<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)
AND
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1)
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INCONTROL, INC.
(NAME OF SUBJECT COMPANY)
PEGASUS ACQUISITIONS CORP.
AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF
GUIDANT CORPORATION
(BIDDERS)
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COMMON STOCK, PAR VALUE $0.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
45336L103
(CUSIP NUMBER OF CLASS OF SECURITIES)
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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
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<PAGE>
This Amendment No. 1 amends and supplements the Tender Offer Statement on
Schedule 14D-1/Schedule 13D, initially filed August 17, 1998, of Guidant
Corporation, an Indiana corporation, and its wholly-owned subsidiaries,
Cardiac Pacemakers, Inc., a Minnesota corporation, and Pegasus Acquisitions
Corp., a Delaware corporation ("Purchaser"), relating to Purchaser's tender
offer for all of the outstanding stock of InControl, Inc., a Delaware
corporation, upon the terms and subject to the conditions set forth in the
Offer to Purchase, dated August 17, 1998.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) -- Offer to Purchase dated August 17, 1998.
<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 18, 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
<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.
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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...................................... 31
14. Certain Conditions of the Offer.................................. 32
15. Certain Legal Matters............................................ 33
16. Fees and Expenses................................................ 35
17. Miscellaneous.................................................... 36
</TABLE>
i
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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
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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.
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<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.
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
17
<PAGE>
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 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
18
<PAGE>
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 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,
19
<PAGE>
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 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
20
<PAGE>
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 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
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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 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
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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 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
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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.
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.
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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.
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
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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 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
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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 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
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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).
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.
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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 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
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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 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)
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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.
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
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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 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
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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.
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
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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 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
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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.
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
35
<PAGE>
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>
SCHEDULE I--DIRECTORS AND EXECUTIVE OFFICERS
OF PURCHASER, CPI AND PARENT
A. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT
The following table sets forth the name, present principal occupation or
employment and material occupations, positions, offices or employment for each
director and executive officer of Parent. Unless otherwise indicated below,
the business address of each such person is 111 Monument Circle, 29th Floor,
Indianapolis, Indiana 46204-5129 and each such person is a citizen of the
United States.
NAME PRESENT PRINCIPAL OCCUPATION OREMPLOYMENT AND
EMPLOYMENT HISTORY
Kim B. Clark, Ph.D. ....... Dr. Clark is a Director of Parent and Dean of the
Faculty and the Harry E. Figgie, Jr. Professor of
Business Administration at the Graduate School of
Business Administration of Harvard University.
Dr. Clark has been a member of the Harvard
faculty since 1978. Dr. Clark was a Member of the
Committee on High Technology Ceramics in Japan,
National Materials Advisory Board, National
Academy of Engineering, in 1983. He was also the
Rapporteur for the Automobile Panel, Committee on
International Trade and Technology, National
Academy of Engineering from 1980-1982. He is also
a director of Fleet Financial, Tower Automotive,
Inc. and Ion, Inc.
James M. Cornelius......... Mr. Cornelius is Chairman of the Board of
Directors and a Director of Parent. Previously,
he was Vice President, Finance and Chief
Financial Officer of Eli Lilly and Company
("Lilly") from 1983 until his retirement in
October 1995 and was a Director for Lilly. Mr.
Cornelius has served as Treasurer of Lilly and as
President of IVAC Corporation, a former Lilly
medical device subsidiary. He joined Lilly in
1967. Mr. Cornelius is a director of American
United Life Insurance Company, Chubb Corporation,
Lilly Industries, Inc., and the National Bank of
Indianapolis. Mr. Cornelius also serves as a
Trustee of the University of Indianapolis.
Maurice A. Cox, Jr. ....... Mr. Cox is a Director of Parent and President and
Chief Executive Officer of The Ohio Partners, LLC
(a venture capital company), a position he has
held since July 1995. Previously, he served as
President and Chief Executive Officer of
CompuServe Incorporated from 1990 to June 1995.
Mr. Cox joined CompuServe in 1979 and has served
as Vice President, Product Management and as
Executive Vice President of CompuServe's
Information Services Division. He is also a
director of Huntington National Bank.
Ronald W. Dollens.......... Mr. Dollens is President, Chief Executive Officer
and a Director of Parent. Previously, he served
as President of Lilly's Medical Devices and
Diagnostics ("MDD") Division from 1991 until
1995. Mr. Dollens served as Vice President of
Lilly's MDD Division and Chairman of the
Company's subsidiary, Advanced Cardiovascular
Systems, Inc. ("ACS") from 1990 to 1991. He also
held the position of President and Chief
Executive Officer of ACS. Mr. Dollens joined
Lilly in 1972. Mr. Dollens currently serves on
the boards of Physio-Control International
Corporation, the Eiteljorg Museum, the Health
Industry Manufacturers Association, and the
Indiana State Symphony Society Board. He is also
the President of the Indiana Health Industry
Forum.
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NAME PRESENT PRINCIPAL OCCUPATION OREMPLOYMENT AND
EMPLOYMENT HISTORY
Enrique C. Falla........... Mr. Falla is a Director of Parent and a Senior
Consultant for The Dow Chemical Company.
Previously, he was an Executive Vice President
from 1991 to 1997. He has also served as Chief
Financial Officer. He joined The Dow Chemical
Company in 1967 and is a member of the Finance
and Investment Policy Committees. Mr. Falla is a
director of The Dow Chemical Company and Kmart
Corporation, and is a member of the Board of
Trustees of the University of Miami.
J. B. King................. Mr. King is Vice President, General Counsel and a
Director of Parent. Mr. King also acts as counsel
to the law firm of Baker & Daniels, which
provides legal services to Parent. He previously
was Vice President and General Counsel for Lilly,
a position he held from 1987 until he retired in
1995. Before joining Lilly, Mr. King was a
partner and chairman of the management committee
of Baker & Daniels. Mr. King is a director of
Bank One, Indianapolis, N.A., the Indiana Legal
Foundation, IWC Resources, Inc., and the James
Whitcomb Riley Memorial Association.
Susan B. King.............. Ms. King is a Director of Parent and the Leader
in Residence and Chair of the Board of Advisors
for the Hart Leadership Program at Duke
University, a position she has held since January
1995. Prior to assuming this position, she served
as Senior Vice President, Corporate Affairs for
Corning Incorporated from 1992 to December 1995.
Ms. King served as President for its Steuben
Glass Division from 1987 to 1992. She joined
Corning Incorporated in 1982. She also served as
Chair of the U.S. Consumer Product Safety
Commission from 1978 to 1981. Ms. King is a
director of The Coca-Cola Company and the Health
Effects Institute. She is also a Trustee for the
Eurasia Foundation, the National Public Radio
Foundation and Duke University.
J. Kevin Moore............. Mr. Moore is a Director of Parent and Vice
President of the Carolinas Medical Center, a
position he has held since 1997. Previously, Mr.
Moore was Associate Chief Operating Officer for
Duke University Medical Center from March 1994 to
1997. Prior to assuming that position, he served
as Assistant Director, Surgical Private
Diagnostic Clinics, and Adjunct Associate
Professor, Graduate School of Health
Administration, from April 1989 to March 1994.
Mr. Moore served as Assistant Director for Duke
Hospital from May 1988 to April 1989 and he
served as Director of Management Services,
Medical Center Administration, and Adjunct
Assistant Professor, Graduate School of Health
Administration, from May 1984 to April 1988. Mr.
Moore is a director of the American Red Cross
Regional Chapter.
38
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NAME PRESENT PRINCIPAL OCCUPATION OREMPLOYMENT AND
EMPLOYMENT HISTORY
Mark Novitch, M.D. ........ Dr. Novitch is a Director of Parent and was
Professor of Health Care Sciences at George
Washington University Medical Center from 1994 to
1997 and presently serves as Adjunct Professor.
Prior to joining George Washington University
Medical Center, he retired as Vice Chairman of
the Board and Chief Compliance Officer of The
Upjohn Company in December 1993. Prior to joining
Upjohn in 1985, Dr. Novitch was Deputy
Commissioner of the federal Food and Drug
Administration ("FDA") from 1981 until 1985. He
served as Acting Commissioner of the FDA from
1983 to 1984. Dr. Novitch is currently serving a
five-year term as a Trustee and Past President of
the U. S. Pharmacopeial Convention. He is also a
Board member of the Food and Drug Law Institute.
Dr. Novitch is a director of Alteon, Inc.,
Calypte Biomedical, Inc., Neurogen Corporation,
Osiris Therapeutics, Inc., and Kos
Pharmaceuticals, Inc.
Eugene L. Step............. Mr. Step is a Director of Parent and has served
as Director, Executive Vice President, President
of the Pharmaceutical Division and a member of
the Executive Committee of Lilly until his
retirement in 1992. He joined Lilly in 1956. Mr.
Step is a director of Cell Genesys, Inc., Medco
Research, Inc., Pathogenesis, Inc., Scios-Nova,
Inc., and DBT Online, Inc.
Ruedi E. Wager, Ph.D. ..... Dr. Wager is a Director of Parent and the Chief
Executive Officer of Centeon LLC. He served as
President and Chief Executive Officer of ZLB
Central Laboratory Blood Transfusion Service SRC
(a plasma fractionation business in Switzerland),
from February 1994 to August 1998, and as Senior
Vice President at Sandoz Pharma Ltd. (a
multinational pharmaceutical company) from March
1989 to January 1994. From January 1993 to
January 1994, Dr. Wager served as Head of
Corporate Project Management and member of the
Executive Committee at Sandoz Pharma Ltd., and
from March 1989 to December 1993, he served as
Head of Worldwide Marketing and member of the
Executive Committee at Sandoz Pharma Ltd. Dr.
Wager joined Sandoz, Ltd. in 1973. Dr. Wager is a
director of ZLB Central Laboratory Blood
Transfusion Service SRC.
James R. Baumgardt......... Mr. Baumgardt is a Vice President of Parent and
President, Western Hemisphere Sales. Previously,
he held the position of Vice President, Corporate
Resources from 1994 to 1995. Mr. Baumgardt has
also served as Executive Director of Human
Resources and Business Development for the MDD
division of Lilly from 1992 to 1994.
Mr. Baumgardt was Director of Personnel for Lilly
from 1990 to 1992 and Director of Sales for
Lilly's Select Product Division from 1988 to
1990. He joined Lilly in 1970. Mr. Baumgardt is a
director of the Rose-Hulman Institute of
Technology.
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NAME PRESENT PRINCIPAL OCCUPATION OREMPLOYMENT AND
EMPLOYMENT HISTORY
Bruce Barclay.............. Mr. Barclay is Deputy General Counsel and
Secretary of Parent. Previously, he served as
Secretary and General Counsel for the Vascular
Intervention and CVS divisions of Parent. He held
the position of Secretary and General Counsel for
ACS in 1992. Mr. Barclay was also named Vice
President of Business Development, first for ACS
in 1993 and later for Vascular Intervention
division in 1995, until 1998. Before being named
General Counsel of ACS, he served as Patent
Counsel for ACS beginning in 1989. Prior to
Joining ACS, Mr. Barclay was a chemist in
pharmaceutical research, and later a patent
attorney, both at Lilly. Mr. Barclay joined Lilly
in 1978.
Keith E. Brauer............ Mr. Brauer is Vice President, Finance and Chief
Financial Officer for Parent. Previously, he
served as Executive Director of Finance and Chief
Accounting Officer of Lilly from 1992 to 1994.
Mr. Brauer was Executive Director of Finance and
Chief Accounting Officer of Lilly from 1988 to
1992 and Director of Corporate Affairs of Lilly
from 1986 to 1988. Additionally, he held the
position of Vice President of Finance and
Treasurer for Physio-Control corporation, a
former Lilly subsidiary. Mr. Brauer joined Lilly
in 1974. Mr. Brauer also serves on the University
of Michigan Business School Corporate Advisory
Board.
A. Jay Graf................ Mr. Graf is a Vice President of Parent and
President, Cardiac Rhythm Management Group. He
has been President and Chief Executive Officer of
Parent subsidiary, Cardiac Pacemakers, Inc.
("CPI") since 1992. He joined CPI as Executive
Vice President and Chief Operating Officer in
1990. Mr. Graf has also held the position of
Senior Vice President of Operations at Physio-
Control Corp. Additionally, Mr. Graf held the
positions of Vice President of Sales and
Technical Services and Vice President of
Marketing and Communications at Physio Control
Corp. He Joined Lilly in 1976. Mr. Graf is a
director of ATS Medical, Inc. and Advance
Biosurfaces.
Ginger L. Graham........... Ms. Graham is a Vice President of Parent and
President of the Vascular Intervention Group. She
has been President of ACS since 1993. She served
as a Director of Pharmaceutical Sales for Lilly
in 1992 and was Director of Corporate
Pharmaceutical Strategic Planning from 1989 to
1991. Ms. Graham joined Lilly in 1979. She is a
director of Amylin Pharmaceuticals, Inc. and the
California Healthcare Institute. She is also a
member of the Committee of 200.
Cynthia L. Lucchese........ Ms. Lucchese is Treasurer of Parent. She served
as Worldwide Treasury Planning Manager for Lilly
from 1992 to 1994. She served as Audit Manager
for Lilly from 1990 to 1992. Ms. Lucchese joined
Lilly in 1987. She is Certified Public
Accountant. She is also a director for MEDMARC
Mutual Insurance Company, Inc.
Roger Marchetti............ Mr. Marchetti is Corporate Controller and Chief
Accounting Officer of Parent. He served as
Manager of Finance for Lilly's Indianapolis
pharmaceutical manufacturing operations from 1992
to 1994, and Manufacturing Controller for ACS
from 1990 to 1992. Mr. Marchetti joined ACS in
1988 as a General account Manager. He is a
Certified Public Accountant.
40
<PAGE>
NAME PRESENT PRINCIPAL OCCUPATION OREMPLOYMENT AND
EMPLOYMENT HISTORY
Rodney R. Nash............. Mr. Nash is presently Vice President, Corporate
Resources and Policy of Parent, effective August
1. He had been the Senior Vice President of
Corporate Affairs since January 1997. Prior to
this assignment, he served for four years as the
President of Guidant Japan and Pacific Rim
Operations. Mr. Nash joined Eli Lilly and Company
in 1972 and has held various assignments in
sales, marketing and general management,
including Director of Marketing, Eli Lilly
Philippines; District Sales Manager, Long Island,
New York; General Manager, Eli Lilly (Taiwan);
Executive Director of Internal Sales and
Marketing, IVAC Corporation; and President of the
Medical Devices and Diagnostics Division, Eli
Lilly Japan. While in Tokyo, he served as Vice
Chairman and later Chairman of the American
Chamber of Commerce in Japan's Medical Equipment
and Supply subcommittee, dealing with U.S./Japan
medical equipment trade issues.
Richard M. Van Oostrom..... Mr. van Oostrom is a Vice President of Parent and
President of Operations, Europe, Middle East and
Africa. He served as Vice President of European
Operations for Lilly's MDD Division from 1984 to
1994. Mr. van Oostrom was an Executive Director
of Marketing for Lilly from 1981 to 1984 and
President and General Manager of Eli Lilly Canada
Inc. from 1980 to 1981. He joined Lilly in 1971.
He is a board member of Isotis B.V. and the
European trade association for medical prosthesis
manufacturers.
F. Thomas (Jay) Watkins.... Mr. Watkins is a Vice President of Parent and
President of the Cardiac and Vascular Surgery
Group. He has also been President of the Parent's
subsidiary, Origin Medsystems, Inc. ("Origin")
since 1995. Mr. Watkins joined Origin in 1989.
B. DIRECTORS AND EXECUTIVE OFFICERS OF CPI
The following table sets forth the name, present principal occupation or
employment and material occupations, positions, offices or employment for each
director and executive officer of CPI. Unless otherwise indicated below, the
business address of each such person is 4100 Hamline Avenue North, St. Paul,
Minnesota 55112 and each such person is a citizen of the United States.
NAME PRESENT PRINCIPAL OCCUPATION OREMPLOYMENT AND
EMPLOYMENT HISTORY
Mark C. Bartell............ Mr. Bartell is Vice President of Marketing at the
Cardiac Rhythm Management division of Parent. He
joined CPI in 1985 and worked as a financial
analyst. He also worked in customer service, the
sales organization and the marketing department.
From 1992-1995 he served as Director of New
Product Planning. Mr. Bartell joined the Vascular
Intervention division in July of 1995, as the
Vice President and General Manager of the Guide
Wire Business Unit. He accepted the position of
Vice President of Marketing at the Cardiac Rhythm
Management division of Parent in October, 1997.
41
<PAGE>
NAME PRESENT PRINCIPAL OCCUPATION OREMPLOYMENT AND
EMPLOYMENT HISTORY
Dale W. DeVries............ Mr. DeVries is Vice President of Product
Assurance and Regulatory Affairs. He started at
CPI in 1979 as Manager of Operational Accounting.
He then accepted the position of Controller, then
Controller of CPI Europe. From 1985-1988, Mr.
DeVries served as Director of International
Marketing. He then spent a year as Director of
Manufacturing. In 1989 he served as Project
Director for research and development. In 1990,
Mr. DeVries accepted the position of Vice
President of Marketing. In 1991, he accepted the
position of Vice President of Product Assurance
and Regulatory Affairs. He is also on the Board
of Directors for Medical Alley and for Regions
Hospital Foundation.
Richard R. Doyle........... Mr. Doyle is Vice President of Manufacturing. He
joined Lilly's IVAC Division in 1980 and served
as Director of Quality Assurance and Regulatory
Affairs and Director of Campus Point Operations.
He then acted as General Manager of CPI del
Caribe in Puerto Rico. In April of 1993, Mr.
Doyle accepted his current position of Vice
President of Manufacturing for the Cardiac Rhythm
Management division of Parent.
Allan L. Gorsett........... Mr. Gorsett is Vice President of Human Resources.
Mr. Gorsett was hired by CPI as a financial
analyst in 1987. He held several positions since
then, including Operations Manager in finance,
Advanced Manufacturing Engineering Manager, and
Director of Advanced Manufacturing Engineering.
In August, 1998, he began his position of Vice
President of Human Resources at CRM.
A. Jay Graf................ President and Chief Executive Officer. See Part
A.
Ralph F. Hall.............. Mr. Hall is General Counsel and Secretary of CPI.
Mr. Hall joined Lilly in 1981 as an attorney in
the product liability area. In 1987, he became
Counsel, Energy & Environmental Affairs and
served in that role until July, 1992. Mr. Hall
has been Secretary and General Counsel since July
1992 and was most recently also named Deputy
General Counsel of Parent and Special Counsel to
the Board of Directors Compliance Committee for
Parent.
Richard S. Vogel........... Mr. Vogel is Vice President of the Business
Resources Division. He joined Lilly in 1983 as a
financial analyst. From 1991 to 1995, he served
as Vice President of Administration and Chief
Financial Officer for Hybritech Incorporated, a
subsidiary of Lilly. Mr. Vogel accepted the
position of Vice President of the Business
Resources Division in 1995.
Jay A. Warren.............. Mr. Warren is Vice President of Research and
Development. In 1988, he joined CPI as the West
Coast Scientific Advisor to the Chief Executive
Officer. In 1993, he accepted his current
position as Vice President of Research and
Development.
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C. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER
The following table sets forth the name, present principal occupation or
employment and material occupations, positions, offices or employment for each
director and executive officer of Purchaser. Unless otherwise indicated below,
the business address of each such person is 4100 Hamline Avenue North, St.
Paul, Minnesota 55112 and each such person is a citizen of the United States.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
NAME EMPLOYMENT AND EMPLOYMENT HISTORY
---- ---------------------------------
<S> <C>
A. Jay Graf................. Director and President. See Part A.
Ralph F. Hall............... Director and Secretary. See Part B.
Richard Vogel............... Director and Treasurer. See Part B.
</TABLE>
43
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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
