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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
CARDIOMETRICS, INC.
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(NAME OF ISSUER)
Common Stock, $.01 Par Value
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(TITLE OF CLASS OF SECURITIES)
141906 10 7
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(CUSIP NUMBER)
Reinhard J. Warnking
Endosonics Corporation
2870 Kilgore Road
Rancho Cordova, CA 95670
(916) 638-8008
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(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS)
January 26, 1997
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(DATE OF EVENT WHICH REQUIRES FILING
OF THIS STATEMENT)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(b)(3) or (4), check the following box. [ ]
NOTE: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom copies
are to be sent.
(Continued on following pages)
(Page 1 of 12 pages)
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*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
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- ------------------------------- -------------------------------
CUSIP NO. 141906 10 7 13D Page 2 of 12 Pages
- ------------------------------- -------------------------------
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1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
Endosonics Corporation
I.R.S. I.D. # 68-0028500
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a)[ ] (b)[ ]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
00
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDING IS REQUIRED PURSUANT
TO ITEMS 2(d) OR 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
State of Delaware
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7 SOLE VOTING POWER
----
NUMBER ------------------------------------------------
OF 8 SHARED VOTING POWER
SHARES 804,023
BENEFICIALLY ------------------------------------------------
OWNED BY 9 SOLE DISPOSITIVE POWER
REPORTING ----
PERSON ------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
----
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
804,023
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN
SHARES*
[ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
11.6%
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14 TYPE OF REPORTING PERSON*
CO
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*SEE INSTRUCTIONS BEFORE FILLING OUT
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Neither the filing of this Schedule 13D nor any of its contents shall be deemed
to constitute an admission by Endosonics Corporation that it is the beneficial
owner of any of the Common Stock referred to herein for purposes of Section
13(d) of the Securities Exchange Act of 1934, as amended (the "Act"), or for any
other purpose, and such beneficial ownership is expressly disclaimed.
3.
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ITEM 1. SECURITY AND ISSUER.
This statement on Schedule 13D relates to the common stock, par value
$.01 per share (the "Issuer Common Stock"), of Cardiometrics, Inc., a Delaware
corporation (the "Issuer"). The principal executive offices of the Issuer are
located at 645 Clyde Avenue, Mountain View, California 94043.
ITEM 2. IDENTITY AND BACKGROUND.
(a) The name of the person filing this statement is Endosonics Corporation,
a Delaware corporation ("Endosonics").
(b) The address of the principal office and principal business of
Endosonics is 2870 Kilgore Road, Rancho Cordova, California 95670.
(c) Endosonics develops, manufactures and markets intravascular ultrasound
("IVUS") imaging systems and catheters to assist in the diagnosis and treatment
of cardiovascular and peripheral vascular disease. Endosonics' IVUS imaging
products enhance the effectiveness of the diagonis and treatment of coronary
artery and other vascular diseases by providing important diagnostic information
not available from conventional x-ray angiography. Set forth in Schedule A is
the name and present principal occupation or employment and the name, principal
business and address of any corporation or other organization in which such
employment is conducted, of each of Endosonics' directors and executive
officers, as of the date hereof.
(d) During the past five years, neither Endosonics nor, to Endosonics' best
knowledge, any person named in Schedule A to this Statement, has been convicted
in a criminal proceeding (excluding traffic violations or similar misdemeanors).
(e) During the past five years, neither Endosonics nor, to Endosonics' best
knowledge, any person named in Schedule A to this Statement, was a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
as a result of which such person was or is subject to a judgment, decree or
final order enjoining future violations of or prohibiting or mandating activity
subject to Federal or State securities laws or finding any violation with
respect to such laws.
(f) Not applicable.
4.
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ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Pursuant to an Agreement and Plan of Reorganization dated January 26,
1997 (the "Reorganization Agreement"), among Endosonics, River Acquisition
Corporation, a Delaware corporation and wholly-owned subsidiary of Endosonics
("Merger Sub") and the Issuer, and subject to the conditions set forth therein
(including approval by stockholders of the Issuer), Merger Sub will be merged
with and into the Issuer (the "Merger"), with each share of Issuer Common Stock
being converted into .35 newly issued shares of Endosonics Common Stock, $0.001
par value (Endosonics Common Stock), .20 shares of CardioVascular Dynamics, Inc.
("CVD") Common Stock held by Endosonics, and $2.00 cash, subject to adjustment
such that based on the average of the closing prices of Endosonics' and CVD's
Common Stock as quoted on the Nasdaq National Market for the ten trading days
immediately preceding (and including) the third trading day prior to the
Cardiometrics stockholders meeting, the merger consideration shall be equal to
$9.00; provided that, if the CVD exchange ratio obtained thereby is greater than
.2636, the CVD exchange ratio shall be .2636 (the "Exchange Ratio"). The
foregoing summary of the Merger is qualified in its entirety by reference to the
copy of the Reorganization Agreement included as Exhibit 1 to this Schedule 13D
and incorporated herein in its entirety by reference.
ITEM 4. PURPOSE OF TRANSACTION.
(a) - (b) As described in Item 3 above, this statement relates to the
Merger of Merger Sub, a wholly-owned subsidiary of Endosonics, with and into
Issuer in a statutory merger pursuant to the Delaware General Corporation Law.
At the effective time of the Merger, the separate existence of Merger Sub will
cease to exist and Issuer will continue as the surviving corporation and as a
wholly-owned subsidiary of Endosonics (the "Surviving Corporation"). Holders of
outstanding Issuer Common Stock will receive, in exchange for each share of
Issuer Common Stock held by them, .35 newly issued shares of Endosonics Common
Stock, .20 shares of CVD Common Stock and $2.00 cash (subject to adjustment as
described in Item 3 above).
As an inducement to Endosonics to enter into the Reorganization
Agreement, each stockholder who is a party to the Voting Agreement, dated as of
January 26, 1997 (the "Voting Agreement"), among the parties thereto
(collectively, the "Voting Agreement Stockholders") and Endosonics, has, by
executing the Voting Agreement, irrevocably appointed Endosonics (or any nominee
of Endosonics) as his, hers or its lawful attorney and proxy. Such proxy gives
Endosonics the limited right to vote each of the 804,023 shares of Issuer Common
Stock beneficially and collectively owned by the Voting Agreement Stockholders
in all matters related to the Merger. The shared voting power with the certain
stockholders of Issuer relates to 804,023 shares of Issuer Common Stock (the
"Shares"). The Voting Agreement Stockholders and the number of shares
beneficially owned by each of them is set forth in Schedule B hereto
5.
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which is hereby incorporated by reference. The foregoing summary of the Voting
Agreement is qualified in its entirety by reference to the copy of the Voting
Agreement included as Exhibit 2 to this Schedule 13D and incorporated herein in
its entirety by reference.
In exercising its right to vote the Shares as lawful attorney
and proxy of the Voting Agreement Stockholders, Endosonics (or any nominee of
Endosonics) will be limited, at every Issuer stockholders meeting and every
written consent in lieu of such meeting to vote the shares (i) in favor of
approval of the Merger and the Reorganization Agreement and in favor of any
matter that could reasonably be expected to facilitate the Merger and (ii)
against any proposal for any recapitalization, merger, sale of assets or other
business combination (other than the Merger) between Issuer and any person or
entity other than Endosonics or any other action or agreement that would result
in a breach of any covenant, representation or warranty or any other obligation
or agreement of Issuer under the Reorganization Agreement or which could result
in any of the conditions to Issuer's obligations under the Reorganization
Agreement not being fulfilled. The Voting Agreement Stockholder may vote the
Shares on all other matters. The Voting Agreement terminates upon the earlier to
occur of (i) such date and time as the Merger shall become effective in
accordance with the terms and provisions of the Reorganization Agreement and
(ii) six months after the date of termination of the Reorganization Agreement.
Pursuant to the Reorganization Agreement, Endosonics and
Issuer entered into a Stock Option Agreement, dated January 26, 1997 ("Option
Agreement"). The Option Agreement grants Endosonics the right, under certain
conditions, to purchase up to 1,379,717 shares of Issuer Common Stock at a price
of $9.00 per share, payable in cash, or at Acquiror's option, Target shall loan
Acquiror the exercise price (less the par value of the shares issued upon
exercise, such par value to be paid in cash) pursuant to an interest free
one-year term loan. Subject to certain conditions, the Option Agreement may be
exercised in whole or in part by Endosonics after the occurrence of any of the
events described in Section 7.3(b) of the Reorganization Agreement or if a
Takeover Proposal or Trigger Event is consummated. At any time during which the
Option Agreement is exercisable, Endosonics shall have the right to sell to
Issuer and Issuer shall be obligated to repurchase from Endosonics, and, subject
to Section 7(c) of the Option Agreement, Issuer shall have the right to
repurchase from Endosonics and Endosonics shall be obligated to sell to Issuer,
all or any portion of the Issuer shares purchased by Endosonics pursuant to the
Option Agreement. The foregoing summary of the Option Agreement is qualified in
its entirety by reference to the copy of the Option Agreement included as
Exhibit 3 to this Schedule 13D and incorporated herein in its entirety by
reference.
(c) Not applicable.
6.
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(d) Upon consummation of the Merger, the directors of the
Surviving Corporation shall be Reinhard J. Warnking and Donald D. Huffman. The
officers of the Surviving Corporation shall be the initial officers of Merger
Sub, until their respective successors are duly elected or appointed and
qualified.
(e) Other than as a result of the Merger described in Item 3
above, not applicable.
(f) Not applicable.
(g) Upon consummation of the Merger, the Certificate of
Incorporation of Merger Sub, as in effect immediately prior to the Merger, shall
be the Certificate of Incorporation of the Surviving Corporation until
thereafter amended as provided by Delaware Law and such Certificate of
Incorporation; provided, however, that Article I of the Certificate of
Incorporation of the Surviving Corporation shall be amended to read as follows:
"The name of the corporation is Cardiometrics, Inc." Upon consummation of the
Merger, the Bylaws of Merger Sub, as in effect immediately prior to the Merger,
shall be the Bylaws of the Surviving Corporation until thereafter amended.
(h) - (i) If the Merger is consummated as planned, the Issuer Common
Stock will be deregistered under the Act and delisted from The Nasdaq National
Market.
(j) Other than described above, Endosonics currently has no plan or
proposals which relate to, or may result in, any of the matters listed in Items
4(a) - (j) of Schedule 13D (although Endosonics reserves the right to develop
such plans).
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) - (b) As a result of the Voting Agreement, Endosonics may be deemed
to be the beneficial owner of at least 804,023 shares of Issuer Common Stock.
Such Issuer Common Stock constitutes approximately 11.6% of the issued and
outstanding shares of Issuer Common Stock.
Endosonics has shared power to vote all of the Shares for the
limited purposes described above. Endosonics does not have the sole power to
vote or to direct the vote or to dispose or to direct the disposition of any
shares of Issuer Common Stock. To the best of Endosonics' knowledge, no shares
of Issuer Common Stock are beneficially owned by any of the persons named in
Schedule A.
(c) Neither Endosonics, nor, to the knowledge of Endosonics, any
person named in Schedule A, has affected any transaction in the Issuer Common
Stock during the past 60 days.
7.
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(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
Other than the Reorganization Agreement, Voting Agreement and
Option Agreement, to the best knowledge of Endosonics, there are no contracts,
arrangements, understandings or relationships (legal or otherwise) among the
persons named in Item 2 and between such persons and any person with respect to
any securities of the Issuer, including but not limited to transfer or voting of
any of the securities, finder's fees, joint ventures, loan or option
arrangements, puts or calls, guarantees of profits, division of profits or loss,
or the giving or withholding of proxies.
ITEM 7. MATERIALS TO BE FILED AS EXHIBITS.
The following documents are filed as exhibits:
1. Form of Agreement and Plan of Reorganization, dated
January 26, 1997, by and among Endosonics
Corporation, a Delaware corporation, River
Acquisition Corporation, a Delaware corporation and
wholly-owned subsidiary of Endosonics Corporation,
and Cardiometrics, Inc. a Delaware corporation.
2. Form of Voting Agreement, dated January 26, 1997,
between Endosonics Corporation, a Delaware
corporation and certain stockholders of
Cardiometrics, Inc., a Delaware corporation.
3. Form of Stock Option Agreement, dated January 26,
1997, by and between Endosonics Corporation, a
Delaware corporation, and Cardiometrics, Inc., a
Delaware corporation.
8.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
Dated: February 4, 1997
ENDOSONICS CORPORATION
By: /s/ Reinhard J. Warnking
-------------------------------------
Reinhard J. Warnking, President
9.
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SCHEDULE A
DIRECTORS AND EXECUTIVE OFFICERS OF
ENDOSONICS CORPORATION.
Present Principle
Occupation Including
Name and Title Name of Employer
-------------- ----------------
Thomas Black Vice President, Systems Manufacturing of
Endosonics Corporation.
Thomas J. Cable Director of Endosonics Corporation and General
Partner of Cable & Howse Ventures, 10900 NE
4th Street, Suite 2300, Bellevue, WA 98004.
William G. Davis Director of Endosonics Corporation and
Independent Business Consultant.
Michael J. Eberle Senior Vice President, Engineering and Chief
Technical Officer of Endosonics Corporation.
Donald Fraley Vice President, Sales and Marketing of Endosonics
Corporation.
Richard Hebert Vice President, Operations, Pleasanton, of
Endosonics Corporation.
Michael R. Henson Director of Endosonics Corporation and President
and Chief Executive Officer of Cardiovascular
Dynamics, Inc., 13900 Alton Parkway, Suite 122,
Irvine, CA 92718.
Donald D. Huffman Vice President, Finance and Administration, and
Chief Financial Officer of Endosonics Corporation.
Edward M. Leonard Director of Endosonics Corporation and Partner of
Brobeck, Phleger & Harrison LLP, 2200 Geng
Road, Palo Alto, CA 94303.
Paul Norris Director of Endosonics Corporation and
Independent Consultant.
David H. Rammler Director of Endosonics Corporation.
10.
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Roger Salquist Chairman of the Board of Directors of Endosonics
Corporation and Director and Consultant of
Calgene Inc., 1920 Fifth Street, Davis, CA 95616.
Adam D. Savakus Vice President, Quality Assurance/Clinical and
Regulatory Affairs of Endosonics Corporation.
Clifford Varney Vice President, Catheter Development and
Manufacturing of Endosonics Corporation.
Reinhard J. Warnking President, Chief Executive Officer and Director of
Endosonics Corporation.
Hans de Weerd Senior Vice President and Managing Director,
Europe, of Endosonics Corporation.
11.
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SCHEDULE B
<TABLE>
<CAPTION>
Stockholder Shares Beneficially Owned
<S> <C>
Claire L. Andrews 2,500
Bay Partners IV, L.P. 304,730
California BPIV, L.P. 26,499
Robert Colloton 35,864
Neal Dempsey 337,623*
Robert J. Erra 8,919
Jeff M. Folick 12,916
Jeffrey S. Frisbie 51,291
Stanley Levy, Jr. 26,523
David B. Musket 15,169
Menahem Nassi 167,901
Robert Y. Newell IV 46,379
Kevin Rhatigan 18,563
Michael J. Sorna 69,894
H. Raymond Wallace 10,481
</TABLE>
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* Includes 304,730 shares owned by Bay Partners IV, L.P. and 26,499
shares owned by California BPIV, L.P. Mr. Dempsey, a Director of the
Company, is a General Partner of Bay Management Company IV, L.P., the
General Partner of Bay Partners IV, L.P., and of California BPIV, L.P.
Because of such relationships, Mr. Dempsey may be deemed to share
voting and investment powers over the shares held by Bay Partners. Mr.
Dempsey disclaims beneficial ownership of the shares held by Bay
Partners IV, L.P. and California BPIV, L.P., except to the extent of
his pecuniary interest therein.
12.
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EXHIBIT 1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
ENDOSONICS CORPORATION,
RIVER ACQUISITION CORPORATION
AND
CARDIOMETRICS, INC.
January 26, 1997
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TABLE OF CONTENTS
Page
ARTICLE I THE MERGER....................................... 2
1.1 The Merger...................................................... 2
1.2 Closing; Effective Time......................................... 2
1.3 Effect of the Merger............................................ 2
1.4 Certificate of Incorporation; Bylaws............................ 2
1.5 Directors and Officers.......................................... 2
1.6 Effect on Capital Stock......................................... 3
1.7 Surrender of Certificates....................................... 5
1.8 No Further Ownership Rights in Target Common Stock.............. 7
1.9 Lost, Stolen or Destroyed Certificates.......................... 7
1.10 Taking of Necessary Action; Further Action...................... 8
ARTICLE II REPRESENTATIONS AND WARRANTIES OF TARGET......... 8
2.1 Organization, Standing and Power................................ 8
2.2 Capital Structure............................................... 8
2.3 Authority....................................................... 10
2.4 SEC Documents; Financial Statements............................. 11
2.5 Absence of Certain Changes...................................... 12
2.6 Absence of Undisclosed Liabilities.............................. 12
2.7 Litigation...................................................... 12
2.8 Restrictions on Business Activities............................. 12
2.9 Governmental Authorization...................................... 13
2.10 Title to Property............................................... 13
2.11 Intellectual Property........................................... 13
2.12 Environmental Matters........................................... 14
2.13 Taxes........................................................... 15
2.14 Employee Benefit Plans.......................................... 16
2.15 Certain Agreements Affected by the Merger....................... 18
2.16 Employee Matters................................................ 19
2.17 Interested Party Transactions................................... 19
2.18 Insurance....................................................... 19
2.19 Compliance With Laws............................................ 19
2.20 Brokers' and Finders' Fees...................................... 19
2.21 Registration Statements; Proxy Statement/Prospectus............. 20
2.22 Opinion of Financial Advisor.................................... 20
2.23 Vote Required................................................... 20
2.24 Board Approval.................................................. 20
2.25 Section 203 of the DGCL Not Applicable.......................... 21
2.26 Target Rights Agreement......................................... 21
2.27 Foreign Corrupt Practices Act................................... 21
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2.28 Government Regulation........................................... 21
2.29 Representations Complete........................................ 21
ARTICLE III REPRESENTATIONS AND WARRANTIES OF
ACQUIROR AND MERGER SUB.................................................. 22
3.1 Organization, Standing and Power................................ 22
3.2 Capital Structure............................................... 22
3.3 Authority....................................................... 23
3.4 SEC Documents; Financial Statements............................. 24
3.5 Absence of Certain Changes...................................... 25
3.6 Absence of Undisclosed Liabilities.............................. 25
3.7 Litigation...................................................... 25
3.8 Restrictions on Business Activities............................. 25
3.9 Governmental Authorization...................................... 26
3.10 Compliance With Laws............................................ 26
3.11 Broker's and Finders' Fees...................................... 26
3.12 Registration Statements; Proxy Statement/Prospectus............. 26
3.13 Board Approval.................................................. 27
3.14 Opinion of Financial Advisor.................................... 27
3.15 VC Common Stock................................................. 27
3.16 Intellectual Property........................................... 27
3.17 Environmental Matters........................................... 27
3.18 Foreign Corrupt Practices Act................................... 28
3.19 VC SEC Documents................................................ 28
3.20 Representations Complete........................................ 28
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME.............. 29
4.1 Conduct of Business of Target and Acquiror...................... 29
4.2 Conduct of Business of Target................................... 30
4.3 No Solicitation................................................. 32
ARTICLE V ADDITIONAL AGREEMENTS............................ 33
5.1 Proxy Statement/Prospectus; Registration Statement.............. 33
5.2 Meeting of Stockholders......................................... 34
5.3 Access to Information........................................... 34
5.4 Confidentiality................................................. 35
5.5 Public Disclosure............................................... 35
5.6 Consents; Cooperation........................................... 35
5.7 Voting Agreement................................................ 36
5.8 Legal Requirements.............................................. 36
5.9 Blue Sky Laws................................................... 36
5.10 Employee Benefit Plans.......................................... 37
5.11 Letter of Acquiror's and Target's Accountants................... 38
5.12 Indemnification................................................. 38
ii.
<PAGE> 4
5.13 Stock Option Agreement.......................................... 39
5.14 Listing of Additional Shares.................................... 39
5.15 Best Efforts and Further Assurances............................. 39
5.16 Retention of Certain Target Employees........................... 40
5.17 Form S-8........................................................ 40
5.18 Cashless Exercise of Options.................................... 40
ARTICLE VI CONDITIONS TO THE MERGER.................................. 40
6.1 Conditions to Obligations of Each Party to Effect the Merger.... 40
6.2 Additional Conditions to Obligations of Target.................. 41
6.3 Additional Conditions to the Obligations of Acquiror and
Merger
Sub............................................................. 42
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER......................... 43
7.1 Termination..................................................... 43
7.2 Effect of Termination........................................... 44
7.3 Expenses and Termination Fees................................... 44
7.4 Amendment....................................................... 46
7.5 Extension; Waiver............................................... 46
ARTICLE VIII GENERAL PROVISIONS........................................ 46
8.1 Non-Survival at Effective Time.................................. 46
8.2 Notices......................................................... 46
8.3 Interpretation.................................................. 47
8.4 Counterparts.................................................... 48
8.5 Entire Agreement; Nonassignability; Parties in Interest......... 48
8.6 Severability.................................................... 48
8.7 Remedies Cumulative............................................. 48
8.8 Governing Law................................................... 48
8.9 Rules of Construction........................................... 49
iii.
<PAGE> 5
SCHEDULES
Target Disclosure Schedule
Acquiror Disclosure Schedule
Schedule 2.6 - Target Balance Sheet
Schedule 2.10 - Target Real Property
Schedule 2.11 - Target Intellectual Property
Schedule 2.14 - Target Employee Plans
Schedule 5.7 - Target Voting Agreement Signatories
Schedule 5.10 - List of Optionholders Under Target Stock Option Plans
EXHIBITS
Exhibit A - Certificate of Merger
Exhibit B - Voting Agreement
Exhibit C - Stock Option Agreement
Exhibit D - Non-Competition Agreement
iv.
<PAGE> 6
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is
made and entered into as of January 26, 1997, by and among Endosonics
Corporation, a Delaware corporation ("Acquiror"), River Acquisition Corporation,
a Delaware corporation ("Merger Sub") and wholly-owned subsidiary of Acquiror,
and Cardiometrics, Inc., a Delaware corporation ("Target").
RECITALS
A. The Boards of Directors of Target, Acquiror and Merger Sub
believe it is in the best interests of their respective companies and the
stockholders of their respective companies that Target and Merger Sub combine
into a single company through the statutory merger of Merger Sub with and into
Target (the "Merger") and, in furtherance thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, the outstanding
shares of Target Common Stock, $.0.01 par value ("Target Common Stock"), shall
be converted into shares of Acquiror Common Stock, $0.001 par value ("Acquiror
Common Stock"), at the rate set forth herein, shares of Common Stock ("VC Common
Stock") of CardioVascular Dynamics, Inc., a Delaware corporation ("VC"), at the
rate set forth herein, and cash, at the rate set forth herein.
C. Target, Acquiror and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
D. Concurrent with the execution of this Agreement and as an
inducement to Acquiror and Merger Sub to enter into this Agreement, (a) Target
and Acquiror have entered into a stock option agreement dated the date hereof
(the "Stock Option Agreement") providing for the purchase by Acquiror of
newly-issued shares of Target's Common Stock, and (b) certain of the affiliates
of Target who are stockholders, officers or directors have on the date hereof
entered into an agreement to vote the shares of Target's Common Stock owned by
such person to approve the Merger and against any competing proposals.
NOW, THEREFORE, in consideration of the covenants and
representations set forth herein, and for other good and valuable consideration,
the parties agree as follows:
<PAGE> 7
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section
1.2) and subject to and upon the terms and conditions of this Agreement, the
Certificate of Merger attached hereto as Exhibit A (the "Certificate of Merger")
and the applicable provisions of the Delaware General Corporation Law ("Delaware
Law"), Merger Sub shall be merged with and into Target, the separate corporate
existence of Merger Sub shall cease and Target shall continue as the surviving
corporation. Target as the surviving corporation after the Merger is hereinafter
sometimes referred to as the "Surviving Corporation."
1.2 Closing; Effective Time. The closing of the transactions
contemplated hereby (the "Closing") shall take place as soon as practicable
after the satisfaction or waiver of each of the conditions set forth in Article
VI hereof or at such other time as the parties hereto agree (the "Closing
Date"). The Closing shall take place at the offices of Acquiror's legal counsel,
or at such other location as the parties hereto agree. In connection with the
Closing, the parties hereto shall cause the Merger to be consummated by filing
the Certificate of Merger with the Secretary of State of the State of Delaware,
in accordance with the relevant provisions of Delaware Law (the time of such
filing or such later time as is set forth in the Certificate of Merger being the
"Effective Time").
1.3 Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in this Agreement, the Certificate of Merger and
the applicable provisions of Delaware Law. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time, all the property,
rights, privileges, powers and franchises of Target and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of Target and
Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the Certificate of
Incorporation of Merger Sub, as in effect immediately prior to the Effective
Time, shall be the Certificate of Incorporation of the Surviving Corporation
until thereafter amended as provided by Delaware Law and such Certificate of
Incorporation; provided, however, that Article I of the Certificate of
Incorporation of the Surviving Corporation shall be amended to read as follows:
"The name of the corporation is Cardiometrics, Inc."
(b) The Bylaws of Merger Sub, as in effect immediately
prior to the Effective Time, shall be the Bylaws of the Surviving Corporation
until thereafter amended.
1.5 Directors and Officers. At the Effective Time, the
directors of the Surviving Corporation shall be Reinhard J. Warnking and Donald
D. Huffman. The officers
2.
<PAGE> 8
of the Surviving Corporation shall be the initial officers of Merger Sub, until
their respective successors are duly elected or appointed and qualified.
1.6 Effect on Capital Stock. By virtue of the Merger and
without any action on the part of Merger Sub, Target or the holders of any of
the following securities:
(a) Conversion of Target Common Stock. At the Effective
Time, each share of Target Common Stock issued and outstanding immediately prior
to the Effective Time (other than any shares of Target Common Stock to be
canceled pursuant to Section 1.6(b) and shares, if any held by persons who have
not voted such shares for approval of the Merger and with respect to which such
persons shall become entitled to appraisal rights in accordance with Section 262
of the Delaware Law ("Dissenting Shares")) will be canceled and extinguished and
be converted automatically into the right to receive:
(i) an amount in cash equal to $2.00
(the "Cash Consideration");
(ii) 0.35 shares of Acquiror Common
Stock (the "Stock Consideration"
and the "Stock Consideration
Exchange Ratio"); and
(iii) 0.20 shares of VC Common Stock held
of record by Acquiror as of the
date hereof (the "VC Exchange
Ratio"), subject to adjustment as
set forth below (the "VC
Consideration" and collectively
with the Cash Consideration and
Stock Consideration, the "Merger
Consideration"). The VC Exchange
Ratio shall be subject to increase
such that based on the average of
the closing prices of Acquiror
Common Stock and the average of the
closing prices of VC Common Stock
for the ten trading days
immediately preceding (and
including) the third trading day
prior to the Target Stockholders'
Meeting, the Merger Consideration
shall be equal to $9.00 (the
"Price"); provided, however, that
if based on such calculation the VC
Exchange Ratio would be greater
than .2636, the VC Exchange Ratio
shall be .2636 (the "Floor");
provided further, that at
Acquiror's option, in lieu of such
increase of the VC Exchange Ratio,
the Cash Consideration may be
increased such that, based on the
average of the closing prices of
Acquiror Common Stock and the
average of the closing prices of VC
Common Stock for the ten trading
days immediately preceding (and
including) the third trading day
prior to the Target Stockholders'
3.
<PAGE> 9
Meeting, the Merger Consideration
shall be equal to $9.00; and
provided further that,
notwithstanding the foregoing, the
VC Exchange Ratio shall not be less
than 0.20 and the Cash
Consideration shall not be less
than $2.00.
(b) Cancellation of Target Common Stock Owned by Acquiror
or Target. At the Effective Time, all shares of Target Common Stock that are
owned by Target as treasury stock and each share of Target Common Stock owned by
Acquiror or any direct or indirect wholly-owned subsidiary of Acquiror or of
Target immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof.
(c) Target Stock Option Plans. Immediately prior to the
Effective Time, each outstanding option under the Target 1985 Stock Option Plan,
the Target 1995 Stock Option Plan and the Target 1995 Stock Incentive Plan
(collectively, the "Target Stock Option Plans") shall vest in full and become
exercisable for any or all of the shares of Target Common Stock at the time
subject to that option, with such accelerated vesting to be conditioned,
however, upon the actual consummation of the Merger. Each share of Target Common
Stock acquired under the Target Option Plans through the exercise of an
outstanding option effected immediately prior to the Effective Time shall be
canceled and extinguished at the Effective Time and converted automatically into
the right to receive the Merger Consideration payable per share of Target Common
Stock. However, if the Merger is not consummated, the option exercise price paid
for any shares of Target Common Stock purchased under the Target Option Plans on
the basis of the acceleration provided under this Section 1.6(c) shall be
refunded by Target, and the vesting schedule for those shares shall revert to
the schedule in effect immediately prior to acceleration hereunder. Any options
which remain outstanding under the Target Option Plans at the Effective Time
shall be cancelled in accordance with the provisions of Section 5.10.
(d) Capital Stock of Merger Sub. At the Effective Time,
each share of Common Stock, $.0001 par value, of Merger Sub ("Merger Sub Common
Stock") issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one validly issued, fully paid and
nonassessable share of Common Stock, $.0001 par value, of the Surviving
Corporation. Each stock certificate of Merger Sub evidencing ownership of any
such shares shall continue to evidence ownership of such shares of capital stock
of the Surviving Corporation.
(e) Adjustments to Exchange Ratio. The exchange ratio for
the shares of Acquiror Common Stock, the VC Exchange Ratio, the Price, the Floor
and the Cash Consideration shall be adjusted to reflect fully the effect of any
stock split, reverse split, stock dividend (including any dividend or
distribution of securities convertible into Acquiror Common Stock, Target Common
Stock or VC Common Stock), reorganization, recapitalization or other like change
with respect to Acquiror Common Stock, Target
4.
<PAGE> 10
Common Stock or VC Common Stock occurring after the date hereof and prior to the
Effective Time.
(f) Fractional Shares. No fraction of a share of Acquiror
Common Stock or VC Common Stock shall be issued, but in lieu thereof each holder
of shares of Target Common Stock who would otherwise be entitled to a fraction
of a share of Acquiror Common Stock or VC Common Stock (after aggregating all
fractional shares of Acquiror Common Stock or VC Common Stock to be received by
such holder) shall receive from Acquiror an amount of cash (rounded to the
nearest whole cent) equal to the product of (i) such fraction, multiplied by
(ii) the average of the closing prices of a share of Acquiror Common Stock or VC
Common Stock, as applicable, for the ten trading days immediately preceding (and
including) the third trading day prior to the Target Stockholders' Meeting, as
reported on the Nasdaq National Market.
(h) Appraisal Rights. Any Dissenting Shares shall not be
converted into the right to receive the consideration set forth in Section
1.6(a) but shall instead be converted into the right to receive such
consideration as may be determined to be due with respect to such Dissenting
Shares pursuant to Delaware Law. Target agrees that, except with the prior
written consent of Acquiror, or as required under Delaware Law, it will not
voluntarily make any payment with respect to, or settle or offer to settle, any
demand with respect to Dissenting Shares. Each holder of Dissenting Shares
("Dissenting Stockholder") who, pursuant to the provisions of Delaware Law,
becomes entitled to payment of the fair value for shares of Target Common Stock
shall receive payment therefor (but only after the value therefor shall have
been agreed upon or finally determined pursuant to such provisions). If, after
the Effective Time, any Dissenting Shares shall lose their status as Dissenting
Shares, Acquiror shall issue and deliver, upon surrender by such shareholder of
certificate or certificates representing shares of Target Common Stock, the
consideration to which such stockholder would otherwise be entitled under this
Section 1.6 and the Certificate of Merger.
1.7 Surrender of Certificates.
(a) Exchange Agent. Chase Mellon Shareholder Services
shall act as exchange agent (the "Exchange Agent") in the Merger.
(b) Acquiror to Provide Common Stock and Cash. Promptly
after the Effective Time (but in no event later than five (5) business days
thereafter), Acquiror shall make available to the Exchange Agent for exchange in
accordance with this Article I, through such reasonable procedures as Acquiror
may adopt, (1) the shares of Acquiror Common Stock issuable pursuant to Section
1.6(a)(ii), (2) the shares of VC Common Stock issuable pursuant to Section
1.6(a)(iii), (3) the cash issuable pursuant to Section 1.6(a)(i), and (4) cash
in an amount sufficient to permit payment of cash in lieu of fractional shares
pursuant to Section 1.6(f).
5.
<PAGE> 11
(c) Exchange Procedures. Within five (5) business days
after the Effective Time, the Surviving Corporation shall cause to be mailed to
each holder of record of a certificate or certificates (the "Certificates")
which immediately prior to the Effective Time represented outstanding shares of
Target Common Stock, whose shares were converted into the right to receive the
Merger Consideration pursuant to Section 1.6, (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon receipt of the Certificates by the Exchange
Agent, and shall be in such form and have such other provisions as Acquiror may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for the Merger Consideration. Upon surrender of a
Certificate for cancellation to the Exchange Agent, together with such letter of
transmittal, duly completed and validly executed in accordance with the
instructions thereto, the holder of such Certificate shall be entitled to
receive in exchange therefor the Merger Consideration and the Certificate so
surrendered shall forthwith be canceled. Until so surrendered, each outstanding
Certificate that, prior to the Effective Time, represented shares of Target
Common Stock shall be deemed from and after the Effective Time, for all
corporate purposes, other than the payment of dividends, to evidence the right
to receive the Merger Consideration. Promptly after the Effective Time, the
Surviving Corporation shall cause to be mailed to each holder of an option under
the Target Option Plans which is cancelled in accordance with Section 5.10
instructions for use in effecting the surrender of the documentation for that
option in exchange for the consideration payable per option share under Section
5.10. Upon surrender of the option documentation for cancellation to the
Exchange Agent or to such other agent or agents as may be appointed by Acquiror,
the holder of such option shall be entitled to receive in exchange therefor the
consideration payable per option share under Section 5.10, and the option shall
be cancelled and the holder of that option shall have no further right to
acquire any securities thereunder. Until so surrendered, each such outstanding
option will be deemed from and after the Effective Time, for all corporate
purposes, to evidence the ownership of the right to receive the consideration
payable per option share under Section 5.10.
(d) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions with respect to Acquiror Common Stock with a
record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Acquiror Common Stock
represented thereby until the holder of record of such Certificate shall
surrender such Certificate. Subject to applicable law, following surrender of
any such Certificate, there shall be paid to the record holder of the
certificates representing whole shares of Acquiror Common Stock issued in
exchange therefor, without interest, at the time of such surrender, the amount
of any such dividends or other distributions with a record date after the
Effective Time theretofore payable (but for the provisions of this Section
1.7(d)) with respect to such shares of Acquiror Common Stock.
(e) Transfers of Ownership. If any certificate for shares
of Acquiror Common Stock or VC Common Stock is to be issued in a name other than
that in which
6.
<PAGE> 12
the Certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that the Certificate so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange will have paid to Acquiror or any agent designated by
it any transfer or other taxes required by reason of the issuance of a
certificate for shares of Acquiror Common Stock or VC Common Stock in any name
other than that of the registered holder of the Certificate surrendered, or
established to the satisfaction of Acquiror or any agent designated by it that
such tax has been paid or is not payable.
(f) No Liability. Notwithstanding anything to the
contrary in this Section 1.7, none of the Exchange Agent, the Surviving
Corporation or any party hereto shall be liable to any person for any amount
properly paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(g) Dissenting Shares. The provisions of this Section 1.7
shall also apply to Dissenting Shares that lose their status as such, except
that the obligations of Acquiror under this Section 1.7 shall commence on the
date of loss of such status and the holder of such shares shall be entitled to
receive in exchange for such shares the consideration to which such holder is
entitled pursuant to Section 1.6 hereof.
1.8 No Further Ownership Rights in Target Common Stock. The Merger
Consideration shall be deemed to have been issued in full satisfaction of all
rights pertaining to such shares of Target Common Stock, and there shall be no
further registration of transfers on the records of the Surviving Corporation of
shares of Target Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article I. The consideration payable per option share under
Section 5.10 with respect to the options outstanding under the Target Option
Plans at the Effective Time shall be full satisfaction of all rights the holders
of those options would otherwise have to acquire shares of Target Common Stock
under those options, and those options shall accordingly be cancelled, together
with the Target Option Plans, and no further shares of Target Common Stock shall
be issuable under the cancelled options or Target Option Plans.
1.9 Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, the Merger
Consideration (and cash in lieu of fractional shares) as may be required
pursuant to Section 1.6; provided, however, that Acquiror may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed Certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against
Acquiror, the Surviving Corporation or the Exchange Agent with respect to the
Certificates alleged to have been lost, stolen or destroyed.
7.
<PAGE> 13
1.10 Taking of Necessary Action; Further Action. If, at any time
after the Effective Time, any further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of Target and Merger Sub, the officers and directors of
Target and Merger Sub are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action, so long as such action is not inconsistent with this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF TARGET
In this Agreement, any reference to any event, change, condition or
effect being "material" with respect to any entity or group of entities means
any material event, change, condition or effect related to the condition
(financial or otherwise), properties, assets (including intangible assets),
liabilities, business, operations or results of operations as presently
conducted of such entity or group of entities. In this Agreement, any reference
to a "Material Adverse Effect" with respect to any entity or group of entities
means any event, change or effect that is materially adverse to the condition
(financial or otherwise), properties, assets, liabilities, business, operations
or results of operations as presently conducted of such entity and its
subsidiaries, taken as a whole;
Except as disclosed in a document of even date herewith and delivered
by Target to Acquiror prior to the execution and delivery of this Agreement (the
"Target Disclosure Schedule"), Target represents and warrants to Acquiror and
Merger Sub as follows:
2.1 Organization, Standing and Power. Target is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization. Target has the corporate power to own its
properties and to carry on its business as now being conducted and as proposed
to be conducted prior to the Effective Time and is duly qualified to do business
and is in good standing in each jurisdiction in which the failure to be so
qualified and in good standing would have a Material Adverse Effect on Target.
Target has delivered or made available a true and correct copy of the Restated
Certificate of Incorporation (the "Certificate of Incorporation") and Bylaws of
Target, each as amended to date, to Acquiror. Target is not in violation of any
of the provisions of its Certificate of Incorporation or Bylaws. Except as
disclosed in the Target SEC Documents (as defined in Section 2.4), Target does
not directly or indirectly own any equity or similar interest in, or any
interest convertible or exchangeable or exercisable for, any equity or similar
interest in, any corporation, partnership, joint venture or other business
association or entity.
2.2 Capital Structure. The authorized capital stock of Target
consists of 15,000,000 shares of Common Stock, $0.01 par value, and 5,000,000
shares of Preferred
8.
<PAGE> 14
Stock, $0.01 par value (20,000 of which have been designated as Series A Junior
Participating Preferred Stock ("Series A Preferred Stock")), of which there were
issued and outstanding as of the close of business on January 23, 1997,
6,933,253 shares of Common Stock and no shares of Preferred Stock. As of the
date hereof, there are no other outstanding shares of capital stock or voting
securities and no other outstanding commitments to issue any shares of capital
stock or voting securities of Target other than pursuant to the Stock Option
Agreement, the exercise of options outstanding as of such date under the Target
Stock Option Plans, pursuant to the Target Employee Stock Purchase Plan (the
"Target ESPP"), pursuant to the Rights Agreement dated as of December 3, 1996,
between Target and The First National Bank of Boston (the "Rights Agreement"),
or pursuant to any outstanding warrants. All outstanding shares of Target Common
Stock are duly authorized, validly issued, fully paid and non-assessable and are
free of any liens or encumbrances other than any liens or encumbrances created
by or imposed upon the holders thereof, and are not subject to preemptive rights
or rights of first refusal created by statute, the Certificate of Incorporation
or Bylaws of Target or any agreement to which Target is a party or by which it
is bound. As of the close of business on January 23, 1997, Target has reserved
(i) 1,399,914 shares of Common Stock for issuance to employees, consultants and
directors pursuant to the Target Stock Option Plans, of which 338,576 shares
have been issued pursuant to option exercises or direct stock purchases, 931,255
shares are subject to outstanding, unexercised options, and no shares are
subject to outstanding stock purchase rights, (ii) 100,000 shares of Common
Stock for issuance to employees pursuant to the Target ESPP, of which 31,643
shares have been issued, (iii) 20,000 shares of Series A Preferred Stock for
issuance under the Rights Agreement, none of which are issued and outstanding
and (iv) 35,156 shares of Common Stock for issuance upon the exercise of
warrants, which warrants have an exercise price of $8.00 per share and which
warrants will not be exercised prior to the Closing and will only be net
exercised at the Closing; provided, however, that such warrants must be net
exercised only to the extent that such net issuance is required in order to
avoid approval of Acquiror's stockholders. Except as expressly permitted by the
terms of this Agreement, since January 23, 1997, Target has not (i) issued or
granted additional options under the Target Stock Option Plans, or (ii) accepted
contributions to or enrollments in the Target ESPP. Except for (i) the rights
created pursuant to this Agreement, the Stock Option Agreement, the Target Stock
Option Plans, the Target ESPP and the Rights Agreement and (ii) the Target's
right to repurchase any unvested shares under the Target Stock Option Plans,
there are no other options, warrants, calls, rights, commitments or agreements
of any character to which Target is a party or by which it is bound obligating
Target to issue, deliver, sell, repurchase or redeem, or cause to be issued,
delivered, sold, repurchased or redeemed, any shares of capital stock of Target
or obligating Target to grant, extend, accelerate the vesting of, change the
price of, or otherwise amend or enter into any such option, warrant, call,
right, commitment or agreement. There are no contracts, commitments or
agreements relating to voting, purchase or sale of Target's capital stock (i)
between or among Target and any of its stockholders and (ii) to Target's
knowledge, between or among any of Target's stockholders, except for the
stockholders named in Schedule 5.7 of this Agreement. The terms of the Target
Stock Option Plans permit the outstanding options under those Plans to be
assumed by Acquiror
9.
<PAGE> 15
as provided in Section 5.10 hereof, without the consent or approval of the
holders of those options, the Target stockholders, or otherwise. The current
"Purchase Interval" (as defined in the Target ESPP) commenced under the Target
ESPP on November 1, 1996 and will, together with the current offering period
under the Target ESPP, end upon the earlier of April 30, 1997 or the Effective
Time as provided in this Agreement, and except for the outstanding purchase
rights held by participants in the current Purchase Interval, there are no other
purchase rights or options outstanding under the Target ESPP. True and complete
copies of all agreements and instruments relating to or issued under the Target
Stock Option Plans or Target ESPP have been made available to Acquiror and such
agreements and instruments have not been amended, modified or supplemented, and
there are no agreements to amend, modify or supplement such agreements or
instruments in any case from the form made available to Acquiror.
2.3 Authority. Target has all requisite corporate power and
authority to enter into this Agreement and the Stock Option Agreement and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Stock Option Agreement and the consummation
of the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of Target, subject only to the
approval of the Merger by Target's stockholders as contemplated by Section
6.1(a). Each of this Agreement and the Stock Option Agreement has been duly
executed and delivered by Target and constitutes the valid and binding
obligation of Target enforceable against Target in accordance with its terms,
except as enforceability may be limited by bankruptcy and other laws affecting
the rights and remedies of creditors generally and general principles of equity.
Subject to satisfaction of the conditions set forth in Article VI hereof, the
execution and delivery of this Agreement and the Stock Option Agreement by
Target does not, and the consummation of the transactions contemplated hereby
will not, conflict with, or result in any violation of, or default under (with
or without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
benefit under (i) any provision of the Certificate of Incorporation or Bylaws of
Target, as amended, or (ii) any material mortgage, indenture, lease, contract or
other agreement or instrument required to be filed with the Target SEC Documents
(as defined in Section 2.4 hereof), permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Target or any of its properties or assets, except where such conflict,
violation, default, termination, cancellation or acceleration with respect to
the foregoing provisions of (ii) would not have had a Material Adverse Effect on
Target. To the knowledge of Target, no consent, approval, order or authorization
of, or registration, declaration or filing with, any court, administrative
agency or commission or other governmental authority or instrumentality
("Governmental Entity") is required by or with respect to Target in connection
with the execution and delivery of this Agreement, the Stock Option Agreement,
or the consummation of the transactions contemplated hereby and thereby, except
for (i) the filing of the Certificate of Merger as provided in Section 1.2, (ii)
the filing with the Securities and Exchange Commission (the "SEC") and the
National Association of Securities Dealers, Inc. (the "NASD") of the Proxy
Statement (as defined in
10.
<PAGE> 16
Section 2.21) relating to the Target Stockholders' Meeting (as defined in
Section 2.21), (iii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state securities laws and the securities laws of any foreign country; (iv) such
filings as may be required under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended ("HSR"); and (v) such other consents, authorizations,
filings, approvals and registrations which, if not obtained or made, would not
have a Material Adverse Effect on Target and would not prevent, or materially
alter or delay any of the transactions contemplated by this Agreement or the
Stock Option Agreement.
2.4 SEC Documents; Financial Statements. Target has furnished or
made available to Acquiror a true and complete copy of each statement, report,
registration statement (with the prospectus in the form filed pursuant to Rule
424(b) of the Securities Act of 1933, as amended (the "Securities Act")),
definitive proxy statement and other filing filed with the SEC by Target since
November 1, 1995, and, prior to the Effective Time, Target will have furnished
Acquiror with true and complete copies of any additional documents filed with
the SEC by Target prior to the Effective Time (collectively, the "Target SEC
Documents"). In addition, Target has made available to Acquiror all exhibits to
the Target SEC Documents filed prior to the date hereof, and will promptly make
available to Acquiror all exhibits to any additional Target SEC Documents filed
prior to the Effective Time. All documents required to be filed as exhibits to
the Target SEC Documents have been so filed, and all material contracts so filed
as exhibits are in full force and effect, except those which have expired in
accordance with their terms, and Target is not in default thereunder, except
where any such default has not resulted in and is not expected to result in any
Material Adverse Effect on Target. As of their respective filing dates, the
Target SEC Documents complied in all material respects with the requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
Securities Act, and none of the Target SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading, except to the extent
corrected by a subsequently filed Target SEC Document. The financial statements
of Target, including the notes thereto, included in the Target SEC Documents
(the "Target Financial Statements") were complete and correct in all material
respects as of their respective dates, complied as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto as of their respective dates,
and have been prepared in accordance with generally accepted accounting
principles applied on a basis consistent throughout the periods indicated and
consistent with each other (except as may be indicated in the notes thereto or,
in the case of unaudited statements included in Quarterly Reports on Form 10-Q,
as permitted by Form 10-Q of the SEC). The Target Financial Statements fairly
present the financial condition and operating results of Target at the dates and
during the periods indicated therein (subject, in the case of unaudited
statements, to normal, recurring year-end adjustments) in all material respects.
There has been no material change in Target
11.
<PAGE> 17
accounting policies except as required to be described in the notes to the
Target Financial Statements.
2.5 Absence of Certain Changes. Since December 31, 1996 (the
"Target Balance Sheet Date"), Target has conducted its business in the ordinary
course consistent with past practice and there has not occurred: (i) any change,
event or condition (whether or not covered by insurance) that has resulted in,
or might reasonably be expected to result in, a Material Adverse Effect to
Target; (ii) any acquisition, sale or transfer of any material asset of Target
other than in the ordinary course of business and consistent with past practice;
(iii) any material change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by Target or any
material revaluation by Target of any of its assets; (iv) any declaration,
setting aside, or payment of a dividend or other distribution with respect to
the shares of Target, or any direct or indirect redemption, purchase or other
acquisition by Target of any of its shares of capital stock other than the
repurchase of any shares of its capital stock from former employees, directors
or consultants in accordance with agreements providing for the repurchase of
shares or (v) any material contract entered into by Target, other than in the
ordinary course of business and as provided or made available to Acquiror, or
any material amendment or termination of, or to Target's knowledge, default
under, any material contract to which Target is a party or by which it is bound
which could result in a Material Adverse Effect on Target.
2.6 Absence of Undisclosed Liabilities. Target has no material
obligations or liabilities (matured or unmatured, fixed or contingent) other
than (i) those set forth or adequately provided for in the Balance Sheet for the
period ended December 31, 1996 attached hereto as Schedule 2.6 (the "Target
Balance Sheet"), (ii) those not required to be set forth in the Target Balance
Sheet under generally accepted accounting principles, (iii) those incurred in
the ordinary course of business since the Target Balance Sheet Date and
consistent with past practice; and (iv) those incurred in connection with the
execution of this Agreement.
2.7 Litigation. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of Target, threatened
against Target or any of its properties or any of its officers or directors (in
their capacities as such) that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect on Target. There is no
judgment, decree or order against Target, or, to the knowledge of Target, any of
its directors or officers (in their capacities as such), that could prevent,
enjoin, materially alter or materially delay any of the transactions
contemplated by this Agreement, or that could reasonably be expected to have a
Material Adverse Effect on Target.
2.8 Restrictions on Business Activities. There is no material
agreement, judgment, injunction, order or decree binding upon Target which has
the effect of prohibiting or materially impairing any current or future business
practice of Target as presently contemplated, any acquisition of property by
Target or the conduct of business by
12.
<PAGE> 18
Target as currently conducted or as proposed to be conducted prior to the
Effective Time by Target.
2.9 Governmental Authorization. Target has obtained each federal,
state, county, local or foreign governmental consent, license, permit, grant, or
other authorization of a Governmental Entity (i) pursuant to which Target
currently operates or holds any interest in any of its properties or (ii) that
is required for the operation of Target's business or the holding of any such
interest ((i) and (ii) herein collectively called "Target Authorizations"), and
all of such Target Authorizations are in full force and effect, except where the
failure to obtain or have any of such Target Authorizations could not reasonably
be expected to have a Material Adverse Effect on Target.
2.10 Title to Property. Target has good and valid title to all of
its properties, interests in properties and assets, real and personal, reflected
in the Target Balance Sheet or acquired after the Target Balance Sheet Date
(except properties, interests in properties and assets sold or otherwise
disposed of since the Target Balance Sheet Date in the ordinary course of
business), or in the case of leased properties and assets, valid leasehold
interests in, free and clear of all mortgages, liens, pledges, charges or
encumbrances of any kind or character, except (i) the lien of current taxes not
yet due and payable, (ii) such imperfections of title, liens and easements as do
not and will not materially detract from or interfere with the use of the
properties subject thereto or affected thereby, or otherwise materially impair
business operations involving such properties, (iii) liens securing debt which
is reflected on the Target Balance Sheet or in the Target SEC Documents or (iv)
those which would not have a Material Adverse Effect on Target. The property and
equipment of Target that are used in the operation of its business are adequate
for the conduct of the business of Target consistent with its past practice. All
properties used in the operations of Target are reflected in the Target Balance
Sheet to the extent generally accepted accounting principles require the same to
be reflected. Schedule 2.10 identifies each parcel of real property owned or
leased by Target.
2.11 Intellectual Property.
(a) Target owns, or is licensed or otherwise possesses
legally enforceable rights to use all patents, trademarks, trade names, service
marks, copyrights, and any applications therefor, schematics, technology,
know-how, trade secrets, inventory, algorithms, processes, computer software
programs or applications (in both source code and object code form), and
tangible or intangible proprietary information or material ("Intellectual
Property") that are used or proposed to be used in the business of Target as
currently conducted or as proposed to be conducted prior to the Effective Time
by Target, except to the extent that the failure to have such rights have not
had and would not reasonably be expected to have a Material Adverse Effect on
Target.
(b) Schedule 2.11 lists (i) all patents and patent
applications and all registered and unregistered trademarks, trade names and
service marks, and registered
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copyrights, which Target considers to be material to its business and included
in the Intellectual Property, including the jurisdictions in which each such
Intellectual Property right has been issued or registered or in which any
application for such issuance and registration has been filed, (ii) all
licenses, sublicenses and other agreements as to which Target is a party (except
customer or end-user licenses entered into in the ordinary course of business)
and which Target considers to be material to its business and pursuant to which
any person is authorized to use any Intellectual Property, and (iii) all
licenses, sublicenses and other agreements as to which Target is a party and
pursuant to which Target is authorized to use any third party patents,
trademarks or copyrights, including software ("Third Party Intellectual Property
Rights") which are incorporated in, are, or form a part of any Target product
that is material to its business.
(c) To Target's knowledge, there is no unauthorized use,
disclosure, infringement or misappropriation of any Intellectual Property rights
of Target, any trade secret material to Target, or any Intellectual Property
right of any third party to the extent licensed by or through Target, by any
third party, including any employee or former employee of Target. Target has not
entered into any agreement to indemnify any other person against any charge of
infringement of any Intellectual Property, other than indemnification provisions
contained in purchase orders or customer agreements arising in the ordinary
course of business.
(d) All patents, registered trademarks, registered
service marks and registered copyrights held by Target and material to the
business of Target as currently conducted and as proposed to be conducted prior
to the Effective Time are valid and subsisting. Target (i) has not been sued in
any suit, action or proceeding which involves a material claim of infringement
of any patents, trademarks, service marks, copyrights or violation of any trade
secret or other proprietary right of any third party and (ii) has not brought
any action, suit or proceeding for infringement of Intellectual Property or
breach of any license or agreement involving Intellectual Property against any
third party. The manufacture, marketing, licensing or sale of Target's products
does not infringe any patent, registered trademark, registered service mark,
registered copyright, trade secret or other proprietary right of any third
party, except where such infringement would not have a Material Adverse Effect
on Target.
(e) Target has taken reasonable steps to protect and
preserve the confidentiality of all Intellectual Property not otherwise
protected by patents, or patent applications or copyright and which constitutes
a trade secret of Target ("Confidential Information").
2.12 Environmental Matters.
(a) The following terms shall be defined as follows:
14.
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(i) "Environmental and Safety Laws" shall mean
any federal, state or local laws, ordinances, codes, regulations, rules,
policies and orders that are intended to assure the protection of the
environment, or that classify, regulate, call for the remediation of, require
reporting with respect to, or list or define air, water, groundwater, solid
waste, hazardous or toxic substances, materials, wastes, pollutants or
contaminants, or which are intended to assure the safety of employees, workers
or other persons, including the public.
(ii) "Hazardous Materials" shall mean any toxic
or hazardous substance, material or waste or any pollutant or contaminant, or
infectious or radioactive substance or material, including without limitation,
those substances, materials and wastes defined in or regulated under any
Environmental and Safety Laws.
(iii) "Property" shall mean all real property
leased or owned by Target either currently or in the past.
(iv) "Facilities" shall mean all buildings and
improvements on the Property of Target.
(b) To the best of its knowledge, Target represents and
warrants as follows: (i) no methylene chloride or asbestos is contained in or
has been used at or released from the Facilities; (ii) all Hazardous Materials
and wastes have been disposed of in accordance with all material Environmental
and Safety Laws; (iii) Target has received no notice (verbal or written) of any
noncompliance of the Facilities or its past or present operations with
Environmental and Safety Laws; (iv) no notices, administrative actions or suits
are pending or threatened relating to a violation of any Environmental and
Safety Laws; (v) Target is not a responsible party under the federal
Comprehensive Environmental Response, Compensation and Liability Act (CERCLA),
or state analog statute, arising out of events occurring prior to the Closing
Date; (vi) there have not been in the past, and are not now, any Hazardous
Materials on, under or migrating to or from the Facilities or Property; (vii)
there have not been in the past, and are not now, any underground tanks or
underground improvements at, on or under the Property including without
limitation, treatment or storage tanks, sumps, or water, gas or oil wells;
(viii) there are no polychlorinated biphenyls (PCBs) deposited, stored, disposed
of or located on the Property or Facilities or any equipment on the Property
containing PCBs at levels in excess of 50 parts per million; (ix) there is no
formaldehyde on the Property or in the Facilities, nor any insulating material
containing urea formaldehyde in the Facilities; (x) the Facilities and Target's
uses and activities therein have at all times complied in all material respects
with all Environmental and Safety Laws; and (xi) Target has all material permits
and licenses required to be issued and is in material compliance with the terms
and conditions of those permits.
2.13 Taxes. Target and any consolidated, combined, unitary or
aggregate group for Tax purposes of which Target is or has been a member have
timely filed all Tax
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<PAGE> 21
Returns required to be filed by it, have paid all Taxes shown thereon to be due
and has provided adequate accruals in accordance with generally accepted
accounting principles in its financial statements for any Taxes that have not
been paid, whether or not shown as being due on any Tax returns. Except as
disclosed in the Target Disclosure Schedule, (i) no material claim for Taxes has
become a lien against the property of Target or is being asserted against Target
other than liens for Taxes not yet due and payable, (ii) to the knowledge of
Target, no audit of any Tax Return of Target is being conducted by a Tax
authority, (iii) no extension of the statute of limitations on the assessment of
any Taxes has been granted by Target and is currently in effect, and (iv) to the
knowledge of Target, there is no agreement, contract or arrangement to which
Target is a party that may result in the payment of any amount that would not be
deductible by reason of Sections 280G or 404 of the Internal Revenue Code of
1986, as amended (the "Code"). For purposes of this Agreement, the following
terms have the following meanings: "Tax" (and, with correlative meaning, "Taxes"
and "Taxable") means (i) any net income, alternative or add-on minimum tax,
gross income, gross receipts, sales, use, ad valorem, transfer, franchise,
profits, license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property, environmental or windfall profit tax, custom,
duty or other tax, governmental fee or other like assessment or charge of any
kind whatsoever, together with any interest or any penalty, addition to tax or
additional amount imposed by any Governmental Entity (a "Tax authority")
responsible for the imposition of any such tax (domestic or foreign), (ii) any
liability for the payment of any amounts of the type described in (i) as a
result of being a member of an affiliated, consolidated, combined or unitary
group for any Taxable period and (iii) any liability for the payment of any
amounts of the type described in (i) or (ii) as a result of any express or
implied obligation to indemnify any other person. As used herein, "Tax Return"
shall mean any return, statement, report or form (including, without
limitation,) estimated Tax returns and reports, withholding Tax returns and
reports and information reports and returns required to be filed with respect to
Taxes.
2.14 Employee Benefit Plans.
(a) Schedule 2.14 lists, with respect to Target, any
subsidiary of Target and any trade or business (whether or not incorporated)
which is treated as a single employer with Target (an "ERISA Affiliate") within
the meaning of Section 414(b), (c), (m) or (o) of the Code, (i) all material
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) in excess of $50,000, (ii)
each loan to a non-officer employee in excess of $50,000, loans to officers and
directors and any stock option, stock purchase, phantom stock, stock
appreciation right, supplemental retirement, severance, sabbatical, medical,
dental, vision care, disability, employee relocation, cafeteria benefit (Code
section 125) or dependent care (Code Section 129), life insurance or accident
insurance plans, programs or arrangements, (iii) all bonus, pension, profit
sharing, savings, deferred compensation or incentive plans, programs or
arrangements, (iv) other fringe or employee benefit plans, programs or
arrangements that apply to senior management of Target and that do not generally
apply to all employees, and (v) any current or former employment or executive
compensation or severance agreements,
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written or otherwise, as to which unsatisfied obligations of Target of greater
than $50,000 remain for the benefit of, or relating to, any present or former
employee, consultant or director of Target (together, the "Target Employee
Plans").
(b) Target has furnished to Acquiror a copy of each of
the Target Employee Plans and related plan documents (including trust documents,
insurance policies or contracts, employee booklets, summary plan descriptions
and other authorizing documents, and, to the extent still in its possession, any
material employee communications relating thereto) and has, with respect to each
Target Employee Plan which is subject to ERISA reporting requirements, provided
copies of the Form 5500 reports filed for the last three plan years. Any Target
Employee Plan intended to be qualified under Section 401(a) of the Code has
either obtained from the Internal Revenue Service a favorable determination
letter as to its qualified status under the Code, including all amendments to
the Code effected by the Tax Reform Act of 1986 and subsequent legislation, or
has applied to the Internal Revenue Service for such a determination letter
prior to the expiration of the requisite period under applicable Treasury
Regulations or Internal Revenue Service pronouncements in which to apply for
such determination letter and to make any amendments necessary to obtain a
favorable determination. Target has also furnished Acquiror with the most recent
Internal Revenue Service determination letter issued with respect to each such
Target Employee Plan, and nothing has occurred since the issuance of each such
letter which could reasonably be expected to cause the loss of the tax-qualified
status of any Target Employee Plan subject to Code Section 401(a).
(c) (i) None of the Target Employee Plans promises or
provides retiree medical or other retiree welfare benefits to any person; (ii)
there has been no "prohibited transaction," as such term is defined in Section
406 of ERISA and Section 4975 of the Code, with respect to any Target Employee
Plan, which could reasonably be expected to have, in the aggregate, a Material
Adverse Effect; (iii) each Target Employee Plan has been administered in
accordance with its terms and in compliance with the requirements prescribed by
any and all statutes, rules and regulations (including ERISA and the Code),
except as would not have, in the aggregate, a Material Adverse Effect, and
Target and each subsidiary or ERISA Affiliate have performed all obligations
required to be performed by them under, are not in any respect in default under
or violation of, and have no knowledge of any default or violation by any other
party to, any of the Target Employee Plans, which default or violation could
reasonably be expected to have a Material Adverse Effect on Target; (iv) neither
Target nor any subsidiary or ERISA Affiliate is subject to any liability or
penalty under Sections 4976 through 4980 of the Code or Title I of ERISA with
respect to any of the Target Employee Plans; (v) all material contributions
required to be made by Target or any subsidiary or ERISA Affiliate to any Target
Employee Plan have been made on or before their due dates and a reasonable
amount has been accrued for contributions to each Target Employee Plan for the
current plan years; (vi) with respect to each Target Employee Plan, no
"reportable event" within the meaning of Section 4043 of ERISA (excluding any
such event for which the thirty (30) day notice requirement has been waived
under the regulations to Section 4043 of ERISA) nor any event described in
Section 4062,
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<PAGE> 23
4063 or 4041 or ERISA has occurred; and (vii) no Target Employee Plan is covered
by, and neither Target nor any subsidiary or ERISA Affiliate has incurred or
expects to incur any liability under, Title IV of ERISA or Section 412 of the
Code. With respect to each Target Employee Plan subject to ERISA as either an
employee pension plan within the meaning of Section 3(2) of ERISA or an employee
welfare benefit plan within the meaning of Section 3(1) of ERISA, Target has
prepared in good faith and timely filed all requisite governmental reports
(which were true and correct in all material respects as of the date filed) and
has properly and timely filed and distributed or posted all notices and reports
to employees required to be filed, distributed or posted with respect to each
such Target Employee Plan, except where the failure to do so would not result in
a Material Adverse Effect on Target. No suit, administrative proceeding, action
or other litigation has been brought, or to the best knowledge of Target is
threatened, against or with respect to any such Target Employee Plan, including
any audit or inquiry by the IRS or United States Department of Labor. Neither
Target nor any Target subsidiary or other ERISA Affiliate is a party to, or has
made any contribution to or otherwise incurred any obligation under, any
"multiemployer plan" as defined in Section 3(37) of ERISA.
(d) With respect to each Target Employee Plan, Target and
each of its United States subsidiaries have complied with (i) the applicable
health care continuation and notice provisions of the Consolidated Omnibus
Budget Reconciliation Act of 1985 ("COBRA") and the proposed regulations
thereunder and (ii) the applicable requirements of the Family and Medical Leave
Act of 1993 and the regulations thereunder, except to the extent that such
failure to comply would not, in the aggregate, have a Material Adverse Effect.
(e) The consummation of the transactions contemplated by
this Agreement will not (i) entitle any current or former employee or other
service provider of Target, any Target subsidiary or any other ERISA Affiliate
to severance benefits or any other payment, except as expressly provided in this
Agreement, or (ii) accelerate the time of payment or vesting, or increase the
amount of compensation due any such employee or service provider.
(f) There has been no amendment to, written
interpretation or announcement (whether or not written) by Target, any Target
subsidiary or other ERISA Affiliate relating to, or change in participation or
coverage under, any Target Employee Plan which would materially increase the
expense of maintaining such Plan above the level of expense incurred with
respect to that Plan for the most recent fiscal year included in Target's
financial statements.
2.15 Certain Agreements Affected by the Merger. Neither the
execution and delivery of this Agreement nor the consummation of the transaction
contemplated hereby will (i) result in any payment (including, without
limitation, severance, unemployment compensation, golden parachute, bonus or
otherwise) becoming due to any director or
18.
<PAGE> 24
employee of Target, (ii) materially increase any benefits otherwise payable by
Target or (iii) result in the acceleration of the time of payment or vesting of
any such benefits.
2.16 Employee Matters. Target is in compliance in all respects with
all currently applicable laws and regulations respecting employment,
discrimination in employment, terms and conditions of employment, wages, hours
and occupational safety and health and employment practices, and is not engaged
in any unfair labor practice, except where the failure to be in compliance or
the engagement in such unfair labor practices would not have a Material Adverse
Effect on Target. There are no pending claims against Target under any workers
compensation plan or policy or for long term disability which would have a
Material Adverse Effect on Target. Target has no obligations under COBRA with
respect to any former employees or qualifying beneficiaries thereunder, except
for obligations that would not have a Material Adverse Effect on Target. There
are no controversies pending or, to the knowledge of Target, threatened, between
Target and any of its employees, which controversies would have a Material
Adverse Effect on Target. Target is not a party to any collective bargaining
agreement or other labor union contract nor does Target know of any activities
or proceedings of any labor union to organize any such employees.
2.17 Interested Party Transactions. Except as disclosed in the
Target SEC Documents and except where disclosure is not required by Items 402
and 404 of Regulation S-K, Target is not indebted to any director, officer,
employee or agent of Target (except for amounts due as normal salaries and
bonuses and in reimbursement of ordinary expenses), and no such person is
indebted to Target, and there have been no other transactions of the type
required to be disclosed pursuant to Items 402 and 404 of Regulation S-K under
the Securities Act and the Exchange Act since December 31, 1995.
2.18 Insurance. Target has policies of insurance and bonds of the
type and in amounts customarily carried by persons conducting businesses or
owning assets similar to those of Target. There is no material claim pending
under any of such policies or bonds as to which coverage has been questioned,
denied or disputed by the underwriters of such policies or bonds. All premiums
due and payable under all such policies and bonds have been paid and Target is
otherwise in compliance in all material respects with the terms of such policies
and bonds. Target has no knowledge of any threatened termination of, or material
premium increase with respect to, any of such policies.
2.19 Compliance With Laws. Target has complied with, is not in
violation of, and has not received any notices of violation with respect to, any
federal, state, local or foreign statute, law or regulation with respect to the
conduct of its business, or the ownership or operation of its business, except
for such violations or failures to comply as would not have a Material Adverse
Effect on Target.
2.20 Brokers' and Finders' Fees. Target has not incurred, nor will
it incur, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or
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investment bankers' fees or any similar charges in connection with this
Agreement or any transaction contemplated hereby.
2.21 Registration Statements; Proxy Statement/Prospectus. The
information supplied by Target for inclusion in the registration statements on
Form S-4 (or such other form or successor form as shall be appropriate) pursuant
to which the shares of Acquiror Common Stock and VC Common Stock to be issued in
the Merger will be registered with the SEC (each a "Registration Statement" and
collectively, the "Registration Statements") shall not at the time such
Registration Statements (including any amendments or supplements thereto) are
declared effective by the SEC contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The information supplied by Target for inclusion
in the proxy statement/prospectus to be sent to the stockholders of Target in
connection with the meeting of Target's stockholders to consider the Merger (the
"Target Stockholders' Meeting") (such proxy statement/prospectus as amended or
supplemented is referred to herein as the "Proxy Statement") shall not, on the
date the Proxy Statement is first mailed to Target's stockholders, at the time
of the Target Stockholders' Meeting and at the Effective Time, contain any
statement which, at such time, is false or misleading with respect to any
material fact, or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they are
made, not false or misleading; or omit to state any material fact necessary to
correct any statement in any earlier communication with respect to the
solicitation of proxies for the Target Stockholders' Meeting which has become
false or misleading. If at any time prior to the Effective Time any event or
information should be discovered by Target which should be set forth in an
amendment to a Registration Statement or a supplement to the Proxy Statement,
Target shall promptly inform Acquiror and Merger Sub. Notwithstanding the
foregoing, Target makes no representation, warranty or covenant with respect to
any information supplied by Acquiror or Merger Sub which is contained in any of
the foregoing documents.
2.22 Opinion of Financial Advisor. Target has been advised in
writing by its financial advisor, Dillon, Read & Co. Inc., that in such
advisor's opinion, as of the date hereof, the consideration to be received by
the stockholders of Target is fair, from a financial point of view, to the
stockholders of Target.
2.23 Vote Required. The affirmative vote of the holders of a
majority of the shares of Target Common Stock outstanding on the record date set
for the Target Stockholders' Meeting is the only vote of the holders of any of
Target's capital stock necessary to approve this Agreement and the transactions
contemplated hereby.
2.24 Board Approval. The Board of Directors of Target has, prior to
the date hereof, (i) approved this Agreement and the Merger, (ii) determined
that the Merger is in the best interests of the stockholders of Target and is on
terms that are fair to such
20.
<PAGE> 26
stockholders and (iii) determined to recommend that the stockholders of Target
approve this Agreement and consummation of the Merger.
2.25 Section 203 of the DGCL Not Applicable. The Board of Directors
of Target has taken all actions so that the restrictions contained in Section
203 of the Delaware Law applicable to a "business combination" (as defined in
Section 203) will not apply to the execution, delivery or performance of this
Agreement or the Stock Option Agreement or the consummation of the Merger or the
other transactions contemplated by this Agreement or by the Stock Option
Agreement.
2.26 Target Rights Agreement. The Board of Directors of Target has
taken all necessary action to amend the Rights Agreement so that neither the
execution of this Agreement nor the consummation of the transactions
contemplated hereunder (including any exercise of the Target Option (as such
term is defined in the Stock Option Agreement)) will cause Acquiror or Merger
Sub to become an Acquiring Person (as such term is defined in the Rights
Agreement) or the occurrence of a Stock Acquisition Date or Distribution Date
(as such terms are defined in the Rights Agreement) and further to provide that,
at the Effective Time, the Rights issued pursuant to the Rights Agreement will
expire.
2.27 Foreign Corrupt Practices Act. Target has not made, offered or
agreed to offer anything of value to any government official, political party or
candidate for government office nor has it otherwise taken any action which
would cause Target to be in violation of the Foreign Corrupt Practices Act of
1977.
2.28 Government Regulation. To Target's knowledge, each 510(k)
premarket notification ("510(k)") and premarket approval application ("PMA")
filed with the United States Food and Drug Administration (the "FDA") with
respect to Target's products complies in all material respects with the rules
and regulations of the FDA regarding the filing of a 510(k) or PMA, as
applicable. Each such 510(k) and PMA includes results of testing and no material
adverse comments with respect thereto have been received by Target from the FDA.
Target reasonably believes that the data submitted as part of each 510(k) and
PMA is sufficient to support FDA approval of such 510(k) or PMA; provided,
however, that notwithstanding the foregoing, Target makes no representation to
the effect that it will not file a supplement to such 510(k) or PMA or that such
510(k) or PMA will be approved by the FDA or contains all of the information
which the FDA requires or will require in its consideration thereof.
2.29 Representations Complete. None of the representations or
warranties made by Target herein or in any Schedule hereto, including the Target
Disclosure Schedule, or certificate furnished by Target pursuant to this
Agreement, or the Target SEC Documents, when all such documents are read
together in their entirety, contains or will contain at the Effective Time any
untrue statement of a material fact, or omits or will omit at the Effective Time
to state any material fact necessary in order to make the statements
21.
<PAGE> 27
contained herein or therein, in the light of the circumstances under which made,
not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB
Except as disclosed in a document of even date herewith and delivered
by Acquiror to Target prior to the execution and delivery of this Agreement (the
"Acquiror Disclosure Schedule"), Acquiror and Merger Sub represent and warrant
to Target as follows:
3.1 Organization, Standing and Power. Each of Acquiror and its
subsidiaries, including Merger Sub, is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization. Each of Acquiror and its subsidiaries has the corporate power to
own its properties and to carry on its business as now being conducted and as
proposed to be conducted and is duly qualified to do business and is in good
standing in each jurisdiction in which the failure to be so qualified and in
good standing would have a Material Adverse Effect on Acquiror. Acquiror has
delivered a true and correct copy of the Certificate of Incorporation and
Bylaws, each as amended to date, of Acquiror to Target. Neither Acquiror nor any
of its subsidiaries is in violation of any of the provisions of its Certificate
of Incorporation or Bylaws or equivalent organizational documents. Acquiror is
the owner of all outstanding shares of capital stock of each of its subsidiaries
and all such shares are duly authorized, validly issued, fully paid and
nonassessable. All of the outstanding shares of capital stock of each such
subsidiary are owned by Acquiror free and clear of all liens, charges, claims or
encumbrances or rights of others. There are no outstanding subscriptions,
options, warrants, puts, calls, rights, exchangeable or convertible securities
or other commitments or agreements of any character relating to the issued or
unissued capital stock or other securities of any such subsidiary, or otherwise
obligating Acquiror or any such subsidiary to issue, transfer, sell, purchase,
redeem or otherwise acquire any such securities. Except as disclosed in the
Acquiror SEC Documents (as defined in Section 3.4), Acquiror does not directly
or indirectly own any equity or similar interest in, or any interest convertible
or exchangeable or exercisable for, any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity.
3.2 Capital Structure. The authorized capital stock of Acquiror
consists of 25,000,000 shares of Common Stock, $0.001 par value, and 5,000,000
shares of Preferred Stock, $0.001 par value, of which there were issued and
outstanding as of the close of business on January 24, 1997, 13,525,426 shares
of Common Stock and no shares of Preferred Stock. As of the date hereof, there
are no other outstanding shares of capital stock or voting securities of
Acquiror other than shares of Acquiror Common Stock issued after January 24,
1997 upon the exercise of options issued under the Acquiror Amended and Restated
1988 Stock Option Plan (the "Acquiror Stock Option Plan"). The authorized
capital stock of Merger Sub consists of 1,000 shares of Common Stock, $.0001 par
value, all
22.
<PAGE> 28
of which are issued and outstanding and are held by Acquiror. All outstanding
shares of Acquiror and Merger Sub have been duly authorized, validly issued,
fully paid and are nonassessable and free of any liens or encumbrances other
than any liens or encumbrances created by or imposed upon the holders thereof.
As of the close of business on January 24, 1997, Acquiror has reserved 3,200,000
shares of Common Stock for issuance to employees, directors and independent
contractors pursuant to the Acquiror Stock Option Plan, of which 773,509 shares
have been issued pursuant to option exercises, and 2,293,105 shares are subject
to outstanding, unexercised options. Other than pursuant to this Agreement,
there are no other options, warrants, calls, rights, commitments or agreements
of any character to which Acquiror or Merger Sub is a party or by which either
of them is bound obligating Acquiror or Merger Sub to issue, deliver, sell,
repurchase or redeem, or cause to be issued, delivered, sold, repurchased or
redeemed, any shares of the capital stock of Acquiror or Merger Sub or
obligating Acquiror or Merger Sub to grant, extend or enter into any such
option, warrant, call, right, commitment or agreement. The shares of Acquiror
Common Stock to be issued pursuant to the Merger will be duly authorized,
validly issued, fully paid, and non-assessable.
3.3 Authority. Acquiror and Merger Sub have all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Acquiror and Merger
Sub. This Agreement has been duly executed and delivered by Acquiror and Merger
Sub and constitutes the valid and binding obligations of Acquiror and Merger
Sub. Subject to satisfaction of the conditions set forth in Article VI hereof,
the execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby will not, conflict with, or result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of a benefit under (i) any provision of the Articles of
Incorporation or Bylaws of Acquiror or any of its subsidiaries, as amended, or
(ii) any material mortgage, indenture, lease, contract or other agreement or
instrument required to be filed with the Acquiror SEC Documents (as defined in
Section 3.4 hereof), permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Acquiror or
any of its subsidiaries or their properties or assets, except where such
conflict, violation, default, termination, cancellation or acceleration with
respect to the foregoing provisions of (ii) would not have had a Material
Adverse Effect on Acquiror. To the knowledge of Acquiror, no consent, approval,
order or authorization of, or registration, declaration or filing with, any
Governmental Entity, is required by or with respect to Acquiror or any of its
subsidiaries in connection with the execution and delivery of this Agreement by
Acquiror and Merger Sub or the consummation by Acquiror and Merger Sub of the
transactions contemplated hereby, except for (i) the filing of the Certificate
of Merger as provided in Section 1.2, (ii) the filing with the SEC and NASD of
the Registration Statements, (iii) the filing of a Form 8-K with the SEC and
NASD within 15 days after the Closing Date, (iv) any filings as may be required
under applicable state securities laws and the securities laws of
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any foreign country, (v) such filings as may be required under HSR, (vi) the
filing with the Nasdaq National Market of a Notification Form for Listing of
Additional Shares with respect to the shares of Acquiror Common Stock issuable
upon conversion of the Target Common Stock in the Merger and upon exercise of
the options under the Target Stock Option Plans assumed by Acquiror, and (vii)
such other consents, authorizations, filings, approvals and registrations which,
if not obtained or made, would not have a Material Adverse Effect on Acquiror
and would not prevent or materially alter or delay any of the transactions
contemplated by this Agreement.
3.4 SEC Documents; Financial Statements. Acquiror has furnished or
made available to Target a true and complete copy of each statement, report,
registration statement (with the prospectus in the form filed pursuant to Rule
424(b) of the Securities Act), definitive proxy statement, and other filing
filed with the SEC by Acquiror since March 4, 1992, and, prior to the Effective
Time, Acquiror will have furnished Target with true and complete copies of any
additional documents filed with the SEC by Acquiror prior to the Effective Time
(collectively, the "Acquiror SEC Documents"). In addition, Acquiror has made
available to Target all exhibits to the Acquiror SEC Documents filed prior to
the date hereof, and will promptly make available to Target all exhibits to any
additional Acquiror SEC Documents filed prior to the Effective Time. All
documents required to be filed as exhibits to the Target SEC Documents have been
so filed, and all material contracts so filed as exhibits are in full force and
effect, except those which have expired in accordance with their terms, and
neither Acquiror nor any of its subsidiaries is in default thereunder, except
where any such default has not resulted in and is not expected to result in any
Material Adverse Effect on Acquiror. As of their respective filing dates, the
Acquiror SEC Documents complied in all material respects with the requirements
of the Exchange Act and the Securities Act, and none of the Acquiror SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were made,
not misleading, except to the extent corrected by a subsequently filed Acquiror
SEC Document. The financial statements of Acquiror, including the notes thereto,
included in the Acquiror SEC Documents (the "Acquiror Financial Statements")
were complete and correct in all material respects as of their respective dates,
complied as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto as of their respective dates, and have been prepared in
accordance with generally accepted accounting principles applied on a basis
consistent throughout the periods indicated and consistent with each other
(except as may be indicated in the notes thereto or, in the case of unaudited
statements included in Quarterly Reports on Form 10-Q, as permitted by Form 10-Q
of the SEC). The Acquiror Financial Statements fairly present the consolidated
financial condition and operating results of Acquiror and its subsidiaries at
the dates and during the periods indicated therein (subject, in the case of
unaudited statements, to normal, recurring year-end adjustments) in all material
respects. There has been no change in Acquiror accounting policies except as
required to be described in the notes to the Acquiror Financial Statements.
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3.5 Absence of Certain Changes. Since September 30, 1996 (the
"Acquiror Balance Sheet Date"), Acquiror has conducted its business in the
ordinary course consistent with past practice and there has not occurred: (i)
any change, event or condition (whether or not covered by insurance) that has
resulted in, or might reasonably be expected to result in, a Material Adverse
Effect to Acquiror; (ii) any acquisition, sale or transfer of any material asset
of Acquiror or any of its subsidiaries other than in the ordinary course of
business and consistent with past practice; (iii) any material change in
accounting methods or practices (including any change in depreciation or
amortization policies or rates) by Acquiror or any material revaluation by
Acquiror of any of its assets; (iv) any declaration, setting aside, or payment
of a dividend or other distribution with respect to the shares of Acquiror, or
any direct or indirect redemption, purchase or other acquisition by Acquiror of
any of its shares of capital stock other than the repurchase of any shares of
its capital stock from former employees, directors or consultants in accordance
with agreements providing for the repurchase of shares; or (v) any material
contract entered into by Acquiror, other than in the ordinary course of business
and as provided or made available to Target, or any material amendment or
termination of, or to Acquiror's knowledge, default under, any material contract
to which Acquiror is a party or by which it is bound which could result in a
Material Adverse Effect on Acquiror.
3.6 Absence of Undisclosed Liabilities. Acquiror has no material
obligations or liabilities (matured or unmatured, fixed or contingent) other
than (i) those set forth or adequately provided for in the Balance Sheet
included in Acquiror's Quarterly Report on Form 10-Q for the period ended
September 30, 1996 (the "Acquiror Balance Sheet"), (ii) those not required to be
set forth in the Acquiror Balance Sheet under generally accepted accounting
principles, and (iii) those incurred in the ordinary course of business since
the Acquiror Balance Sheet Date and consistent with past practice.
3.7 Litigation. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of Acquiror or any of its
subsidiaries, threatened against Acquiror or any of its subsidiaries or any of
their respective properties or any of their respective officers or directors (in
their capacities as such) that, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect on Acquiror. There is
no judgment, decree or order against Acquiror or any of its subsidiaries or, to
the knowledge of Acquiror or any of its subsidiaries, any of their respective
directors or officers (in their capacities as such) that could prevent, enjoin,
materially alter or materially delay any of the transactions contemplated by
this Agreement, or that could reasonably be expected to have a Material Adverse
Effect on Acquiror.
3.8 Restrictions on Business Activities. There is no material
agreement, judgment, injunction, order or decree binding upon Acquiror or any of
its subsidiaries which has the effect of prohibiting or materially impairing any
current or future business practice of Acquiror or any of its subsidiaries as
presently contemplated, any acquisition of property by Acquiror or any of its
subsidiaries or the conduct of business by Acquiror or any of its
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subsidiaries as currently conducted or as proposed to be conducted prior to the
Effective Time by Acquiror or any of its subsidiaries.
3.9 Governmental Authorization. Acquiror and each of its
subsidiaries have obtained each federal, state, county, local or foreign
governmental consent, license, permit, grant, or other authorization of a
Governmental Entity (i) pursuant to which Acquiror or any of its subsidiaries
currently operates or holds any interest in any of its properties or (ii) that
is required for the operation of Acquiror's or any of its subsidiaries' business
or the holding of any such interest ((i) and (ii) herein collectively called
"Acquiror Authorizations"), and all of such Acquiror Authorizations are in full
force and effect, except where the failure to obtain or have any of such
Acquiror Authorizations could not reasonably be expected to have a Material
Adverse Effect on Acquiror.
3.10 Compliance With Laws. Each of Acquiror and its subsidiaries
has complied with, are not in violation of, and have not received any notices of
violation with respect to, any federal, state, local or foreign statute, law or
regulation with respect to the conduct of its business, or the ownership or
operation of its business, except for such violations or failures to comply as
would not have a Material Adverse Effect on Acquiror.
3.11 Broker's and Finders' Fees. Acquiror has not incurred, nor
will it incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or investment bankers' fees or any similar charges
in connection with this Agreement or any transaction contemplated hereby.
3.12 Registration Statements; Proxy Statement/Prospectus. The
information supplied by Acquiror and Merger Sub for inclusion in the
Registration Statements shall not, at the time the Registration Statements
(including any amendments or supplements thereto) are declared effective by the
SEC, contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The information
supplied by Acquiror for inclusion in the Proxy Statement shall not, on the date
the Proxy Statement is first mailed to Target's stockholders, at the time of the
Target Stockholders' Meeting and at the Effective Time, contain any statement
which, at such time, is false or misleading with respect to any material fact,
or omit to state any material fact necessary in order to make the statements
therein, in light of the circumstances under which it is made, not false or
misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Target Stockholders' Meeting which has become false or
misleading. If at any time prior to the Effective Time any event or information
should be discovered by Acquiror or Merger Sub which should be set forth in an
amendment to a Registration Statement or a supplement to the Proxy Statement,
Acquiror or Merger Sub will promptly inform Target. Notwithstanding the
foregoing, Acquiror and Merger Sub make no representation, warranty or covenant
with respect to any information supplied by Target which is contained in any of
the foregoing documents.
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3.13 Board Approval. The Boards of Directors of Acquiror and Merger
Sub have prior to the date hereof (i) approved this Agreement and the Merger
with all affirmative votes except for one abstention, (ii) determined that the
Merger is in the best interests of their respective stockholders and is on terms
that are fair to such stockholders and (iii) determined to recommend that the
stockholder of Merger Sub approve this Agreement and the consummation of the
Merger.
3.14 Opinion of Financial Advisor. Acquiror has been advised in
writing by its financial advisor, Piper Jaffray Inc., that in such advisor's
opinion as of the date hereof, the consideration to be paid by Acquiror is fair
to Acquiror from a financial point of view.
3.15 VC Common Stock. Acquiror has good title to all the shares of
VC Common Stock to be transferred hereunder, free and clear of all liens,
encumbrances, equities, security interests and claims, with full right and
authority to deliver the same hereunder, and that upon the delivery of such
shares of VC Common Stock against surrender of certificates for Target Common
Stock, the Target shareholders will receive good title thereto, free and clear
of all liens, encumbrances, security interests and claims.
3.16 Intellectual Property. Acquiror owns, or is licensed or
otherwise possesses legally enforceable rights to use all patents, trademarks,
trade names, service marks, copyrights, and any applications therefor,
schematics, technology, know-how, trade secrets, inventory, algorithms,
processes, computer software programs or applications (in both source code and
object code form), and tangible or intangible proprietary information or
material that are used or proposed to be used in the business of Acquiror as
currently conducted or as proposed to be conducted prior to the Effective Time
by Acquiror, except to the extent that the failure to have such rights have not
had and would not reasonably be expected to have a Material Adverse Effect on
Acquiror.
3.17 Environmental Matters.
(a) The following terms shall be defined as follows:
(i) "Acquiror Property" shall mean all real
property leased or owned by Acquiror or its subsidiaries either currently or in
the past.
(ii) "Acquiror Facilities" shall mean all
buildings and improvements on the Acquiror Property.
(b) To the best of its knowledge, Acquiror represents and
warrants as follows: (i) no methylene chloride or asbestos is contained in or
has been used at or released from the Acquiror Facilities; (ii) all Hazardous
Materials and wastes have been disposed of in accordance with all material
Environmental and Safety Laws; (iii) Acquiror has received no notice (verbal or
written) of any noncompliance of the Facilities or its past or present
operations with Environmental and Safety Laws; (iv) no notices, administrative
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actions or suits are pending or threatened relating to a violation of any
Environmental and Safety Laws; (v) Acquiror is not a responsible party under the
federal Comprehensive Environmental Response, Compensation and Liability Act
(CERCLA), or state analog statute, arising out of events occurring prior to the
Closing Date; (vi) there have not been in the past, and are not now, any
Hazardous Materials on, under or migrating to or from the Acquiror Facilities or
Acquiror Property; (vii) there have not been in the past, and are not now, any
underground tanks or underground improvements at, on or under the Acquiror
Property including without limitation, treatment or storage tanks, sumps, or
water, gas or oil wells; (viii) there are no polychlorinated biphenyls (PCBs)
deposited, stored, disposed of or located on the Acquiror Property or Acquiror
Facilities or any equipment on the Acquiror Property containing PCBs at levels
in excess of 50 parts per million; (ix) there is no formaldehyde on the Acquiror
Property or in the Acquiror Facilities, nor any insulating material containing
urea formaldehyde in the Acquiror Facilities; (x) the Acquiror Facilities and
Acquiror's uses and activities therein have at all times complied in all
material respects with all Environmental and Safety Laws; and (xi) Acquiror has
all material permits and licenses required to be issued and is in material
compliance with the terms and conditions of those permits.
3.18 Foreign Corrupt Practices Act. Acquiror has not made,
offered or agreed to offer anything of value to any government official,
political party or candidate for government office nor has it otherwise taken
any action which would cause Acquiror to be in violation of the Foreign Corrupt
Practices Act of 1977.
3.19 VC SEC Documents. Acquiror has reviewed all registration
statements and Quarterly Reports on Form 10-Q filed by VC and all other reports
filed by VC pursuant to Sections 13(a) or 15(d) of the Exchange Act
(collectively, the "VC SEC Documents"), and to Acquiror's knowledge, none of the
VC SEC Documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were made,
not misleading, except to the extent corrected by a subsequently filed VC SEC
Document.
3.20 Representations Complete. None of the representations or
warranties made by Acquiror or Merger Sub herein or in any Schedule hereto,
including the Acquiror Disclosure Schedule, or certificate furnished by Acquiror
or Merger Sub pursuant to this Agreement, or the Acquiror SEC Documents, when
all such documents are read together in their entirety, contains or will contain
at the Effective Time any untrue statement of a material fact, or omits or will
omit at the Effective Time to state any material fact necessary in order to make
the statements contained herein or therein, in the light of the circumstances
under which made, not misleading.
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ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of Target and Acquiror. During the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, each of Target and Acquiror
agrees (except to the extent expressly contemplated by this Agreement or as
consented to in writing by the other), to carry on its and its subsidiaries'
business in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted, to pay and to cause its subsidiaries to pay
debts and Taxes when due subject to good faith disputes over such debts or
Taxes, to pay or perform other obligations when due, and to use all reasonable
efforts consistent with past practice and policies to preserve intact its and
its subsidiaries' present business organizations, use its reasonable efforts
consistent with past practice to keep available the services of its and its
subsidiaries' present officers and key employees and use its reasonable efforts
consistent with past practice to preserve its and its subsidiaries'
relationships with customers, suppliers, distributors, licensors, licensees, and
others having business dealings with it or its subsidiaries, to the end that its
and its subsidiaries' goodwill and ongoing businesses shall be unimpaired at the
Effective Time. Each of Target and Acquiror agrees to promptly notify the other
of any event or occurrence not in the ordinary course of its or its
subsidiaries' business, and of any event which could reasonably be expected to
have a Material Adverse Effect. Without limiting the foregoing, except as
expressly contemplated by this Agreement, neither Target nor Acquiror shall do,
cause or permit any of the following, or allow, cause or permit any of its
subsidiaries to do, cause or permit any of the following, without the prior
written consent of the other, and Acquiror shall use reasonable efforts to
prevent VC from doing any of the following without the prior written consent of
Target:
(a) Charter Documents. Cause or permit any
amendments to its Certificate of Incorporation or Bylaws;
(b) Dividends; Changes in Capital Stock.
Except as set forth in the Acquiror Disclosure Schedule or the Target Disclosure
Schedule, declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital stock, or
split, combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, or repurchase or otherwise acquire, directly or
indirectly, any shares of its capital stock except from former employees,
directors and consultants in accordance with agreements providing for the
repurchase of shares in connection with any termination of service to it or its
subsidiaries;
(c) Stock Option Plans, Etc. Accelerate, amend
or change the period of exercisability or vesting of options or other rights
granted under its employee stock
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plans or director stock plans or authorize cash payments in exchange for any
options or other rights granted under any of such plans;
(d) Other. Take, or agree in writing or
otherwise to take, any of the actions described in Sections 4.1(a) through (c)
above, or any action which would make any of its representations or warranties
contained in this Agreement untrue or incorrect or prevent it from performing or
cause it not to perform its covenants hereunder.
4.2 Conduct of Business of Target. During the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement or the Effective Time, except as expressly contemplated by this
Agreement, Target shall not do, cause or permit any of the following without the
prior written consent of Acquiror, which consent shall not be unreasonably
withheld:
(a) Material Contracts. Enter into any material
contract or material commitment, or violate, amend or otherwise modify or waive
any of the terms of any of its contracts required to be filed as an exhibit to
the Target SEC Documents, other than in the ordinary course of business
consistent with past practice and in no event shall such contract, commitment,
amendment, modification or waiver be in excess of $100,000;
(b) Issuance of Securities. Except as set
forth in the Target Disclosure Schedule, issue, deliver or sell or authorize or
propose the issuance, delivery or sale of, or purchase or propose the purchase
of, any shares of its capital stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities, other than the issuance of shares of its Common Stock
pursuant to the exercise of stock options, warrants or other rights therefor
outstanding as of the date hereof; provided, however, that Target may, in the
ordinary course of business consistent with past practice, grant options for the
purchase of Target Common Stock under the Target Option Plans (not to exceed an
aggregate of 10,000 options to purchase shares of Target Common Stock granted
after the date hereof); and provided further, however, that Target may
repurchase any shares of its capital stock from former employees, directors or
consultants in accordance with agreements providing for the repurchase of
shares.
(c) Intellectual Property. Transfer to any
person or entity any rights to its Intellectual Property other than in the
ordinary course of business;
(d) Exclusive Rights. Enter into or amend any
agreements pursuant to which any other party is granted exclusive marketing or
other exclusive rights of any type or scope with respect to any of its products
or technology;
(e) Dispositions. Sell, lease, license or
otherwise dispose of or encumber any of its properties or assets which are
material, individually or in the aggregate, to its business except in the
ordinary course of business;
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(f) Indebtedness. Incur any indebtedness for
borrowed money or guarantee any such indebtedness or issue or sell any debt
securities or guarantee any debt securities of others;
(g) Leases. Enter into any operating lease in
excess of an aggregate of $50,000;
(h) Payment of Obligations. Pay, discharge or
satisfy in an amount in excess of $25,000 in any one case or $100,000 in the
aggregate, any claim, liability or obligation (absolute, accrued, asserted or
unasserted, contingent or otherwise) arising other than in the ordinary course
of business, other than the payment, discharge or satisfaction of liabilities
reflected or reserved against in the Target Financial Statements or incurred in
the ordinary course of business subsequent to the Target Financial Statements;
(i) Capital Expenditures. Make any material
capital expenditures, material capital additions or material capital
improvements except in the ordinary course of business;
(j) Insurance. Materially reduce the amount of
any material insurance coverage provided by existing insurance policies;
(k) Employee Benefit Plans; New Hires; Pay
Increases. Adopt or amend any employee benefit or stock purchase or option plan,
or hire any new director level or officer level employee (except that it may
hire a replacement for any current director level or officer level employee if
it first provides Acquiror advance notice regarding such hiring decision), pay
any special bonus or special remuneration to any employee or director, or
increase the salaries or wage rates of its employees except in the ordinary
course of business or for changes pursuant to employment agreements in effect as
of the date hereof or changes in position;
(l) Severance Arrangements. Grant any severance
or termination pay (i) to any director or officer or (ii) to any other employee
except (A) payments made pursuant to standard written agreements outstanding on
the date hereof or (B) grants which are made in the ordinary course of business
in accordance with its standard past practice;
(m) Lawsuits. Commence a lawsuit other than (i)
for the routine collection of bills, (ii) in such cases where it in good faith
determines that failure to commence suit would result in the material impairment
of a valuable aspect of its business, provided that it consults with Acquiror
prior to the filing of such a suit, or (iii) for a breach of this Agreement;
(n) Acquisitions. Acquire or agree to acquire
by merging or consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association or other business
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organization or division thereof, or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to its and its
subsidiaries' business, taken as a whole, or acquire or agree to acquire any
equity securities of any corporation, partnership, association or business
organization;
(o) Taxes. Other than in the ordinary course
of business, make or change any material election in respect of Taxes, adopt or
change any accounting method in respect of Taxes, file any material Tax Return
or any amendment to a material Tax Return, enter into any closing agreement,
settle any claim or assessment in respect of Taxes, or consent to any extension
or waiver of the limitation period applicable to any claim or assessment in
respect of Taxes;
(p) Revaluation. Revalue any of its assets,
including without limitation writing down the value of inventory or writing off
notes or accounts receivable other than in the ordinary course of business; or
(q) Other. Take or agree in writing or
otherwise to take, any of the actions described in Sections 4.2(a) through (p)
above, or any action which would make any of its representations or warranties
contained in this Agreement untrue or incorrect or prevent it from performing or
cause it not to perform its covenants hereunder.
4.3 No Solicitation. Target and the officers, directors,
employees or other agents of Target will not, directly or indirectly, (i) take
any action to solicit, initiate or encourage any Takeover Proposal (defined
below) or (ii) subject to the terms of the immediately following sentence,
engage in negotiations with, or disclose any nonpublic information relating to
Target to, or afford access to the properties, books or records of Target to,
any person that has advised Target that it may be considering making, or that
has made, a Takeover Proposal; provided, nothing herein shall prohibit Target's
Board of Directors from taking and disclosing to Target's stockholders a
position with respect to a tender offer pursuant to Rules 14d-9 and 14e-2
promulgated under the Exchange Act. Notwithstanding the immediately preceding
sentence, if an unsolicited Takeover Proposal, or an unsolicited written
expression of interest that can reasonably be expected to lead to a Takeover
Proposal, shall be received by the Board of Directors of Target, then, to the
extent the Board of Directors of Target believes in good faith (after
consultation with its financial advisor) that such Takeover Proposal would, if
consummated, result in a transaction more favorable to Target's stockholders
from a financial point of view than the transaction contemplated by the
Agreement (any such more favorable Takeover Proposal being referred to in this
Agreement as a "Superior Proposal") and the Board of Directors of Target
determines in good faith after consultation with outside legal counsel that it
is necessary for the Board of Directors of Target to comply with its fiduciary
duties to stockholders under applicable law, Target and its officers, directors,
employees, investment bankers, financial advisors, attorneys, accountants and
other representatives retained by it may furnish in connection therewith
information and take such other actions as are consistent with the fiduciary
obligations of Target's Board of Directors, and such actions
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shall not be considered a breach of this Section 4.3 or any other provisions of
this Agreement, provided that in each such event Target notifies Acquiror of
such determination by the Target Board of Directors and provides Acquiror with a
true and complete copy of the Superior Proposal received from such third party,
if the Superior Proposal is in writing, or a complete written summary thereof,
if it is not in writing, and provides Acquiror with all documents containing or
referring to non-public information of Target that are supplied to such third
party; provided, further, that (A) the Board of Directors of Target has
determined, with the advice of Target's investment bankers, that such third
party is capable of making a Superior Proposal upon satisfactory completion of
such third party's review of the information supplied by Target, (B) the third
party has made a written expression of interest that can reasonably be expected
to lead to a Superior Proposal, (C) Target may not provide any non-public
information to any such third party if it has not prior to the date thereof
provided such information to Acquiror or Acquiror's representatives, and (D)
Target provides such non-public information pursuant to a non-disclosure
agreement at least as restrictive as the Confidentiality Agreement (as defined
in Section 5.4); provided, however, that Target shall not, and shall not permit
any of its officers, directors, employees or other representatives to agree to
or endorse any Takeover Proposal unless Target shall have terminated this
Agreement pursuant to Section 7.1(e) and paid Acquiror all amounts payable to
Acquiror pursuant to Section 7.3(b). Target will promptly notify Acquiror after
receipt of any Takeover Proposal or any notice that any person is considering
making a Takeover Proposal or any request for non-public information relating to
Target or for access to the properties, books or records of Target by any person
that has advised Target that it may be considering making, or that has made, a
Takeover Proposal and will keep Acquiror fully informed of the status as well as
the material details of any such Takeover Proposal notice, request or any
correspondence or communications related thereto and shall provide Acquiror with
a true and complete copy of such Takeover Proposal notice or request or
correspondence or communications related thereto, if it is in writing, or a
complete written summary thereof, if it is not in writing. For purposes of this
Agreement, "Takeover Proposal" means any offer or proposal for, or any
indication of interest in, a merger or other business combination involving
Target or the acquisition of any significant equity interest in, or a
significant portion of the assets of, Target, other than the transactions
contemplated by this Agreement.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Proxy Statement/Prospectus; Registration Statement. As
promptly as practicable after the execution of this Agreement, Target and
Acquiror shall prepare, and Target shall file with the SEC, preliminary proxy
materials relating to the approval of the Merger and the transactions
contemplated hereby by the stockholders of Target and, as promptly as
practicable following receipt of SEC comments thereon, Acquiror shall file with
the SEC a Registration Statement on Form S-4 (or such other or successor form as
shall be appropriate), which complies in form with applicable SEC requirements
and shall use all
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reasonable efforts to cause the Registration Statement to become effective as
soon thereafter as practicable. Subject to the provisions of Section 4.3, the
Proxy Statement shall include the recommendation of the Board of Directors of
Target in favor of the Merger; provided that such recommendation may not be
included or may be withdrawn if previously included if Target's Board of
Directors believes in good faith that a Superior Proposal has been made and
shall determine that to include such recommendation or not withdraw such
recommendation if previously included would constitute a breach of the Board's
fiduciary duty under applicable law.
5.2 Meeting of Stockholders. Target shall promptly after the
date hereof take all action necessary in accordance with Delaware Law and its
Certificate of Incorporation and Bylaws to convene the Target Stockholders'
Meeting within 45 days of the Registration Statements being declared effective
by the SEC. Target shall consult with Acquiror regarding the date of the Target
Stockholders' Meeting and use all reasonable efforts and shall not postpone or
adjourn (other than for the absence of a quorum) the Target Stockholders'
Meeting without the consent of Acquiror. Subject to Section 5.1, Target shall
use its best efforts to solicit from stockholders of Target proxies in favor of
the Merger and shall take all other action necessary or advisable to secure the
vote or consent of stockholders required to effect the Merger.
5.3 Access to Information.
(a) Target shall afford Acquiror and its
accountants, counsel and other representatives, reasonable access during normal
business hours during the period prior to the Effective Time to (i) all of
Target's properties, books, contracts, commitments and records, and (ii) all
other information concerning the business, properties and personnel of Target as
Acquiror may reasonably request. Target agrees to provide to Acquiror and its
accountants, counsel and other representatives copies of regularly prepared
internal financial statements promptly upon request. Acquiror shall afford
Target and its accountants, counsel and other representatives, reasonable access
during normal business hours during the period prior to the Effective Time to
(i) all of Acquiror's and its subsidiaries' properties, books, contracts,
commitments and records, and (ii) all other information concerning the business,
properties and personnel of Acquiror and its subsidiaries as Target may
reasonably request. Acquiror agrees to provide to Target and its accountants,
counsel and other representatives copies of regularly prepared internal
financial statements promptly upon request.
(b) Subject to compliance with applicable law,
from the date hereof until the Effective Time, each of Acquiror and Target shall
confer on a regular and frequent basis with one or more representatives of the
other party to report operational matters of materiality and the general status
of ongoing operations of Acquiror, Target and, to Acquiror's knowledge, VC.
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(c) No information or knowledge obtained in any
investigation pursuant to this Section 5.3 shall affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
5.4 Confidentiality. The parties acknowledge that each of
Acquiror and Target have previously executed a non-disclosure agreement dated
January 3, 1997 (the "Confidentiality Agreement"), which Confidentiality
Agreement shall continue in full force and effect in accordance with its terms.
5.5 Public Disclosure. Unless otherwise permitted by this
Agreement, Acquiror and Target shall consult with each other before issuing any
press release or otherwise making any public statement or making any other
public (or non-confidential) disclosure (whether or not in response to an
inquiry) regarding the terms of this Agreement and the transactions contemplated
hereby, and neither shall issue any such press release or make any such
statement or disclosure without the prior approval of the other (which approval
shall not be unreasonably withheld), except as may be required by law, or in
exercise of the fiduciary duties of the Board of Directors, or by obligations
pursuant to any listing agreement with any national securities exchange or with
the NASD.
5.6 Consents; Cooperation.
(a) Each of Acquiror and Target shall promptly
apply for or otherwise seek, and use its best efforts to obtain, all consents
and approvals required to be obtained by it for the consummation of the Merger,
including those required under HSR, and shall use its reasonable efforts to
obtain all necessary consents, waivers and approvals under any of its material
contracts in connection with the Merger for the assignment thereof or otherwise.
The parties hereto will consult and cooperate with one another, and consider in
good faith the views of one another, in connection with any analyses,
appearances, presentations, memoranda, briefs, arguments, opinions and proposals
made or submitted by or on behalf of any party hereto in connection with
proceedings under or relating to HSR or any other federal or state antitrust or
fair trade law.
(b) Each of Acquiror and Target shall use all
reasonable efforts to resolve such objections, if any, as may be asserted by any
Governmental Entity with respect to the transactions contemplated by this
Agreement under HSR, the Sherman Act, as amended, the Clayton Act, as amended,
the Federal Trade Commission Act, as amended, and any other Federal, state or
foreign statutes, rules, regulations, orders or decrees that are designed to
prohibit, restrict or regulate actions having the purpose or effect of
monopolization or restraint of trade (collectively, "Antitrust Laws"). In
connection therewith, if any administrative or judicial action or proceeding is
instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any Antitrust Law, each of
Acquiror and Target shall cooperate and use all best efforts vigorously to
contest and resist any such action or proceeding and to have vacated, lifted,
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reversed, or overturned any decree, judgment, injunction or other order, whether
temporary, preliminary or permanent (each an "Order"), that is in effect and
that prohibits, prevents, or restricts consummation of the Merger or any such
other transactions, unless by mutual agreement Acquiror and Target decide that
litigation is not in their respective best interests. Notwithstanding the
provisions of the immediately preceding sentence, it is expressly understood and
agreed that neither Acquiror nor Target shall have any obligation to litigate or
contest any administrative or judicial action or proceeding or any Order beyond
the earlier of (i) September 30, 1997, or (ii) the date of a ruling preliminary
enjoining the Merger issued by a court of competent jurisdiction (the
"Injunction Date"). Each of Acquiror and Target shall use all reasonable efforts
to take such action as may be required to cause the expiration of the notice
periods under the HSR or other Antitrust Laws with respect to such transactions
as promptly as possible after the execution of this Agreement.
(c) Notwithstanding anything to the contrary in
Section 5.6(a) or (b), (i) neither Acquiror nor any of it subsidiaries shall be
required to divest any of their respective businesses, product lines or assets,
or to take or agree to take any other action or agree to any limitation that
could reasonably be expected to have a Material Adverse Effect on Acquiror or of
Acquiror combined with the Surviving Corporation after the Effective Time and
(ii) Target shall not be required to divest any of its business, product lines
or assets, or to take or agree to take any other action or agree to any
limitation that could reasonably be expected to have a Material Adverse Effect
on Target.
5.7 Voting Agreement. Target shall use its best efforts, on
behalf of Acquiror and pursuant to the request of Acquiror, to cause each
officer and director of Target named in Schedule 5.7 to execute and deliver to
Acquiror a Voting Agreement substantially in the form of Exhibit B attached
hereto concurrent with the execution of this Agreement.
5.8 Legal Requirements. Each of Acquiror, Merger Sub and
Target will, and will cause their respective subsidiaries to, take all
reasonable actions necessary to comply promptly with all legal requirements
which may be imposed on them with respect to the consummation of the
transactions contemplated by this Agreement and will promptly cooperate with and
furnish information to any party hereto necessary in connection with any such
requirements imposed upon such other party in connection with the consummation
of the transactions contemplated by this Agreement and will take all reasonable
actions necessary to obtain (and will cooperate with the other parties hereto in
obtaining) any consent, approval, order or authorization of, or any
registration, declaration or filing with, any Governmental Entity or other
person, required to be obtained or made in connection with the taking of any
action contemplated by this Agreement.
5.9 Blue Sky Laws. Acquiror shall take such steps as may be
necessary to comply with the securities and blue sky laws of all jurisdictions
which are applicable to the issuance of the Acquiror Common Stock in connection
with the Merger. Target shall use its best efforts to assist Acquiror as may be
necessary to comply with the securities and blue
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sky laws of all jurisdictions which are applicable in connection with the
issuance of Acquiror Common Stock in connection with the Merger.
5.10 Employee Benefit Plans.
(a) Schedule 5.10 hereto sets forth a true and complete list
as of the date hereof of all holders of outstanding options under the Target
Stock Option Plans, including the number of shares of Target capital stock
subject to each such option, the exercise price per share and the term of each
such option. On the Closing Date, Target shall deliver to Acquiror an updated
Schedule 5.10 hereto current as of such date. At the Effective Time, the Target
Stock Option Plans and a portion of each outstanding option to purchase shares
of Target Common Stock under the Target Stock Option Plans will be assumed and
cashed out by Acquiror on the terms set forth in this paragraph (a) and
paragraph (b) below. Each such option so assumed by Acquiror under this
Agreement shall continue to have, and be subject to, the same terms and
conditions set forth in the Target Stock Option Plans, immediately prior to the
Effective Time, except that (i) such option will be exercisable for that number
of whole shares of Acquiror Common Stock equal to the product of the number of
shares of Target Common Stock that were issuable upon exercise of such option
immediately prior to the Effective Time multiplied by the Stock Consideration
Exchange Ratio (as defined in Section 1.6(a)(ii) hereof) and rounded down to the
nearest whole number of shares of Acquiror Common Stock, (ii) the per share
exercise price for the shares of Acquiror Common Stock issuable upon exercise of
such assumed option will be equal to the quotient determined by dividing the
exercise price per share of Target Common Stock at which such option was
exercisable immediately prior to the Effective Time by the Conversion Ratio,
rounded up to the nearest whole cent, and (iii) the option shall be fully and
immediately exercisable for vested shares of Acquiror Common Stock. While there
can be no assurances that the assumed options will be incentive stock options,
the parties will use their reasonable efforts to effect the assumption in a
manner calculated to ensure preservation of incentive stock option status for
the assumed options. Within ten (10) business days after the Effective Time,
Acquiror will issue to each person who, immediately prior to the Effective Time,
was a holder of an outstanding option under the Target Stock Option Plans a
document in form and substance satisfactory to Target evidencing the foregoing
assumption of such option by Acquiror. For purposes of this Section 5.10, the
Conversion Ratio shall be that fraction, the numerator of which is the value of
the Stock Consideration as of the Effective Time and the denominator of which is
the value of the Merger Consideration (as valued pursuant to Section 1.6(a)) as
of the Effective Time.
(b) At the Effective Time, a payment shall be made with
respect to each option assumed by Acquiror pursuant to paragraph (a) above. Such
payment per option share shall be equal to the Cash Consideration and the VC
Consideration payable per share of Target Common Stock under Section 1.6(a)
multiplied by the number of shares of Target Common Stock subject to the assumed
option less the excess of (i) the aggregate option exercise price in effect for
the option immediately prior to the Effective Time less (ii) the aggregate
exercise price of such assumed option as determined immediately after the
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Effective Time as set forth in paragraph (a) above. Such consideration per
option share shall be paid proportionately in Cash Consideration and VC
Consideration, with the cash amount to be in the same ratio as the Cash
Consideration payable per share of Target Common Stock bears to the total of the
Cash Consideration and the VC Consideration, and the VC portion to be in the
same ratio as the VC Consideration payable per share of Target Common Stock
bears to the total of the Cash Consideration and the VC Consideration.
(c) Outstanding purchase rights under the Target ESPP shall be
exercised upon the earlier of (i) the next scheduled purchase date under the
Target ESPP or (ii) immediately prior to the Effective Time, and each
participant in the Target ESPP shall accordingly be issued shares of Target
Common Stock at that time, and each share of Target Common Stock so issued shall
be canceled and extinguished at the Effective Time and converted automatically
into the right to receive the Merger Consideration payable per share of Target
Common Stock. The Target ESPP shall terminate with such exercise date, and no
purchase rights shall be subsequently granted or exercised under the Target
ESPP. Target employees who otherwise meet the eligibility requirements for
participation in the Acquiror Employee Stock Purchase Plan shall be eligible to
begin payroll deductions under that plan as of the first entry date thereunder
following the Effective Time.
5.11 Letter of Acquiror's and Target's Accountants.
(a) Acquiror shall use all reasonable efforts
to cause to be delivered to Target a Procedures Letter of Acquiror's independent
auditors, dated a date within two business days before the date on which the
Registration Statements shall become effective and addressed to Target, in form
reasonably satisfactory to Target and customary in scope and substance for
letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statements.
(b) Target shall use all reasonable efforts to
cause to be delivered to Acquiror a Procedures Letter of Target's independent
auditors, dated a date within two business days before the date on which the
Registration Statements shall become effective and addressed to Acquiror, in
form reasonably satisfactory to Acquiror and customary in scope and substance
for letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statements.
5.12 Indemnification.
(a) After the Effective Time, Acquiror will,
and will cause the Surviving Corporation to, indemnify and hold harmless the
present and former officers, directors, employees and agents of Target (the
"Indemnified Parties") in respect of acts or omissions occurring on or prior to
the Effective Time to the full extent permitted by law and to the full extent
provided under Target's Certificate of Incorporation and Bylaws or any
indemnification agreement with Target officers and directors to which Target is
a party, in each case in effect on the date hereof. Without limitation of the
foregoing, in the event any
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such Indemnified Party is or becomes involved in any capacity in any action,
proceeding or investigation in connection with any matter relating to this
Agreement or the transactions contemplated hereby occurring on or prior to the
Effective Time, Acquiror shall or shall cause the Surviving Corporation to pay
as incurred such Indemnified Party's reasonable legal and other expenses
(including the cost of any investigation and preparation) incurred in connection
therewith.
(b) For four (4) years after the Effective Time,
Acquiror will either (i) at all times maintain at least $100,000,000 in cash,
marketable securities and unrestricted lines of credit to be available to
indemnify the Indemnified Parties in accordance with Section 5.12(a) above, or
(ii) cause the Surviving Corporation to use its best efforts to provide
officers' and directors' liability insurance in respect of acts or omissions
occurring on or prior to the Effective Time covering each such person currently
covered by Target's officers' and directors' liability insurance policy on terms
substantially similar to those of such policy in effect on the date hereof,
provided that in satisfying its obligation under this Section , Acquiror shall
not be obligated to cause the Surviving Corporation to pay premiums in excess of
150% of the annualized average of the amount per annum Target paid since
Target's initial public offering, which amount has been disclosed to Acquiror
and if the Surviving Corporation is unable to obtain the insurance required by
this Section 5.12, it shall obtain as much comparable insurance as possible for
an annual premium equal to such maximum amount.
(c) The provisions of this Section 5.12 are
intended to be for the benefit of, and shall be enforceable by, each Indemnified
Party, his or her heirs and representatives.
5.13 Stock Option Agreement. Concurrently with the execution
of this Agreement, Target shall deliver to Acquiror an executed Stock Option
Agreement in the form of Exhibit C attached hereto. Target agrees to fully
perform its obligations under the Stock Option Agreement.
5.14 Listing of Additional Shares. Prior to the Effective
Time, Acquiror shall file with the Nasdaq National Market a Notification Form
for Listing of Additional Shares with respect to the shares referred to in
Section 6.1(f).
5.15 Best Efforts and Further Assurances. Each of the parties
to this Agreement shall use its best efforts to effectuate the transactions
contemplated hereby and to fulfill and cause to be fulfilled the conditions to
closing under this Agreement. Each party hereto, at the reasonable request of
another party hereto, shall execute and deliver such other instruments and do
and perform such other acts and things as may be necessary or desirable for
effecting completely the consummation of this Agreement and the transactions
contemplated hereby.
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5.16 Retention of Certain Target Employees. Each of Acquiror
and Target shall use reasonable efforts to cooperate to further the retention of
certain of the employees of Target immediately prior to the Effective Time (as
determined by Acquiror), including mutual consultation to structure compensation
and benefit plans (at no expense to Target), and to cause certain key employees
to enter into a Non-competition Agreement in the form attached hereto as Exhibit
D.
5.17 Form S-8. Acquiror agrees to file, no later than five (5)
days after the Closing, a registration statement on Form S-8 covering the shares
of Acquiror Common Stock issuable pursuant to outstanding options under the
Target Stock Option Plans assumed by Acquiror. Target shall cooperate with and
assist Acquiror in the preparation of such registration statement.
5.18 Cashless Exercise of Options. Target shall use its best
efforts to encourage cashless exercises of options with exercise prices of
greater than $4.00 per share on or prior to the date of the Target Stockholders'
Meeting. Acquiror shall use its best efforts to encourage option exercises prior
to the date of the Target Stockholders' Meeting.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the
Merger. The respective obligations of each party to this Agreement to consummate
and effect this Agreement and the transactions contemplated hereby shall be
subject to the satisfaction at or prior to the Effective Time of each of the
following conditions, any of which may be waived, in writing, by agreement of
all the parties hereto:
(a) Stockholder Approval. This Agreement and
the Merger shall have been approved and adopted by the holders of a majority of
the shares of Target Common Stock outstanding as of the record date set for the
Target Stockholders' Meeting.
(b) Registration Statements Effective. The SEC
shall have declared the Registration Statements effective. No stop order
suspending the effectiveness of the Registration Statements or any part thereof
shall have been issued and no proceeding for that purpose, and no similar
proceeding in respect of the Proxy Statement, shall have been initiated or
threatened by the SEC; and all requests for additional information on the part
of the SEC shall have been complied with to the reasonable satisfaction of the
parties hereto.
(c) No Injunctions or Restraints; Illegality.
No temporary restraining order, preliminary or permanent injunction or other
order issued by any court of competent jurisdiction or other legal or regulatory
restraint or prohibition preventing the
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consummation of the Merger shall be in effect, nor shall any proceeding brought
by an administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign, seeking any of the foregoing be pending;
nor shall there be any action taken, or any statute, rule, regulation or order
enacted, entered, enforced or deemed, by a government agency, applicable to the
Merger, which makes the consummation of the Merger illegal. In the event an
injunction or other order shall have been issued, each party agrees to use its
reasonable diligent efforts to have such injunction or other order lifted.
(d) Governmental Approval. Acquiror, Target and
Merger Sub and their respective subsidiaries shall have timely obtained from
each Governmental Entity all approvals, waivers and consents, if any, necessary
for consummation of or in connection with the Merger and the several
transactions contemplated hereby, including such approvals, waivers and consents
as may be required under the Securities Act, under state Blue Sky laws, and
under HSR.
(e) Listing of Additional Shares. The filing
with the Nasdaq National Market of a Notification Form for Listing of Additional
Shares with respect to the shares of Acquiror Common Stock issuable upon
conversion of the Target Common Stock in the Merger and cashless exercise of the
options under the Target Stock Option Plans shall have been made.
6.2 Additional Conditions to Obligations of Target. The
obligations of Target to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, by Target:
(a) Representations, Warranties and Covenants.
(i) The representations and warranties made by Acquiror and Merger Sub in this
Agreement shall be true and correct in all material respects (except for such
representations and warranties that are qualified by their terms by a reference
to materiality which representations and warranties as so qualified shall be
true in all respects) on and as of the Effective Time as though such
representations and warranties were made on and as of such time and (ii)
Acquiror and Merger Sub shall have performed and complied in all material
respects with all covenants, obligations and conditions of this Agreement
required to be performed and complied with by them as of the Effective Time.
(b) Certificate of Acquiror. Target shall have
been provided with a certificate executed on behalf of Acquiror by its President
and its Chief Financial Officer to the effect that, as of the Effective Time:
(i) all representations and warranties made
by Acquiror and Merger Sub under this Agreement are true and complete in all
material respects; and
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(ii) all covenants, obligations and
conditions of this Agreement to be performed by Acquiror and Merger Sub on or
before such date have been so performed in all material respects.
(c) No Material Adverse Changes. There shall
not have occurred any material adverse change in the condition (financial or
otherwise), properties, assets (including intangible assets), liabilities,
business, operations, results of operations of Acquiror and its subsidiaries,
taken as a whole.
(d) Third Party Consents. Target shall have
been furnished with evidence satisfactory to it of the consent or approval of
those persons whose consent or approval shall be required in connection with the
Merger under any material contract of Acquiror or any of its subsidiaries or
otherwise.
(e) Injunctions or Restraints on Conduct of
Business. No temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other legal or
regulatory restraint provision limiting or restricting Acquiror's business
following the Merger shall be in effect, nor shall any proceeding brought by an
administrative agency or commission or other Governmental Entity, domestic or
foreign, seeking the foregoing be pending.
6.3 Additional Conditions to the Obligations of Acquiror and
Merger Sub. The obligations of Acquiror and Merger Sub to consummate and effect
this Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, by Acquiror:
(a) Representations, Warranties and Covenants.
(i) The representations and warranties made by Target in this Agreement shall be
true and correct in all material respects (except for such representations and
warranties that are qualified by their terms by a reference to materiality,
which representations and warranties as so qualified shall be true in all
respects) on and as of the Effective Time as though such representations and
warranties were made on and as of such time and (ii) Target shall have performed
and complied in all material respects with all covenants, obligations and
conditions of this Agreement required to be performed and complied with by it as
of the Effective Time.
(b) Certificate of Target. Acquiror shall have
been provided with a certificate executed on behalf of Target by its President
and Chief Financial Officer to the effect that, as of the Effective Time:
(i) all representations and warranties
made by Target under this Agreement are true and complete in all material
respects; and
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(ii) all covenants, obligations and
conditions of this Agreement to be performed by Target on or before such date
have been so performed in all material respects.
(c) Third Party Consents. Acquiror shall have
been furnished with evidence satisfactory to it of the consent or approval of
those persons whose consent or approval shall be required in connection with the
Merger under any material contract of Target or otherwise; provided, however,
that no consent of Cordis Corporation ("Cordis") with respect to that certain
International Distributor Agreement dated September 1, 1994, by and between
Target and Cordis, shall be required by this Section 6.2(c).
(d) Injunctions or Restraints on Conduct of
Business. No temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other legal or
regulatory restraint provision limiting or restricting Acquiror's conduct or
operation of the business of Target following the Merger shall be in effect, nor
shall any proceeding brought by an administrative agency or commission or other
Governmental Entity, domestic or foreign, seeking the foregoing be pending.
(e) No Material Adverse Changes. There shall
not have occurred any material adverse change in the condition (financial or
otherwise), properties, assets (including intangible assets), liabilities,
business, operations, results of operations of Target.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. At any time prior to the Effective Time,
whether before or after approval of the matters presented in connection with the
Merger by the stockholders of Target, this Agreement may be terminated:
(a) by mutual consent of Acquiror and Target;
(b) by either Acquiror or Target, if, without
fault of the terminating party, the Closing shall not have occurred on or before
September 30, 1997 (or such later date as may be agreed upon in writing by the
parties hereto);
(c) by Acquiror, if (i) Target shall breach any
of its representations, warranties or obligations hereunder in any material
respects and such breach shall not have been cured within ten business days of
receipt by Target of written notice of such breach, (ii) the Board of Directors
of Target shall have withdrawn or modified its recommendation of this Agreement
or the Merger in a manner adverse to Acquiror or shall have resolved
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to do any of the foregoing, or (iii) for any reason Target fails to call and
hold the Target Stockholders' Meeting by September 30, 1997;
(d) by Target, if Acquiror shall breach any of
its representations, warranties or obligations hereunder in any material
respects and such breach shall not have been cured within ten days following
receipt by Acquiror of written notice of such breach;
(e) by either Acquiror or Target if a Trigger
Event (as defined in Section 7.3(b)) or Takeover Proposal shall have occurred
and the Board of Directors of Target in connection therewith withdraws or
modifies its approval and recommendation of this Agreement and the transactions
contemplated hereby after determining that to cause Target to proceed with the
transactions contemplated hereby would not be consistent with the Board of
Directors' fiduciary duty to the stockholders of Target;
(f) by either Acquiror or Target if (i) any
permanent injunction or other order of a court or other competent authority
preventing the consummation of the Merger shall have become final and
nonappealable or (ii) if any required approval of the stockholders of Target
shall not have been obtained by reason of the failure to obtain the required
vote upon a vote held at a duly held meeting of stockholders or at any
adjournment thereof; or
(g) by Target, in the event that the Merger
Consideration is less than $8.00 based on the exchange ratios calculated three
days prior to the Target Stockholders' Meeting as set forth in Section 1.6(a)
hereof.
7.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 7.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Acquiror, Merger
Sub or Target or their respective officers, directors, stockholders or
affiliates, except to the extent that such termination results from the breach
by a party hereto of any of its representations, warranties or covenants set
forth in this Agreement; provided that, the provisions of Section 5.4
(Confidentiality), Section 7.3 (Expenses and Termination Fees) and this Section
7.2 shall remain in full force and effect and survive any termination of this
Agreement.
7.3 Expenses and Termination Fees.
(a) Subject to subsections (b), (c) and (d) of
this Section 7.3, whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby (including, without limitation, the fees and expenses of its
advisers, accountants and legal counsel) shall be paid by the party incurring
such expense, except that expenses incurred in connection with printing the
Proxy Materials and the Registration Statements, registration and filing fees
incurred in connection with the Registration Statements, the Proxy Materials and
the listing of additional shares pursuant to Section 6.1(f) and fees, costs and
expenses associated with
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compliance with applicable state securities laws in connection with the Merger
shall be shared equally by Target and Acquiror.
(b) In the event that (i) either Acquiror or
Target shall terminate this Agreement pursuant to Section 7.1(e), (ii) either
Acquiror or Target shall terminate this Agreement pursuant to Section 7.1(f)(ii)
following a failure of the stockholders of Target to approve this Agreement and,
prior to the time of the meeting of Target's stockholders, there shall have been
(A) a Trigger Event with respect to Target or (B) a Takeover Proposal with
respect to Target which at the time of the meeting of Target's stockholders
shall not have been (x) rejected by Target and (y) withdrawn by the third party,
(iii) Acquiror shall terminate this Agreement pursuant to Section 7.1(c)(i) or
Section 7.1(c)(iii), due in whole or in part to any failure by Target to use its
best efforts to perform and comply with all agreements and conditions required
by this Agreement to be performed or complied with by Target prior to or on the
Closing Date or any failure by Target's affiliates to take any actions required
to be taken hereby, and prior thereto there shall have been (A) a Trigger Event
with respect to Target or (B) a Takeover Proposal with respect to Target which
shall not have been (x) rejected by Target and (y) withdrawn by the third party,
or (iv) Acquiror shall terminate this Agreement pursuant to Section 7.1(c)(ii),
then Target shall promptly pay to Acquiror the sum of $3,500,000; provided,
however, that with respect to Section 7.3(b)(ii)(A) and Section 7.3(b)(iii)(A),
a Trigger Event shall not be deemed to include the acquisition by any Person of
securities representing 15% or more of Target if such Person has acquired such
securities not with the purpose nor with the effect of changing or influencing
the control of Target, nor in connection with or as a participant in any
transaction having such purpose or effect, including without limitation not in
connection with such Person (i) making any public announcement with respect to
the voting of such shares at any meeting to consider any merger, consolidation,
sale of substantial assets or other business combination or extraordinary
transaction involving Target, (ii) making, or in any way participating in, any
"solicitation" of "proxies" (as such terms are defined or used in Regulation 14A
under the Exchange Act) to vote any voting securities of Target (including,
without limitation, any such solicitation subject to Rule 14a-11 under the
Exchange Act) or seeking to advise or influence any Person with respect to the
voting of any voting securities of Target, (iii) forming, joining or in any way
participating in any "group" within the meaning of Section 13(d)(3) of the
Exchange Act with respect to any voting securities of Target or (iv) otherwise
acting, alone or in concert with others, to seek control of Target or to seek to
control or influence the management or policies of Target. As used herein, a
"Trigger Event" shall occur if any Person acquires securities representing 15%
or more, or commences a tender or exchange offer following the successful
consummation of which the offeror and its affiliate would beneficially own
securities representing 20% or more, of the voting power of Target.
(c) In the event that (i) Acquiror shall terminate this
Agreement pursuant to Section 7.1(c)(i) or Section 7.1(c)(iii) or (ii) Acquiror
shall terminate this Agreement pursuant to Section 7.1(f)(ii), provided that the
Merger Consideration at the time of the Target Stockholders' Meeting is at least
$9.00, Target shall promptly reimburse Acquiror
45.
<PAGE> 51
$1,500,000 for the out-of-pocket costs and expenses incurred by Acquiror in
connection with this Agreement and the transactions contemplated hereby
(including, without limitation, the fees and expenses of its advisors,
accountants and legal counsel) as Acquiror's sole remedy.
7.4 Amendment. The boards of directors of the parties hereto
may cause this Agreement to be amended at any time by execution of an instrument
in writing signed on behalf of each of the parties hereto; provided that an
amendment made subsequent to adoption of the Agreement by the stockholders of
Target or Merger Sub shall not (i) alter or change the amount or kind of
consideration to be received on conversion of the Target Common Stock, (ii)
alter or change any term of the Certificate of Incorporation of the Surviving
Corporation to be effected by the Merger, or (iii) alter or change any of the
terms and conditions of the Agreement if such alteration or change would
adversely affect the holders of Target Common Stock or Merger Sub Common Stock.
7.5 Extension; Waiver. At any time prior to the Effective Time
any party hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival at Effective Time. The representations,
warranties and agreements set forth in this Agreement shall terminate at the
Effective Time, except that the agreements set forth in Article I, Section 5.4
(Confidentiality) 5.7 (Affiliates), 5.10 (Employee Benefit Plans), 5.12
(Indemnification), 5.15 (Best Efforts and Further Assurances), 7.3 (Expenses and
Termination Fees), 7.4 (Amendment), and this Article VIII shall survive the
Effective Time.
8.2 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or by
commercial delivery service, or mailed by registered or certified mail (return
receipt requested) or sent via facsimile (with confirmation of receipt) to the
parties at the following address (or at such other address for a party as shall
be specified by like notice):
46.
<PAGE> 52
(a) if to Acquiror or Merger Sub, to:
Endosonics Corporation
2870 Kilgore Road
Rancho Cordova, CA 95670
Attention: President
Facsimile No.: (916) 638-8112
Telephone No.: (916) 638-8008
with a copy to:
Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, CA 94303
Attention: Edward M. Leonard, Esq.
Facsimile No.: (415) 496-2885
Telephone No.: (415) 424-0160
(b) if to Target, to:
Cardiometrics, Inc.
645 Clyde Avenue
Mountain View, CA 94043
Attention: President
Facsimile No.: (415) 961-8753
Telephone No.: (415) 961-6993
with a copy to:
Gunderson Dettmer Stough Villeneuve
Franklin & Hachigian LLP
155 Constitution Drive
Menlo Park, CA 94025
Attn: David T. Young, Esq.
Facsimile No.: (415) 321-2800
Telephone No.: (415) 321-2400
8.3 Interpretation. When a reference is made in this Agreement
to Exhibits or Schedules, such reference shall be to an Exhibit or Schedule to
this Agreement unless otherwise indicated. The words "include," "includes" and
"including" when used herein shall be deemed in each case to be followed by the
words "without limitation." The phrase "made available" in this Agreement shall
mean that the information referred to has been
47.
<PAGE> 53
made available if requested by the party to whom such information is to be made
available. The phrases "the date of this Agreement", "the date hereof", and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to January 26, 1997. The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
8.4 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.
8.5 Entire Agreement; Nonassignability; Parties in Interest.
This Agreement and the documents and instruments and other agreements
specifically referred to herein or delivered pursuant hereto, including the
Exhibits, the Schedules, including the Target Disclosure Schedule and the
Acquiror Disclosure Schedule (a) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, except for the Confidentiality Agreement,
which shall continue in full force and effect, and shall survive any termination
of this Agreement or the Closing, in accordance with its terms; (b) are not
intended to confer upon any other person any rights or remedies hereunder,
except as set forth in Sections 1.6(a)-(c) and (f), 1.7-1.9, 5.10 and 5.12; and
(c) shall not be assigned by operation of law or otherwise except as otherwise
specifically provided.
8.6 Severability. In the event that any provision of this
Agreement, or the application thereof, becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the remainder of
this Agreement will continue in full force and effect and the application of
such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further agree
to replace such void or unenforceable provision of this Agreement with a valid
and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
8.7 Remedies Cumulative. Except as otherwise provided herein,
any and all remedies herein expressly conferred upon a party will be deemed
cumulative with and not exclusive of any other remedy conferred hereby, or by
law or equity upon such party, and the exercise by a party of any one remedy
will not preclude the exercise of any other remedy.
8.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws that might otherwise govern under
applicable principles of conflicts of law. Each of the parties hereto
irrevocably consents to the exclusive jurisdiction of any court located within
the State of California in connection with any matter based upon
48.
<PAGE> 54
or arising out of this Agreement or the matters contemplated herein, agrees that
process may be served upon them in any manner authorized by the laws of the
State of California for such persons and waives and covenants not to assert or
plead any objection which they might otherwise have to such jurisdiction and
such process.
8.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation, preparation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
49.
<PAGE> 55
IN WITNESS WHEREOF, Target, Acquiror and Merger Sub have caused this
Agreement to be executed and delivered by their respective officers thereunto
duly authorized, all as of the date first written above.
TARGET:
CARDIOMETRICS, INC.
By:
-------------------------------------
Menahem Nassi
President and Chief Executive Officer
ACQUIROR:
ENDOSONICS CORPORATION
By:
-------------------------------------
Reinhard J. Warnking
President and Chief Executive Officer
MERGER SUB:
RIVER ACQUISITION CORPORATION
By:
-------------------------------------
Reinhard J. Warnking
President and Chief Executive Officer
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION]
<PAGE> 1
EXHIBIT 2
VOTING AGREEMENT
This Voting Agreement (the "Agreement") is made and entered into as of
January 26, 1997, between Endosonics Corporation, a Delaware corporation
("Acquiror"), and the undersigned stockholder ("Stockholder") of Cardiometrics,
Inc., a Delaware corporation ("Target").
RECITALS
A. Pursuant to an Agreement and Plan of Reorganization dated as
of January 26, 1997 (the "Reorganization Agreement") by and among Acquiror,
River Acquisition Corporation, a Delaware corporation ("Merger Sub") and
wholly-owned subsidiary of Acquiror, and Target, Merger Sub is merging with and
into Target (the "Merger") and Target, as the surviving corporation of the
Merger, will remain as a wholly-owned subsidiary of Acquiror;
B. Pursuant to Section 5.7 of the Reorganization Agreement, in
order to induce Acquiror to enter into the Reorganization Agreement, Target has
agreed to use its best efforts to solicit the proxy of certain significant
stockholders of Target on behalf of Acquiror, and to cause certain significant
stockholders of Target to execute and deliver to Acquiror Voting Agreements;
C. The Stockholder is the beneficial owner (as defined in Rule
13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) of such number of shares of the outstanding Common Stock, $0.01 par value
per share, of Target as is indicated on the final page of this Agreement (the
"Shares"); and
D. In consideration of the execution of the Reorganization
Agreement by Acquiror, Stockholder agrees not to transfer or otherwise dispose
of any of the Shares, or any other shares of capital stock of Target acquired by
Stockholder hereafter and prior to the Expiration Date (as defined in Section
1.1 below), and agrees to vote the Shares and any other such shares of capital
stock of Target so as to facilitate consummation of the Merger.
NOW, THEREFORE, the parties agree as follows:
1. Agreement to Retain Shares.
1.1 Transfer and Encumbrance. Stockholder agrees not to
transfer (except as may be specifically required by court order or by operation
of law), sell, exchange, pledge (except in connection with a bona fide loan
transaction, provided that any pledgee agrees not to transfer, sell, exchange,
pledge or otherwise dispose of or encumber the Shares or any New Shares (as
defined in Section 1.2) prior to the Expiration Date and to be subject to the
<PAGE> 2
Proxy (as defined in Section 3)) or otherwise dispose of or encumber the Shares
or any New Shares, or to make any offer or agreement relating thereto, at any
time prior to the Expiration Date. As used herein, the term "Expiration Date"
shall mean the earlier to occur of (i) such date and time as the Merger shall
become effective in accordance with the terms and provisions of the
Reorganization Agreement and (ii) six months after the date of termination of
the Reorganization Agreement.
1.2 New Shares. Stockholder agrees that any shares of capital stock
of Target that Stockholder purchases or with respect to which Stockholder
otherwise acquires beneficial ownership after the date of this Agreement and
prior to the Expiration Date ("New Shares") shall be subject to the terms and
conditions of this Agreement to the same extent as if they constituted Shares.
2. Agreement to Vote Shares. At every meeting of the stockholders of
Target called with respect to any of the following, and at every adjournment
thereof, and on every action or approval by written consent of the stockholders
of Target with respect to any of the following, Stockholder shall vote the
Shares and any New Shares (i) in favor of approval of the Reorganization
Agreement and the Merger and any matter that could reasonably be expected to
facilitate the Merger and (ii) against any proposal for any recapitalization,
merger, sale of assets or other business combination (other than the Merger)
between Target and any person or entity other than Acquiror or any other action
or agreement that would result in a breach of any covenant, representation or
warranty or any other obligation or agreement of Target under the Reorganization
Agreement or which would result in any of the conditions to Target's obligations
under the Reorganization Agreement not being fulfilled.
3. Irrevocable Proxy. Concurrently with the execution of this
Agreement, Stockholder agrees to deliver to Acquiror a proxy in the form
attached hereto as Exhibit A (the "Proxy"), which shall be irrevocable to the
extent provided in Section 212 of the Delaware General Corporation Law, covering
the total number of Shares and New Shares beneficially owned or as to which
beneficial ownership is acquired (as such term is defined in Rule 13d-3 under
the Exchange Act) by Stockholder set forth therein.
4. Representations, Warranties and Covenants of Stockholder.
Stockholder hereby represents, warrants and covenants to Acquiror that
Stockholder (i) is the beneficial owner of the Shares, which at the date of this
Agreement and at all times up until the Expiration Date will be free and clear
of any liens, claims, options, charges or other encumbrances; (ii) does not
beneficially own any shares of capital stock of Target other than the Shares
(excluding shares as to which Stockholder currently disclaims beneficial
ownership in accordance with applicable law); and (iii) has full power and
authority to make, enter into and carry out the terms of this Agreement and the
Proxy.
2.
<PAGE> 3
5. Additional Documents. Stockholder hereby covenants and agrees to
execute and deliver any additional documents necessary or desirable, as
reasonably agreed to between Acquiror and Stockholder, to carry out the purpose
and intent of this Agreement.
6. Consent and Waiver. Stockholder hereby gives any consents or waivers
that are reasonably required for the consummation of the Merger under the terms
of any agreement to which Stockholder is a party or pursuant to any rights
Stockholder may have.
7. Termination. This Agreement and the Proxy delivered in connection
herewith shall terminate and shall have no further force or effect as of the
Expiration Date.
8. Miscellaneous.
8.1 Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, then the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
8.2 Binding Effect and Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but, except as
otherwise specifically provided herein, neither this Agreement nor any of the
rights, interests or obligations of the parties hereto may be assigned by either
of the parties without the prior written consent of the other. This Agreement is
intended to bind Stockholder as a stockholder of Target only with respect to the
specific matters set forth herein.
8.3 Amendment and Modification. This Agreement may not be modified,
amended, altered or supplemented except by the execution and delivery of a
written agreement executed by the parties hereto.
8.4 Specific Performance; Injunctive Relief. The parties hereto
acknowledge that Acquiror will be irreparably harmed and that there will be no
adequate remedy at law for a violation of any of the covenants or agreements of
Stockholder set forth herein. Therefore, it is agreed that, in addition to any
other remedies that may be available to Acquiror upon any such violation,
Acquiror shall have the right to enforce such covenants and agreements by
specific performance, injunctive relief or by any other means available to
Acquiror at law or in equity.
8.5 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with confirmation of receipt) to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice):
3.
<PAGE> 4
(a) if to Acquiror or Merger Sub, to:
Endosonics Corporation
2870 Kilgore Road
Rancho Cordova, CA 95670
Attention: President
Facsimile No.: 916-638-8112
Telephone No.: 916-638-8008
with a copy to:
Brobeck, Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, California 94303
Attn: Edward M. Leonard, Esq.
Facsimile No.: (415) 496-2885
Telephone No.: (415) 424-0160
(b) if to Target, to:
Cardiometrics, Inc.
645 Clyde Avenue
Mountain View, CA 94043
Attention: President
Facsimile No.: 415-961-8753
Telephone No.: 415-961-6993
4.
<PAGE> 5
with a copy to:
Gunderson Dettmer Stough Villeneuve
Franklin & Hachigian LLP
155 Constitution Drive
Menlo Park, CA 94025
Attn: David T. Young, Esq.
Facsimile No.: 415-321-2800
Telephone No.: 415-321-2400
8.6 Governing Law. This Amendment shall be governed by, construed
and enforced in accordance with the internal laws of the State of Delaware.
8.7 Entire Agreement. This Agreement and the Proxy contain the
entire understanding of the parties in respect of the subject matter hereof, and
supersede all prior negotiations and understandings between the parties with
respect to such subject matters.
8.8 Counterpart. This Agreement may be executed in several
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
8.9 Effect of Headings. The section headings herein are for
convenience only and shall not affect the construction or interpretation of this
Agreement.
5.
<PAGE> 6
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed on the day and year first above written.
ACQUIROR:
ENDOSONICS CORPORATION
By _____________________________________
Reinhard J. Warnking
President and Chief Executive Officer
STOCKHOLDER
By: _____________________________________
Stockholder's Address for Notice:
__________________________________________
__________________________________________
__________________________________________
Shares beneficially owned:
____________ shares of Target Common Stock
[SIGNATURE PAGE TO VOTING AGREEMENT]
<PAGE> 7
EXHIBIT A
IRREVOCABLE PROXY
TO VOTE STOCK OF
CARDIOMETRICS, INC.
The undersigned stockholder of Cardiometrics, Inc., a Delaware
corporation ("Target"), hereby irrevocably (to the full extent permitted by
Section 212 of the Delaware General Corporation Law) appoints the members of the
Board of Directors of Endosonics Corporation, a Delaware corporation
("Acquiror"), and each of them, as the sole and exclusive attorneys and proxies
of the undersigned, with full power of substitution and resubstitution, to vote
and exercise all voting and related rights (to the full extent that the
undersigned is entitled to do so) with respect to all of the shares of capital
stock of Target that now are or hereafter may be beneficially owned by the
undersigned, and any and all other shares or securities of Target issued or
issuable in respect thereof on or after the date hereof (collectively, the
"Shares") in accordance with the terms of this Proxy. The Shares beneficially
owned by the undersigned stockholder of Target as of the date of this Proxy are
listed on the final page of this Proxy. Upon the undersigned's execution of this
Proxy, any and all prior proxies given by the undersigned with respect to any
Shares are hereby revoked and the undersigned agrees not to grant any subsequent
proxies with respect to the Shares until after the Expiration Date (as defined
below).
This Proxy is irrevocable (to the extent provided in Section 212 of the
Delaware General Corporation Law), is granted pursuant to that certain Voting
Agreement dated as of January 26, 1997, by and among Acquiror and the
undersigned stockholder (the "Voting Agreement"), and is granted in
consideration of Acquiror entering into that certain Agreement and Plan of
Reorganization, dated January 26, 1997, by and among Target, Acquiror and River
Acquisition Corporation, a Delaware corporation ("Merger Sub") and wholly-owned
subsidiary of Acquiror (the "Reorganization Agreement"). The Reorganization
Agreement provides for the merger of Merger with and into Target (the "Merger").
As used herein, the term "Expiration Date" shall mean the earlier to occur of
(i) such date and time as the Merger shall become effective in accordance with
the terms and provisions of the Reorganization Agreement and (ii) six months
after the date of termination of the Reorganization Agreement.
The attorneys and proxies named above, and each of them are hereby
authorized and empowered by the undersigned, at any time prior to the Expiration
Date, to act as the undersigned's attorney and proxy to vote the Shares, and to
exercise all voting and other rights of the undersigned with respect to the
Shares (including, without limitation, the power to execute and deliver written
consents pursuant to Section 228 of the Delaware General Corporation Law), at
every annual, special or adjourned meeting of the stockholders of Target and in
every written consent in lieu of such meeting (i) in favor of approval of the
Merger and the Reorganization Agreement and in favor of any matter that could
reasonably
<PAGE> 8
be expected to facilitate the Merger and (ii) against any proposal for any
recapitalization, merger, sale of assets or other business combination (other
than the Merger) between Target and any person or entity other than Acquiror or
any other action or agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of Target under
the Reorganization Agreement or which could result in any of the conditions to
Target's obligations under the Reorganization Agreement not being fulfilled. The
attorneys and proxies named above may not exercise this Proxy on any other
matter except as provided above. The undersigned stockholder may vote the Shares
on all other matters.
Any obligation of the undersigned hereunder shall be binding upon the
successors and assigns of the undersigned.
This Proxy is irrevocable (to the extent provided in Section 212 of the
Delaware General Corporation Law).
Dated: ___________, 1997
__________________________________________
(Signature of Stockholder)
__________________________________________
(Print Name of Stockholder)
Shares beneficially owned:
_________ shares of Target Common Stock
[SIGNATURE PAGE TO PROXY]
<PAGE> 1
EXHIBIT 3
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT (the "Agreement"), dated as of January 26,
1997, by and between Endosonics Corporation, a Delaware corporation
("Acquiror"), and Cardiometrics, Inc., a Delaware corporation ("Target").
WHEREAS, concurrently with the execution and delivery of this
Agreement, Target, Acquiror and River Acquisition Corporation, a Delaware
corporation ("Sub"), are entering into an Agreement and Plan of Reorganization,
dated as of the date hereof (the "Reorganization Agreement"), which provides
that, among other things, upon the terms and subject to the conditions thereof,
Merger Sub will be merged with and into Target (the "Merger"), with Target
continuing as the surviving corporation; and
WHEREAS, as a condition and inducement to Acquiror's willingness to
enter into the Reorganization Agreement, Acquiror has required that Target
agree, and Target has so agreed, to grant to Acquiror an option with respect to
certain shares of Target's common stock on the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein and in the Reorganization Agreement,
the parties hereto agree as follows:
1. Grant of Option. Target hereby grants Acquiror an irrevocable
option (the "Target Option") to purchase up to 1,379,717 shares (the "Target
Shares") of common stock, par value $0.01 per share, of Target (the "Target
Common Stock") in the manner set forth below at a price (the "Exercise Price")
of $9.00 per Target Share, payable in cash, or at Acquiror's option, Target
shall loan Acquiror the Exercise Price (less the par value of the shares issued
upon exercise, such par value to be paid in cash), pursuant to an interest free
one-year term loan (the "Note"). Capitalized terms used herein but not defined
herein shall have the meanings set forth in the Reorganization Agreement.
2. Exercise of Option. The Target Option may be exercised by
Acquiror, in whole or in part at any time or from time to time after the
occurrence of any of the events described in Section 7.3(b) of the
Reorganization Agreement or if a Takeover Proposal or Trigger Event is
consummated. In the event Acquiror wishes to exercise the Target Option,
Acquiror shall deliver to Target a written notice (an "Exercise Notice")
specifying the total number of Target Shares it wishes to purchase. The closing
of the purchase of Target Shares (the "Closing") shall occur at a place, on a
date and at a time designated by Acquiror in an Exercise Notice delivered at
least two business days prior to the date of the Closing. The Target Option
shall terminate upon the earlier of: (i) the Effective Time; (ii) the
termination of the Reorganization Agreement pursuant to Section 7.1 thereof
(other than a termination in connection with which Acquiror is entitled to any
payments as specified in Sections 7.3(b)thereof); or (iii) 180 days following
any termination
<PAGE> 2
of the Reorganization Agreement in connection with which Acquiror is entitled to
a payment as specified in Section 7.3(b)thereof (or if, at the expiration of
such 180-day period, the Target Option cannot be exercised by reason of any
applicable judgment, decree, order, law or regulation, ten business days after
such impediment to exercise shall have been removed or shall have become final
and not subject to appeal), but in no event under this clause (iii) later than
March 31, 1997. Notwithstanding the foregoing, (i) the Target Option may not be
exercised if Acquiror is in material breach of any of its representations,
warranties, covenants or agreements contained in this Agreement or in the
Reorganization Agreement; and (ii) in the event Acquiror receives more than the
Exercise Price multiplied by the number of Target Shares purchased by Acquiror
pursuant to the Target Option, in connection with sales or other dispositions of
the Target Shares, all proceeds in excess of such amount shall be remitted to
Target.
3. Conditions to Closing. The obligation of Target to issue the
Target Shares to Acquiror hereunder is subject to the conditions that (i) all
waiting periods, if any, under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the rules and regulations promulgated thereunder ("HSR
Act"), applicable to the issuance of the Target Shares hereunder shall have
expired or have been terminated; (ii) all consents, approvals, orders or
authorizations of, or registrations, declarations or filings with, any Federal,
state or local administrative agency or commission or other Federal state or
local governmental authority or instrumentality, if any, required in connection
with the issuance of the Target Shares hereunder shall have been obtained or
made, as the case may be; and (iii) no preliminary or permanent injunction or
other order by any court of competent jurisdiction prohibiting or otherwise
restraining such issuance shall be in effect.
4. Closing. At the Closing, (a) Target will deliver to Acquiror a
single certificate in definitive form representing the number of Target Shares
designated by Acquiror in its Exercise Notice, such certificate to be registered
in the name of Acquiror and to bear the legend set forth in Section 13, and (b)
Acquiror will deliver to Target the aggregate price for the Target Shares so
designated and being purchased by wire transfer of immediately available funds
or certified check or bank check.
5. Representations and Warranties of Target. Target represents and
warrants to Acquiror that (a) Target is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the corporate power and authority to enter into this Agreement and to carry out
its obligations hereunder, (b) the execution and delivery of this Agreement by
Target and the consummation by Target of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Target and no other corporate proceedings on the part of Target are necessary to
authorize this Agreement or any of the transactions contemplated hereby, (c)
this Agreement has been duly executed and delivered by Target and constitutes a
valid and binding obligation of Target, and, assuming this Agreement constitutes
a valid and binding obligation of Acquiror, is enforceable against Target in
accordance with its terms, except as enforceability may be limited by bankruptcy
and other laws affecting the rights and remedies
2.
<PAGE> 3
of creditors generally and general principles of equity, (d) Target has taken
all necessary corporate action to authorize and reserve for issuance and to
permit it to issue, upon exercise of the Target Option, and at all times from
the date hereof through the expiration of the Target Option will have reserved,
1,379,717 unissued Target Shares, all of which, upon their issuance and delivery
in accordance with the terms of this Agreement, will be validly issued, fully
paid and nonassessable, (e) upon delivery of the Target Shares to Acquiror upon
the exercise of the Target Option, Acquiror will acquire the Target Shares free
and clear of all claims, liens, charges, encumbrances and security interests of
any nature whatsoever, except as provided for in the Note, (f) except as
described in the Reorganization Agreement, and except as may be required under
the Securities Act of 1933, as amended (the "Securities Act"), the execution and
delivery of this Agreement by Target does not, and the performance of this
Agreement by Target will not, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or the
loss of a benefit under, or the creation of a lien, pledge, security interest or
other encumbrance on assets pursuant to (any such conflict, violation, default,
right of termination, cancellation or acceleration, loss or creation, a
"Violation") (A) any provision of the Certificate of Incorporation, as amended,
or By-laws, as amended, of Target or (B) any provisions of any material
mortgage, indenture, lease, contract or other agreement, instrument, permit,
concession, franchise, or license required to be filed with the Target SEC
Documents or (C) any judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Target or its properties or assets, which Violation, in
the case of each of clauses (B) and (C), would have a Material Adverse Effect on
Target and (g) except as described in the Reorganization Agreement, the
execution and delivery of this Agreement by Target does not, and the performance
of this Agreement by Target will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority.
6. Representations and Warranties of Acquiror. Acquiror represents
and warrants to Target that (a) Acquiror is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder, (b) the execution and delivery of this
Agreement by Acquiror and the consummation by Acquiror of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Acquiror and no other corporate proceedings on the part of
Acquiror are necessary to authorize this Agreement or any of the transactions
contemplated hereby, (c) this Agreement has been duly executed and delivered by
Acquiror and constitutes a valid and binding obligation of Acquiror, and,
assuming this Agreement constitutes a valid and binding obligation of Target, is
enforceable against Acquiror in accordance with its terms, except as
enforceability may be limited by bankruptcy and other laws affecting the rights
and remedies of creditors generally and general principles of equity, (d) except
as described in Section 3.3 of the Reorganization Agreement, the execution and
delivery of this Agreement by Acquiror does not, and the performance of this
Agreement by Acquiror will not, result in any Violation pursuant to, (A) any
provision of the Certificate
3.
<PAGE> 4
of Incorporation or By-laws of Acquiror, (B) any provisions of any material
mortgage, indenture, lease, contract or other agreement, instrument, permit,
concession, franchise, or license or (C) any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Acquiror or its properties or
assets, which Violation, in the case of each of clauses (B) and (C), would have
a Material Adverse Effect on Acquiror, (e) except as described in Section 3.3 of
the Reorganization Agreement and Section 3(i) of this Agreement, and except as
may be required under the Securities Act, the execution and delivery of this
Agreement by Acquiror does not, and the performance of this Agreement by
Acquiror will not, require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority and (f)
any Target Shares acquired upon exercise of the Target Option will not be, and
the Target Option is not being, acquired by Acquiror with a view to the public
distribution thereof.
7. Certain Repurchases.
(a) Put and Call. At any time during which the Target Option is
exercisable pursuant to Section 2 hereof (the "Repurchase Period"), upon demand
by Acquiror, Acquiror shall have the right to sell to Target (or any successor
entity thereof) and Target (or such successor entity) shall be obligated to
repurchase from Acquiror (the "Put"), and upon demand by Target, subject to
Section 7(c) hereof, Target (or any successor entity thereof) shall have the
right to repurchase from Acquiror and Acquiror shall be obligated to sell to
Target (or such successor entity) (the "Call"), all or any portion of the Target
Option, at the price set forth in subparagraph (i) below, or, at any time prior
to March 31, 1997 all or any portion of the Target Shares purchased by Acquiror
pursuant thereto, at a price set forth in subparagraph (ii) below:
(i) the difference between the "Market/Tender Offer Price"
for shares of Target Common Stock as of the date (the "Notice Date") notice of
exercise of the Put or Call, as the case may be, is given to the other party
(defined as the higher of (A) the price per share offered as of the Notice Date
pursuant to any tender or exchange offer or other Takeover Proposal (as defined
in the Reorganization Agreement) which was made prior to the Notice Date and not
terminated or withdrawn as of the Notice Date (the "Tender Price") or (B) the
average of the closing prices of shares of Target Common Stock on the Nasdaq
National Market for the ten trading days immediately preceding the Notice Date,
(the "Market Price")), and the Exercise Price, multiplied by the number of
Target Shares purchasable pursuant to the Target Option (or portion thereof with
respect to which Acquiror or Target is exercising its rights under this Section
7), but only if the Market/Tender Offer Price is greater than the Exercise
Price;
(ii) the Exercise Price paid by Acquiror for the Target Shares
acquired pursuant to the Target Option plus the difference between the
Market/Tender Offer Price and the Exercise Price, but only if the Market/Tender
Offer Price is greater than the Exercise Price, multiplied by the number of
Target Shares so purchased;
4.
<PAGE> 5
(iii) provided further that in no event shall the Acquiror
receive any proceeds pursuant to Section 7(a)(i) and provided further that in no
event shall the proceeds payable to Acquiror pursuant to Section 7(a) above
exceed the Exercise Price multiplied by the number of Target Shares purchased.
For purposes of clauses (i) and (ii) of this Section 7(a), the Tender Price
shall be the highest price per share offered pursuant to a tender or exchange
offer or other Takeover Proposal during the Repurchase Period.
(b) Payment and Redelivery of Target Option or Shares. In the event
Acquiror or Target exercises its rights under this Section 7, Target shall,
within ten business days of the Notice Date, pay the required amount to Acquiror
in immediately available funds and Acquiror shall surrender to Target the Target
Option or the certificates evidencing the Target Shares purchased by Acquiror
pursuant thereto, and Acquiror shall warrant that it owns such shares and that
such shares are then free and clear of all liens, claims, charges and
encumbrances of any kind or nature whatsoever.
(c) Limitation on Call. The Call shall not be exercisable by Target
(or any successor entity thereof) unless substantially concurrently therewith
Target has consummated the transaction contemplated by a Takeover Proposal or
the stockholders of Target have transferred their shares of Target Common Stock
pursuant to a tender or exchange offer or other Takeover Proposal.
8. Voting of Shares. Following the date hereof and prior to the
Expiration Date (as defined in Section 9(b)hereof), Acquiror shall vote any
shares of Target Common Stock acquired pursuant to this Agreement ("Restricted
Shares") on each matter submitted to a vote of stockholders of Target for and
against such matter in the same proportion as the vote of all other stockholders
of Target are voted (whether by proxy or otherwise) for and against such matter.
9. Restrictions on Certain Actions.
(a) Restrictions. Other than pursuant to the Reorganization
Agreement, following the date hereof and prior to the Expiration Date, without
the prior written consent of Target, Acquiror shall not, nor shall Acquiror
permit its affiliates to, directly or indirectly, alone or in concert or
conjunction with any other Person or Group (as defined in Section 9(b)), (i) in
any manner acquire, agree to acquire or make any proposal to acquire, any
securities of, equity interest in, or any material property of, Target (other
than pursuant to this Agreement or the Reorganization Agreement), (ii) except at
the specific written request of Target, propose to enter into any merger or
business combination involving Target or to purchase a material portion of the
assets of Target, (iii) make or in any way participate in any "solicitation" of
"proxies" (as such terms are used in Regulation 14A promulgated under the
Exchange Act) to vote, or seek to advise or influence any Person with respect to
the voting of, any voting securities of Target, (iv) form, join or in any way
participate in a Group with respect to any voting securities of Target, (v) seek
to control or influence the management, Board of Directors or policies of
Target, (vi) disclose any
5.
<PAGE> 6
intention, plan or arrangement inconsistent with the foregoing, (vii) advise,
assist or encourage any other Person in connection with the foregoing or (viii)
request Target (or its directors, officers, employees or agents) to amend or
waive any provisions of this Section 9, or take any action which may require
Target to make a public announcement regarding the possibility of a business
combination or merger with such party. Target shall not adopt any Rights
Agreement in any manner which would cause Acquiror, if Acquiror has complied
with its obligations under this Agreement, to become an "Acquiring Person" under
such Rights Agreement solely by reason of the beneficial ownership of the shares
purchasable hereunder.
(b) Certain Definitions. For purposes of this Agreement, (i) the
term "Person" shall mean any corporation, partnership, individual, trust,
unincorporated association or other entity or Group (within the meaning of
Section 13(d)(3) of the Exchange Act), (ii) the term "Expiration Date" with
respect to any obligation or restriction imposed on one party shall mean the
earlier to occur of (A) the third anniversary of the date hereof or (B) such
time as the other party shall have suffered a Change of Control and (iii) a
"Change of Control" with respect to one party shall be deemed to have occurred
whenever (A) there shall be consummated (1) any consolidation or merger of such
party in which such party is not the continuing or surviving corporation, or
pursuant to which shares of such party's common stock would be converted in
whole or in part into cash, other securities or other property, other than a
merger of such person in which the holders of such party's common stock
immediately prior to the merger have substantially the same proportionate
ownership of common stock of the surviving corporation immediately after the
merger, or (2) any sale, lease, exchange or transfer (in one transaction or a
series of related transactions) of all or substantially all the assets of such
party, or (B) the stockholders of such party shall approve any plan or proposal
for the liquidation or dissolution of such party, or (C) any party, other than
such party or a subsidiary thereof or any employee benefit plan sponsored by
such party or a subsidiary thereof or a corporation owned, directly or
indirectly, by the stockholders of such party in substantially the same
proportions as their ownership of stock of such party, shall become the
beneficial owner of securities of such party representing 20% or more, or
commences a tender or exchange offer following the successful consummation of
which the offeror and its affiliates would beneficially own securities
representing 20% or more, of the combined voting power of then outstanding
securities ordinarily (and apart from rights accruing in special circumstances)
having the right to vote in the election of directors, as a result of a tender
or exchange offer, open market purchases, privately negotiated purchases or
otherwise; provided, however, that a Change in Control shall not be deemed to
include the acquisition by any party of securities representing 20% or more of
Target if such party has acquired such securities not with the purpose nor with
the effect of changing or influencing the control of Target, nor in connection
with or as a participant in any transaction having such purpose or effect,
including without limitation not in connection with such party (i) making any
public announcement with respect to the voting of such shares at any meeting to
consider any merger, consolidation, sale of substantial assets or other business
combination or extraordinary transaction involving Target, (ii) making, or in
any way participating in, any
6.
<PAGE> 7
"solicitation" of "proxies" (as such terms are defined or used in Regulation 14A
under the Exchange Act) to vote any voting securities of Target (including,
without limitation, any such solicitation subject to Rule 14a-11 under the
Exchange Act) or seeking to advise or influence any party with respect to the
voting of any voting securities of Target, directly or indirectly, relating to a
merger or other business combination involving Target or the sale or transfer of
any material assets (excluding the sale or disposition of assets in the ordinary
course of business) of Target, (iii) forming, joining or in any way
participating in any "group" within the meaning of Section 13(d)(3) of the
Exchange Act with respect to any voting securities of Target, directly or
indirectly, relating to a merger or other business combination involving Target
or the sale or transfer of any material assets (excluding the sale or
disposition of assets in the ordinary course of business) of Target, or (iv)
otherwise acting, alone or in concert with others, to seek control of Target or
to seek to control or influence the management or policies of Target, or (D) at
any time during the period commencing on the date of this Agreement and ending
on the Expiration Date, individuals who at the date hereof constituted the Board
of Directors of such party shall cease for any reason to constitute at least a
majority thereof, unless the election or the nomination for election by such
party's stockholders of each new director during the period commencing on the
date of this Agreement and ending on the Expiration Date was approved by a vote
of at least two-thirds of the directors then still in office who were directors
at the date hereof, or (E) any other event shall occur with respect to such
party that would be required to be reported in response to Item 6(e) (or any
successor provision) of Schedule 14A of Regulation 14A promulgated under the
Exchange Act.
10. Restrictions on Transfer.
(a) Restrictions on Transfer. Prior to the Expiration Date,
Acquiror shall not, directly or indirectly, by operation of law or otherwise,
sell, assign, pledge, or otherwise dispose of or transfer any Restricted Shares
beneficially owned by Acquiror, other than (i) pursuant to Section 7, or (ii) in
accordance with Section 10(b).
(b) Permitted Sales. Following the termination of the
Reorganization Agreement, Acquiror shall be permitted to sell any Restricted
Shares beneficially owned by it if such sale is made pursuant to a tender or
exchange offer that has been approved or recommended, or otherwise determined to
be fair and in the best interests of the stockholders of Target, by a majority
of the members of the Board of Directors of Target (which majority shall include
a majority of directors who were directors prior to the announcement of such
tender or exchange offer).
11. Adjustment Upon Changes in Capitalization. In the event of any
change in Target Common Stock by reason of stock dividends, splitups, mergers
(other than the Merger), recapitalizations, combinations, exchange of shares or
the like, the type and number of shares or securities subject to the Target
Option, and the purchase price per share provided in Section 1, shall be
adjusted appropriately, and proper provision shall be made in the agreements
governing such transaction so that Acquiror shall receive, upon
7.
<PAGE> 8
exercise of the Target Option, the number and class of shares or other
securities or property that Acquiror would have received in respect of the
Target Common Stock if the Target Option had been exercised immediately prior to
such event or the record date therefor, as applicable.
12. Restrictive Legends. Each certificate representing shares of Target
Common Stock issued to Acquiror hereunder shall include a legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD ONLY
IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. SUCH
SECURITIES ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH
IN THE STOCK OPTION AGREEMENT, DATED AS OF JANUARY 26, 1997, A COPY OF WHICH MAY
BE OBTAINED FROM THE ISSUER.
13. Binding Effect; No Assignment. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns. Except as expressly provided for in this Agreement,
neither this agreement nor the rights or the obligations of either party hereto
are assignable or transferable, except by operation of law or with the written
consent of the other party. Nothing contained in this Agreement, express or
implied, is intended to confer upon any person other than the parties hereto and
their respective permitted assigns any rights or remedies of any nature
whatsoever by reason of this Agreement.
14. Specific Performance. The parties recognize and agree that if for
any reason any of the provisions of this Agreement are not performed in
accordance with their specific terms or are otherwise breached, immediate and
irreparable harm or injury would be caused for which money damages would not be
an adequate remedy. Accordingly, each party agrees that, in addition to other
remedies, the other party shall be entitled to an injunction restraining any
violation or threatened violation of the provisions of this Agreement. In the
event that any action should be brought in equity to enforce the provisions of
this Agreement, neither party will allege, and each party hereby waives the
defense, that there is adequate remedy at law.
15. Entire Agreement. This Agreement and the Reorganization Agreement
(including the Target Disclosure Schedule and the Acquiror Disclosure Schedule
relating thereto) constitute the entire agreement among the parties with respect
to the subject matter hereof and supersede all other prior agreements and
understandings, both written and oral, among the parties or any of them with
respect to the subject matter hereof.
8.
<PAGE> 9
16. Further Assurance. Each party will execute and deliver all such
further documents and instruments and take all such further action as may be
necessary in order to consummate the transactions contemplated hereby.
17. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect. In
the event any court or other competent authority holds any provision of this
Agreement to be null, void or unenforceable, the parties hereto shall negotiate
in good faith the execution and delivery of an amendment to this Agreement in
order, as nearly as possible, to effectuate, to the extent permitted by law, the
intent of the parties hereto with respect to such provision. Each party agrees
that, should any court or other competent authority hold any provision of this
Agreement or part hereof to be null, void or unenforceable, or order any party
to take any action inconsistent herewith, or not take any action required
herein, the other party shall not be entitled to specific performance of such
provision or part hereof or to any other remedy, including but not limited to
money damages, for breach hereof or of any other provision of this Agreement or
part hereof as the result of such holding or order.
18. Notices. Any notice or communication required or permitted
hereunder shall be in writing and either delivered personally, telegraphed or
telecopied or sent by certified or registered mail, postage prepaid, and shall
be deemed to be given, dated and received when so delivered personally,
telegraphed or telecopied or, if mailed, five business days after the date of
mailing to the following address or telecopy number, or to such other address or
addresses as such person may subsequently designate by notice given hereunder.
(a) if to Acquiror or Merger Sub, to:
Endosonics Corporation
2870 Kilgore Road
Rancho Cordova, CA 95670
Attention: President
Facsimile No.: 916-638-8112
Telephone No.: 916-638-8008
9.
<PAGE> 10
with a copy to:
Brobeck, Phleger & Harrison LLP
2200 Geng Road
Two Embarcadero Place
Palo Alto, CA 94303
Attention: Edward M. Leonard, Esq.
Facsimile No.: (415) 496-2885
Telephone No.: (415) 424-0160
(b) if to Target, to:
Cardiometrics, Inc.
645 Clyde Avenue
Mountain View, CA 94043
Attention: President
Facsimile No.: 415-961-8753
Telephone No.: 415-961-6993
with a copy to:
Gunderson Dettmer Stough Villeneuve
Franklin & Hachigian LLP
155 Constitution Drive
Menlo Park, CA 94025
Attention: David T. Young, Esq.
Facsimile No.: (415) 321-2800
Telephone No.: (415) 321-2400
19. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware applicable to agreements
made and to be performed entirely within such State without regard to any
applicable conflicts of law rules.
20. Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
21. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which,
taken together, shall constitute one and the same instrument.
22. Expenses. Except as otherwise expressly provided herein or in
the Reorganization Agreement, all costs and expenses incurred in connection with
the
10.
<PAGE> 11
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses.
23. Amendments; Waiver. This Agreement may be amended by the parties
hereto and the terms and conditions hereof may be waived only by an instrument
in writing signed on behalf of each of the parties hereto, or, in the case of a
waiver, by an instrument signed on behalf of the party waiving compliance.
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
ACQUIROR
By:____________________________
Name:__________________________
Title:_________________________
TARGET
By:____________________________
Name:__________________________
Title:_________________________
[SIGNATURE PAGE TO STOCK OPTION AGREEMENT]
