to
its shareholders a Superior Proposal for a period of not less than five (5)
business days after Parent's receipt of a copy of such Superior Proposal; and
provided, further, that, unless this Agreement has been terminated in accordance
with Section 8.1, nothing contained in this Section 6.2
28
<PAGE>
shall limit the Company's obligation to call, give notice of, hold or convene
the Shareholders Meeting (regardless of whether the recommendation of the Board
of Directors of the Company shall have been withdrawn, modified or not yet made)
or to provide the shareholders with material information relating to such
meeting.
(d) The Company shall immediately advise Parent orally and in writing
of any request for information or of any Takeover Proposal, the material terms
and conditions of such request or Takeover Proposal and the identity of the
person making such request or Takeover Proposal. The Company will immediately
inform Parent of any material change in the details (including amendments or
proposed amendments) of any such request or Takeover Proposal.
(e) Nothing contained in this Section 6.2 shall prohibit the Company
from taking and disclosing to its shareholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to the
Company's shareholders if, in the good faith judgment of the Board of Directors
of the Company, after consultation with outside counsel, failure so to disclose
would be inconsistent with applicable law, provided, however, that except as set
forth above, neither the Company nor its Board of Directors nor any committee
thereof shall withdraw or modify, or propose to withdraw or modify, its position
with respect to the Offer, the Merger or this Agreement or approve or recommend,
or propose to approve or recommend, or state to be advisable, a Takeover
Proposal.
SECTION 6.3 Shareholder Approval; Preparation of Proxy Statement.
----------------------------------------------------
(a) If the Company Shareholder Approval is required by law, the
Company shall, as promptly as practicable following the expiration of the Offer,
duly call, give notice of, convene and hold a meeting of its shareholders (the
"Shareholders Meeting") for the purpose of obtaining the Company Shareholder
Approval. The Company shall, through its Board of Directors, recommend to its
shareholders that the Company Shareholder Approval be given. Notwithstanding the
foregoing, if Sub or any other subsidiary of Parent shall acquire at least 90%
of the outstanding Shares, the parties shall, at the option and request of
Parent, take all necessary and appropriate action to cause the Merger to become
effective as soon as practicable after the expiration of the Offer without a
Shareholders Meeting in accordance with the short form merger provisions of the
DGCL. Without limiting the generality of the foregoing, the Company agrees that
its obligations pursuant to the first sentence of this Section 6.3(a) shall not
be affected by (i) the commencement, public proposal, public disclosure or
communication to the Company of any Takeover Proposal or (ii) the withdrawal or
modification by the Board of Directors of the Company of its approval or
recommendation of the Offer, this Agreement or the Merger.
(b) If the Company Shareholder Approval is required by law, the
Company shall, as soon as practicable following the expiration of the Offer,
prepare and file a preliminary proxy statement (the "Proxy Statement") with the
SEC and shall use all reasonable efforts to respond to any comments of the SEC
or its staff and to cause the Proxy Statement to be mailed to the Company's
shareholders as promptly as practicable.
29
<PAGE>
The Company shall notify Parent promptly of the receipt of any comments from the
SEC or its staff and of any request by the SEC or its staff for amendments or
supplements to the Proxy Statement or for additional information and will supply
Parent with copies of all correspondence between the Company or any of its
representatives, on the one hand, and the SEC or its staff, on the other hand,
with respect to the Proxy Statement or the Merger. The Company shall give Parent
an opportunity to comment on any correspondence with the SEC or its staff or any
proposed material to be included in the Proxy Statement prior to transmission to
the SEC or its staff and shall not transmit any such material to which Parent
reasonably objects. If at any time prior to the Shareholders Meeting there shall
occur any event that should be set forth in an amendment or supplement to the
Proxy Statement, the Company shall promptly prepare and mail to its shareholders
such an amendment or supplement. The Company shall not mail any Proxy Statement,
or any amendment or supplement thereto, to which Parent reasonably objects.
(c) Parent agrees to cause all Shares owned by Parent or any
subsidiary of Parent to be voted in favor of the Company Shareholder Approval.
SECTION 6.4 Access to Information.
---------------------
The Company shall, and shall cause each of its subsidiaries to, afford
to Parent and its officers, employees, accountants, counsel, agents and other
representatives reasonable access to all of the properties, personnel, books and
records of the Company and its subsidiaries, and shall furnish promptly all
information concerning the business, properties and personnel of Company and its
subsidiaries as Parent may reasonably request. All such information shall be
kept confidential in accordance with the terms of the Confidentiality Agreement
between Parent and the Company (the "Confidentiality Agreement").
SECTION 6.5 Updating.
--------
From time to time prior to the Effective Time, the Company shall
supplement or amend the Company Disclosure Schedule with respect to any matter
hereafter arising or any information obtained after the date hereof of which, if
existing, occurring or known at or prior to the date of this Agreement, would
have been required to be set forth or described in the Company Disclosure
Schedule or which is necessary to complete or correct any information in such
schedule or in any representation and warranty of the Company which has been
rendered inaccurate thereby, except for such information that would not cause
any representation or warranty of the Company or the Company Disclosure Schedule
to be untrue or incomplete in any material respect. For purposes of determining
the satisfaction of the conditions to the consummation of the transactions
contemplated hereby, no such supplement, amendment or information shall be
considered. The Company shall promptly inform Parent of (a) any claim by a
third party that a contract has been breached, is in default, may not be renewed
or that a consent would be required as a result of the transactions contemplated
by this Agreement or the Shareholder Agreement, (b) any Material Adverse Effect
on the Company, (c) any litigation or Governmental Entity complaint,
investigation or hearing (or communications indicating the same may be
contemplated) against or affecting the Company or any
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subsidiary or (d) any written notice from any taxing authority proposing any
adjustment for any Tax of the Company or any subsidiary and provide to Parent a
copy of such notice. The Company shall promptly deliver to Parent true and
correct copies of any forms, reports, schedules, statements and other documents
filed by the Company or any subsidiary with the SEC subsequent to the date
hereof.
SECTION 6.6 Reasonable Efforts.
-------------------
(a) Subject to Section 6.6(c), each of the parties hereto shall 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 and the Shareholder Agreement
as promptly as practicable including, but not limited to, (i) the
preparation and filing of all forms, registrations and notices required to
be filed to consummate the transactions contemplated by this Agreement and
the Shareholder Agreement and the taking of such commercially reasonable
actions as are necessary to obtain any requisite approvals, consents,
orders, exemptions or waivers by any third party or Governmental Entity,
including filings pursuant to the HSR Act and (ii) using all reasonable
efforts to cause the satisfaction of all conditions to Closing. Each party
shall promptly consult with the other with respect to, provide any
necessary information with respect to and provide the other (or its
counsel) copies of, all filings made by such party with any Governmental
Entity or any other information supplied by such party to a Governmental
Entity in connection with this Agreement or the Shareholder Agreement and
the transactions contemplated by this Agreement or the Shareholder
Agreement.
(b) Each party hereto shall promptly inform the others of any
communication from any Governmental Entity regarding any of the
transactions contemplated by this Agreement or the Shareholder Agreement.
If any party or affiliate thereof receives a request for additional
information or documentary material from any such Governmental Entity with
respect to the transactions contemplated by this Agreement or the
Shareholder Agreement, then such party will endeavor in good faith to make,
or cause to be made, as soon as reasonably practicable and after
consultation with the other party, an appropriate response in compliance
with such request. Nothing herein shall require any party to waive any
substantial rights or agree to any substantial limitation on its (or the
Surviving Corporation's) operations or to dispose of any assets.
(c) Nothing in this Section 6.6 shall require, or be construed to
require, Parent or any of its affiliates to proffer to, or agree to (i)
license, sell, hold separate, discontinue or limit, before or after the
Effective Time, any assets, businesses, or interest in any assets or
businesses of Parent, the Company or any of their respective affiliates (or
to consent to any license, sale, holding separate, or discontinuance or
limitation by the Company of any of its assets or businesses) or (ii) agree
to any conditions relating to, or changes or restriction in, the operations
of any such asset or businesses which, in either case, could, in the
judgment of the Board of Directors of Parent, materially and adversely
impact the economic or business benefits to Parent of the transactions
contemplated by this Agreement.
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(d) Parent shall cause Sub to comply with its obligations under this
Agreement.
SECTION 6.7 Indemnification; Insurance.
---------------------------
(a) Parent and Sub agree that all rights to indemnification for acts
or omissions occurring prior to the Effective Time now existing in favor of
the current or former directors or officers (the "Indemnified Parties") of
the Company and its subsidiaries as provided in their respective articles
of incorporation or by-laws (or similar organizational documents), shall
survive the Merger and shall continue in full force and effect in
accordance with their terms for the period of all applicable statutes of
limitations from the Effective Time. Further, Parent and Sub agree that the
limitations of liability regarding the directors of the Company as
currently provided in Article 10 of the Company's Certificate of
Incorporation shall continue in full force and effect and during the period
of all applicable statutes of limitations and shall not be amended in a
manner that adversely affects the rights of any party to indemnification
thereunder or under this Section 6.7.
(b) For the period of all applicable statutes of limitations from the
Effective Time, Parent shall, unless Parent agrees in writing to guarantee
the indemnification obligations set forth in Section 6.7(a), maintain in
effect the Company's current directors' and officers' liability insurance
covering those persons who are currently covered by the Company's
directors' and officers' liability insurance policy (a true and correct
copy of which has been heretofore delivered to Parent) (or, in lieu of
maintaining such insurance, cause coverage to be provided under any policy
maintained for the benefit of Parent or any of its subsidiaries or
otherwise obtained by Parent, so long as the terms thereof are no less
advantageous to the intended beneficiaries thereof than those of the
Company's policy), provided, however, that in no event shall Parent be
required to expend in excess of 150% of the annual premiums currently paid
by the Company for such insurance, which the Company represents is
approximately $175,000, and, provided further, that if the annual premiums
of such insurance coverage exceed such amount, Parent shall be obligated to
obtain a policy with the greatest coverage available for a cost not
exceeding such amount.
(c) This Section 6.7 shall survive the consummation of the Merger at
the Effective Time, is intended to benefit the Indemnified Parties, and
shall be binding on all successors and assigns of Parent and the Surviving
Corporation. Parent, Sub, the Company and the Surviving Corporation agree
to reimburse each of the Indemnified Parties against all costs and expenses
(including reasonable attorneys' fees and disbursements) incurred by any
such Indemnified Party against Parent, Sub, the Company or the Surviving
Corporation to enforce to the fullest extent the rights to indemnification
set forth in this Section 6.7, provided that there is a finding that such
Indemnified Party was entitled to such indemnification.
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<PAGE>
SECTION 6.8 Certain Litigation.
------------------
The Company agrees that it shall not settle any litigation commenced
after the date hereof against the Company or any of its directors by any
shareholder of the Company relating to the Offer, the Merger, this
Agreement, or the Shareholder Agreement, without the prior written consent
of Parent. In addition, except as provided in Section 6.2(c), the Company
shall not voluntarily cooperate with any third party that may hereafter
seek to restrain or prohibit or otherwise oppose the Offer or the Merger
and shall cooperate with Parent and Sub to resist any such effort to
restrain or prohibit or otherwise oppose the Offer or the Merger.
SECTION 6.9 Certain Transaction Related Fees.
--------------------------------
The Company shall not, and shall not permit any subsidiary to, incur,
spend or otherwise become liable or obligated for any fees, costs or other
expenses arising out of or related to the transactions contemplated hereby
and by the Shareholder Agreement, including, without limitation, fees of
legal counsel, investment banking, and other financial and other advisors,
in excess of $4,000,000. The Company shall not, without the prior written
consent of Parent, amend the arrangements with the Financial Advisor, which
have been disclosed by the Company to Parent.
SECTION 6.10 Benefit Arrangements.
---------------------
For a period of at least one year following the Effective Time, Parent
will provide benefits to employees of the Company and its subsidiaries that
are substantially equivalent to the benefits currently provided to
similarly situated employees of Parent and its subsidiaries. From and after
the Effective Time, Parent and its subsidiaries shall grant all employees
of the Company and its subsidiaries who are employed by the Company or any
subsidiary of the Company immediately before the Effective Time credit for
all service (to the same extent as service with Parent is taken into
account with respect to similarly situated employees of Parent or its
subsidiaries) with the Company or its subsidiaries prior to the Effective
Time for (i) vesting purposes and (ii) for purposes of vacation accrual
after the Effective Time as if such service with the Company or its
subsidiaries were service with Parent or its subsidiaries, provided,
however, that past service credit in any plan intended to be qualified
under Section 401(a) of the Code shall not exceed five years. Parent and
the Company agree that with respect to any medical or dental benefit plan
of Parent, Parent shall waive (or cause to be waived) any pre-existing
condition exclusion and actively-at-work requirements (provided, however,
that no such waiver shall apply to a pre-existing condition of any employee
of the Company or a subsidiary of the Company who was, as of the Effective
Time, excluded from participation in a similar plan maintained by the
Company or any of its subsidiaries immediately before the Effective Time by
virtue of such pre-existing condition and provided that any covered
expenses incurred on or before the Effective Time by an employee or an
employee's covered dependents shall be taken into account for purposes of
satisfying applicable deductible, coinsurance and maximum out-of-pocket
provisions after the Effective Time to the same extent as such expenses are
taken into account for the benefit of similarly situated employees of
Parent or its subsidiaries. Following the
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<PAGE>
date hereof, Parent and the Company agree to negotiate in good faith the
terms and conditions of severance arrangements with respect to employees of
the Company. Nothing contained herein shall prevent, prohibit, restrict or
limit in any way Parent's ability to terminate the employment of any
employee of the Company or any of its subsidiaries and any agreements to
provide to such employee benefits pursuant to this Section 6.10 shall
terminate with respect to such employee at the time such employee's
employment is terminated.
SECTION 6.11 Takeover Statutes.
------------------
If any "fair price," "moratorium," "control share acquisition" or
other form of antitakeover Law is or shall become applicable to the Offer,
the Merger, this Agreement, the Shareholder Agreement, the acquisition of
Shares by Sub pursuant to the Offer and the Shareholder Agreement or any
other transaction contemplated hereby or by the Shareholder Agreement,
unless the Board of Directors recommends a Superior Proposal in accordance
with Sections 6.2(c) and 8.5 hereof, the Company and the members of the
Board of Directors of the Company shall grant such approvals and take such
actions as are necessary so that the Offer, the Merger, this Agreement, the
Shareholder Agreement, the acquisition of Shares by Sub pursuant to the
Offer and the Shareholder Agreement and any other transaction contemplated
hereby and by the Shareholder Agreement may be consummated as promptly as
practicable on the terms contemplated hereby and by the Shareholder
Agreement and otherwise act to eliminate or minimize the effects of such
Law on the Offer, the Merger, this Agreement, the Shareholder Agreement,
the acquisition of Shares by Sub pursuant to the Offer and the Shareholder
Agreement and any other transaction contemplated hereby and by the
Shareholder Agreement.
SECTION 6.12 Shareholder Agreement Legend.
----------------------------
The Company will not register the transfer of any Certificate unless
such transfer is made in accordance with the terms of the Shareholder
Agreement. The Company will inscribe upon any Certificate representing the
Shares owned beneficially or otherwise by a Shareholder (as such term is
defined in the Shareholder Agreement) the following legend: THE SHARES OF
COMMON STOCK, VALUE $0.01 PER SHARE OF THE COMPANY REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO A SHAREHOLDER AGREEMENT DATED AS OF AUGUST 10,
1998, AND ARE SUBJECT TO THE TERMS THEREOF. COPIES OF SUCH AGREEMENT MAY BE
OBTAINED AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY.
SECTION 6.13 Loan Agreement.
--------------
Promptly following the execution and delivery of this Agreement,
Parent and the Company shall enter into a loan agreement in the form
attached hereto as Exhibit 6.13 (the "Loan Agreement").
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SECTION 6.14 Redemption of Series B Stock.
----------------------------
(a) The Company shall take all action necessary to redeem, including,
without limitation, providing notices of redemption required pursuant to
the Certificate of Designations governing the Series B Stock promptly
following the satisfaction of all conditions to such redemption as provided
in the Certificate of Designations for the Series B Stock and shall redeem
if permitted to do so pursuant to the terms of the Certificate of
Designations any and all outstanding shares of Series B Stock (other than
shares of Series B Stock converted by the holders thereof into shares of
Common Stock) prior to the Effective Time in accordance with the
Certificate of Designations of the Series B Stock.
(b) Purchaser shall make an offer to each holder of the outstanding
Series B Stock to purchase all outstanding Series B Stock held by such
holder at the price per share of Series B Stock contemplated by Section
5(d) of the Certificate of Designations of the Series B Stock.
(c) The Company shall take all action necessary to cause the
expiration of the Warrants as of the Effective Time in accordance with the
terms of the Warrants, including, without limitation, providing notice of
the Offer and the Merger as contemplated by the terms of the Warrants
promptly following the date of this Agreement.
ARTICLE VII.
CONDITIONS
SECTION 7.1 Conditions to Each Party's Obligation To Effect the
---------------------------------------------------
Merger.
------
The respective obligation of each party to effect the Merger shall be
subject to the satisfaction of the following conditions:
(a) Company Shareholder Approval. If required by applicable law, the
----------------------------
Company Shareholder Approval shall have been obtained.
(b) No Injunctions or Restraints. No Law or Order issued by any court
----------------------------
of competent jurisdiction or other Governmental Entity or other legal
restraint or prohibition preventing the consummation of the Merger shall be
in effect, provided, however, that each of the parties shall have used
reasonable efforts to prevent the entry of any such Order and to appeal as
promptly as possible any Order that may be entered.
(c) Purchase of Shares. Sub shall have previously accepted for
------------------
payment and paid for all Shares validly tendered and not withdrawn pursuant
to the Offer.
(d) All authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations of waiting periods imposed by,
any Governmental Entity or third party necessary for the consummation of
the transactions contemplated by this Agreement shall have been filed,
occurred or been obtained, with such exceptions as
35
<PAGE>
would not individually or in the aggregate have a Material Adverse Effect
on the Company.
ARTICLE VIII.
TERMINATION AND AMENDMENT
SECTION 8.1 Termination.
-----------
Subject to Section 8.5(b), this Agreement may be terminated at any
time prior to the Effective Time, whether before or after approval of the
terms of this Agreement by the shareholders of the Company:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if (x) the Offer shall have expired without the
acceptance for payment of Shares thereunder or (y) Sub
shall not have accepted for payment any Shares pursuant
to the Offer prior to March 31, 1999, provided,
however, that the right to terminate this Agreement
pursuant to this (b)(i) shall not be available to any
party whose failure to perform any of its obligations
under this Agreement results in the failure of any such
condition or if the failure of such condition results
from facts or circumstances that constitute a breach of
representation or warranty under this Agreement by such
party; or
(ii) if any Governmental Entity shall have issued an Order
or taken any other action permanently enjoining,
restraining or otherwise prohibiting the acceptance for
payment of, or payment for, Shares pursuant to the
Offer or the Merger and such Order or other action
shall have become final and nonappealable;
(c) by Parent prior to the purchase of Shares pursuant to the Offer
if the Company shall have breached or failed to perform any representation,
warranty, covenant or other agreement contained in this Agreement that
would give rise to the failure of a condition set forth in paragraph (e) or
(f) of Exhibit A;
(d) by Parent or Sub if either (A) Parent or Sub is entitled to
terminate the Offer as a result of the occurrence of any event set forth in
paragraph (d) of Exhibit A to this Agreement or (B) the Company has
breached in any material respect its covenants contained in Section 6.2; or
(e) by the Company prior to the purchase of Shares pursuant to the
Offer if Parent or Sub shall have breached or failed to perform any of
their respective representations, warranties, covenants or other agreements
contained in this Agreement,
36
<PAGE>
except, in any case, such breaches and failures which are not reasonably
likely to materially and adversely affect Parent's or Sub's ability to
consummate the Offer or the Merger.
(f) by Parent if any person, entity or group (as such terms are
defined or used in Section 13d-3 of the Exchange Act) other than Parent or
Sub acquires beneficial ownership (as such term is defined or used in Rule
13d-3 under the Exchange Act) of 30% or more of the outstanding Shares;
(g) by the Company if prior to the purchase of at least a majority of
the outstanding Shares pursuant to the Offer, the Board of Directors of the
Company shall have withdrawn or modified its approval or recommendation of
the Offer, this Agreement or the Merger to permit the Company to negotiate
or execute a definitive agreement relating to a Superior Proposal or to
approve a Superior Proposal, or the Board of Directors of the Company shall
have recommended such Superior Proposal, in each case in accordance with
Section 6.2(c) hereof.
SECTION 8.2 Effect of Termination.
---------------------
Except as specifically provided in this Section 8.2 hereof, in the
event of a termination of this Agreement by either the Company or Parent as
provided in Section 8.1, this Agreement shall forthwith become void and
there shall be no liability or obligation on the part of Parent, Sub or the
Company or their respective officers or directors, provided, however, that
(i) nothing herein shall relieve any party for liability for any willful
breach hereof and (ii) the Confidentiality Agreement, including the
standstill provisions therein, the Loan Agreement and the agreements
contained in Section 8.5 of this Agreement shall survive any termination
hereof.
SECTION 8.3 Amendment.
---------
This Agreement may be amended by the parties hereto, by duly
authorized action taken, at any time before or after obtaining the Company
Shareholder Approval, but, after the purchase of Shares pursuant to the
Offer, no amendment shall be made which decreases the Merger Consideration
and, after the Company Shareholder Approval, no amendment shall be made
which by law requires further approval by such shareholders without
obtaining such further approval. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the parties hereto.
SECTION 8.4 Extension; Waiver.
-----------------
At any time prior to the Effective Time, the parties hereto may, to
the extent legally allowed, subject to Section 8.3, (i) extend the time for
the performance of any of the obligations or other acts of the other
parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto or
(iii) 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 a written instrument signed
on behalf of such
37
<PAGE>
party. The failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a waiver of
those rights.
SECTION 8.5 Expenses.
---------
(a) Except as otherwise provided in this Section 8.5, each party
shall bear its own expenses in connection with the transactions
contemplated by this Agreement.
(b) If (i) this Agreement is terminated pursuant to Sections 8.1(c),
8.1(d) or 8.1(g), or (ii) at any time on or prior to six months from the
date of any termination of this Agreement for any reason other than any
termination by the Company pursuant to Section 8.1(e), there shall occur a
Change in Control (as hereinafter defined), then the Company shall pay to
Parent a fee of $5,000,000 by wire transfer of immediately available funds.
Such fee shall be paid prior to and as a condition to any termination in
the event of any termination pursuant to Section 8.1(g) by the Company, and
in any other event within one business day following such termination. The
Company acknowledges that the agreements contained in this Section 8.5(b)
are an integral part of the transactions contemplated in this Agreement,
and that, without these agreements, Parent would not enter into this
Agreement. Accordingly, if the Company fails to pay the amount due pursuant
to this Section 8.5(b) when it is required to be paid, and, in order to
obtain such payment, Parent commences a suit which results in a judgment
against the Company for the fee set forth in this Section 8.5(b), the
Company shall pay to Parent its costs and expenses (including attorneys'
fees) in connection with such suit, including any costs of collection,
together with interest on the amount of the fee at the rate of 12% per
annum from the date such fee was required to be paid.
(c) For purposes hereof, "Change of Control" means the occurrence of
any of the following events:
(i) the Company is merged or consolidated with or into another
corporation (other than as contemplated by this Agreement) with
the effect that the common shareholders immediately prior to such
merger or consolidation hold less than fifty percent (50%) of the
ordinary voting power of the outstanding securities of the
surviving corporation of such merger or the corporation resulting
from such consolidation;
(ii) a change in the composition of the Board of Directors of the
Company after the date hereof (other than as contemplated by this
Agreement) as a result of which fewer than a majority of the
incumbent directors are directors who either (i) had been
directors of the Company 12 months prior to such change, or (ii)
were elected, or nominated for election, to the Board of
Directors with the affirmative votes of a majority of the
directors who had been directors of the Company 12 months prior
to such change and who were still in office at the time of the
election or nomination;
(iii) any person or persons, entity or group (as such terms are defined
or
38
<PAGE>
used in Section 13d-3 under the Exchange Act) shall:
A. as a result of a tender or exchange offer, open market
purchases, merger, privately negotiated purchases or
otherwise, have become, directly or indirectly, the
beneficial owner (as such term is defined or used in
Rule 13d-3 under the Exchange Act) of thirty percent
(30%) or more of the Shares;
B. commence, or announce the intention to commence, any
tender offer or exchange offer for thirty percent (30%)
or more of the Shares; or
(iv) the Company shall enter into any agreement, including without
limitation an agreement in principle, regarding any Takeover
Proposal.
ARTICLE IX.
MISCELLANEOUS
SECTION 9.1 Nonsurvival of Representations and Warranties.
---------------------------------------------
None of the representations and warranties in this Agreement or
in any instrument delivered pursuant to this Agreement shall survive the
Effective Time.
SECTION 9.2 Notices.
-------
All notices and other communications hereunder shall be in writing and
shall be deemed given upon receipt by the parties at the following
addresses (or at such other address for a party as shall be specified by
like notice):
(a) if to Parent or Sub, to
Guidant Corporation
111 Monument Circle
Indianapolis, Indiana 46204-5129
Attention: J.B. King, Esq.
with a copy to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019-6092
Fax: (212) 259-6333
Attention: Bernard E. Kury, Esq.
Jonathan L. Freedman, Esq.
(b) if to the Company, to
39
<PAGE>
InControl, Inc.
6675 185th Ave. N.E.
Redmond, WA 98052-6734
Fax: (425) 861-9301
Attention: Kurt C. Wheeler
with a copy to:
Perkins Coie LLP
1201 Third Avenue, 40th Floor
Seattle, Washington 98101-3099
Fax: (206) 583-8500
Attention: Stephen M. Graham, Esq.
Alan C. Smith, Esq.
SECTION 9.3 Interpretation.
--------------
(a) When a reference is made in this Agreement to an Article or
a Section, such reference shall be to an Article or a Section of this
Agreement unless otherwise indicated.
(b) The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
(c) This Agreement is the result of the joint efforts of Parent,
Sub and the Company, and each provision hereof has been subject to the
mutual consultation, negotiation and agreement of the parties and there
shall be no construction against any party based on any presumption of that
party's involvement in the drafting thereof.
(d) The words "include", "includes" or "including" shall be
deemed to be followed by the words "without limitation."
(e) "knowledge" means actual awareness of a particular fact or
other matter. Knowledge of a corporate entity is deemed to include actual
knowledge of its officers and directors.
(f) A "subsidiary" of any person means another person, an amount
of the voting securities, other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its Board
of Directors or other governing body (or, if there are no such voting
interests, 50% or more of the equity interests of which) is owned directly
or indirectly by such first person.
(g) The term "ordinary course of business" (or similar terms)
shall be deemed to be followed by the words "consistent with past
practice."
40
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SECTION 9.4 Counterparts.
------------
This Agreement may be executed in two or more counterparts, all of
which shall be considered one and the same agreement, it being understood that
all parties need not sign the same counterpart.
SECTION 9.5 Entire Agreement; No Third Party Beneficiaries.
----------------------------------------------
This Agreement (including the documents and the instruments referred
to herein) (a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, and (b) except as provided in Section 6.7,
is not intended to confer upon any person other than the parties hereto any
rights or remedies hereunder.
SECTION 9.6 Governing Law.
-------------
This Agreement shall be governed and construed in accordance with the
laws of the State of Delaware without regard to any applicable conflicts of law.
SECTION 9.7 Publicity.
---------
Except as otherwise required by law, court process or the rules of any
applicable securities exchange or the Nasdaq National Market or as contemplated
or provided elsewhere herein, no party hereto shall issue any press release or
otherwise make any public statement with respect to the transactions
contemplated by this Agreement without prior consultation with the other parties
hereto.
SECTION 9.8 Assignment.
----------
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other parties,
except that Sub may assign, in its sole discretion, any or all of its rights,
interests, liabilities and obligations hereunder to Parent or to any wholly
owned subsidiary of Parent, upon which assignment Sub will be relieved of and
released from its liabilities and obligations hereunder. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by the parties and their respective successors and assigns.
SECTION 9.9 Enforcement.
-----------
The parties agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
of this Agreement, in addition to any other remedy to which they are entitled at
law or in equity. In addition, each of the parties hereto waives any right to
trial by jury with respect to any claim or proceeding related to or arising out
of this Agreement or any of the transactions contemplated hereby.
41
<PAGE>
SECTION 9.10 Severability.
------------
This Agreement shall be deemed severable; the invalidity or
unenforceability of any term or provision of this Agreement shall not affect the
validity or enforceability of the balance of this Agreement or of any other term
hereof, which shall remain in full force and effect. If of any of the provisions
hereof are determined to be invalid or unenforceable, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible.
42
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the date
first written above.
GUIDANT CORPORATION
By: /s/ Ronald W. Dollens
----------------------------
Name: Ronald W. Dollens
Title: President and CEO
PEGASUS ACQUISITIONS CORP.
By: /s/ A. Jay Graf
----------------------------
Name: A. Jay Graf
Title: President
INCONTROL, INC.
By: /s/ Kurt C. Wheeler
----------------------------
Name: Kurt C. Wheeler
Title: Chairman of the Board
President and CEO
43
<PAGE>
EXHIBIT A
Conditions of the Offer
Notwithstanding any other term of the Offer, Sub shall not be required to
accept for payment or, subject to any applicable rules and regulations of the
SEC, including Rule 14e-1(c) under the Exchange Act (relating to Sub's
obligation to pay for or return tendered Shares after the termination or
withdrawal of the Offer), to pay for any Shares tendered pursuant to the Offer
unless prior to the Expiration Date (as defined in the Offer) (i) there shall
have been validly tendered a majority of the outstanding Shares (determined on a
fully diluted basis) (the "Minimum Condition") (ii) the Series B Stock shall
have been redeemed by the Company or converted into shares of Common Stock (in
either case in accordance with the Certificate of Designations for the Series B
Stock) and (iii) any waiting period under the HSR Act applicable to the purchase
of Shares pursuant to the Offer shall have expired or been terminated.
Furthermore, notwithstanding any other term of the Offer or this Agreement, Sub
shall not be required to accept for payment or, subject as aforesaid, to pay for
any Shares not theretofore accepted for payment or paid for, and may terminate
the Offer if, at any time on or after the date of this Agreement and prior to
the Expiration Date, any of the following conditions exists:
(a) there shall be threatened, instituted or pending by any
Governmental Entity any suit, action or proceeding (i) challenging the
acquisition by Parent or Sub of any Shares under the Offer, seeking to restrain
or prohibit the making or consummation of the Offer or the Merger or seeking to
obtain from the Company, Parent or Sub any damages that are material in relation
to the Company and its subsidiaries taken as a whole, (ii) seeking to prohibit
or materially limit the ownership or operation by the Company, Parent or any of
their respective subsidiaries of a material portion of the business or assets of
the Company and its subsidiaries, taken as a whole, or Parent and its
subsidiaries, taken as a whole, or to compel the Company and its subsidiaries,
taken as a whole or Parent to dispose of or hold separate any material portion
of the business or assets of the Company or Parent and its subsidiaries, taken
as a whole, in each case as a result of the Offer or any of the other
transactions contemplated by this Agreement or the Shareholder Agreement, (iii)
seeking to impose material limitations on the ability of Parent or Sub to
acquire or hold, or exercise full rights of ownership of, any Shares to be
accepted for payment pursuant to the Offer including, without limitation, the
right to vote such Shares on all matters properly presented to the shareholders
of the Company, (iv) seeking to prohibit Parent or any of its subsidiaries from
effectively controlling in any material respect any material portion of the
business or operations of the Company or its subsidiaries or (v) which otherwise
is reasonably likely to have a Material Adverse Effect on the Company;
(b) there shall be any Law or Order enacted, entered, enforced,
promulgated or deemed applicable to the Offer or the Merger, by any Governmental
Entity, other than the routine application to the Offer or the Merger of
applicable waiting periods under the HSR Act, that is reasonably likely to
result, directly or indirectly, in any of the consequences referred to in
clauses (i) through (v) of paragraph (a) above;
44
<PAGE>
(c) there shall have occurred any Material Adverse Effect with
respect to the Company;
(d) (i) the Board of Directors of the Company or any committee
thereof shall have (x) withdrawn or modified in a manner adverse to Parent or
Sub its approval, recommendation or statement as to advisability of the Offer or
the Merger or its adoption of this Agreement or the Shareholder Agreement, (y)
approved, recommended, stated to be advisable or taken a neutral position (or
failed to or was otherwise unable to take a position) with respect to any
Takeover Proposal, (z) failed to reaffirm its approval, recommendation or
statement as to advisability of the Offer or the Merger or its adoption of this
Agreement or the Shareholder Agreement within five business days of being
requested by Parent to do so or (ii) the Board of Directors of the Company or
any committee thereof shall have resolved to take any of the foregoing actions,
except any taking or disclosing to the shareholders a position contemplated by
Rule 14e-2(a)(2) or (3) promulgated under the Exchange Act with respect to any
Takeover Proposal if within five (5) business days of taking or disclosing to
the shareholders the aforementioned position, the Board of Directors publicly
reconfirms its recommendation of the transactions contemplated hereby as set
forth in Section 1.2(a) hereof;
(e) any of the representations and warranties of the Company set
forth in this Agreement shall not be true and correct (except where such failure
to be true and correct would not have a Material Adverse Effect on the Company
(except with respect to any representation or warranty which is already
qualified by a materiality standard in which case such representation or
warranty shall not be true and correct in all respects)), in each case at the
date of the Agreement and at the scheduled or extended expiration of the Offer;
(f) the Company shall have failed to perform or comply with any
agreement, obligation or covenant to be performed or complied with by it under
this Agreement in all material respects, which failure to perform or comply has
not been cured within five business days after the giving of written notice to
the Company; or
(g) this Agreement shall have been terminated in accordance with its
terms.
The foregoing conditions are for the sole benefit of Parent and Sub and
may, subject to the terms of this Agreement, be waived by Parent and Sub in
whole or in part at any time and from time to time in their reasonable
discretion. The failure by Parent or Sub at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right, the waiver of
any such right with respect to particular facts and circumstances shall not be
deemed a waiver with respect to any other facts and circumstances and each such
right shall be deemed an ongoing right that may be asserted at any time and from
time to time.
Terms used but not defined herein shall have the meanings assigned to such
terms in the Agreement to which this Exhibit A is a part.
45
<PAGE>
Exhibit (c)(2)
<PAGE>
FORM OF SHAREHOLDER AGREEMENT
-----------------------------
SHAREHOLDER AGREEMENT, dated as of August 10, 1998, among GUIDANT
CORPORATION, an Indiana corporation ("Parent"), PEGASUS ACQUISITIONS CORP., a
Delaware corporation and a wholly-owned subsidiary of Parent ("Sub"), and the
persons listed on Schedule A hereto (the "Shareholders").
WHEREAS, Parent, Sub and InControl, Inc., a Delaware corporation (the
"Company"), propose to enter into an Agreement and Plan of Merger, dated the
date hereof (as the same may be amended or supplemented, the "Merger Agreement")
providing for (i) the making of a cash tender offer (as such offer may be
amended from time to time as permitted under the Merger Agreement, the "Offer")
by Sub for all the outstanding shares of Common Stock, par value $0.01 per
share, of the Company (the "Company Common Stock") and (ii) the merger of Sub
with the Company (the "Merger");
WHEREAS, each Shareholder is the record and beneficial owner of the number
of shares of Company Common Stock set forth opposite such Shareholder's name on
Schedule A hereto; such shares of Company Common Stock, as such shares may be
adjusted by stock dividend, stock split, recapitalization, combination or
exchange of shares, merger, consolidation, reorganization or other change or
transaction of or by the Company, together with shares of Company Common Stock
that may be acquired after the date hereof by such Shareholder, including shares
of Company Common Stock issuable upon the exercise of options to purchase
Company Common Stock (as the same may be adjusted as aforesaid), being
collectively referred to herein as the "Shares"; and
WHEREAS, as a condition to their willingness to enter into the Merger
Agreement, Parent and Sub have requested that the Shareholders enter into this
Agreement;
NOW, THEREFORE, to induce Parent and Sub to enter into, and in
consideration of their entering into, the Merger Agreement, and in consideration
of the promises and the representations, warranties and agreements contained
herein, the parties agree as follows:
1. Tender of Shares.
----------------
Each Shareholder hereby agrees that it shall tender its Shares into the
Offer and that it shall not withdraw any Shares so tendered.
2. Representations and Warranties of the Shareholders. Each Shareholder
--------------------------------------------------
hereby represents and warrants severally and not jointly to Parent and Sub as
follows:
(a) Authority. The Shareholder has all requisite power and authority to
---------
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
and the consummation of the
1
<PAGE>
transactions contemplated hereby have been duly authorized by the Shareholder.
This Agreement has been duly executed and delivered by the Shareholder and,
assuming this Agreement constitutes a valid and binding obligation of Parent and
Sub, constitutes a valid and binding obligation of the Shareholder enforceable
against the Shareholder in accordance with its terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating to creditors'
rights and general principles of equity (the "Enforceability Exceptions").
Except for the expiration or termination of the waiting periods under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act") and
filings with the Securities and Exchange Commission, neither the execution,
delivery or performance of this Agreement by the Shareholder nor the
consummation by the Shareholder of the transactions contemplated hereby will (i)
require any filing with, or permit, authorization, consent or approval of, any
federal, state, local or foreign government or any court, tribunal,
administrative agency or commission or other governmental or regulatory
authority or agency, domestic, foreign or supranational (a "Governmental
Entity"), (ii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default under, or give rise to
any right of termination, amendment, cancellation or acceleration under, or
result in the creation of any pledge, claim, lien, charge, encumbrance or
security interest of any kind or nature whatsoever (a "Lien") upon any of the
properties or assets of the Shareholder under, or require consent pursuant to,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, permit, concession, franchise, contract, agreement or
other instrument or obligation (a "Contract") to which the Shareholder is a
party or by which the Shareholder or any of the Shareholder's properties or
assets, including the Shareholder's Shares, may be bound or (iii) violate any
judgment, order, writ, preliminary or permanent injunction or decree (an
"Order") or any statute, law, ordinance, rule or regulation of any Governmental
Entity (a "Law") applicable to the Shareholder or any of the Shareholder's
properties or assets, including the Shareholder's Shares.
(b) The Shares. The Shareholder's Shares and the certificates representing
----------
such Shares are now, and at all times during the term hereof will be, held by
such Shareholder, or by a nominee or custodian for the benefit of such
Shareholder, and the Shareholder has good and marketable title to such Shares,
free and clear of any Liens, proxies, voting trusts or agreements,
understandings or arrangements, except for any such Liens or proxies arising
hereunder. The Shareholder owns of record or beneficially no shares of Company
Common Stock other than such Shareholder's Shares and shares of Company Common
Stock issuable upon the exercise of Company Stock Options.
(c) Brokers. No broker, investment banker, financial advisor or other
-------
person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of such Shareholder.
(d) Merger Agreement. The Shareholder understands and acknowledges that
----------------
Parent is entering into, and causing Sub to enter into, the Merger Agreement in
upon the Shareholder's execution and delivery of this Agreement.
2
<PAGE>
3. Representations and Warranties of Parent and Sub. Parent and Sub hereby
------------------------------------------------
jointly and severally represent and warrant to the Shareholders as follows:
(a) Authority. Parent and Sub have the requisite corporate power and
---------
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by Parent and Sub and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Parent and Sub. This Agreement has been duly executed and
delivered by Parent and Sub and, assuming this Agreement constitutes a valid and
binding obligation of the Shareholders, constitutes a valid and binding
obligation of Parent and Sub enforceable in accordance with its terms, subject
to the Enforceability Exceptions.
(b) Securities Act. The Shares will be acquired in compliance with, and
--------------
Sub will not offer to sell or otherwise dispose of any Shares so acquired by it
in violation of any of, the Securities Exchange Act of 1934 or the registration
requirements of the Securities Act of 1933.
4. Covenants of the Shareholders. Each Shareholder agrees as follows:
-----------------------------
(a) The Shareholder shall not, except as contemplated by the terms of this
Agreement, (i) sell, transfer, pledge, assign or otherwise dispose of, or enter
into any Contract, option or other arrangement (including any profit sharing
arrangement) or understanding with respect to the sale, transfer, pledge,
assignment or other disposition of, or grant or suffer to exist any Lien with
respect to, the Shares to any person other than Sub or Sub's designee, (ii)
enter into any voting arrangement, whether by proxy, voting agreement, voting
trust, power-of-attorney or otherwise, with respect to the Shares or (iii) take
any other action that would in any way restrict, limit or interfere with the
performance of its obligations hereunder or the transactions contemplated
hereby.
(b) Until the Merger is consummated or the Merger Agreement is terminated,
the Shareholder shall not, nor shall the Shareholder cause any investment
banker, financial adviser, attorney, accountant or other representative or agent
of the Shareholder to, directly or indirectly (i) solicit, initiate or encourage
(including by way of furnishing information), or take any other action designed
or reasonably likely to facilitate, any inquiries or the making of any proposal
which constitutes, or may reasonably be expected to lead to, any Takeover
Proposal or (ii) participate in any discussions or negotiations regarding any
Takeover Proposal.
(c) At any meeting of shareholders of the Company called to vote upon the
Merger and the Merger Agreement or at any adjournment thereof or in any other
circumstances upon which a vote, consent or other approval (including by written
consent) with respect to the Merger and the Merger Agreement is sought, each
Shareholder shall, including by initiating a written consent solicitation if
requested by Parent, vote (or cause to be voted) such Shareholder's Shares in
favor of the Merger, the adoption by the Company of the Merger Agreement and the
approval of the other
3
<PAGE>
transactions contemplated by the Merger Agreement. At any meeting of
shareholders of the Company or at any adjournment thereof or in any other
circumstances upon which the Shareholder's vote, consent or other approval is
sought, such Shareholder shall vote (or cause to be voted) such Shareholder's
Shares against (i) any merger agreement or merger (other than the Merger
Agreement and the Merger), consolidation, combination, sale of assets,
reorganization, recapitalization, dissolution, liquidation or winding up of or
by the Company or any other Takeover Proposal (collectively, "Alternative
Transactions") or (ii) any amendment of the Company's Certificate of
Incorporation or By-laws or other proposal or transaction involving the Company
or any of its subsidiaries, which amendment or other proposal or transaction
would in any manner impede, frustrate, prevent or nullify the Offer, the Merger,
the Merger Agreement or any of the other transactions contemplated by the Merger
Agreement (collectively, "Frustrating Transactions").
5. Grant of Irrevocable Proxy; Appointment of Proxy. (a) Each Shareholder
------------------------------------------------
hereby irrevocably grants to, and appoints, each of James M. Cornelius, Ronald
W. Dollens, and J. B. King and any other individual who shall hereafter be
designated by Parent, and each of them, such Shareholder's proxy and attorney-
in-fact (with full power of substitution), for and in the name, place and stead
of such Shareholder, to vote such Shareholder's Shares, or grant a consent or
approval in respect of such Shares, at any meeting of shareholders of the
Company or at any adjournment thereof or in any other circumstances upon which
their vote, consent or other approval is sought, (i) in favor of the Merger, the
adoption by the Company of the Merger Agreement and the approval of the other
transactions contemplated by the Merger Agreement and against (i) any merger
agreement or merger (other than the Merger Agreement and the Merger),
consolidation, combination, sale of assets, reorganization, recapitalization,
dissolution, liquidation or winding up of or by the Company and (ii) any
Alternative Transaction or Frustrating Transaction.
(b) Each Shareholder represents that any proxies heretofore given in
respect of such Shareholder's Shares are not irrevocable, and that any such
proxies are hereby revoked.
(c) Each Shareholder hereby affirms that the irrevocable proxy set forth
in this Section 5 is given in connection with the execution of the Merger
Agreement, and that such irrevocable proxy is given to secure the performance of
the duties of such Shareholder under this Agreement. Such Shareholder hereby
further affirms that the irrevocable proxy is coupled with an interest and may
under no circumstances be revoked, subject to Section 8. Such Shareholder hereby
ratifies and confirms all that such irrevocable proxy may lawfully do or cause
to be done by virtue hereof. Such irrevocable proxy is executed and intended to
be irrevocable in accordance with the provisions of Section 212 of the Delaware
General Corporation Law. Such irrevocable proxy shall be valid until the
termination of this Agreement pursuant to Section 8.
6. Further Assurances. Each Shareholder will, from time to time, execute
------------------
and deliver, or cause to be executed and delivered, such additional or further
transfers,
4
<PAGE>
assignments, endorsements, consents and other instruments as Parent or Sub may
reasonably request for the purpose of effectively carrying out the transactions
contemplated by this Agreement and to vest the power to vote such Shareholder's
Shares as contemplated by Section 5. Parent and Sub jointly and severally agree
to use reasonable efforts to take, or cause to be taken, all actions necessary
to comply promptly with all legal requirements that may be imposed with respect
to the transactions contemplated by this Agreement (including legal requirements
of the HSR Act).
7. Assignment. Neither this Agreement nor any of the rights, interests or
----------
obligations hereunder shall be assigned by any of the parties without the prior
written consent of the other parties, except that Sub may assign, in its sole
discretion, any or all of its rights, interests, liabilities and obligations
hereunder to Parent or to any wholly owned subsidiary of Parent, upon which
assignment Sub shall be relieved of and released from its liabilities and
obligations hereunder. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns. Each Shareholder agrees that this
Agreement and the obligations of such Shareholder hereunder shall attach to such
Shareholder's Shares and shall be binding upon any person or entity to which
legal or beneficial ownership of such Shares shall pass, whether by operation of
law or otherwise, including without limitation such Shareholder's heirs,
guardians, administrators or successors.
8. Termination. This Agreement, and all rights and obligations of the
-----------
parties hereunder, shall terminate upon the earliest of (a) the date upon which
the Merger Agreement is terminated pursuant to Section 8.1(a) thereof, (b) the
date upon which the Merger Agreement is terminated pursuant to Section 8.1(e)
thereof, (c) the later of (i) the first anniversary of the date of termination
of the Merger Agreement other than pursuant to Section 8.1(a) and (ii) the date
on which all waiting periods under the HSR Act applicable to the purchase of
Shares pursuant to Section 1 shall have expired or been terminated and (d) the
date that Parent or Sub shall have purchased the Shareholders' Shares pursuant
to Section 1.
9. General Provisions.
(a) Expenses. All costs and expenses incurred in connection with this
--------
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expense.
(b) Amendments. This Agreement may not be amended except by an instrument
----------
in writing signed by each of the parties hereto.
(c) Notice. All notices and other communications hereunder shall be in
------
writing and shall be deemed given upon receipt to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(i) if to Parent, to
5
<PAGE>
Guidant Corporation
111 Monument Circle
Indianapolis, Indiana 46204-5129
Attention: J.B. King, Esq.
with a copy to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, NY 10019-6092
Fax: (212) 259-6333
Attention: Bernard E. Kury, Esq.
Jonathan L. Freedman, Esq.
and
(ii) if to a Shareholder, to the address set forth under the name of such
Shareholder on Schedule A hereto
with a copy to:
Perkins Coie LLP
1201 Third Avenue, 40th Floor
Seattle, Washington 98101-3099
Fax: (206) 583-8500
Attention: Stephen M. Graham, Esq.
Alan C. Smith, Esq.
(d) Interpretation. When a reference is made in this Agreement to a
--------------
Section, such reference shall be to a Section of this Agreement unless otherwise
indicated. 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. Wherever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation".
(e) Counterparts. This Agreement may be executed in two or more
------------
counterparts, all of which shall be considered one and the same agreement, it
being understood that all parties need not sign the same counterpart.
(f) Entire Agreement; No Third-Party Beneficiaries. This Agreement
----------------
(including the documents and instruments referred to herein) (i) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof
and (ii) is not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder.
6
<PAGE>
(g) Governing Law. This Agreement shall be governed and construed in
-------------
accordance with the laws of the State of Delaware without regard to any
applicable conflicts of law.
(h) Publicity. Except as otherwise required by law, court process or the
---------
rules of a national securities exchange or the Nasdaq National Market or as
contemplated or provided in the Merger Agreement, for so long as this Agreement
is in effect, neither any Shareholder nor Parent shall issue or cause the
publication of any press release or other public announcement with respect to
the transactions contemplated by this Agreement or the Merger Agreement without
the consent of the other parties, which consent shall not be unreasonably
withheld.
10. Shareholder Capacity. No person executing this Agreement who is or
--------------------
becomes during the term hereof a director or officer of the Company makes any
agreement or understanding herein in his or her capacity as such director or
officer. Each Shareholder signs solely in his or her capacity as the record
holder and beneficial owner of, or the trustee of a trust whose beneficiaries
are the beneficial owners of, such Shareholder's Shares and nothing herein shall
limit or affect any actions taken by a Shareholder in its capacity as an officer
or director of the Company to the extent specifically permitted by the Merger
Agreement.
11. Performance by Sub. Parent covenants and agrees for the benefit of the
------------------
Shareholders that it shall cause Sub to perform in full each obligation of Sub
set forth in this Agreement.
12. Enforcement. The parties agree that irreparable damage would occur in
-----------
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in court of the United States located
in the State of Delaware or any Delaware State court, this being in addition to
any other remedy to which they are entitled at law or in equity. In addition,
each of the parties hereto waives any right to trial by jury with respect to any
claim or proceeding related to or arising out of this Agreement or any of the
transactions contemplated hereby.
7
<PAGE>
IN WITNESS WHEREOF, each of Parent and Sub has caused this Agreement to be
signed by its officer thereunto duly authorized and each Shareholder has signed
this Agreement, all as of the date first written above.
GUIDANT CORPORATION
By: _________________________
Name:
Title:
PEGASUS ACQUISITIONS CORP.
By: _________________________
Name:
Title:
SHAREHOLDER:
[SHAREHOLDER]
8
<PAGE>
SCHEDULE A
[Intentionally Omitted]
9
<PAGE>
Exhibit (c)(3)
<PAGE>
CREDIT AGREEMENT
By and Between
INCONTROL, INC.
Borrower,
and
GUIDANT CORPORATION
Lender,
Dated as of August 10, 1998
____________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1 Definitions...................................................................................... 1
ARTICLE 2 Loan............................................................................................. 7
2.1 Loan................................................................................................. 7
2.2 Interest............................................................................................. 8
2.3 Payments............................................................................................. 8
ARTICLE 3 Conditions Precedent............................................................................. 10
3.1 Conditions to Disbursement........................................................................... 10
3.2 Conditions for the Benefit of the Lender............................................................. 11
ARTICLE 4 Representations and Warranties of the Borrower................................................... 11
4.1 Due Organization..................................................................................... 11
4.2 Capitalization....................................................................................... 11
4.3 Requisite Power...................................................................................... 12
4.4 Authorization........................................................................................ 12
4.5 Officer Authorization................................................................................ 12
4.6 Binding Nature....................................................................................... 12
4.7 No Conflict.......................................................................................... 12
4.8 No Event of Default.................................................................................. 12
4.9 Full Disclosure...................................................................................... 12
4.10 Merger Agreement Representations..................................................................... 12
ARTICLE 5 Affirmative Covenants............................................................................ 13
5.1 Financial Statements and Notices..................................................................... 13
5.2 Access............................................................................................... 14
5.3 Maintenance of Existence............................................................................. 14
5.4 Facilities........................................................................................... 14
5.5 Compliance with Laws................................................................................. 14
5.6 Material Agreements.................................................................................. 15
5.7 Insurance............................................................................................ 15
5.8 Taxes and Other Liabilities.......................................................................... 15
5.9 Governmental Approvals............................................................................... 15
ARTICLE 6 Negative Covenants............................................................................... 15
6.1 Certain Covenants of the Company..................................................................... 15
6.2 Change of Business................................................................................... 15
6.3 Liens and Encumbrances............................................................................... 15
6.4 Sale-Leasebacks...................................................................................... 15
6.5 Transactions With Affiliates......................................................................... 16
6.6 Investments.......................................................................................... 16
6.7 Obligations.......................................................................................... 16
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
6.8 Intellectual Property................................................................................... 16
ARTICLE 7 Events of Default................................................................................... 16
7.1 Events of Default....................................................................................... 16
7.2 Acceleration............................................................................................ 18
ARTICLE 8 Representations and Warranties of the Lender........................................................ 18
8.1 Due Organization........................................................................................ 18
8.2 Requisite Power......................................................................................... 18
8.3 Authorization........................................................................................... 18
8.4 Officer Authorization................................................................................... 18
8.5 Binding Nature.......................................................................................... 19
8.6 No Conflict............................................................................................. 19
ARTICLE 9 Miscellaneous....................................................................................... 19
9.1 Successors and Assigns and Sale of Interests............................................................ 19
9.2 No Implied Waiver....................................................................................... 19
9.3 Amendments and Waivers.................................................................................. 19
9.4 Remedies Cumulative..................................................................................... 19
9.5 Severability............................................................................................ 19
9.6 Costs, Expenses and Attorneys' Fees..................................................................... 20
9.7 General Indemnification................................................................................. 20
9.8 Confidentiality......................................................................................... 20
9.9 Notices................................................................................................. 21
9.10 Entire Agreement....................................................................................... 21
9.11 Governing Law and Consent to Jurisdiction.............................................................. 22
9.12 Publicity.............................................................................................. 22
9.13 Counterparts........................................................................................... 22
9.14 Headings............................................................................................... 22
</TABLE>
EXHIBITS AND SCHEDULES
----------------------
No. Description
--- -----------
Exhibit 2.1 (b) Form of Note
Schedule I Liens
Schedule II Existing Defaults
ii
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (this "Agreement") is entered into as of August 10,
---------
1998, between INCONTROL, INC., A DELAWARE CORPORATION (THE "BORROWER"), AND
--------
GUIDANT CORPORATION, AN INDIANA CORPORATION (THE "LENDER").
------
W I T N E S S E T H:
- - - - - - - - - -
In consideration of the premises and mutual agreements herein contained,
the parties hereto agree as follows:
ARTICLE 1
Definitions
-----------
In addition to any terms defined elsewhere in this Agreement, the following
terms have the meanings indicated for purposes of this Agreement (such
definitions being equally applicable to the singular and plural forms of the
defined term):
"Acceleration" means that the Loan (a) shall not have been paid at the
------------
Maturity Date, or (b) shall have become due and payable prior to its stated
maturity pursuant to Section 7.2 hereof.
"Agreement" or "Credit Agreement" means this Credit Agreement, as from time
--------- ----------------
to time amended, modified or supplemented.
"Banking Day" means a day other than a Saturday or a Sunday when commercial
-----------
banks are open for business in New York, New York.
"Borrower" shall have the meaning specified in the heading to this
--------
Agreement.
"Borrowing Notice" shall have the meaning specified in Section 2.1(f)
----------------
hereof.
"Business" means the design, development, manufacture and sale of
--------
implantable atrial defibrillators and related products, including transvenous
defibrillation leads and temporary defibrillation catheters.
"Cash Equivalents" means the net current cash value of (a) obligations
----------------
issued or guaranteed by the United States of America; (b) certificates of
deposit, bankers' acceptances and other "money market instruments" issued by any
Permissible Bank; (c) open market commercial paper bearing the highest credit
rating issued by Standard & Poor's Corp. or by another nationally recognized
credit rating firm; (d) repurchase agreements entered into with any Permissible
Bank; and (e) shares of "money market funds," each having net assets of not less
than $500,000,000.
"Change of Control" means the occurrence of any of the following events:
-----------------
<PAGE>
(a) the Borrower is merged or consolidated with or into another
corporation (other than as contemplated by the Merger Agreement) with
the effect that the common stockholders immediately prior to such
merger or consolidation hold less than fifty percent (50%) of the
ordinary voting power of the outstanding securities of the surviving
corporation of such merger or the corporation resulting from such
consolidation;
(b) a change in the composition of the Board of Directors of the Borrower
after the date hereof (other than as contemplated by the Merger
Agreement) as a result of which fewer than a majority of the incumbent
directors are directors who either (i) had been directors of the
Borrower 12 months prior to such change, or (ii) were elected, or
nominated for election, to the Board of Directors with the affirmative
votes of a majority of the directors who had been directors of the
Borrower 12 months prior to such change and who were still in office
at the time of the election or nomination;
(c) any person or persons, entity or group (within the meaning of Rule
13d-5 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) shall:
(i) as a result of a tender or exchange offer, open market
purchases, merger, privately negotiated purchases or
otherwise, have become, directly or indirectly, the
beneficial owner (within the meaning of Rule 13d-3 under the
Exchange Act) of thirty percent (30%) or more of the Shares;
or
(ii) commence, or announce the intention to commence, any tender
offer or exchange offer for thirty percent (30%) or more of
the Shares;
(d) The Merger Agreement shall terminate pursuant to Sections 8.1(d) or
8.1(g) thereof; or
(e) Borrower shall enter into any agreement, including without limitation
an agreement in principle, regarding any Takeover Proposal.
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Disbursement Date" means any date on which a disbursement of the Loan is
-----------------
made. Each Disbursement Date shall be on the date designated in a written
notice from the Borrower to the Lender; provided, however, that the Lender shall
-------- -------
not be required to make any disbursement if the conditions thereto are not
satisfied.
"Dollars" and "$" mean United States Dollars.
------- -
"Effective Date" means the date of this Agreement.
--------------
"Environmental Claim" means all claims, however asserted, by any
-------------------
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law or for release or injury
to the environment or threat to public health, personal injury (including
sickness, disease or death), property damage, natural resources damage, or
otherwise alleging liability or responsibility for damages (punitive or
otherwise), cleanup, removal, remedial or response costs, restitution, civil or
criminal penalties, injunctive relief, or other type of relief.
2
<PAGE>
"Environmental Laws" means any Governmental Requirement pertaining to land
------------------
use, air, soil, surface water, groundwater (including the protection, cleanup,
removal, remediation or damage thereof), public or employee health or safety or
any other environmental matter; including without limitation, the following laws
as the same may be amended from time to time:
(1) Clean Air Act (42 U.S.C. Section 7401, et seq.);
-- ---
(2) Clean Water Act (33 U.S.C. Section 1251, et seq.);
-- ---
(3) Resource Conservation and Recovery Act (42 U.S.C. Section 6901, et
--
seq.);
---
(4) Comprehensive Environmental Response, Compensation and Liability Act
(42 U.S.C. Section 9601, et seq.);
-- ---
(5) Safe Drinking Water Act (42 U.S.C. Section 300f, et seq.);
-- ---
(6) Toxic Substances Control Act (15 U.S.C. Section 2601, et seq.);
-- ---
(7) Rivers and Harbors Act (33 U.S.C. Section 401, et seq.);
-- ---
(8) Endangered Species Act (16 U.S.C. Section 1531, et seq.);
-- ---
(9) Occupational Safety and Health Act (29 U.S.C. Section 651, et seq.).
-- ---
"Event of Default" shall have the meaning set forth in Article 7 hereof.
----------------
"Fully Diluted Common Equity" means the number of shares of the Borrower's
---------------------------
common stock that would be outstanding assuming the exercise or conversion of
all outstanding options, warrants, convertible securities and any other rights
to acquire common stock.
"GAAP" means generally accepted accounting principles set forth in the
----
pronouncements of the Financial Accounting Standards Board applied on a
consistent basis or in such other statements, opinions or interpretive releases
by such other entities as may be approved by a significant segment of the
accounting profession, which are applicable to the circumstances as of the date
of determination. Each accounting term not defined herein and each accounting
term partly defined herein to the extent not defined shall have the meaning
given to it under GAAP.
"Governmental Approvals" means any consent, right, exemption, concession,
----------------------
permit, license, authorization, certificate, order, franchise, determination or
approval of any federal, state, provincial, municipal or governmental
department, commission, board, bureau, agency or instrumentality required for
the ownership of, or activities of the Borrower or any other Person in
connection with, the business, assets and properties of the Borrower.
"Governmental Authority" means any nation or government, any state,
----------------------
province or other political subdivision thereof or any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
3
<PAGE>
"Governmental Requirements" means all legal requirements in effect from
-------------------------
time to time including all laws, statutes, codes, acts, ordinances, orders,
judgments, decrees, injunctions, rules, regulations, permits, licenses,
authorizations, certificates, orders, franchises, determinations, approvals,
notices, demand letters, directions and requirements of all governments,
departments, commissions, boards, courts, authorities, agencies, officials and
officers, and all instruments of record, foreseen or unforeseen, ordinary or
extraordinary, including but not limited to any change in any law, regulation or
the interpretation thereof by any foreign or domestic governmental or other
authority (whether or not having the force of law), relating now or at any time
heretofore or hereafter to the business or operations of the Borrower or to any
of the property owned, leased or used by the Borrower, including, without
limitation, the development, design, construction, acquisition, start-up,
ownership and operation and maintenance of property.
"Hazardous Substance" means any pollutant, contaminant, toxic or hazardous
-------------------
substance, material, constituent or waste as such terms are defined in or
pursuant to any Environmental Law.
"Incipient Default" shall have the meaning set forth in Section 3.1(c)
-----------------
hereof.
"Indebtedness" means (a) any obligation for borrowed money; (b) any
------------
obligation evidenced by bonds, debentures, notes or other similar instruments;
(c) any obligation to pay the deferred purchase price of property or for
services (other than in the ordinary course of business); (d) any capitalized
lease obligation; (e) any obligation or liability secured by a lien on any asset
of the Borrower, whether or not such obligation or liability is assumed; and (f)
any other long-term obligation or liability which is required by GAAP to be
shown as part of the liabilities on a balance sheet; provided, however, that
-------- -------
Indebtedness shall not mean obligations incurred in connection with (x) the
acquisition of equipment which is less than or equal to (A) if a Loan Extension
Event has occurred, two million Dollars ($2,000,000) or (B) if no Loan Extension
Event has occurred, one million Dollars ($1,000,000), in each case in the
aggregate at any time outstanding or (y) any judgment, order or decree that does
not constitute an Event of Default pursuant to Section 7.1(e) hereof.
"Insolvency Proceeding" means (a) any case, action or proceeding before any
---------------------
court or other Governmental Authority relating to bankruptcy, reorganization,
insolvency, liquidation, receivership, dissolution, winding-up or relief of
debtors; and (b) any general assignment for the benefit of creditors,
composition, marshalling of assets for creditors or other, similar arrangement.
"Intellectual Property" has the meaning specified in the Merger Agreement.
---------------------
"Investment," as applied to any party, means any direct or indirect
----------
ownership or purchase or other acquisition by that party of any capital stock,
equity interest, obligations or other securities, or a beneficial interest in
any capital stock, equity interest, obligations, or all or substantially all
assets used to conduct a business or a line of business, or any direct or
indirect loan, or capital contribution by that party to any other party, or any
joint venture or other arrangement involving the sharing of profits or losses
from joint business activities.
"Lender" shall have the meaning specified in the heading of this Agreement.
------
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
----
assignment, charge or deposit arrangement, encumbrance, lien (statutory or
other) or preference, priority or other security
4
<PAGE>
interest or preferential arrangement of any kind or nature whatsoever
(including, without limitation, those created by, arising under or evidenced by
any conditional sale or other title retention agreement, the interest of a
lessor under a capital lease obligation, any financing lease having
substantially the same economic effect as any of the foregoing, or the filing of
any financing statement naming the owner of the asset to which such lien relates
as debtor, under the UCC or any comparable law) and any contingent or other
agreement to provide any of the foregoing; provided, however, that Lien shall
-------- -------
not mean liens created in connection with the acquisition of equipment which
secure obligations less than or equal (A) if a Loan Extension Event has
occurred, two million Dollars ($2,000,000) or (B) if no Loan Extension Event has
occurred, one million Dollars ($1,000,000), in each case in the aggregate at any
time outstanding.
"Loan" shall have the meaning set forth in Section 2.1(a) hereof.
----
"Loan Documents" means this Agreement and the Note and all agreements,
--------------
instruments and documents (including, without limitation, if any, security
agreements, loan agreements, notes, fee agreements, guaranties, mortgages, deeds
of trust, subordination agreements, pledges, assignments of intellectual
property, powers of attorney, consents, assignments, contracts, notices, leases,
financing statements, letter of credit applications, reimbursement agreements,
certificates, statements, reports and notices and all other writings)
heretofore, now or hereafter executed by, on behalf of or for the benefit of the
Borrower and delivered to the Lender pursuant to or in connection with this
Agreement or the transactions contemplated hereby, together with all amendments,
modifications and supplements thereto.
"Loan Extension Event" shall have the meaning set forth in Section 2.1(e)
--------------------
hereof.
"Material Adverse Change" means a material adverse change in the business,
-----------------------
assets, prospects, operations, or financial condition of the Borrower and its
subsidiaries considered as a whole.
"Material Adverse Effect" means a material adverse effect on the business,
-----------------------
assets, prospects, operations, or financial condition of the Borrower and its
subsidiaries considered as a whole.
"Maturity" means the date on which the Loan or any portion thereof becomes
--------
due and payable whether as stated, by virtue of mandatory prepayment, by
acceleration or otherwise.
"Maturity Date" means, subject to Section 2.1(e), February 10, 1999.
-------------
"Merger Agreement" means that certain Agreement and Plan of Merger, dated
----------------
August 10, 1998, by and among Borrower, Lender and Pegasus Acquisitions Corp., a
Delaware corporation and a wholly-owned subsidiary of Lender.
"Monthly Disbursement Limit" has the meaning specified in Section 2.1(a),
--------------------------
subject to Section 2.1(d).
"Monthly Disbursement Limit Increase Event" means, with respect to a
-----------------------------------------
calendar month, the occurrence of any of the following events:
5
<PAGE>
(a) the Borrower has paid or is obligated to make a payment to a holder of
Series B Stock to redeem within such calendar month the Series B Stock
of such holder in accordance with the terms of the Certificate of
Designations of the Series B Stock;
(b) the Borrower has paid or is obligated to make a payment within such
calendar month to any taxing authority of any tax (i) imposed on any
amount other than operating income and (ii) not normally and
customarily incurred in the ordinary course of business; or
(c) any fees and expenses of Goldman, Sachs & Co. as financial advisor to
the Borrower in connection with the transactions contemplated by the
Merger Agreement shall be paid or become due and payable within such
calendar month, in accordance with the terms of an engagement letter
(a copy of which has been made available to Lender), provided that a
Monthly Disbursement Limit Increase Event shall not include any
payment of additional fees and expenses to Goldman, Sachs & Co. in
accordance with the terms and conditions of any amendment or
modification of such engagement letter unless Lender has consented to
such amendment or modification.
"Monthly Disbursement Limit Increase Event Payment" shall mean, with
-------------------------------------------------
respect to a Monthly Disbursement Limit Increase Event, any payment the Borrower
has made or is obligated to make as a result of the occurrence of such Monthly
Disbursement Limit Increase Event.
"Note" has the meaning specified in Section 2.1(b).
----
"Obligations" means all loans, advances, debts, liabilities, obligations,
-----------
covenants and duties owing, to the Lender by the Borrower of any kind or nature,
present or future, whether or not evidenced by any note, guaranty or other
instrument, arising under any Loan Document, whether or not for the payment of
money, arising by reason of an extension of credit, absolute or contingent, due
or to become due, now existing or hereafter arising, including all principal,
interest, charges, expenses, fees, attorneys' fees and disbursements and any
other sum chargeable to the Borrower under this Agreement or any other Loan
Document.
"Permissible Bank" means any bank or trust company organized under the laws
----------------
of the United States of America or any state thereof and having capital and
surplus of an aggregate amount not less than $500,000,000.
"Permitted Encumbrances" means: (a) liens arising in connection with
----------------------
worker's compensation and unemployment insurance; (b) any lien existing or
arising by operation of law in the ordinary course of business, such as a
"banker's lien" or similar right of offset; (c) liens for taxes, fees,
assessments or other government charges or levies, either not delinquent or
being contested in good faith by appropriate proceedings; (d) liens arising from
judgments, decrees or attachments in circumstances not constituting an Event of
Default hereunder; (e) easements, reservations, rights-of-way, restrictions,
minor defects or irregularities in title or similar encumbrances affecting real
property not interfering in any material respect with the ordinary conduct of
business; (f) liens in favor of customs and revenue authorities arising in the
ordinary course of business; (g) liens (including a lien consisting of the
rights of a lessor under a sale-leaseback transaction) created in connection
with the acquisition of equipment, which liens secure obligations not in excess
of (A) if a Loan Extension Event has occurred, two million Dollars
6
<PAGE>
($2,000,000) or (B) if no Loan Extension Event has occurred, one million Dollars
($1,000,000), in each case in the aggregate at any time outstanding; (h) liens
securing Indebtedness, which liens secure Indebtedness not in excess of (A) if a
Loan Extension Event has occurred, two million Dollars ($2,000,000) or (B) if no
Loan Extension Event has occurred, one million Dollars ($1,000,000), in each
case in the aggregate at any time outstanding; and (i) those liens outstanding
as of the date hereof and set forth on Schedule I hereto.
"Person" means any individual, corporation, partnership, limited liability
------
company, trust, association or other entity or organization, including any
government, political subdivision, agency or instrumentality thereof.
"Series B Stock" has the meaning specified in the Merger Agreement.
--------------
"Shares" has the meaning specified in the Merger Agreement.
------
"Takeover Proposal" has the meaning specified in the Merger Agreement.
-----------------
ARTICLE 2
Loan
----
2.1 Loan.
----
(a) Loan. Subject to all of the terms and conditions of this
----
Agreement, Lender agrees to make a loan (the "Loan") to the Borrower in the
----
amount of ten million Dollars ($10,000,000) to be governed by the terms and
conditions of, and repaid in accordance with, this Agreement. Disbursement
amounts shall be in multiples of one hundred thousand Dollars ($100,000).
Subject to the satisfaction of applicable conditions set forth in Article 3
hereof, the Loan shall be disbursed to the Borrower as follows: up to three
million Dollars ($3,000,000) shall be disbursed on the first Disbursement Date
and any subsequent Disbursement Date. Subject to Section 2.1(d), in no event
shall the Lender be obligated to disburse to the Borrower more than three
million Dollars ($3,000,000) in any calendar month (the "Monthly Disbursement
--------------------
Limit"). Subject to Section 2.1(e), in no event shall the Lender be obligated to
- -----
disburse to the Borrower more than ten million Dollars ($10,000,000) in total.
In addition, no more than two Disbursement Dates shall occur in any calendar
month. The Borrower shall use the proceeds of the Loan solely for the general
corporate purposes of the Business. Amounts prepaid in respect of the Loan
(whether repaid when due or prepaid) may not be reborrowed.
(b) Note. The Borrower's obligation to the Lender to repay the
----
Loan shall be evidenced by a promissory note of the Borrower (the "Note") in the
----
form attached hereto as Exhibit 2.1(b).
(c) Disbursement. Upon the prior or contemporaneous
------------
satisfaction of all the applicable conditions precedent set forth in Article 3
hereof, or waiver by the Lender of any conditions not so satisfied, the Lender
shall disburse the proceeds of each disbursement of the Loan to the Borrower (or
to such other Person as the Borrower may designate in writing) by wire transfer
of immediately available funds to such bank account as is specified in writing
by Borrower to
7
<PAGE>
Lender. Such disbursement shall be made on such date as is specified in the
Borrowing Notice, which date shall not be earlier than five (5) Banking Days
following such notice.
(d) Increases in Monthly Disbursement Limit. If, at any time, a
---------------------------------------
Monthly Disbursement Limit Increase Event occurs, then the Monthly Disbursement
Limit for the calendar month in which such Monthly Disbursement Limit Increase
Event occurs shall be increased to an amount which is the sum of (x) three
million Dollars ($3,000,000) and (y) the amount of any Monthly Disbursement
Limit Increase Event Payment; provided, however, and subject to Section 2.1(e),
that in no event shall the total amount required to be disbursed by Lender to
the Borrower exceed ten million Dollars ($10,000,000) in total.
(e) Lender's Breach of Merger Agreement. If the Lender shall at
-----------------------------------
any time breach in any material respect or fail to perform in any material
respects any of its covenants or other agreements contained in the Merger
Agreement (a "Loan Extension Event"), then (i) the total amount required to be
--------------------
disbursed by Lender hereto shall be increased to fifteen million Dollars
($15,000,000) and (ii) the Maturity Date shall be one year from the date hereof.
(f) Borrowing Notice. The Borrower shall provide the Lender
----------------
with at least five (5) Banking Days' written notice of a requested disbursement
(a "Borrowing Notice"), which notice shall include, if applicable, notification
----------------
that a Monthly Disbursement Limit Increase Event has occurred and providing a
reasonably detailed calculation of the amount of any Monthly Disbursement Limit
Increase Event Payment. Borrower shall provide Lender with reasonable access to
all information reasonably needed by Lender to verify that a Monthly
Disbursement Limit Increase Event has occurred and the amount of the Monthly
Disbursement Limit Increase Event Payment related to such Monthly Disbursement
Limit Increase Event, and the Lender shall not be required to disburse any funds
pursuant hereto until the Lender has verified to its reasonable satisfaction
such facts and amount.
2.2 Interest.
--------
(a) Interest. Subject to the immediately succeeding sentence,
--------
the outstanding principal amount of the Loan shall bear interest at a rate per
annum equal to seven percent (7.00%). Upon the occurrence and during the
continuation of an Incipient Default or an Event of Default, the outstanding
principal amount of the Loan shall, to the extent permitted by applicable law,
bear interest at a rate equal to the applicable rate provided above plus two
percent (2.00%) per annum. Interest shall be payable as set forth in Section
2.3(a) below.
(b) Computation of Interest. Interest shall be computed for the
-----------------------
actual number of days elapsed on the basis of a year consisting of 360 days.
Payments.
(a) Interest Payments. Interest accrued in respect of the Loan
-----------------
shall be added to the outstanding principal amount thereof as of the last day of
each calendar month. The Lender and the Borrower acknowledge that the
outstanding principal amount may thereby exceed ten million Dollars
($10,000,000) by an amount equal to the aggregate amount of accrued interest
that is added to outstanding principal. On the Maturity Date, Borrower shall pay
Lender all interest then accrued and not so added to the principal balance of
the Loan.
8
<PAGE>
(b) Loan Payment. The Borrower shall repay the entire
------------
outstanding principal amount of the Loan in full on the Maturity Date.
(c) Optional Prepayment. The Borrower may at any time prepay
-------------------
the entire outstanding principal amount of the Loan or any portion thereof;
provided that (i) all accrued interest on the amount so prepaid shall be paid in
- --------
full and (ii) in the case of a prepayment of less than the entire outstanding
principal amount of the Loan, the principal amount outstanding after such
prepayment shall be an integral multiple of one hundred thousand Dollars
($100,000). If the Borrower prepays the outstanding principal amount of the Loan
in full, the Lender shall not be obligated to make any further disbursements
under this Agreement.
(d) Prepayment for Sale of Assets. The Borrower shall repay the
-----------------------------
outstanding principal amount of the Loan in its entirety plus all interest
accrued to the date of prepayment immediately upon the occurrence of a sale,
lease, exchange or transfer of all or substantially all of the assets of the
Borrower, and in such event the Lender shall have no further obligation to make
any further disbursements under this Agreement.
(e) Change of Control-Repayment. Upon the occurrence of a
---------------------------
Change of Control, the Borrower shall immediately notify the Lender in writing
of such occurrence and offer to pay to the Lender the outstanding principal
amount of the Loan plus all interest accrued to date. The Lender shall have the
option of requiring the Borrower to repay the Loan in accordance with this
Section 2.3(e) by giving the Borrower written notice to such effect. The
Borrower shall repay such amounts within one (1) Banking Day after the Lender's
notice.
(f) Payments by the Borrower. All payments (including
------------------------
prepayments) to be made by the Borrower on account of Principal and interest
shall be made without set-off or counterclaim and shall be made to the Lender by
wire transfer in Dollars and in immediately available funds to Lender's Account
No. 102-7141, at Mellon Bank, located in Pittsburgh, Pennsylvania, A.B.A. No.
0430-0026-1 no later than 12:00 noon (Eastern Standard Time) of the Banking Day
on which payment is due. Any payment which is received by the Lender later than
12:00 noon (Eastern Standard Time) shall be deemed to have been received on the
immediately succeeding Banking Day. Whenever any payment hereunder shall be
stated to be due on a day other than a Banking Day, such payment shall be made
on the next succeeding Banking Day, and such extension of time shall in such
case be included in the computation of interest.
(g) Offset. In addition to and not in limitation of all rights
------
of offset that the Lender may have under applicable law, Lender, upon the
occurrence and during the continuance of an Acceleration, shall have the right
to appropriate and apply to the payment of all Obligations any and all amounts
that Lender may owe Borrower for any reason. Lender agrees promptly to notify
the Borrower after any such offset and application; provided, however, that the
-------- -------
failure to give such notice shall not affect the validity of such offset and
application. The rights of Lender under this Section 2.3(h) are in addition to
the other rights and remedies which the Lender may have.
9
<PAGE>
ARTICLE 3
Conditions Precedent
--------------------
3.1 Conditions to Disbursement.
---------------------------
(a) The obligation of the Lender to make the first disbursement of
the Loan shall be subject to the prior or contemporaneous satisfaction of each
of the following conditions:
(i) Delivery of Documents. The Note shall have been duly executed
---------------------
and delivered to the Lender;
(ii) Certificate of Secretary. The Lender shall have received, dated
------------------------
and in full force and effect as of the date of the first Disbursement
Date, a certificate of the Secretary or an Assistant Secretary of the
Borrower as to authorization of the execution, delivery and
performance of this Agreement and all of the other Loan Documents by
the Borrower; and
(iii) Legal Opinion. The Lender shall have received an opinion of
-------------
counsel to the Borrower, in form and substance satisfactory to the
Lender and its counsel, as to the enforceability of this Agreement and
the other Loan Documents (to the extent applicable) and as to such
other matters as the Lender and its counsel may reasonably request.
(b) The obligation of the Lender to make each disbursement of the
Loan, including the first disbursement thereof, shall be subject to the prior or
contemporaneous satisfaction of each of the following conditions:
(i) Reports, Certificates and Other Information. The Lender shall
-------------------------------------------
have received the following, dated and in full force and effect on
each of the respective Disbursement Dates:
(A) a certificate, signed by an authorized officer of the
Borrower, stating (x) that the representations and
warranties contained in Article 4 hereof are then accurate
and complete in all material respects as though made on and
as of such date and (y) that there has then occurred no
Event of Default or Incipient Default which is continuing;
and
(B) such other instruments or documents as the Lender may
reasonably request relating to the existence and good
standing of the Borrower or to the corporate authorization
by the Borrower for the execution, delivery and performance
of this Agreement or any of the other Loan Documents.
(ii) No Existing Default. No Event of Default or Incipient Default
-------------------
shall exist on the respective Disbursement Date or after giving effect
to the transactions contemplated to take place hereunder on such date;
10
<PAGE>
(iii) Representations and Warranties Correct. The representations and
--------------------------------------
warranties set forth in Article 4 hereof shall be true and correct in
all material respects on and as of the respective Disbursement Date,
and after giving effect to the transactions contemplated to occur on
such date;
(iv) Cash Balances. The Lender shall have received a certificate of
-------------
the principal financial officer of the Borrower in form and substance
satisfactory to the Lender stating that as of the close of the second
Banking Day prior to the respective Disbursement Date, the aggregate
amount of cash and Cash Equivalents of the Borrower and its
subsidiaries on a consolidated basis does not exceed four million
Dollars ($4,000,000); and
(v) Other Documents. The Lender shall have received any other
---------------
document, instrument, undertaking or certificate stated in any of the
Loan Documents to be delivered on the Disbursement Date or as the
Lender may reasonably request.
3.2 Conditions for the Benefit of the Lender. The conditions set forth
----------------------------------------
in this Article 3 are for the exclusive benefit of the Lender and may be waived,
for purposes of this Agreement, only by a written waiver declaration signed by
the Lender.
ARTICLE 4
Representations and Warranties of the Borrower
----------------------------------------------
In order to induce Lender to enter into or become party to this Agreement
and to make the Loan, the Borrower makes the following representations and
warranties to the Lender:
4.1 Due Organization. The Borrower is a corporation duly organized, validly
----------------
existing and in good standing under the laws of the State of Delaware. The
Borrower is duly licensed or qualified to conduct business and in good standing
in each jurisdiction wherein the character of the property owned or the nature
of the business transacted by it makes such licensing or qualifications
necessary, except as to jurisdictions where the failure to be so licensed or
qualified would not have a Material Adverse Effect.
4.2 Capitalization.
--------------
(a) The corporate charter or certificate of incorporation and all
amendments thereto for the Borrower have been duly filed and are in proper
order. All of the outstanding capital stock of the Borrower has been validly
issued in compliance with all federal and state securities laws and is fully
paid and nonassessable.
(b) As of each Disbursement Date, the Borrower is not subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital stock other than the Borrower's obligation to
redeem the Series B Stock in accordance with the terms of the Certificate of
Designations of the Series B Stock and as contemplated by the Merger Agreement.
11
<PAGE>
4.3 Requisite Power. The Borrower has all requisite corporate or other
---------------
legal power and all Governmental Approvals necessary to own and operate its
properties and to carry on its business as now conducted and as proposed to be
conducted. The Borrower has all requisite power to borrow the sums provided for
in this Agreement and to execute, deliver, issue and perform this Agreement and
the Note.
4.4 Authorization. All corporate action on the part of the Borrower and
-------------
its directors and stockholders necessary for the authorization, execution,
delivery and performance of this Agreement and the Note and the other Loan
Documents has been duly taken and is in full force and effect.
4.5 Officer Authorization. Each authorized officer of the Borrower
---------------------
executing this Agreement or any of the other Loan Documents is (as of the date
of such execution) duly and properly in office and fully authorized to execute
and deliver the same.
4.6 Binding Nature. This Agreement, the Note and each of the other Loan
--------------
Documents is, or upon the execution and delivery thereof will be, a legal, valid
and binding obligation of the Borrower, and in full force and effect and
enforceable in accordance with its respective terms, except for the effect of
applicable laws regarding bankruptcy or insolvency or similar laws affecting
creditors' rights generally and by general principles of equity relating to
enforceability.
4.7 No Conflict. Neither the execution nor delivery of this Agreement,
-----------
the Note or any of the other Loan Documents nor fulfillment of nor compliance
with the terms and provisions hereof or thereof will (a) conflict with or result
in a breach of any Governmental Requirement, or of any agreement or instrument
binding upon the Borrower, where such conflict or breach is reasonably likely to
have a Material Adverse Effect, or conflict with or result in a breach of any
provision of the corporate charter or by-laws of the Borrower, or (b) result in
the creation or imposition of any Lien (other than a Permitted Lien) upon any
property of the Borrower pursuant to any such agreement or instrument, except
pursuant to or as contemplated by this Agreement or any other Loan Documents. No
authorization, consent or approval or other action by, and no notice to or
filing with, any Governmental Authority or any other Person is required to be
obtained or made by the Borrower, for the due execution, delivery and
performance by the Borrower of this Agreement, the Note or any of the other Loan
Documents or for the validity or enforceability thereof.
4.8 No Event of Default. No Event of Default or Incipient Default has
-------------------
occurred and is continuing or would result from the execution of this Agreement.
4.9 Full Disclosure. None of the representations or warranties made by
---------------
the Borrower in the Loan Documents as of the date of such representations and
warranties contains any untrue statement of a material fact or omits any
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they are made, not
misleading.
4.10 Merger Agreement Representations. The representations and warranties
--------------------------------
contained in Sections 4.5 through 4.20 of the Merger Agreement (including the
defined terms used therein) are incorporated by reference herein in their
entirety, as if set forth herein in their entirety.
12
<PAGE>
ARTICLE 5
Affirmative Covenants
---------------------
The Borrower covenants and agrees that so long as any Obligation is
outstanding it will comply with and, if applicable, cause any of its
subsidiaries to comply with the following provisions:
5.1 Financial Statements and Notices. The Borrower shall furnish to the
--------------------------------
Lender the following financial statements, information and notices:
(a) Within forty-five (45) days after the close of the first
three quarters of Borrower's fiscal year, commencing with the fiscal quarter
ending September 30, 1998, for the Borrower and its subsidiaries on a
consolidated basis: (i) a statement of cash flows for such quarter; (ii) an
income statement for such quarter; and (iii) a balance sheet as of the end of
such quarter. All such statements shall be prepared on a consolidated and
consolidating basis for the Borrower and its subsidiaries, in reasonable detail,
subject to year-end audit adjustments and without footnotes, shall include
appropriate comparisons to the same period for the prior year, and shall be
certified by the principal financial officer of the Borrower to have been
prepared in accordance with GAAP consistently applied, subject to year-end audit
adjustments;
(b) Within ninety (90) days after the close of Borrower's fiscal
year, commencing with the fiscal year ending December 31, 1998 a copy of the
annual audit report for such year for the Borrower, including for the Borrower
and its subsidiaries on a consolidated basis (i) a statement of stockholders'
equity for such fiscal year; (ii) a statement of cash flows for such fiscal
year, (iii) an income statement for such fiscal year, and (iv) a balance sheet
as of the end of such fiscal year, together with like internal unaudited
consolidating financial statements for the Borrower and its subsidiaries. All
statements required by this Section 5.1(b) shall include appropriate comparisons
to the prior year. Such consolidated financial statements shall be audited by an
independent certified public accounting firm and shall include a report of such
accounting firm, which report shall be unqualified as to the Borrower's status
as a going concern and as to the scope of the audit performed by such accounting
firm and shall state that such financial statements fairly present in all
material respects the financial position of the Borrower and its subsidiaries as
at the dates indicated and the results of their operations and their cash flows
for the periods indicated in conformity with GAAP, consistently applied;
(c) Promptly after they are sent, made available or filed,
copies of all reports, proxy statements and financial statements that the
Borrower sends or makes available to its stockholders and all registration
statements and reports that the Borrower may file with the Securities and
Exchange Commission;
(d) Promptly, but in no event later than five (5) Banking Days
after the principal financial officer of the Borrower obtains knowledge of the
occurrence of an Event of Default or an Incipient Default, provide the Lender
with a statement of an authorized officer of the Borrower setting forth details
of such Event of Default or Incipient Default and the action which the Borrower
proposes to take with respect thereto;
13
<PAGE>
(e) Promptly but in no event later than five (5) Banking Days
after the principal financial officer of the Borrower learns thereof, written
notice of any actual or threatened claims, litigation, suits, investigations, or
proceedings against or affecting the Borrower, including, without limitation:
(i) any claim, litigation, suit, investigation, proceeding or dispute involving
a monetary amount, whether or not covered by insurance, in excess of one million
Dollars ($1,000,000), (ii) any denial, suspension, or revocation of any material
Governmental Approval; (iii) any investigation or proceeding before or by any
Governmental Authority which is reasonably likely to have a Material Adverse
Effect; (iv) any Environmental Claim from any person concerning any alleged
violation of any Environmental Law by the Borrower or any of its predecessors
which is reasonably likely to either (x) have a Material Adverse Effect or (y)
result in a liability to the Borrower, whether or not insured, in excess of one
million Dollars ($1,000,000); or (v) the commencement of any investigation by
any Government Authority, or the receipt by the Borrower of written request by
any Government Authority for information, relating to the handling, storage or
disposal of any Hazardous Substance, or the release thereof into the
environment, by the Borrower, or any of its predecessors, or any other Person,
which investigation or request is other than routine; and
(f) Within a reasonable time after a request therefor, such
other information as the Lender may reasonably request.
Each notice pursuant to this Section 5.1 (d), (e) or (f) shall be
accompanied by a written statement by an authorized officer of the Borrower
setting forth details of the occurrence referred to therein known to such
officer and stating what action the Borrower proposes to take with respect
thereto.
5.2 Access. The Borrower shall permit the Lender, at such reasonable
------
times and intervals as the Lender may designate upon reasonable notice, at its
own expense by and through the representatives and agents of the Lender, to
inspect, audit and examine its books and records, to make copies thereof, to
discuss its affairs, finances and accounts with its officers and independent
public accountants, and to visit and inspect its properties.
5.3 Maintenance of Existence. The Borrower and each of its subsidiaries
------------------------
shall preserve and maintain their respective corporate existences and all of
their material licenses, privileges and franchises and other rights necessary or
desirable in the normal course of their businesses.
5.4 Facilities. The Borrower and its subsidiaries shall use commercially
----------
reasonable efforts to keep the properties used in their respective businesses in
good repair, working order and condition, and from time to time shall use
commercially reasonable efforts to make necessary repairs or replacements
thereto so that their property shall be maintained adequately for its intended
use. The foregoing notwithstanding, the Borrower may dispose of obsolete and
unneeded property.
5.5 Compliance with Laws. The Borrower and its subsidiaries shall use
--------------------
commercially reasonable efforts to comply in all respects with all Governmental
Requirements, except where the failure to do so could not in the aggregate have
a Material Adverse Effect.
14
<PAGE>
5.6 Material Agreements. The Borrower and its subsidiaries shall use
-------------------
commercially reasonable efforts to comply in all material respects with the
terms of each agreement to which any of them is a party.
5.7 Insurance. The Borrower and its subsidiaries shall maintain in full
---------
force and effect insurance of such types and in such amounts as are customarily
carried in their respective lines of business, including, but not limited to,
fire, public liability, property damage, hazard insurance, products liability
and workers' compensation insurance.
5.8 Taxes and Other Liabilities. The Borrower and its subsidiaries shall
---------------------------
pay and discharge when due any and all indebtedness, obligations, liabilities,
assessments and real and personal property taxes, including, but not limited to,
federal and state income and personal and real property taxes, except as may be
subject to good faith contest or as to which a bona fide dispute may arise;
provided, however, that an adequate reserve therefor is made in accordance with
- -------- -------
GAAP.
5.9 Governmental Approvals. The Borrower and its subsidiaries shall use
----------------------
commercially reasonable efforts to apply for, diligently pursue, and obtain or
cause to be obtained, and shall thereafter maintain in full force and effect all
material Governmental Approvals that shall now or hereafter be necessary under
any Governmental Requirement (a) for land use, public and employee health and
safety, pollution or protection of the environment and (b) for the operation of
the business of the Borrower and the subsidiaries, except where the failure to
obtain or maintain such Governmental Approval would not have a Material Adverse
Effect.
ARTICLE 6
Negative Covenants
------------------
The Borrower covenants and agrees that so long as any Obligation is
outstanding and the Lender has not failed to make a disbursement of the Loan
which Lender was required to make, the Borrower will comply with and, if
applicable, cause any of its subsidiaries to comply with, the following
provisions:
6.1 Certain Covenants of the Company. The Borrower shall not, directly or
--------------------------------
indirectly, take (and shall cause its subsidiaries not to take) any of the
actions contemplated by Section 6.1 of the Merger Agreement.
6.2 Change of Business. The Borrower shall not engage in any business
------------------
other than the Business.
6.3 Liens and Encumbrances. The Borrower shall not, and shall not allow
----------------------
any of its subsidiaries to, create, incur, assume, or permit to exist any Lien
of any kind upon any of the property or assets of the Borrower or such
subsidiary now owned or hereafter acquired, including, without limitation, any
Intellectual Property, other than Permitted Encumbrances,.
6.4 Sale-Leasebacks. Neither the Borrower nor any of its subsidiaries
---------------
shall enter into or become liable in connection with any sale-leaseback
transaction, except for a sale-leaseback in connection with which the property
subject thereto is subject to a Permitted Encumbrance.
15
<PAGE>
6.5 Transactions With Affiliates. Except on terms no less favorable to
----------------------------
the Borrower than would be obtainable if no such relationship existed, Borrower
shall not purchase, acquire or lease any property from, or sell, transfer or
lease any property to, or loan or advance money to, or otherwise deal with any
affiliate or subsidiary.
6.6 Investments. Neither the Borrower nor any of its subsidiaries shall
-----------
make or permit to remain outstanding any Investment, except (a) Investments by
the Borrower in its subsidiaries; (b) investment-grade debt securities having a
term not longer than one (1) year; (c) certificates of deposit issued by a
Permissible Bank and having a term not longer than one (1) year; (d) Investments
received in the settlement of any debt owing to the Borrower or any of its
subsidiaries, where such debt was incurred in the ordinary course of business;
(e) other Investments not to exceed one hundred thousand Dollars ($100,000) in
the aggregate at any time outstanding; and (f) other Investments in connection
with a bona fide acquisition, joint venture or other business relationship;
---- ----
provided such sale or other issuance is in furtherance of the Business and does
- --------
not result in the issuance of securities representing ten percent (10%) or more
of Fully Diluted Common Equity immediately prior to such sale or other issuance.
6.7 Obligations.
-----------
(a) Neither the Borrower nor any of its subsidiaries shall enter
into or otherwise become liable in connection with any contracts, agreements or
understandings which, individually or in the aggregate, obligate the Borrower or
any of its subsidiaries to pay or otherwise give consideration which is equal to
or greater than (A) if a Loan Extension Event has occurred, two million Dollars
($2,000,000) or (B) if no Loan Extension Event has occurred, one million Dollars
($1,000,000), in each case per year.
(b) Borrower shall not make any grants or gifts to any person or
enter into any commitments to do the same.
6.8 Intellectual Property. Neither the Borrower nor any of its
---------------------
subsidiaries shall sell, assign, transfer, convey or grant any license or any
other right in or to any Intellectual Property.
ARTICLE 7
Events of Default
-----------------
7.1 Events of Default. Each of the following shall constitute an Event of
-----------------
Default under this Agreement:
(a) Principal Payments. The Borrower shall fail to pay when due
------------------
(whether due when scheduled or as a result of a mandatory prepayment) any
payment of principal or premium in respect of the Loan;
(b) Interest and Other Payments. The Borrower shall fail to pay
---------------------------
when due any payment of interest or other sum payable hereunder or under any of
the other Loan Documents or in the Merger Agreement and continuance of such
default for fifteen (15) Banking Days after notice thereof to the Borrower from
the Lender;
16
<PAGE>
(c) Other Covenants and Loan Agreements. The Borrower shall
-----------------------------------
default in the performance of any of its respective agreements set forth in any
provision herein, in any of the other Loan Documents or in the Merger Agreement
(and not constituting an Event of Default under any of the other clauses of this
Section 7.1), such default shall continue for thirty (30) days after notice
thereof to the Borrower from the Lender, and with respect to those covenants
contained in Article 5 only, such default shall have a Material Adverse Effect;
(d) Representations and Warranties. Any representation or
------------------------------
warranty contained in Section 4 hereof or certification pursuant to Section
3.2(b)(i) or 5.1 made by the Borrower, any officer of the Borrower or in the
Merger Agreement, shall be untrue in any material respect, in any case on any
date as of which the facts set forth are stated or certified;
(e) Judgments. Any final judgment, order or decree shall be
---------
rendered against the Borrower in an amount equal to or greater than five hundred
thousand Dollars ($500,000), and either (i) enforcement proceedings shall have
been commenced by any Person upon such judgment or order or (ii) there shall be
any period of thirty (30) consecutive days during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or otherwise, shall not be
in effect, unless such judgment, order or decree shall, within such 30-day
period, be vacated or discharged (other than by satisfaction thereof);
(f) Cross-Default. Other than as set forth on Schedule II
-------------
hereto, the Borrower shall (i) fail to pay when due, by stated maturity,
acceleration or otherwise, any Indebtedness for borrowed money of, or any
guaranty of Indebtedness for borrowed money by, the Borrower (not arising
hereunder or under any of the other Loan Documents) outstanding in aggregate
principal amount greater than five hundred thousand Dollars ($500,000), and such
failure continues after the applicable grace period, if any, specified in the
document relating thereto, or (ii) fail to perform or observe (subject to any
applicable grace period) any agreement, covenant or condition with respect to
any such Indebtedness or guaranty if the effect of such failure is to accelerate
the maturity of any such Indebtedness or to permit the holder or holders of any
such Indebtedness or guaranty, or any trustee or agent for such holders, to
cause such Indebtedness to become due and payable prior to its expressed
maturity or to call upon such guaranty in advance of nonpayment of the
guaranteed Indebtedness;
(g) Insolvency. An Insolvency Proceeding (whether voluntary or
----------
involuntary) shall be commended against the Borrower or any subsidiary of the
Borrower; or the Borrower or any subsidiary of the Borrower shall file a
petition initiating or shall otherwise institute any similar Insolvency
Proceeding under any other applicable federal or state law, or shall consent
thereto; or the Borrower or any subsidiary of the Borrower shall apply for, or
by consent or acquiescence there shall be an appointment of, a receiver,
liquidator, sequestrator, trustee or other officer with similar powers, or the
Borrower or any subsidiary of the Borrower shall make an assignment for the
benefit of creditors; or the Borrower or any subsidiary of the Borrower shall
admit in writing its inability to pay its debts generally as they become due;
or, if an involuntary case shall be commenced seeking the liquidation or
reorganization of the Borrower or any subsidiary of the Borrower under Chapter 7
or Chapter 11, respectively, of the United States Bankruptcy Code, or any
similar proceeding shall be commenced against the Borrower or any subsidiary of
the Borrower under any other applicable federal or state law, and (i) the
petition commencing the involuntary case is not timely controverted; or (ii) the
petition commencing the involuntary case is
17
<PAGE>
not dismissed within forty-five (45) days of its filing; or (iii) an interim
trustee is appointed to take possession of all or a portion of the property
and/or to operate all or any part of the business of the debtor; or (iv) an
order for relief shall have been issued or entered therein; or a decree or order
of a court having jurisdiction in the premises for the appointment of a
receiver, liquidator, sequestrator, trustee or other officer having similar
powers over the debtor, or of all or any part of the property of any of the
foregoing, shall have been entered; or any other similar relief shall be granted
against the Borrower or any subsidiary of the Borrower, under any applicable
federal or state law; or
(h) Invalidity of Loan Documents. Any of the Loan Documents
----------------------------
shall cease for any reason to be in full force and effect and the Lender shall
be substantially deprived of any of its rights under the Loan Documents or any
party thereto (other than Lender) shall purport to disavow its obligations
thereunder, shall declare that it does not have any further obligation
thereunder or shall contest the validity or enforceability thereof.
7.2 Acceleration. If any Event of Default described in Section 7.1(g)
------------
hereof shall occur, the Note and all other Obligations shall become immediately
due and payable, all without notice of any kind, and the Lender shall have no
further obligation to make any disbursement of the Loan which has not then been
made. Notwithstanding any other provision in this Agreement, if any other Event
of Default shall occur, the Lender shall have no further obligation to make any
disbursement of the Loan which has not then been made and may declare, at any
time after the occurrence of an Event of Default, the Note and all other
Obligations to be due and payable, whereupon the Note and all other Obligations
shall immediately become due and payable, all as so declared by the Lender and
without presentment, demand, protest or other notice of any kind. Any such
declaration made pursuant to this Section 7.2 may be rescinded by the Lender.
ARTICLE 8
Representations and Warranties of the Lender
--------------------------------------------
The Lender makes the following representations and warranties to the
Borrower:
8.1 Due Organization. The Lender is a corporation duly organized, validly
----------------
existing and in good standing under the laws of the State of Indiana.
8.2 Requisite Power. The Lender has all requisite corporate or other
---------------
legal power and all governmental licenses, permits, authorizations, consents and
approvals necessary to enter into and perform its obligations under this
Agreement.
8.3 Authorization. All corporate action on the part of the Lender and its
-------------
directors and stockholders necessary for the authorization, execution, delivery
and performance of this Agreement and the other Loan Documents has been duly
taken and is in full force and effect.
8.4 Officer Authorization. Each authorized officer of the Lender executing
---------------------
this Agreement or any of the other Loan Documents is (as of the date of such
execution) duly and properly in office and fully authorized to execute and
deliver the same.
18
<PAGE>
8.5 Binding Nature. This Agreement is a legal, valid and binding
--------------
obligation of the Lender, and in full force and effect and enforceable in
accordance with its terms, except for the effect of applicable laws regarding
bankruptcy or insolvency or similar laws affecting creditors' rights generally
and by general principles of equity relating to enforceability.
8.6 No Conflict. Neither the execution nor delivery of this Agreement or
-----------
any of the other Loan Documents nor fulfillment of nor compliance with the terms
and provisions hereof or thereof will (a) conflict with or result in a breach of
any material Governmental Requirement, or of any material agreement or
instrument binding upon the Lender, or conflict with or result in a breach of
any provision of the articles of incorporation or by-laws of the Lender. No
authorization, consent or approval or other action by, and no notice to or
filing with, any Governmental Authority or any other Person is required to be
obtained or made by the Lender, for the due execution, delivery and performance
by the Lender of this Agreement or any of the other Loan Documents or for the
validity or enforceability thereof.
ARTICLE 9
Miscellaneous
-------------
9.1 Successors and Assigns and Sale of Interests. The terms and
--------------------------------------------
provisions of this Agreement shall be binding upon, and, subject to the
provisions of this Section 9.1, the benefits thereof shall inure to, the parties
hereto and their respective successors and assigns; provided, however, that the
-------- -------
Borrower shall not assign this Agreement or any of its rights, duties or
obligations hereunder without the prior written consent of the Lender, and the
Lender shall not delegate its obligations or duties hereunder without the prior
written consent of the Borrower.
9.2 No Implied Waiver. No delay or omission to exercise any right, power
-----------------
or remedy accruing to the Lender upon any breach or default of the Borrower
under this Agreement or under any of the other Loan Documents shall impair any
such right, power or remedy of the Lender, nor shall it be construed to be a
waiver of any such breach or default, or an acquiescence therein, or of or in
any similar breach or default occurring thereafter, nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring theretofore or thereafter.
9.3 Amendments and Waivers. No amendment or waiver of any provision of
----------------------
this Agreement or any other Loan Document and no consent with respect to any
departure by the Borrower therefrom, shall be effective unless the same shall be
in writing and signed by the Lender, and then any such waiver shall be effective
only in the specific instance and for the specific purpose for which given.
9.4 Remedies Cumulative. All rights and remedies, either under this
-------------------
Agreement, by law or otherwise afforded to the Lender shall be cumulative and
not exclusive, and any single or partial exercise of any power or right
hereunder or thereunder does not preclude other or further exercise thereof, or
the exercise of any other power or right. In no event shall either party hereto
be liable for consequential damages for breach hereof, even if foreseeable.
9.5 Severability. Any provision of this Agreement, the Note or any of the
------------
other Loan Documents which is prohibited or unenforceable in any jurisdiction,
shall be, only as to such
19
<PAGE>
jurisdiction, ineffective to the extent of such prohibition or unenforceability,
but all the remaining provisions of this Agreement, the Note and the other Loan
Documents shall remain valid.
9.6 Costs, Expenses and Attorneys' Fees. Each party shall pay all of its
-----------------------------------
fees and expenses associated with the negotiation, preparation, execution and
closing of this Agreement and the first disbursement of the Loan, including, but
not limited to, reasonable attorneys' fees and expenses. The Borrower shall pay
all costs and expenses, including, but not limited to, reasonable attorneys'
fees and expenses (including the allocated cost of in-house counsel), expended
or incurred by the Lender in collecting any sum which becomes due under the Note
or under this Agreement, any of the other Loan documents, or in the protection,
perfection, preservation and enforcement of any and all rights of the Lender in
connection with the Loan Documents including, without limitation, the fees and
costs incurred in any out-of-court work-out or a bankruptcy or reorganization
proceeding. This obligation on the part of the Borrower shall survive the
expiration or termination of this Agreement, without occurrence of the Closing
Date and shall survive repayment of the Loan in full.
9.7 General Indemnification. The Borrower shall indemnify and hold the
-----------------------
Lender and each of its directors, officers, employees, affiliates, attorneys and
agents (collectively referred to herein as the "Lender Indemnitees") harmless
------------------
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and disbursements
of any kind or nature whatsoever (including without limitation, any expenses
(including attorneys' fees and the allocated cost of in-house counsel) incurred
by any such Lender Indemnitee in connection with any investigation in connection
with any such matter, whether or not any such Lender Indemnitee shall be
designated a party thereto) which may be imposed on, incurred by or asserted
against such Lender Indemnities by any Person other than the Lender with which
such Lender Indemnitee is affiliated (whether direct, indirect or consequential
and whether based on any federal or state laws or other statutory regulations,
including, without limitation, securities, environmental and commercial laws and
regulations, under common law or at equitable cause, or on contract or
otherwise) in any manner relating to or arising out of this Agreement and any
other Loan Documents, or any act, event or transaction related or attendant
thereto; the making of the Loan hereunder, the management of the Loan (including
any liability under federal, state or local Environmental Laws or regulations),
the use or intended use of the proceeds of the Loan (collectively, the
"Indemnified Matters"); provided, however, that the Borrower shall have no
------------------- -------- -------
obligation to any Lender Indemnitee under this Section 9.7 with respect to
Indemnified Matters to the extent such Indemnified Matters were caused by or
resulted from the gross negligence or willful misconduct of a Lender Indemnitee.
To the extent that the undertaking to indemnify, pay and hold harmless set forth
in the preceding sentence may be unenforceable because it is violative of any
law or public policy, the Borrower shall contribute to the payment and
satisfaction of all Indemnified Matters incurred by the Lender Indemnities the
maximum portion which the Borrower is permitted to pay and satisfy under
applicable law. This indemnification shall survive repayment by the Borrower of
the Loan made under this Agreement, and the termination of this Agreement
without occurrence of the Closing Date.
9.8 Confidentiality. Lender agrees that all information furnished to
---------------
Lender by Borrower pursuant to this Agreement will be held under the Lender's
obligations pursuant to that certain Confidentiality Agreement by and between
Lender and Borrower (the "Confidentiality Agreement"). Borrower agrees that,
-------------------------
notwithstanding the terms of said Confidentiality Agreement,
20
<PAGE>
all such information may be used by Lender in connection with this Agreement and
that Lender need not comply with the provisions of the third-to-last paragraph
of the Confidentiality Agreement until all Obligations hereunder have been paid
or otherwise satisfied in full and the Lender has no further obligation to make
the Loan.
9.9 Notices. Any notice which the Borrower or the Lender may be required
-------
or may desire to give to the other party under any provision of this Agreement
shall be in writing by electronic facsimile transmission and shall be deemed to
have been given or made when transmitted to the Lender or the Borrower as
follows:
To the Borrower: InControl, Inc.
6675 185th Avenue
Redmond, Washington 98052-6734
Attention: Chief Executive Officer
Facsimile: (425) 861-9301
with a copy to: Perkins Coie LLP
1201 Third Avenue, 40th Floor
Seattle, Washington 98101-3099
Attention: Stephen M. Graham, Esq.
Alan C. Smith, Esq.
Facsimile: (206) 583-8500
To the Lender: Guidant Corporation
111 Monument Circle, 29th Floor
Indianapolis, IN 46204-5129
Attention: Treasurer
Facsimile: (317) 971-2050
with a copy to: Dewey Ballantine LLP
1301 Avenue of the Americas
New York, NY 10019
Attention: Bernard E. Kury, Esq.
Jonathan L. Freedman, Esq.
Facsimile: (212) 259-6333
Any party may change the address to which all notices, requests and other
communications are to be sent to it by giving written notice of such address
change to the other parties in conformity with this paragraph, but such change
shall not be effective until notice of such change has been received by the
other parties.
9.10 Entire Agreement. This Agreement, together with the exhibits to this
----------------
Agreement, all of the other Loan Documents and the Merger Agreement, is intended
by the Borrower and the Lender as a final expression of their agreement and,
together with all of the other Loan Documents and the Merger Agreement, is
intended as a complete statement of the terms and conditions of their agreement.
This Agreement, the other Loan Documents and the Merger Agreement contain all of
21
<PAGE>
the agreements and understandings between the Borrower and the Lender concerning
the Loan and the other transactions contemplated hereby.
9.11 Governing Law and Consent to Jurisdiction. The validity, construction
-----------------------------------------
and effect of this Agreement, the Note and all of the other Loan Documents shall
be governed by the laws of the State of Washington, without regard to its laws
regarding choice of applicable law. All judicial proceedings brought against the
Borrower with respect to this Agreement, the Note or any of the other Loan
Documents may be brought in any state or federal court of competent jurisdiction
in the State of Indiana, and the Borrower accepts for itself and its assets and
properties, generally and unconditionally, the nonexclusive jurisdiction of the
aforesaid courts. The Borrower waives, to the fullest extent permitted by
applicable law, any objection (including, without limitation, any objection to
the laying of venue or based on the grounds of forum non conveniens) which it
may now or hereafter have to the bringing of any such action or proceeding in
any such jurisdiction. Nothing herein shall limit the right of Lender to bring
proceedings against the Borrower in the court of any other jurisdiction. TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE BORROWER WAIVES COMPLETELY ANY
RIGHT WHICH IT MIGHT OTHERWISE HAVE TO TRIAL BY JURY.
9.12 Publicity. Neither party may disclose the existence or content of
---------
this Agreement without the prior written consent of the other party, unless such
disclosure is in the judgment of the disclosing party reasonably necessary to
comply with applicable law or the rules of any stock exchange. Each party shall
have the opportunity to review and approve any press releases with respect to
this Agreement and/or the transaction contemplated hereunder prior to
disclosure. In the case of any disclosure required by law or the rules of any
stock exchange, the parties shall consult with each other for the purpose of
limiting disclosure to such matters as are required by law or the rules of any
stock exchange.
9.13 Counterparts. This Agreement may be executed in any number of
------------
counterparts each of which shall be an original with the same effect as if the
signatures thereto and hereto were upon the same instrument.
9.14 Headings. Captions, headings and the table of contents in this
--------
Agreement are for convenience only, and are not to be deemed part of this
Agreement.
[Signature Page Follows]
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by its
duly authorized officers as of the date and year first above written.
INCONTROL, INC.
By: /s/ Kurt C. Wheeler
---------------------------
Kurt C. Wheeler
Chairman of the Board,
President and CEO
GUIDANT CORPORATION
By: /s/ Ronald W. Dollens
---------------------------
Ronald W. Dollens
President and CEO
23
<PAGE>
[Exhibits Intentionally Omitted]
24
<PAGE>
Exhibit (c)(4)
<PAGE>
[LETTERHEAD OF INCONTROL, INC.]
August 14, 1998
Guidant Corporation
111 Monument Circle, 29th Floor
Indianapolis, IN 46204
Pegasus Acquisitions Corp.
4111 Hamline Avenue North
St. Paul, MN 55112
Attention: A. Jay Graf, President
Re: Representation as to Preferred Stock and Waiver of Certain
-----------------------------------------------------------
Covenants in the Merger Agreement
---------------------------------
Gentlemen:
Reference is made to that certain Agreement and Plan of Merger (the
"Merger Agreement"), dated as of August 10, 1998, by and among InControl, Inc.,
a Delaware corporation (the "Company"), Guidant Corporation, an Indiana
corporation ("Parent") and Pegasus Acquisitions Corp., a Delaware corporation
and an indirect wholly-owned subsidiary of Parent ("Sub," and together with
Parent, the "Purchasers"). Any term used herein and not otherwise defined herein
shall have the meaning assigned to such term in the Merger Agreement.
1. The Company hereby represents and warrants that as of the date
hereof, all of the shares of Series B Stock issued and outstanding
as of August 6, 1998 have been converted by the holders thereof into
an aggregate of 844,884 shares of Common Stock, and no shares of the
Company's Series B Stock remain issued or outstanding.
2. The Company hereby waives the performance of the covenant contained
in Section 6.14(b) of the Merger Agreement.
3. The Purchasers hereby waive performance of the covenant contained in
Section 6.14(a) of the Merger Agreement.
4. The Purchasers hereby deem the condition to the Offer contained in
Exhibit A to the Merger Agreement that all shares of Series B Stock
shall have been redeemed by the Company or converted into shares of
Common Stock satisfied.
<PAGE>
The execution and delivery of this letter agreement shall not, except as
specifically provided above, constitute a waiver by any party to the Merger
Agreement of any other term or condition of the Merger Agreement, and, except as
specifically provided above, the Merger Agreement shall remain unamended and in
full force and effect.
To evidence your agreement with the foregoing, please execute this
letter agreement in the space provided below and return said executed
counterpart to the undersigned, whereupon this letter agreement shall be a
binding agreement among the Company and the Purchasers.
Very truly yours,
INCONTROL, INC.
/s/ Kurt C. Wheeler
By: ___________________________
Kurt C. Wheeler
Chairman of the Board, President & CEO
AGREED AND ACCEPTED TO:
GUIDANT CORPORATION
/s/ A. Jay Graf
BY: ______________________________________________________________
A. Jay Graf
Vice President
PEGASUS ACQUISITIONS CORP.
/s/ A. Jay Graf
BY: ______________________________________________________________
A. Jay Graf
President
