<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 28, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BOSTON SCIENTIFIC CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3841 04-2695240
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
ONE BOSTON SCIENTIFIC PLACE
NATICK, MA 01760-1537
(508) 650-8000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
PAUL W. SANDMAN
SENIOR VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
BOSTON SCIENTIFIC CORPORATION
ONE BOSTON SCIENTIFIC PLACE
NATICK, MA 01760-1537
(508) 650-8000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
PETER D. LYONS MICHAEL W. HALL
SHEARMAN & STERLING VENTURE LAW GROUP,
599 LEXINGTON AVENUE A PROFESSIONAL CORPORATION
NEW YORK, NY 10022 2800 SAND HILL ROAD
(212) 848-8000 MENLO PARK, CA 94025
(415) 854-4488
</TABLE>
Approximate date of commencement of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT
AND THE
SATISFACTION OR WAIVER OF THE CONDITIONS TO THE CONSUMMATION OF THE MERGER
DESCRIBED HEREIN.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
=============================================================================================================
<CAPTION>
PROPOSED
MAXIMUM OFFERING PROPOSED AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO PRICE PER MAXIMUM AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED(1) SHARE(2) OFFERING PRICE(2) FEE(2)
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
Common Stock, $.01 par
value...................... 17,129,327 shares Not Applicable Not Applicable $328,967
=============================================================================================================
</TABLE>
(1) This Registration Statement relates to securities of the Registrant issuable
to holders of common stock of Target Therapeutics, Inc., a Delaware
corporation ("Target"), in the proposed merger of a wholly owned subsidiary
of the Registrant with and into Target (the "Merger").
(2) Pursuant to Rule 457(f), the registration fee was computed on the basis of
the market value of the Target common stock to be exchanged in the Merger,
in accordance with Rule 457(c) on the basis of the average of the high and
low prices per share of such stock on The Nasdaq National Market on February
25, 1997. Pursuant to Rule 457(b), the registration fee has been reduced by
the $205,735 paid on February 10, 1997 upon the filing under the Securities
Exchange Act of 1934 of preliminary copies of Target's proxy materials
included herein. Therefore, the registration fee payable upon filing this
Registration Statement is $123,232.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS
EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME
EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL
THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
[TARGET THERAPEUTICS LOGO]
March 4, 1997
To our Stockholders:
You are cordially invited to attend a Special Meeting of Stockholders of
Target Therapeutics, Inc. ("Target") which will be held on Tuesday, April 8,
1997, at 9:30 a.m., local time, at Target's offices located at 47201 Lakeview
Boulevard, Fremont, California 94538.
At the Special Meeting, you will be considering and voting upon the
adoption of the Agreement and Plan of Merger dated as of January 20, 1997 (the
"Merger Agreement") among Boston Scientific Corporation, a Delaware corporation
("Boston Scientific"), Patriot Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of Boston Scientific ("Merger Sub"), and Target, that
provides for the merger (the "Merger") of Merger Sub into Target. After the
effective time of the Merger, Target will be a wholly owned subsidiary of Boston
Scientific. The terms of the Merger are described in detail in the accompanying
Proxy Statement/Prospectus.
The Board of Directors of Target believes that the Merger provides Target
with an exciting opportunity to capitalize on its leadership position in the
interventional neuroradiology market. The Merger will bring together two
companies that are widely recognized as leaders in their respective markets and
will combine complementary product lines. By combining Target's proprietary
technology, research and development capabilities and presence in the
interventional neuroradiology market with Boston Scientific's worldwide
manufacturing, sales and marketing and distribution capabilities, the Board of
Directors believes that the Merger has the potential to expand the markets for
Target's products. In addition, the Board of Directors believes that the
consideration to be received by the stockholders of Target in the Merger
appropriately recognizes the significant value of Target's business.
If the Merger Agreement is adopted and the Merger is completed, each share
of common stock, par value $.0025 per share, of Target issued and outstanding
immediately prior to the effective time of the Merger (other than treasury
shares, which will be cancelled) will be converted into the right to receive
1.07 shares (the "Exchange Ratio") of Boston Scientific's common stock, par
value $.01 per share ("Boston Scientific Common Stock"), and any cash to be paid
in lieu of fractional shares of Boston Scientific Common Stock.
On January 20, 1997, Goldman, Sachs & Co. ("Goldman Sachs"), the financial
advisor retained by the Board of Directors of Target in connection with the
Merger, rendered its oral opinion that, as of such date, the Exchange Ratio
pursuant to the Merger Agreement was fair to the holders of Target Common Stock.
A copy of the written opinion of Goldman Sachs, confirming its oral opinion, is
included in the enclosed Proxy Statement/Prospectus as Exhibit B thereto, and
you are urged to, and should, read such opinion in its entirety.
THE BOARD OF DIRECTORS OF TARGET, AFTER CAREFUL CONSIDERATION, HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND BELIEVES THAT THE MERGER IS FAIR
TO, AND IN THE BEST INTERESTS OF, TARGET AND ITS STOCKHOLDERS. THE BOARD OF
DIRECTORS RECOMMENDS UNANIMOUSLY THAT TARGET STOCKHOLDERS VOTE FOR ADOPTION OF
THE MERGER AGREEMENT AT THE SPECIAL MEETING.
The attached Notice of Special Meeting and Proxy Statement/Prospectus
contain detailed information concerning the Special Meeting. Please read the
Notice and the Proxy Statement/Prospectus and consider this information
carefully.
[LETTERFOOT]
<PAGE> 3
Please take this opportunity to participate in the affairs of Target by
voting on the business to be presented at this meeting. WHETHER OR NOT YOU PLAN
TO ATTEND THE MEETING, PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD
PROMPTLY IN THE ACCOMPANYING POSTAGE PREPAID REPLY ENVELOPE. Returning the proxy
does NOT deprive you of your right to attend the meeting and to vote your shares
in person for the matters to be acted upon at the Special Meeting.
We look forward to your attendance at the Special Meeting. Thank you for
your consideration and your continued support.
Sincerely,
GARY R. BANG
President and Chief Executive Officer
<PAGE> 4
TARGET THERAPEUTICS, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 8, 1997
TO THE STOCKHOLDERS OF TARGET THERAPEUTICS, INC.:
Notice is hereby given that a Special Meeting of Stockholders of Target
Therapeutics, Inc., a Delaware corporation ("Target"), will be held on Tuesday,
April 8, 1997, at 9:30 a.m., local time, at Target's offices located at 47201
Lakeview Boulevard, Fremont, California 94538 to act upon the following matters:
1. To consider and vote upon the adoption of the Agreement and Plan of
Merger dated January 20, 1997 (the "Merger Agreement") among Boston
Scientific Corporation, a Delaware corporation ("Boston Scientific"),
Patriot Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of Boston Scientific ("Merger Sub"), and Target, that provides
for the merger (the "Merger") of Merger Sub into Target. After the
effective time of the Merger, Target will be the surviving corporation and
a wholly owned subsidiary of Boston Scientific.
Upon consummation of the Merger, each share of common stock, par
value $.0025 per share, of Target issued and outstanding immediately prior
to the effective time of the Merger (other than treasury shares, which will
be cancelled) will be converted into the right to receive 1.07 shares of
Boston Scientific's common stock, par value $.01 per share ("Boston
Scientific Common Stock"), and any cash to be paid in lieu of fractional
shares of Boston Scientific Common Stock.
2. To transact such other business as may properly come before the
Special Meeting or any adjournment or postponement thereof. Target does not
intend to bring any business other than the adoption of the Merger
Agreement before the Special Meeting or any adjournment or postponement
thereof.
THE BOARD OF DIRECTORS OF TARGET HAS UNANIMOUSLY APPROVED THE MERGER AND
BELIEVES THAT THE TERMS OF THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF,
TARGET AND ITS STOCKHOLDERS. THE BOARD OF DIRECTORS OF TARGET RECOMMENDS
UNANIMOUSLY THAT TARGET STOCKHOLDERS VOTE FOR ADOPTION OF THE MERGER AGREEMENT
AT THE SPECIAL MEETING.
Only stockholders of record at the close of business on February 28, 1997
are entitled to notice of, and to vote at, the Special Meeting and any
adjournment or postponement thereof. A complete list of the stockholders
entitled to vote at the meeting will be available during the 10 days prior to
the Special Meeting at Target's principal executive office located at 47201
Lakeview Boulevard, Fremont, California 94538 for examination by any stockholder
and will also be available for inspection at the meeting.
<PAGE> 5
The accompanying Proxy Statement/Prospectus describes in detail the Merger
and the transactions contemplated by the Merger Agreement. The Merger is of
great importance to Target and its stockholders. Please read the Proxy
Statement/Prospectus carefully and then complete, sign and date the enclosed
proxy card and return it promptly in the enclosed self-addressed postage prepaid
reply envelope.
By Order of the Board of Directors,
GARY R. BANG
President and Chief Executive Officer
Fremont, California
March 4, 1997
- ------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT.
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND IN PERSON. HOWEVER, TO
ENSURE YOUR REPRESENTATION AT THE MEETING, PLEASE MARK, SIGN, DATE AND RETURN
THE ENCLOSED PROXY CARD PROMPTLY IN THE ENCLOSED POSTAGE PREPAID REPLY ENVELOPE.
IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON EVEN IF YOU HAVE PREVIOUSLY
RETURNED A PROXY CARD.
- ------------------------------------------------------------------------------
<PAGE> 6
PROXY STATEMENT/PROSPECTUS
PROSPECTUS
BOSTON SCIENTIFIC CORPORATION
SHARES OF COMMON STOCK
AND
PROXY STATEMENT
FOR
SPECIAL MEETING OF STOCKHOLDERS
OF
TARGET THERAPEUTICS, INC.
TO BE HELD ON APRIL 8, 1997
------------------------
This Proxy Statement/Prospectus ("Proxy Statement/Prospectus") is being
furnished to the stockholders of Target Therapeutics, Inc., a Delaware
corporation ("Target"), in connection with the solicitation of proxies by the
Board of Directors of Target (the "Target Board") for use at the Special Meeting
of Stockholders of Target to be held on Tuesday, April 8, 1997 at 9:30 a.m.,
local time, at Target's offices at 47201 Lakeview Boulevard, Fremont, California
94538 (the "Target Special Meeting"), or any adjournments or postponements
thereof.
At the Target Special Meeting, holders of shares of Target's common stock,
par value $.0025 per share ("Target Common Stock"), will vote upon a proposal to
adopt the Agreement and Plan of Merger dated as of January 20, 1997 (the "Merger
Agreement") among Boston Scientific Corporation, a Delaware corporation ("Boston
Scientific"), Patriot Acquisition Corp., a Delaware corporation and a wholly
owned subsidiary of Boston Scientific ("Merger Sub"), and Target, pursuant to
which Merger Sub will merge into Target (the "Merger"). Target will be the
surviving corporation (the "Surviving Corporation") of the Merger and will
become a wholly owned subsidiary of Boston Scientific. A copy of the Merger
Agreement is attached to this Proxy Statement/Prospectus as Exhibit A and
incorporated herein by reference. At the Target Special Meeting, stockholders of
Target will also be asked to consider and vote upon such other business, if any,
as may properly be brought before the Target Special Meeting or any adjournments
or postponements thereof. Target does not intend to bring any business other
than the adoption of the Merger Agreement before the Target Special Meeting or
any adjournments or postponements thereof.
In the Merger, each share of Target Common Stock issued and outstanding
immediately prior to the effective time of the Merger (other than treasury
shares, which will be cancelled) will be converted into the right to receive
1.07 shares of Boston Scientific's common stock, par value $.01 per share
("Boston Scientific Common Stock"), and any cash to be paid in lieu of
fractional shares of Boston Scientific Common Stock. The exchange ratio is fixed
and, accordingly, will not vary with either increases or decreases in the price
per share of Boston Scientific Common Stock. A description of the terms of the
Merger is set forth in this Proxy Statement/Prospectus.
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY INVESTORS
IN EVALUATING THE MERGER, SEE "RISK FACTORS," BEGINNING ON PAGE 20.
This Proxy Statement/Prospectus also constitutes the prospectus for the
shares of Boston Scientific Common Stock to be issued in the Merger. Boston
Scientific has filed a Registration Statement on Form S-4 (together with any
amendments thereto, the "Registration Statement") with the Securities and
Exchange Commission (the "Commission") regarding the registration of such
shares, of which this Proxy Statement/Prospectus is a part.
THE SHARES OF BOSTON SCIENTIFIC COMMON STOCK TO BE ISSUED IN THE MERGER HAVE NOT
BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The approximate date on which this Proxy Statement/Prospectus and the
accompanying proxies will first be mailed to Target stockholders is
March 4, 1997.
The date of this Proxy Statement/Prospectus is March 4, 1997.
<PAGE> 7
AVAILABLE INFORMATION
Boston Scientific and Target are each subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith file reports, proxy statements and other
information with the Commission. The reports, proxy statements and other
information filed by Boston Scientific and Target with the Commission may be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and should be available at the Commission's Regional Offices at 7
World Trade Center, 13th Floor, New York, New York 10048, and the Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material also can be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission maintains a site on the world wide web that contains reports, proxy
and information statements and other information on registrants, such as Boston
Scientific and Target, who must file such material with the Commission
electronically. The Commission's internet address on the world wide web is
http://www.sec.gov. Boston Scientific Common Stock is listed on the New York
Stock Exchange, Inc. ("NYSE"), Target Common Stock is quoted on The Nasdaq
National Market ("Nasdaq"), and certain of Boston Scientific's and Target's
reports, proxy materials and other information may be available for inspection
at the offices of the NYSE at 20 Broad Street, New York, New York 10005, or of
Nasdaq at 1735 K Street, N.W., Washington, D.C. 20006, respectively.
Boston Scientific has filed with the Commission a Registration Statement
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the Boston Scientific Common Stock to be issued pursuant to the
Merger. This Proxy Statement/Prospectus does not contain all of the information
set forth in the Registration Statement and the exhibits thereto, certain parts
of which were omitted as permitted by the rules and regulations of the
Commission. Such additional information may be obtained from the Commission's
principal office in Washington, D.C. Statements contained in this Proxy
Statement/Prospectus or in any document incorporated in this Proxy
Statement/Prospectus by reference pertaining to the content of any contract or
other document referred to herein or therein are not necessarily complete, and
in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement or such other
document, each such statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by Boston Scientific
(File No. 1-11083) are incorporated by reference in this Proxy
Statement/Prospectus:
1. Boston Scientific's Annual Report on Form 10-K for the year ended
December 31, 1995;
2. Boston Scientific's Quarterly Reports on Form 10-Q for the
quarters ended September 30, 1996, June 30, 1996 and March 31, 1996;
3. Boston Scientific's Current Report on Form 8-K dated February 5,
1997;
4. Boston Scientific's Current Report on Form 8-K dated May 3, 1996;
5. Boston Scientific's Current Report on Form 8-K dated March 14,
1996;
6. Boston Scientific's Current Report on Form 8-K/A dated March 14,
1996;
7. Boston Scientific's Current Report on Form 8-K dated January 25,
1996;
8. Boston Scientific's Current Report on Form 8-K dated January 22,
1996;
9. Boston Scientific's Registration Statement on Form S-3 dated
April 1, 1996;
10. Boston Scientific's Proxy Statement for the Annual Meeting of
Stockholders held on May 12, 1996; and
ii
<PAGE> 8
11. The descriptions of Boston Scientific Common Stock set forth in
Boston Scientific's Registration Statement on Form 8-A filed pursuant to
Section 12 of the Exchange Act, and any amendment or report filed for the
purpose of updating any such description.
The following documents filed with the Commission by Target (File No.
0-19801) are incorporated by reference in this Proxy Statement/Prospectus:
1. Target's Annual Report on Form 10-K for the year ended March 31,
1996;
2. Target's Quarterly Reports on Form 10-Q for the quarters ended
December 31, 1996, September 30, 1996 and June 30, 1996;
3. Target's Proxy Statement for the Annual Meeting of Stockholders
held on September 4, 1996;
4. Target's Current Report on Form 8-K dated February 25, 1997;
5. Target's Current Report on Form 8-K dated January 23, 1997;
6. Target's Current Report on Form 8-K dated July 30, 1996;
7. Target's Current Report on Form 8-K dated July 24, 1996;
8. Target's Current Report on Form 8-K/A dated May 23, 1996;
9. Target's Registration Statement on Form S-3/A.2 dated September 7,
1996;
10. Target's Registration Statement on Form S-3/A.1 dated July 31,
1996;
11. Target's Registration Statement on Form S-3 dated July 13, 1996;
12. Target's Registration Statement on Form S-3/A-1 dated January 29,
1997; and
13. Target's Registration Statement on Form S-3 dated January 7, 1997.
All documents and reports filed by Boston Scientific or Target with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
after the date of this Proxy Statement/Prospectus and prior to the date of the
Target Special Meeting shall be deemed to be incorporated by reference in this
Proxy Statement/Prospectus and to be a part hereof from the dates of filing of
such documents or reports. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Proxy Statement/Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Proxy Statement/Prospectus.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED
BY REFERENCE TO SUCH DOCUMENTS) ARE AVAILABLE, WITHOUT CHARGE, TO ANY PERSON,
INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS
DELIVERED, ON WRITTEN OR ORAL REQUEST, WITH RESPECT TO BOSTON SCIENTIFIC
DOCUMENTS, TO BOSTON SCIENTIFIC CORPORATION, ONE BOSTON SCIENTIFIC PLACE,
NATICK, MASSACHUSETTS 01760-1537, ATTENTION: INVESTOR RELATIONS, OR BY TELEPHONE
AT (508) 650-8555; OR, WITH RESPECT TO TARGET DOCUMENTS, TO TARGET THERAPEUTICS,
INC., 47201 LAKEVIEW BOULEVARD, FREMONT, CALIFORNIA 94538, ATTENTION: INVESTOR
RELATIONS, OR BY TELEPHONE AT (510) 440-7700. IN ORDER TO ENSURE DELIVERY OF THE
DOCUMENTS PRIOR TO THE TARGET SPECIAL MEETING, REQUESTS MUST BE RECEIVED BY
APRIL 1, 1997.
All information set forth or incorporated by reference herein concerning
Target has been furnished by Target, and all information set forth or
incorporated by reference herein concerning Boston Scientific has been furnished
by Boston Scientific.
No person is authorized to give any information or to make any
representation not contained in this Proxy Statement/Prospectus or in the
documents incorporated herein by reference in connection with the
iii
<PAGE> 9
solicitation and the offering made hereby and, if given or made, such
information or representation should not be relied upon as having been
authorized by Target or Boston Scientific. This Proxy Statement/Prospectus does
not constitute an offer to sell, or a solicitation of an offer to purchase, the
securities offered by this Proxy Statement/Prospectus or the solicitation of a
proxy from any person in any jurisdiction in which it is unlawful to make such
offer, solicitation of an offer or proxy solicitation. Neither the delivery of
this Proxy Statement/ Prospectus nor any distribution of the securities made
hereunder shall, under any circumstances, create an implication that there has
been no change in the affairs of Boston Scientific or Target since the date of
this Proxy Statement/Prospectus other than as set forth in the documents
incorporated herein by reference.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Proxy Statement/Prospectus contains forward-looking statements,
including, most importantly, information concerning possible or assumed future
results of operations of Boston Scientific and Target set forth under "Risk
Factors," "Companies" and "The Merger," and those preceded by, followed by or
that include the words "may," "believes," "expects," "anticipates" or the
negation thereof, or similar expressions. The achievement of the outcomes
described in such forward-looking statements is subject to both known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the medical devices industry generally,
and of Boston Scientific and Target in particular, to be materially different
from any outcomes expressed or implied by such forward-looking statements. For
those statements, Boston Scientific and Target claim the protection of the safe
harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. Several important factors, in addition to those
discussed under "Risk Factors" herein and elsewhere in this document and in the
documents which are incorporated by reference, could affect the future results
of Boston Scientific and Target, and could cause those results to differ
materially from those expressed in the forward-looking statements contained
herein. Such additional factors include, among other things, future economic,
competitive and regulatory conditions, demographic trends, financial market
conditions and future business decisions of Boston Scientific, Target and their
competitors (including those that may be taken in contemplation of the Merger),
all of which are difficult or impossible to predict accurately and many of which
are beyond the control of Boston Scientific and Target.
iv
<PAGE> 10
TABLE OF CONTENTS
<TABLE>
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PAGE
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AVAILABLE INFORMATION................................................................. ii
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....................................... ii
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS............................ iv
INDEX OF DEFINED TERMS................................................................ vii
SUMMARY............................................................................... 1
RISK FACTORS.......................................................................... 20
Rapid Technological Change and Intense Competition.................................. 20
Challenges to Patents and Proprietary Rights........................................ 20
Realization of Synergies............................................................ 21
FDA and Other Governmental Regulation............................................... 21
Possible Denial of Third-Party Reimbursement........................................ 21
Dependence on Demand for Combined Company's Products................................ 21
Possible Effects of Controlling Interests of Principal Stockholders................. 22
Dependence on Key Personnel......................................................... 22
Conflicts of Interest............................................................... 22
Exposures from International Operations............................................. 23
Investigation by Office of the Inspector General of Reimbursement Claims
made by Certain Customers........................................................ 24
COMPANIES............................................................................. 25
Boston Scientific Corporation....................................................... 25
Patriot Acquisition Corp. .......................................................... 26
Target Therapeutics, Inc. .......................................................... 26
Recent Developments................................................................. 26
THE SPECIAL MEETING................................................................... 27
General............................................................................. 27
Matters to Be Considered............................................................ 27
Vote Required....................................................................... 27
Record Date; Proxies................................................................ 27
Solicitation of Proxies............................................................. 28
THE MERGER............................................................................ 29
General............................................................................. 29
Background of the Merger............................................................ 29
Boston Scientific's Reasons for the Merger.......................................... 31
Target's Reasons for the Merger; Recommendation of Target's Board of Directors...... 32
Effective Time...................................................................... 34
Conversion of Shares of Target Common Stock......................................... 34
Opinion of Financial Advisor to Target.............................................. 34
Certain Federal Income Tax Consequences............................................. 38
Accounting Treatment................................................................ 39
Resale of Boston Scientific Common Stock; Agreements with Affiliates of Target
and Boston Scientific............................................................ 39
Regulatory Approvals................................................................ 40
Stock Exchange Listing.............................................................. 41
Conflicts of Interest............................................................... 41
</TABLE>
v
<PAGE> 11
<TABLE>
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PAGE
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<S> <C>
CERTAIN PROVISIONS OF THE MERGER AGREEMENT............................................ 45
Conversion of Securities............................................................ 45
Exchange Procedures................................................................. 45
Distributions with Respect to Unexchanged Shares.................................... 46
No Further Rights in Target Common Stock............................................ 46
No Fractional Shares................................................................ 46
Target Stock Options................................................................ 46
No Liability........................................................................ 47
Termination of Exchange Fund........................................................ 47
Certain Representations and Warranties.............................................. 47
Conduct of Business Pending the Merger.............................................. 48
No Solicitation of Transactions..................................................... 49
Target Distribution Agreements...................................................... 50
Conditions to Consummation of the Merger............................................ 50
Termination......................................................................... 52
Effect of Termination............................................................... 53
Fees and Expenses................................................................... 53
Amendment and Waiver................................................................ 54
MANAGEMENT............................................................................ 55
Directors........................................................................... 55
Officers............................................................................ 55
CAPITALIZATION........................................................................ 56
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION.......................... 57
COMPARISONS OF STOCKHOLDERS' RIGHTS................................................... 66
General............................................................................. 66
Size and Classification of the Board of Directors................................... 66
Cumulative Voting for Directors..................................................... 66
Removal of Directors................................................................ 67
Special Meetings of Stockholders.................................................... 67
Amendment of Charter Documents...................................................... 67
Purchases from 5% or Greater Stockholders........................................... 67
Stockholder Vote Required for Certain Transactions.................................. 68
Certain Business Combinations....................................................... 68
Absence of Dissenters' Rights....................................................... 68
LEGAL MATTERS......................................................................... 69
EXPERTS............................................................................... 69
STOCKHOLDER PROPOSALS................................................................. 70
EXHIBITS
A Agreement and Plan of Merger
B Opinion of Goldman, Sachs & Co.
</TABLE>
vi
<PAGE> 12
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Abele Stockholders.................................................................... 22
Antitrust Division.................................................................... 7
Boston Scientific..................................................................... i
Boston Scientific Affiliates Agreement................................................ 40
Boston Scientific Board............................................................... 9
Boston Scientific Certificate......................................................... 66
Boston Scientific Common Stock........................................................ i
Boston Scientific's By-laws........................................................... 70
Breach of Representation Termination by Boston Scientific............................. 52
Cause................................................................................. 42
Certificates.......................................................................... 45
Change of Control..................................................................... 42
Change of Control Officer............................................................. 4
CMI................................................................................... 26
Code.................................................................................. 5
Commission............................................................................ i
Competing Transaction................................................................. 50
Competing Transaction Termination by Boston Scientific................................ 52
Competing Transaction Termination by Target........................................... 52
Cordis................................................................................ 20
Current Offering...................................................................... 43
CVIS.................................................................................. 18
DGCL.................................................................................. 8
Directors Plan........................................................................ 42
EBIT.................................................................................. 36
Effective Time........................................................................ 3
Employment Agreement.................................................................. 42
Endotech/MinTec....................................................................... 17
Engagement Letter..................................................................... 38
EPS................................................................................... 36
EPT................................................................................... 11
ESPP.................................................................................. 43
Exchange Act.......................................................................... ii
Exchange Agent........................................................................ 45
Exchange Fund......................................................................... 45
Exchange Ratio........................................................................ 3
Expiration Date Termination........................................................... 52
FDA................................................................................... 26
First Management Case................................................................. 36
FTC................................................................................... 7
GDC................................................................................... 26
Goldman Sachs......................................................................... 4
Heart Technology...................................................................... 18
HHS................................................................................... 24
High Synergies Case................................................................... 36
HSR Act............................................................................... 6
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<TABLE>
<CAPTION>
PAGE
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IBES.................................................................................. 35
Incumbent Directors................................................................... 42
Involuntary Termination............................................................... 42
IRS................................................................................... 38
ITC................................................................................... 17
Large Cap Selected Companies.......................................................... 35
Low Synergies Case.................................................................... 36
LTM................................................................................... 36
Meadox................................................................................ 18
Merger................................................................................ i
Merger Agreement...................................................................... i
Merger Sub............................................................................ i
Nasdaq................................................................................ ii
Nicholas Stockholders................................................................. 22
No Synergies Case..................................................................... 36
NYSE.................................................................................. ii
OIG................................................................................... 24
Proxy Statement/Prospectus............................................................ i
Record Date........................................................................... 3
Registration Statement................................................................ i
SCIMED................................................................................ 18
Second Management Case................................................................ 36
Securities Act........................................................................ ii
Selected Acquisitions................................................................. 36
Small and Medium Cap Selected Companies............................................... 35
Stockholder Rejection Termination..................................................... 53
Subsidiary............................................................................ 42
Surviving Corporation................................................................. i
Symbiosis............................................................................. 17
Target................................................................................ i
Target 1996 Balance Sheet............................................................. 49
Target Affiliates Agreement........................................................... 40
Target Board.......................................................................... i
Target Certificate.................................................................... 66
Target Common Stock................................................................... i
Target Options........................................................................ 3
Target Special Meeting................................................................ i
Target Stock Option Plans............................................................. 3
Target's By-laws...................................................................... 66
Tender Offer Termination.............................................................. 52
Terminating Boston Scientific Breach.................................................. 53
Terminating Company Breach............................................................ 52
Termination Fee....................................................................... 53
Vesica................................................................................ 18
Voting Stock.......................................................................... 67
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viii
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SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement/Prospectus and the Exhibits hereto. This Summary is not
intended to be complete, and is qualified in its entirety by the more detailed
information and financial statements and related notes appearing elsewhere in
this Proxy Statement/Prospectus or incorporated herein by reference.
Stockholders are urged to read carefully this Proxy Statement/Prospectus and the
Exhibits hereto, and in particular the section herein entitled "Risk Factors,"
in their entirety.
<CAPTION>
THE COMPANIES
<S> <C>
Boston Scientific
Corporation
One Boston Scientific Place
Natick, MA 01760-1537
(508) 650-8000............. Boston Scientific is a worldwide developer,
manufacturer and marketer of medical devices.
Boston Scientific sells products in numerous
product categories that are used by physicians to
perform less invasive medical procedures. Boston
Scientific's products are used in a broad range of
interventional medical specialties, including
cardiology, gastroenterology, pulmonary medicine,
radiology, urology and vascular surgery. Less
invasive procedures provide effective alternatives
to traditional surgery by reducing procedural
trauma, complexity, risk to patient, cost and
recovery time. Boston Scientific's products are
generally inserted into the human body through
natural openings or small incisions in the skin and
can be guided to most areas of the anatomy to
diagnose and treat a wide range of medical
problems.
Patriot Acquisition Corp.
c/o Boston Scientific
Corporation
One Boston Scientific Place
Natick, MA 01760-1537
(508) 650-8000............. Patriot Acquisition Corp., a wholly owned
subsidiary of Boston Scientific ("Merger Sub"), was
formed in January 1997 by Boston Scientific solely
for the purpose of effecting the Merger. Upon
consummation of the Merger, Merger Sub will merge
into Target, and the separate corporate existence
of Merger Sub will thereupon cease.
Target Therapeutics, Inc.
47201 Lakeview Boulevard
Fremont, CA 94538
(510) 440-7700............. Target develops, manufactures and markets
specialized disposable micro-catheters, guidewires,
micro-coils, silicone balloons, embolics and
angioplasty products. These therapeutic devices are
used in minimally invasive procedures to treat
vascular diseases of the brain associated with
stroke and other disease sites accessible through
small vessels of the circulatory system. Target's
products are used to treat diseased, ruptured or
blocked blood vessels in the brain responsible for
stroke, as well as in other regions of the body.
THE SPECIAL MEETING OF STOCKHOLDERS
Time and Place............. The Target Special Meeting is scheduled to be held
on Tuesday, April 8, 1997, at 9:30 a.m., local
time, at Target's offices located at 47201 Lakeview
Boulevard, Fremont, California 94538.
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Matters To Be Considered... At the Target Special Meeting, holders of Target
Common Stock will consider and vote upon a proposal
to adopt the Merger Agreement, and such other
matters as may properly be brought before the
Target Special Meeting or any adjournments or
postponements thereof. Target does not intend to
bring any business other than the adoption of the
Merger Agreement before the Target Special Meeting
or any adjournments or postponements thereof.
Vote Required.............. Adoption of the Merger Agreement requires the
affirmative vote of a majority of the outstanding
shares of Target Common Stock. In determining
whether the proposal regarding the adoption of the
Merger Agreement has been approved, abstentions and
broker nonvotes will be counted and will have the
same effect as a vote against such proposal.
Holders of Target Common Stock are entitled to one
vote at the Target Special Meeting for each share
of Target Common Stock held of record at the close
of business on the Record Date. As of the Record
Date, directors and executive officers of Target
and their affiliates, in the aggregate, were
entitled to vote approximately 1,530,609 shares of
Target Common Stock, representing approximately
10.2% of the total shares entitled to vote at the
Target Special Meeting. Of these shares, Collagen
Corporation was entitled to vote approximately
1,275,888 shares, representing approximately 8.5%
of the total shares entitled to vote at the Target
Special Meeting.
Voting of Proxies.......... Shares of Target Common Stock represented by
properly executed proxy cards received prior to the
vote at the Target Special Meeting and that have
not been revoked will be voted in accordance with
the instructions indicated thereon. IF NO
INSTRUCTIONS ARE INDICATED, SUCH PROXIES WILL BE
VOTED FOR ADOPTION OF THE MERGER AGREEMENT AND IN
THE DISCRETION OF THE PROXY HOLDER, TAKING INTO
ACCOUNT THE RECOMMENDATION OF TARGET MANAGEMENT, AS
TO ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE
THE TARGET SPECIAL MEETING.
Revocability of Proxies.... A Target stockholder who has given a proxy may
revoke such proxy at any time before it has been
voted at the Target Special Meeting by (i) giving
written notice of revocation bearing a later date
than the proxy to the Secretary of Target, (ii)
properly submitting to Target a duly executed proxy
card relating to the same shares of Target Common
Stock and bearing a later date, or (iii) attending
the Target Special Meeting and voting in person.
Attendance at the Target Special Meeting will not
in and of itself revoke a proxy. All written
notices of revocation and other communications with
respect to revocation of proxies by Target
stockholders should be addressed as follows: Target
Therapeutics, Inc., 47201 Lakeview Boulevard,
Fremont, California 94538, Attention: Secretary, or
hand-delivered to the Secretary of Target before
the vote is taken at the Target Special Meeting.
Solicitation of Proxies.... In addition to solicitation of proxies by mail, the
directors, officers and employees of Target may
solicit proxies from stockholders personally or by
telephone, telegraph or facsimile transmission.
Such directors, officers and employees will not be
compensated for such solicitation but may be
reimbursed for reasonable out-of-pocket expenses.
Arrangements will also be made with banks,
brokerage houses and other custodians, nominees and
fiduciaries for forwarding proxy solicitation
materials to beneficial owners of shares held of
record by such persons, and Target
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will reimburse such custodians, nominees and
fiduciaries for their reasonable out-of-pocket
expenses in connection therewith. Additionally,
Target may decide to employ a third party to assist
in the solicitation of proxies. See "The Special
Meeting -- Solicitation of Proxies."
Record Date; Shares
Entitled to Vote........... The close of business on February 28, 1997 has been
fixed as the record date (the "Record Date") for
determining holders of shares of Target Common
Stock entitled to notice of and to vote at the
Target Special Meeting. As of the Record Date,
approximately 15,007,371 shares of Target Common
Stock were outstanding and held of record by
approximately 155 holders.
Quorum..................... The presence, in person or by proxy, of the holders
of a majority of the outstanding shares of Target
Common Stock is necessary to constitute a quorum
for the transaction of business. The Target Special
Meeting may be adjourned, if a quorum is not
present, for the purpose of obtaining additional
proxies or votes or for any other purpose, and, at
any subsequent reconvening of the Target Special
Meeting, all proxies will be voted in the same
manner as such proxies would have been voted at the
original convening of the Target Special Meeting
(except for any proxies that have theretofore been
revoked or withdrawn), notwithstanding that they
may have been voted on the same or any other matter
at a previous meeting.
THE MERGER
Terms of the Merger........ At the effective time of the Merger (the "Effective
Time"), Merger Sub will merge into Target, with
Target to be the surviving corporation and a wholly
owned subsidiary of Boston Scientific. The Merger
Agreement is attached as Exhibit A to this Proxy
Statement/Prospectus and is incorporated herein by
reference. See "The Merger."
Each share of Target Common Stock issued and
outstanding immediately prior to the Effective Time
(other than treasury shares, which will be
cancelled) will be converted into the right to
receive 1.07 shares of Boston Scientific Common
Stock (with the number of shares of Boston
Scientific Common Stock to be issued upon exchange
of each share of Target Common Stock being referred
to herein as the "Exchange Ratio"), and any cash to
be paid in lieu of fractional shares of Boston
Scientific Common Stock. The Exchange Ratio is
fixed and, accordingly, will not vary with either
increases or decreases in the price per share of
Boston Scientific Common Stock.
All outstanding options to purchase Target capital
stock (the "Target Options"), whether or not
exercisable, whether or not vested, at the
Effective Time under Target's 1988 Stock Option
Plan and 1991 Director Option Plan (collectively,
the "Target Stock Option Plans"), will remain
outstanding following the Effective Time. At the
Effective Time, the Target Options will, by virtue
of the Merger and without any further action on the
part of Target or the holder thereof, be assumed by
Boston Scientific, and each Target Option assumed
by Boston Scientific will be exercisable upon the
terms and conditions set forth in the applicable
Target Stock Option Plan and the applicable option
agreement, except that (A) each such Target Option
will be exercisable for that whole number of shares
of Boston Scientific Common Stock (rounded to the
nearest whole share) into which the number of
shares of Target Com-
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3
<PAGE> 17
mon Stock subject to such Target Option immediately
prior to the Effective Time would have been
converted under the terms of the Merger Agreement
applicable to the exchange of Target Common Stock
for Boston Scientific Common Stock; and (B) the
option price per share of Boston Scientific Common
Stock will be an amount equal to the option price
per share of Target Common Stock subject to such
Target Option in effect immediately prior to the
Effective Time divided by the Exchange Ratio
(rounded to the nearest full cent). As discussed in
"Summary -- Conflicts of Interest" and "The
Merger -- Conflicts of Interest" below, certain
Target Options granted to Gary R. Bang, the Change
of Control Officers and certain directors will
immediately vest at the Effective Time. See also,
"Certain Provisions of the Merger
Agreement -- Target Stock Options."
Recommendation of the
Target Board............. The Target Board has determined that the terms of
the Merger Agreement are fair to, and in the best
interests of, Target and its stockholders.
Accordingly, the Target Board has unanimously
approved the Merger Agreement and unanimously
recommends that the stockholders of Target vote FOR
adoption of the Merger Agreement. The Target
Board's recommendation is based on the factors
described in "The Merger -- Target's Reasons for
the Merger; Recommendation of Target's Board" and
"The Merger -- Background of the Merger."
Opinion of Financial
Advisor to Target........ On January 20, 1997, Goldman, Sachs & Co. ("Goldman
Sachs"), financial advisor to Target, delivered its
oral opinion to the Target Board that, as of such
date, the Exchange Ratio pursuant to the Merger
Agreement was fair to the holders of Target Common
Stock. Goldman Sachs confirmed its oral opinion by
delivery of its written opinion dated January 20,
1997. The full text of the written opinion of
Goldman Sachs, which sets forth the assumptions
made, matters considered and limitations on the
review undertaken in connection with such opinion,
is attached hereto as Exhibit B and is incorporated
herein by reference. HOLDERS OF SHARES OF TARGET
COMMON STOCK ARE URGED TO, AND SHOULD, READ SUCH
OPINION IN ITS ENTIRETY. See "The Merger -- Opinion
of Financial Advisor to Target."
Conflicts of Interest...... In considering the recommendation of the Target
Board with respect to the Merger Agreement, holders
of shares of Target Common Stock should be aware
that certain members of Target's management and its
Board of Directors have interests in the Merger
that are in addition to the interests of Target
stockholders generally.
Gary R. Bang, the President and Chief Executive
Officer of Target, and thirteen other executive
officers of Target (as described in "The
Merger -- Conflicts of Interest") (each, other than
Mr. Bang, a "Change of Control Officer") are
parties to change of control agreements with Target
providing certain benefits upon a change of control
of Target, including the Merger.
Under his change of control agreement, if Mr. Bang
is terminated as a result of an Involuntary
Termination other than for Cause, he will be
entitled to receive payments for two years equal to
the salary and bonus he was entitled to receive
prior to the change of control. If a Change of
Control Officer is terminated under these
conditions, such officer will be
4
<PAGE> 18
entitled to receive payments for one year equal to
the salary and bonus he or she was entitled to
receive prior to the change of control. In
addition, Mr. Bang and each Change of Control
Officer will be entitled to a pro rata portion of
his or her target bonus for the fiscal year in
which the Involuntary Termination occurs. Mr. Bang
will also be entitled to receive certain employee
benefits for two years, and each Change of Control
Officer will be entitled to receive certain
employee benefits for one year after such
Involuntary Termination. Mr. Bang and each Change
of Control Officer are also entitled to receive
certain outplacement services. Because there will
be a change in the job duties, responsibilities and
requirements of Mr. Bang as a result of the Merger,
any termination of his employment by Mr. Bang will
be treated as an Involuntary Termination other than
for Cause.
Under the terms of an earlier agreement between
Target and Mr. Bang, which was memorialized in
resolutions of the Target Board dated April 30,
1993, all unvested Target Options granted to Mr.
Bang will immediately vest on the date of a change
of control, including the Merger. In addition,
unvested Target Options granted to Robert McNamara,
Target's Chief Financial Officer, pursuant to the
initial agreement between Target and Mr. McNamara
on the commencement of his employment with Target,
will immediately vest on the date of a change of
control, including the Merger. In the event of a
transaction in which any person becomes the
beneficial owner of 50% or more of Target's
outstanding voting securities without the approval
of the Target Board, all unvested Target Options
granted to a Change of Control Officer will also
immediately vest. In the event of any other
transaction resulting in a change of control,
including the Merger, one-half of all unvested
Target Options granted to a Change of Control
Officer (other than certain Target Options granted
to Mr. McNamara on the commencement of his
employment) will immediately vest. The remaining
unvested Target Options held by any Change of
Control Officer will vest at the same rate provided
for in the agreement pursuant to which the options
were granted. Additionally, if a Change of Control
Officer is terminated as a result of an Involuntary
Termination other than for Cause, such officer's
Target Options will immediately vest.
If any payments under the change of control
agreements result in the imposition of an excise
tax under Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), such payments
will be reduced to the extent necessary to avoid
the imposition of such excise tax.
It is expected that Mr. Bang, Target and Boston
Scientific will enter into an employment agreement
(the "Employment Agreement") to become effective as
of the Effective Time. The Employment Agreement
would supersede both Mr. Bang's change of control
agreement and the earlier agreement between Mr.
Bang and Target, which was memorialized in the
resolutions of the Target Board dated April 30,
1993. The terms of the Employment Agreement are
substantially similar to the terms of these earlier
agreements, except that under the Employment
Agreement (i) Mr. Bang may not be terminated by
Boston Scientific without cause prior to December
31, 1997, (ii) five months' prior notice is
required for Mr. Bang or Boston Scientific to
terminate Mr. Bang's employment, and (iii) Mr. Bang
has agreed not to compete in the field of
interventional neuroradiology for a period of two
(2) years following the Effective Date.
5
<PAGE> 19
All unvested Target Options held by non-employee
directors issued under the Target 1991 Director
Stock Option Plan will become immediately
exercisable on the date of a merger or sale of
Target, including the Merger.
Additionally, under the terms of the Merger
Agreement, Boston Scientific and the Surviving
Corporation have agreed that the indemnification
obligations set forth in Target's Certificate of
Incorporation and By-Laws, as of the date of the
Merger Agreement, will survive the Merger and will
not be amended, repealed or otherwise modified
after the Effective Time in any manner that would
adversely affect the rights thereunder of the
individuals who at the Effective Time or at any
time prior thereto were entitled to indemnification
thereunder. Further, Boston Scientific and the
Surviving Corporation have agreed to honor and
fulfill Target's obligations pursuant to
indemnification agreements with Target's directors
and officers. From and after the Effective Time,
such obligations will be the joint and several
obligations of Boston Scientific and the Surviving
Corporation.
The Target Board was aware of these interests and
considered them, among other matters, in approving
the Merger Agreement. See "The Merger -- Conflicts
of Interests."
Conditions to Consummation
of the Merger............ The obligations of Boston Scientific and Target to
consummate the Merger are subject to various
conditions, including the adoption of the Merger
Agreement by Target's stockholders. See "Certain
Provisions of the Merger Agreement -- Conditions to
Consummation of the Merger."
Termination................ The Merger Agreement may be terminated at any time
prior to the Effective Time by written consent duly
authorized by the Boards of Directors of each of
Boston Scientific, Merger Sub and Target. The
Merger Agreement may also be terminated at any time
prior to the Effective Time by either Boston
Scientific or Target if either (i) the Effective
Time will not have occurred on or before June 30,
1997 or, if a request for additional information is
received pursuant to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), the 90th day following acknowledgment
by the relevant governmental authority that Boston
Scientific and Target have complied with such
request, but in any event not later than September
30, 1997, or, if any actions taken by Boston
Scientific will have caused the delay of the
Effective Time to occur on or before June 30, 1997,
such date with respect to Boston Scientific's right
to terminate the Merger Agreement will be extended
by the amount of time of such delay, but in no
event later than September 30, 1997; or (ii) there
exists any law that makes consummation of the
Merger illegal or otherwise prohibited, or if any
court of competent jurisdiction or governmental
authority issues an order, decree or ruling or
takes any other action restraining, enjoining or
otherwise prohibiting the Merger and such order,
decree, ruling or other action becomes final and
nonappealable.
The Merger Agreement may be terminated by either
Boston Scientific or Target if either (i) the other
party has breached and failed to cure any
representation or warranty that, individually or in
the aggregate, would have a material adverse effect
on such party, or material agreement in
6
<PAGE> 20
the Merger Agreement; or (ii) the stockholders of
Target fail to adopt the Merger Agreement.
The Merger Agreement may also be terminated by
Boston Scientific if either (i) the Target Board
withdraws, modifies or changes its recommendation
of the Merger in a manner adverse to Boston
Scientific or the Target Board recommends to the
Target stockholders any Competing Transaction (as
defined in "The Merger -- No Solicitations of
Transactions"); or (ii) a tender offer or exchange
offer for 30% or more of the outstanding shares of
Target Common Stock is commenced, and the Target
Board either fails to recommend against acceptance
of such tender offer or exchange offer by its
stockholders or takes no position with respect to
the acceptance of such tender offer or exchange
offer by its stockholders.
The Merger Agreement may also be terminated by
Target in order to enter into a definitive
agreement for a Competing Transaction, upon three
business days' prior written notice to Boston
Scientific setting forth, in reasonable detail, the
identity of the person making the Competing
Transaction and the final terms and conditions of
such Competing Transaction, if (a) as a result of
an unsolicited proposal for such Competing
Transaction, the Target Board, after consultation
with independent legal counsel, determines in good
faith that, after giving effect to any concessions
which may be offered by Boston Scientific, their
fiduciary duties under applicable law require that
such Competing Transaction be accepted, and (b)
Target has made payment to Boston Scientific of
certain amounts described in "Certain Provisions of
the Merger Agreement -- Fees and Expenses."
The Merger Agreement may be terminated by either
Target or Boston Scientific if the average of the
closing sale prices on the NYSE of Boston
Scientific Common Stock as reported under Composite
Transactions in The Wall Street Journal for the ten
consecutive trading days immediately preceding the
first business day following the satisfaction
(including as a result of a waiver) of all of the
conditions to the Merger is less than $55 per
share. See "Certain Provisions of the Merger
Agreement -- Termination."
Termination Fees and
Expenses................. Target will be required to pay Boston Scientific a
$34 million fee if the Merger Agreement is
terminated upon the occurrence of certain events
(including the Target Board's entering into a
Competing Transaction). See "Certain Provisions of
the Merger Agreement -- Fees and Expenses."
Stock Exchange Listing..... Boston Scientific will file an application to list
the shares of Boston Scientific Common Stock to be
issued in connection with the Merger on the NYSE.
Regulatory Approvals....... Boston Scientific and Target each filed
notification and report forms
under the HSR Act with the Federal Trade Commission
(the "FTC") and the Antitrust Division of the
Department of Justice (the "Antitrust Division") on
January 28, 1997. The waiting period under the HSR
Act expired on February 27, 1997. See "The
Merger -- Regulatory Approvals."
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Absence of Dissenting
Stockholders' Rights..... If the Merger is consummated, holders of Target
Common Stock will not be entitled to dissenters'
rights of appraisal under the Delaware General
Corporation Law (the "DGCL").
Effective Time............. The Effective Time will occur as promptly as
practicable, and in no event later than five
business days, after the requisite adoption of the
Merger Agreement by Target's stockholders and the
satisfaction or waiver of all other conditions to
the Merger. The Effective Time will occur upon the
filing of a Certificate of Merger with the
Secretary of State of the State of Delaware.
Accounting Treatment....... The Merger will be accounted for using the
"pooling-of-interests" method of accounting
pursuant to Opinion No. 16 of the Accounting
Principles Board. Under the Merger Agreement, it is
a condition precedent to the obligations of Boston
Scientific and Target to consummate the Merger,
that each receive letters from Ernst & Young LLP,
independent auditors to each of Boston Scientific
and Target, regarding that firm's concurrence with
Boston Scientific management's and Target
management's conclusions as to the appropriateness
of "pooling-of-interests" accounting for the
Merger, under Accounting Principles Board No. 16,
if closed and consummated in accordance with the
Merger Agreement. The "pooling-of-interests" method
of accounting is intended to present as a single
interest two or more common stockholder interests
that were previously independent. The
"pooling-of-interests" method assumes that the
combining companies have been merged from
inception. Consequently, the historical financial
statements for periods prior to consummation of the
Merger are restated as though the companies had
been combined. Under the Merger Agreement, Target
and Boston Scientific must use their best efforts
to cause the Merger to qualify, and will not take
any actions which could prevent the Merger from
qualifying, for "pooling-of-interests" accounting
treatment. See "The Merger -- Accounting Treatment"
and "Certain Provisions of the Merger
Agreement -- Conditions to Consummation of the
Merger", "-- Conduct of Business Pending the
Merger" and "Unaudited Pro Forma Combined Condensed
Financial Information."
Certain Federal Income Tax
Consequences............. The Merger is intended to qualify for federal
income tax purposes as a "reorganization" within
the meaning of Section 368(a) of the Code so that
no gain or loss would be recognized by Target
stockholders on the exchange of their Target Common
Stock for Boston Scientific Common Stock, except in
respect of cash received in lieu of fractional
shares, and no gain or loss would be recognized by
Boston Scientific or Target. Under the Merger
Agreement, Target's obligation to consummate the
Merger is conditioned on the receipt of an opinion
from Venture Law Group, A Professional Corporation,
to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a)
of the Code. ALL STOCKHOLDERS SHOULD READ CAREFULLY
THE DISCUSSION UNDER "THE MERGER -- CERTAIN FEDERAL
INCOME TAX CONSEQUENCES." IN VIEW OF THE
COMPLEXITIES OF FEDERAL INCOME AND OTHER TAX LAWS,
EACH TARGET STOCKHOLDER SHOULD CONSULT WITH HIS OR
HER TAX ADVISOR REGARDING, AMONG OTHER
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THINGS, THE FEDERAL, STATE AND LOCAL INCOME TAX
CONSEQUENCES OF THE MERGER APPLICABLE TO HIS
OR HER SPECIFIC CIRCUMSTANCES.
MANAGEMENT
Directors..................... At the Effective Time, the directors of Merger
Sub will become the directors of the Surviving
Corporation. The Merger will not result in any
change in the composition of the Board of
Directors of Boston Scientific (the "Boston
Scientific Board").
Officers...................... At the Effective Time, the officers of Target
will become the initial officers of the
Surviving Corporation.
RISK FACTORS.................. STOCKHOLDERS OF TARGET SHOULD CAREFULLY
EVALUATE THE MATTERS SET FORTH UNDER "RISK
FACTORS."
COMPARATIVE MARKET PRICES AND
DIVIDENDS -- BOSTON SCIENTIFIC
AND TARGET.................... The following tables set forth, for the
quarters indicated (ended March 31, June 30,
September 30 and December 31 for Boston
Scientific and Target), the high and low sales
prices per share of Boston Scientific Common
Stock as reported on the NYSE and the high and
low closing sales price per share of Target
Common Stock as quoted on Nasdaq. Shares of
Boston Scientific Common Stock are listed on
the NYSE and shares of Target Common Stock are
quoted on Nasdaq under the symbols "BSX" and
"TGET," respectively.
On January 17, 1997, the last full trading day
preceding the day of the public announcement of
the execution of the Merger Agreement, the last
reported sale price per share of Boston
Scientific Common Stock was $71.50 and the last
reported sale price per share of Target Common
Stock was $46.75. Under the terms of the Merger
Agreement, each share of Target Common Stock
outstanding immediately prior to the Effective
Time (other than shares to be cancelled
pursuant to the Merger Agreement) will be
converted into the right to receive 1.07 shares
of Boston Scientific Common Stock, and any cash
to be paid in lieu of fractional shares of
Boston Scientific Common Stock. The equivalent
market value of the Target Common Share on
January 17, 1997, the last full trading day
preceding the day of the public announcement of
the execution of the Merger Agreement, based on
a Boston Scientific Common Stock price of
$71.50 (the last reported sales price preceding
the day of the public announcement of the
execution of the Merger Agreement), was $76.51.
</TABLE>
- -------------------------------------------------------------------------------
9
<PAGE> 23
<TABLE>
<CAPTION>
BOSTON SCIENTIFIC
COMMON STOCK
FISCAL YEAR ENDING DECEMBER 31
------------------------------
HIGH LOW
------- -------
<S> <C> <C>
FISCAL YEAR 1994
1st Quarter..................... $16.500 $11.875
2nd Quarter..................... 15.500 12.000
3rd Quarter..................... 16.750 12.625
4th Quarter..................... 17.875 15.250
FISCAL YEAR 1995
1st Quarter..................... 26.375 16.625
2nd Quarter..................... 33.250 24.625
3rd Quarter..................... 42.625 30.500
4th Quarter..................... 49.375 37.375
FISCAL YEAR 1996
1st Quarter..................... 51.625 39.875
2nd Quarter..................... 47.375 37.750
3rd Quarter..................... 57.625 39.625
4th Quarter..................... 61.500 52.875
FISCAL YEAR 1997
1st Quarter (1)(2).............. 71.500 58.625
</TABLE>
<TABLE>
<CAPTION>
TARGET COMMON STOCK
FISCAL YEAR ENDING MARCH 31
---------------------------
HIGH LOW
------- -------
<S> <C> <C>
FISCAL YEAR 1995
1st Quarter (3)................. $13.250 $10.250
2nd Quarter (3)................. 15.125 09.875
3rd Quarter (3)................. 16.125 11.875
4th Quarter (3)................. 19.875 13.625
FISCAL YEAR 1996
1st Quarter (3)................. 23.875 16.344
2nd Quarter (3)................. 35.125 20.750
3rd Quarter..................... 43.000 30.750
4th Quarter..................... 66.000 37.500
FISCAL YEAR 1997
1st Quarter..................... 67.750 34.500
2nd Quarter..................... 43.000 26.813
3rd Quarter..................... 44.750 33.000
4th Quarter (4)(5).............. 71.375 40.750
</TABLE>
-------------------------------------------------
(1) The high and low sales prices per share of
Boston Scientific Common Stock as reported
on the NYSE between January 1, 1997 and
January 17, 1997, the last full trading
day prior to the public announcement of
the execution of the Merger Agreement,
were $71.50 and $58.625, respectively.
(2) Through February 26, 1997.
(3) Adjusted for 2-for-1 stock split effected
on December 18, 1995.
(4) The high and low sales prices per share of
Target Common Stock as quoted on Nasdaq
between January 1, 1997 and January 17,
1997, the last full trading day prior to
the public announcement of the execution
of the Merger Agreement, were $49.50 and
$40.75, respectively.
(5) Through February 26, 1997.
TARGET STOCKHOLDERS ARE URGED TO OBTAIN CURRENT
MARKET QUOTATIONS FOR SHARES OF BOSTON
SCIENTIFIC COMMON STOCK AND TARGET COMMON
STOCK.
10
<PAGE> 24
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Boston Scientific has not paid any dividends
since its initial public offering and currently
intends to retain all of its earnings to
finance the continued growth of the business.
Boston Scientific may consider declaring and
paying a dividend in the future; however, there
can be no assurance that it will do so. Other
than a $7 million dividend to Collagen
Corporation and other holders of record of
Target's preferred stock as of January 15,
1992, no dividends have been declared or paid
on Target Common Stock since Target's
inception.
SELECTED HISTORICAL PRO FORMA
FINANCIAL DATA -- BOSTON
SCIENTIFIC
AND TARGET.................... The following tables set forth selected
historical unaudited consolidated financial
data of Boston Scientific and Target and
unaudited combined pro forma financial data
giving effect to the Merger using the
"pooling-of-interests" method of accounting and
reflecting the Exchange Ratio and the pro forma
adjustments described in the accompanying
notes.
The selected historical consolidated financial
data for the five years ended December 31, 1995
for Boston Scientific, and for the five fiscal
years ended March 31, 1996 for Target has been
obtained from the consolidated financial
statements of Boston Scientific and of Target,
except for the reclassification of Target's
royalty payments, which statements have been
audited by Ernst & Young LLP, independent
auditors. The Boston Scientific consolidated
financial tables have been restated to reflect
the merger with EP Technologies, Inc. ("EPT"),
which was consummated on January 22, 1996 and
was accounted for as a "pooling-of-interests."
The selected historical financial data for
Target for the nine-month periods ended
December 31, 1996 and 1995 have been obtained
from Target's unaudited consolidated financial
statements and include, in the opinion of
Target's management, all adjustments which are
of a recurring nature necessary to present
fairly the data for such periods.
The selected historical financial data for
Boston Scientific for the nine-month periods
ended September 30, 1996 and 1995 have been
obtained from Boston Scientific's unaudited
consolidated financial statements and include,
in the opinion of Boston Scientific's
management, all adjustments which are of a
recurring nature necessary to present fairly
the data for such periods.
It is anticipated that, upon consummation of
the Merger, the fiscal year of Target will be
changed to December 31. Accordingly, financial
statements of Target subsequent to the Merger
will include the financial information of
Target on a calendar year basis.
The unaudited pro forma information set forth
below is for illustrative purposes only and is
not necessarily indicative of the operating
results or financial position that would have
occurred if the Merger had been consummated as
of the dates specified, nor is it necessarily
indicative of future operating results or
financial position. No provision has been
reflected in the unaudited pro forma combined
condensed operating data for direct expenses
related to the Merger,
</TABLE>
- --------------------------------------------------------------------------------
11
<PAGE> 25
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
which are expected to approximate $13.5
million. The unaudited pro forma combined
condensed financial information also excludes
any benefits from synergies that may result
from the Merger. Boston Scientific expects to
record non-recurring and special charges in
connection with the acquisition of Target. The
amount of such charges cannot be determined
until management evaluates the needs of the
combined operations. The unaudited pro forma
combined selected financial information should
be read in conjunction with the "Unaudited Pro
Forma Combined Condensed Financial
Information." The Pro Forma Combined Condensed
Statements of Income reflect the
reclassifications of Target's royalty expenses
so as to be consistent with Boston Scientific's
expense classifications. The reclassifications
have no impact on pro forma combined operating
income or net income. There were no material
transactions between Boston Scientific and
Target during any of the periods presented.
Comparative per share data for net income,
dividends and book value of Boston Scientific
and Target are also set forth below on both a
historical and pro forma combined basis and on
a per share equivalent pro forma basis for
Target. Pro forma combined net income per share
is derived from the pro forma combined
information presented elsewhere herein, which
gives effect to the Merger under the
"pooling-of-interests" accounting method as if
the Merger had occurred at the beginning of
each period and combines the results of Boston
Scientific and Target for the periods
presented. Pro forma combined dividends per
share reflect Boston Scientific's and Target's
cash dividends paid in the period indicated.
The per share equivalent pro forma combined
data presentation is based upon the Exchange
Ratio. Book value per share for the pro forma
combined presentation is based upon the number
of weighted average shares outstanding of
Boston Scientific Common Stock, adjusted to
include the shares of Boston Scientific Common
Stock to be issued as a result of the Merger.
</TABLE>
- -------------------------------------------------------------------------------
12
<PAGE> 26
- -------------------------------------------------------------------------------
BOSTON SCIENTIFIC CORPORATION
SELECTED HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE NINE-MONTH
PERIOD ENDED SEPTEMBER
30, YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- -------- ---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA(1):
Net sales....................... $1,053,315 $823,955 $1,129,185 $888,572 $746,983 $614,957 $480,944
Gross profit.................... 768,343 580,621 804,122 608,800 515,037 429,657 342,450
Selling, general and
administrative expenses....... 352,910 265,311 373,390 299,292 257,391 198,530 164,701
Royalty expenses................ 11,141 20,151 24,874 25,682 24,473 28,000 8,272
Research and development
expenses...................... 84,755 68,564 93,843 76,692 62,024 45,348 28,297
Litigation provision(2)......... 67,000 28,000
Purchased research and
development(3)................ 96,000 32,646 32,646
Special charge(3)............... 32,341 92,103 204,448 6,899
Total operating expenses........ 577,147 478,775 729,201 401,666 410,888 278,777 229,270
Operating income(2)(3).......... 191,196 101,846 74,921 207,134 104,149 150,880 113,180
Net income(2)(3)................ 90,362 34,323 6,440 135,307 69,466 89,031 68,391
Primary net income per common
share(2)(3)................... $ 0.50 $ 0.19 $ 0.04 $ 0.78 $ 0.40 $ 0.53 $ 0.42
Fully diluted net income per
common share(2)(3)............ 0.49 0.19 0.04 0.77 0.40 0.53 0.42
Dividend per common share(4).... 0.212
Primary weighted average number
of common shares.............. 180,699,000 177,882,000 177,534,000 174,197,000 172,123,000 169,236,000 162,204,000
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
SEPTEMBER 30, --------------------------------------------------------
1996 1995 1994 1993 1992 1991
------------- ---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA(1):
Working capital(5)............................... $ 149,825 $ 282,969 $ 432,021 $323,094 $383,941 $177,730
Total assets..................................... 1,357,151 1,099,888 1,049,549 786,823 644,503 369,923
Borrowings due within one year(9)................ 225,983 57,520 88,948 57,141 27,390 7,400
Long-term debt, net of current portion........... 383 4,162 16,800 3,671 4,274 22,644
Contingent stock repurchase obligation(7)........ 24,855 10,938
Stockholders' equity(5)(7)....................... 831,129 774,150 738,685 544,643 498,045 239,686
Book value per common share...................... $ 4.60 $ 4.36 $ 4.24 $ 3.16 $ 2.94 $ 1.48
</TABLE>
See Accompanying Notes to Selected Historical and Pro Forma Financial Data
of Boston Scientific and Target
- -------------------------------------------------------------------------------
13
<PAGE> 27
- -------------------------------------------------------------------------------
TARGET THERAPEUTICS, INC.
SELECTED HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE NINE-MONTH
PERIOD ENDED DECEMBER
31, YEAR ENDED MARCH 31,
----------------------- --------------------------------------------------------------
1996 1995 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA(1):
Net sales................ $ 68,025 $ 48,625 $ 69,795 $ 47,508 $ 35,353 $ 28,117 $ 20,449
Gross profit............. 48,834 34,759 49,923 33,161 22,428 18,618 13,529
Selling, general and
administrative
expenses............... 19,041 14,247 20,726 13,556 9,245 7,543 5,447
Royalty expenses......... 1,661 1,086 1,606 804 443 158
Research and development
expense................ 14,768 9,081 12,937 10,336 7,624 6,496 4,347
Purchased research and
development(3)......... 14,000
Total operating
expenses............... 49,470 24,414 35,269 24,696 17,312 14,197 9,794
Operating income
(loss)(3).............. (636) 10,345 14,654 8,465 5,116 4,421 3,735
Net income (loss)(3)..... (3,574) 8,454 11,702 7,378 4,951 3,580 2,500
Primary income (loss) per
common share(3)........ $ (0.24) $ 0.56 $ 0.77 $ 0.51 $ 0.35 $ 0.25 $ 0.25
Fully diluted net income
per common share (3)... (0.24) 0.55 0.76 0.51 0.35 0.25 0.25
Dividend per share(4).... 0.69
Primary weighted average
number of common
shares(10)............. 14,828,000 15,156,000 15,280,000 14,466,000 14,206,000 14,150,000 10,186,000
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
DECEMBER 31, --------------------------------------------------------
1996 1996 1995 1994 1993 1992
------------ -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA(1):
Working capital..................... $ 64,663 $ 72,729 $44,952 $41,527 $37,370 $34,602
Total assets........................ 115,749 114,275 70,399 57,130 46,827 42,103
Stockholders' equity(6)............. 89,109 90,838 57,863 49,064 42,462 37,983
Book value per common share(10)..... $ 6.01 $ 5.94 $ 4.00 $ 3.45 $ 3.00 $ 3.73
</TABLE>
See Accompanying Notes to Selected Historical and Pro Forma Financial Data
of Boston Scientific and Target
- -------------------------------------------------------------------------------
14
<PAGE> 28
- -------------------------------------------------------------------------------
BOSTON SCIENTIFIC AND TARGET
SELECTED HISTORICAL COMBINED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA COMBINED
INTERIM NINE-MONTHS PRO FORMA COMBINED FINANCIAL DATA
FINANCIAL DATA(13) FISCAL YEARS COMBINED(13)
------------------------ ---------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA(1)(13):
Net sales................ $ 1,121,340 $ 872,580 $ 1,198,980 $ 936,080 $ 782,336 $ 643,074 $ 501,393
Gross profit............. 817,177 615,380 854,045 641,961 537,465 448,275 355,979
Selling, general and
administrative
expenses............... 371,951 279,558 394,116 312,848 266,636 206,073 170,148
Royalty expenses......... 12,802 21,237 26,480 26,486 24,916 28,158 8,272
Research and development
expenses............... 99,523 77,645 106,780 87,028 69,648 51,844 32,644
Litigation
provision(2)........... 67,000 28,000
Purchased research and
development(3)......... 110,000 32,646 32,646
Special charge(3)........ 32,341 92,103 204,448 6,899
Total operating
expenses............... 626,617 503,189 764,470 426,362 428,200 292,974 239,064
Operating income......... 190,560 112,191 89,575 215,599 109,265 155,301 116,915
Net income(2)(3)......... 86,788 42,777 18,142 142,685 74,417 92,611 70,891
Primary net income per
common
share(2)(3)(10)........ $ 0.44 $ 0.22 $ 0.09 $ 0.75 $ 0.40 $ 0.50 $ 0.41
Fully diluted net income
per common
share(2)(3)(10)........ 0.44 0.22 0.09 0.75 0.40 0.50 0.41
Dividend per
share(4)(10)........... 0.11 0.04
Primary weighted average
number of common
shares................. 196,565,000 194,099,000 193,884,000 189,676,000 187,323,000 184,377,000 173,103,000
</TABLE>
See Accompanying Notes to Selected Historical and Pro Forma Financial Data
of Boston Scientific and Target
- --------------------------------------------------------------------------------
15
<PAGE> 29
- -------------------------------------------------------------------------------
BOSTON SCIENTIFIC AND TARGET
SELECTED HISTORICAL FINANCIAL DATA -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA COMBINED
FINANCIAL DATA AS PRO FORMA
OF FISCAL YEARS COMBINED(13)
SEPTEMBER 30, ----------------------------------------------------
1996(13) 1995 1994 1993 1992 1991
------------------ ---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (1) (13):
Working capital........... $ 214,488 $ 355,698 $ 476,973 $364,621 $421,311 $212,332
Total assets.............. 1,472,900 1,214,163 1,119,948 843,953 691,330 412,026
Borrowings due within one
year(9)................ 225,983 57,520 88,948 57,141 27,390 7,400
Long-term debt, net of
current portion........ 383 4,162 16,800 3,671 4,274 22,644
Contingent stock
repurchase
obligation(7).......... 24,855 10,938
Stockholders'
equity(6)(7)(10)....... 920,238 864,988 796,548 593,707 540,507 277,669
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA COMBINED
FINANCIAL DATA FOR
THE NINE-MONTH
PERIOD ENDED PRO FORMA
SEPTEMBER 30(13) FISCAL YEARS COMBINED(13)
------------------- ----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
----- ----- ---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
TARGET EQUIVALENTS(12):
Exchange ratio data:
Primary net income per
common share......... $0.47 $0.24 $0.10 $0.80 $0.43 $0.54 $0.44
Fully diluted net income
per common share..... 0.47 0.23 0.10 0.80 0.42 0.54 0.44
Dividend per share...... 0.12 0.04
Book value per common
share................ 5.01 4.02 4.77 4.49 3.39 3.14 1.72
</TABLE>
See Accompanying Notes to Selected Historical and Pro Forma Financial Data
Of Boston Scientific and Target
- -------------------------------------------------------------------------------
16
<PAGE> 30
- -------------------------------------------------------------------------------
BOSTON SCIENTIFIC AND TARGET
NOTES TO SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
(1) On January 20, 1997, Boston Scientific and Target jointly announced
the signing of the Merger Agreement. Under the terms of the Merger
Agreement, each share of Target Common Stock issued and outstanding
immediately prior to the effective time of the Merger will be
converted into the right to receive 1.07 shares of Boston Scientific
Common Stock. The Merger is intended to be a tax-free, stock-for-stock
transaction and is valued at approximately $1.1 billion. The Merger is
subject to the approval of Target stockholders and regulatory
approval. Boston Scientific's pro forma combined results were restated
for all periods presented to reflect the Merger, which will be
accounted for as a "pooling-of-interests."
In addition, the Boston Scientific results have been restated for all
periods presented to reflect Boston Scientific's merger with EP
Technologies, Inc. ("EPT"). On January 22, 1996, Boston Scientific
completed its merger with EPT in a stock-for-stock transaction. The
transaction, which is accounted for as a "pooling-of-interests," was
effected through the exchange of 0.297 shares of Boston Scientific
Common Stock for each EPT share held. Approximately 3 million shares
of Boston Scientific Common Stock were issued in conjunction with the
EPT merger. EPT designs, develops, manufactures and markets advanced
electrophysiology catheters and systems for use in minimally invasive
procedures to diagnose and treat tachyarrhythmias (abnormally rapid
heart rates resulting from defective or diseased cardiac tissues that
interfere with the normal conduction of electrical activity
responsible for heart muscle contraction).
The unaudited financial statements of Boston Scientific for the
nine-month period ended September 30, 1996 include the operations of
Symbiosis Corporation ("Symbiosis"), beginning in March 1996, and
Endotech, Ltd. and MinTec, Inc. ("Endotech/MinTec"), beginning in May
1996. On March 14, 1996, Boston Scientific acquired Symbiosis,
formerly a wholly owned subsidiary of American Home Products
Corporation. Boston Scientific purchased Symbiosis, a developer and
manufacturer of specialty medical devices, for approximately $153
million in a cash transaction. On May 3, 1996, Boston Scientific
acquired assets from Endotech/MinTec, a privately held company
dedicated to the development of stent graft technology for the repair
of diseased blood vessels. Boston Scientific purchased
Endotech/MinTech's assets for approximately $72 million in a cash
transaction. Both acquisitions were accounted for using the purchase
method of accounting.
The unaudited financial statements of Target for the nine-month
period ended December 31, 1996 include the operations of
Interventional Therapeutics Corporation. ("ITC"), beginning in May
1996. On May 23, 1996, Target completed the closing of the
acquisition of ITC, at which time approximately 331,000 shares of
Target Common Stock were exchanged for all the outstanding shares and
options to purchase shares of ITC stock. ITC is a developer and
manufacturer of vascular occlusion devices used in neurovascular and
vascular embolization. The acquisition of ITC was accounted for using
the purchase method of accounting.
The restated financial data is not necessarily indicative of the
operating results or financial position that would have occurred if
the Target or EPT mergers had been consummated during the periods
presented, nor is it indicative of future operating results or
financial position.
(2) Boston Scientific's 1993 results include an estimated loss from patent
litigation of $67 million pre-tax or $0.23 per share, net of tax.
Boston Scientific's 1991 results include an estimated loss from
another patent litigation settlement of $28 million pre-tax, or $0.10
per share, net of tax.
(3) In 1996, Boston Scientific recorded special charges of $128 million
which primarily related to the merger with EPT and the acquisitions of
Symbiosis and Endotech/MinTec. Charges include $96 million for
purchased research and development, $5 million in direct transaction
costs and $12 million of estimated costs to be incurred in merging the
separate operating businesses of EPT with subsidiaries of Boston
Scientific. Estimated costs include those typical in a merging of
operations and relate to, among other things, rationalization of
facilities, workforce reductions, unwinding of
- --------------------------------------------------------------------------------
17
<PAGE> 31
- -------------------------------------------------------------------------------
BOSTON SCIENTIFIC AND TARGET
NOTES TO SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA -- (CONTINUED)
various contractual commitments, asset writedowns and other
integration costs. The majority of the remaining $16 million, which is
primarily non-deductible for tax purposes, represents a change in
management's estimates of the merger-related charges recorded in 1995.
The change to prior year estimates relates primarily to the costs of
unwinding various contractual obligations and the rationalization of
facilities.
In connection with the 1995 acquisitions of SCIMED Life Systems, Inc.
("SCIMED"), Cardiovascular Imaging Systems, Inc. ("CVIS"), Vesica
Medical, Inc. ("Vesica"), Meadox Medicals, Inc. ("Meadox") and Heart
Technology, Inc. ("Heart Technology"), Boston Scientific recorded
non-recurring and special charges of $237 million in 1995. Estimated
costs include purchased research and development and those costs
typical in a merging of operations and relate to, among other things,
rationalization of facilities and administration, severance, and
unwinding of various contractual commitments.
During 1992, Boston Scientific initiated a worldwide voluntary
product recall due to five product failures related to a component of
the Rotablator(R) system. Total product recall expenses were $7
million, which were fully incurred or accrued in 1992.
In conjunction with the acquisition of ITC, Target allocated $14
million of the purchase price to purchased research and development.
(4) Boston Scientific has never paid dividends, other than in March 1992
(which was prior to the initial public offering of Boston Scientific
Common Stock in May of 1992) when Boston Scientific paid a one-time
dividend of an aggregate of $20 million, or $0.212 per share, to
holders of common stock. The $0.212 per share is based on Boston
Scientific's weighted average number of shares of common stock
outstanding at the time the dividend was declared, rather than the
restated weighted average number of common shares outstanding. Boston
Scientific currently intends to retain all of its earnings to finance
the continued growth of its business. Boston Scientific may consider
declaring and paying a dividend in the future; however, there can be
no assurance that it will do so.
Other than a $7 million dividend to Collagen Corporation and other
holders of record of Target's preferred stock as of January 15, 1992,
no dividends have been declared or paid on Target Common Stock since
Target's inception.
(5) During the second quarter of 1996 and in 1993, Boston Scientific
repurchased 1.3 million and 5 million shares of its common stock at an
aggregate cost of approximately $52 million and $62 million,
respectively. The repurchased shares are being used as part of Boston
Scientific's program to satisfy Boston Scientific's obligations
pursuant to its employee benefit and incentive plans.
(6) During May 1996, Target's Board of Directors authorized a stock
repurchase program in which up to 350,000 shares of its common stock
may be purchased in the open market from time to time. During the
three months ended September 30, 1996, Target completed the repurchase
of the 350,000 shares of its common stock at an overall average
acquisition price of approximately $40. Target currently plans to keep
the repurchased shares as treasury stock and may use this stock in
various Company stock benefit plans.
In addition, in August 1996, the Target Board of Directors authorized
the repurchase of up to 500,000 additional shares of Target's common
stock under the repurchase program. Through December 31, 1996, none
of the 500,000 shares have been repurchased.
(7) At September 30, 1996 and December 31, 1993, Boston Scientific's
contingent obligation to repurchase shares upon exercise of
outstanding European equity put obligations approximated $25 million
and $11 million, respectively, which were sold in the second quarter
of 1996 and during 1993, respectively, in connection with Boston
Scientific's program to satisfy its employee benefit
- -------------------------------------------------------------------------------
18
<PAGE> 32
- -------------------------------------------------------------------------------
BOSTON SCIENTIFIC AND TARGET
NOTES TO SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA -- (CONTINUED)
plan obligations. At September 30, 1996 and December 31, 1993, the
obligations have been reclassified from permanent equity and presented
as a contingent stock repurchase obligation.
(8) During 1992, Boston Scientific sold 27 million shares of common stock
in a public offering at a price to the public of $17 per share.
Concurrent with the offering, 19 million shares of common stock were
purchased from a shareholder. Boston Scientific realized net proceeds
of $122 million.
(9) During the second quarter of 1996, Boston Scientific initiated a
commercial paper program. The commercial paper is supported by a new
credit agreement of $350 million. Outstanding commercial paper reduces
available borrowings under the new credit agreement. Proceeds from
issuing the commercial paper were used for repayment of a $100 million
short term seller-financed loan associated with the acquisition of
Symbiosis, repayment of borrowings under preexisting credit
agreements, and repurchase of Boston Scientific Common Stock. The
remaining proceeds primarily were used for general operating purposes.
At September 30, 1996, Boston Scientific had approximately $200
million in commercial paper outstanding.
(10) All Target share and per share amounts reflect a two-for-one stock
split effected on December 18, 1995.
(11) Pro forma per share amounts are based on historical per share amounts
after giving effect to the pro forma adjustments described elsewhere
herein, and converting each share of Target Common Stock into 1.07
shares of Boston Scientific Common Stock.
(12) Target equivalents are determined by multiplying the pro forma
combined amounts by the pro forma exchange ratio for conversion of
Target Common Stock to represent equivalent per share amounts for
Target shareholders.
(13) Pro forma balance sheet information is as of September 30, 1996 for
Boston Scientific and December 31, 1996 for Target. Pro forma income
statement information is as of the respective calendar year or
nine-month period for Boston Scientific and as of the respective
fiscal year or nine-month period for Target.
- -------------------------------------------------------------------------------
19
<PAGE> 33
RISK FACTORS
Holders of Target Common Stock should consider carefully all the
information contained in this Proxy Statement/Prospectus and, in particular, the
following risk factors:
RAPID TECHNOLOGICAL CHANGE AND INTENSE COMPETITION
The medical device market is highly competitive. Boston Scientific and
Target both compete with many companies, some of which have access to greater
financial and other resources than Boston Scientific or Target. Furthermore, the
medical device market is characterized by intensive development efforts and
rapidly advancing technology. Boston Scientific's and Target's present and
future products could be rendered obsolete or uneconomical by technological
advances by one or more of Boston Scientific's and Target's current or future
competitors or by alternative therapies such as drugs. The future success of the
combined company will depend, in large part, upon its ability to anticipate and
keep pace with such advances. Competitive market forces may also adversely
affect the prices at which the combined company sells its products.
CHALLENGES TO PATENTS AND PROPRIETARY RIGHTS
Both Boston Scientific and Target rely on a combination of patents, trade
secrets and nondisclosure agreements to protect their respective proprietary
intellectual property. Boston Scientific and Target each own numerous U.S. and
foreign patents and patent applications and have license rights to certain
patents held by third parties. There can be no assurance that pending patent
applications will result in issued patents, that patents issued to or licensed
by the combined company will not be challenged or circumvented by competitors or
that such patents will be found to be valid or sufficiently broad to protect the
combined company's technology or to provide the combined company with any
competitive advantage. Third parties could also obtain patents that may require
licensing for the conduct of the combined company's business, and there can be
no assurance that the required licenses would be available. The combined company
will also rely on confidentiality agreements with certain employees, consultants
and other parties to protect, in part, trade secrets and other proprietary
technology. There can be no assurance that these agreements will not be
breached, that the combined company will have adequate remedies for any breach,
that others will not independently develop substantially equivalent proprietary
information or that third parties will not otherwise gain access to the combined
company's trade secrets and proprietary knowledge.
There has been substantial litigation regarding patent and other
intellectual property rights in the medical device industry generally,
particularly in the areas in which Boston Scientific and Target conduct their
businesses. In the future, both Boston Scientific and Target may be forced to
defend themselves against claims and legal actions alleging infringement of the
patent rights of others. Adverse determinations in any such litigation could
subject the combined company to significant liabilities to third parties, could
require the combined company to seek licenses from third parties and could, if
such licenses are not available, prevent the combined company from
manufacturing, selling or using certain of its products, any of which could have
a material adverse effect on the combined company. Additionally, the combined
company may find it necessary to initiate litigation to enforce its patent
rights, to protect its trade secrets or know-how and to determine the scope and
validity of the proprietary rights of others. Patent litigation can be costly
and time-consuming, and there can be no assurance that the combined company's
litigation expenses will not be significant in the future or that the outcome of
such litigation will be favorable to the combined company.
In November 1994, Target filed a lawsuit in United States District Court
against SCIMED, a subsidiary of Boston Scientific, and Cordis Endovascular
Systems, Inc. ("Cordis"), a subsidiary of Johnson & Johnson, Inc., alleging
infringement of a Target patent relating to variable stiffness in
microcatheters, and seeking damages and preliminary and permanent injunctive
relief. The defendants responded, challenging the validity of the patent,
denying infringement, and raising other defenses. In May 1996, the District
Court granted Target's motion for an injunction prohibiting the defendants from
continuing to sell the products alleged to infringe the patent. In July 1996,
the United States Court of Appeals for the Federal Circuit stayed the injunction
pending an appeal by the defendants, and the Court of Appeals heard oral
argument on the appeal in January 1997. Following the consummation of the
merger, it is anticipated that Target will continue
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the litigation against Cordis. An outcome adverse to Target on the appeal of the
preliminary injunction, or in the underlying litigation, would not have a
material adverse effect on the combined company.
REALIZATION OF SYNERGIES
Among the factors considered by the Boston Scientific Board and the Target
Board in connection with their approvals of the Merger Agreement were the
opportunities for the combined company to realize cost advantages through the
consolidation and integration of certain manufacturing, distribution and
administrative operations and functions, and to realize greater sales of
Target's products through Boston Scientific's more extensive marketing and sales
organization and its larger customer network. However, the Merger involves the
consolidation of two companies that have previously operated independently. The
combined company's growth and profitability will be affected by its ability to
consolidate and rationalize certain businesses, operations and employees of
Boston Scientific and Target. No assurance can be given that Boston Scientific
will integrate the respective operations of Boston Scientific and Target without
encountering difficulties or that the benefits expected from such integration
will be realized.
FDA AND OTHER GOVERNMENTAL REGULATION
The medical devices manufactured and marketed by Boston Scientific and
Target are subject to rigorous regulation by the FDA and numerous other federal,
state and foreign governmental authorities. The process of obtaining regulatory
approvals to market a medical device, particularly from the FDA, can be costly
and time-consuming, and there can be no assurance that such approvals will be
granted on a timely basis, if at all. While Boston Scientific and Target believe
that they have obtained all necessary clearances for the manufacture and sale of
their current products and that they are generally in compliance with applicable
FDA and other material regulatory requirements, there can be no assurance that
the combined company will be able to continue such compliance. If the FDA were
to believe that the combined company was not in compliance with applicable laws
or regulations, it could institute proceedings to detain or seize the combined
company's products, issue a recall, impose operating restrictions, enjoin future
violations and assess civil and criminal penalties against the combined company,
its officers or its employees and could recommend criminal prosecution to the
Department of Justice. Furthermore, the FDA may proceed to ban, or request
recall, repair, replacement or refund of the cost of, any device manufactured or
distributed by the combined company. Additionally, the regulatory process may
delay the marketing of new products for lengthy periods and impose substantial
additional costs. Moreover, foreign governmental authorities have become
increasingly stringent and the combined company may be subject to more rigorous
regulation by foreign governmental authorities in the future.
POSSIBLE DENIAL OF THIRD-PARTY REIMBURSEMENT
Boston Scientific's and Target's products are purchased by hospitals,
doctors and other health care providers, who are reimbursed for the health care
services provided to their patients by third-party payors, such as governmental
programs (e.g., Medicare and Medicaid), private insurance plans and managed care
programs. These third-party payors may deny reimbursement if they should
determine that a device used in a procedure was not used in accordance with
cost-effective treatment methods, as determined by such third-party payor, or
was used for an unapproved indication. Also, third-party payors are increasingly
challenging the prices charged for medical products and services. There can be
no assurance that the combined company's products will be considered
cost-effective by third-party payors, that reimbursement will be available or,
if available, that the third-party payors' reimbursement policies will not
adversely affect the combined company's ability to sell its products profitably.
DEPENDENCE ON DEMAND FOR COMBINED COMPANY'S PRODUCTS
Demand for the combined company's products and procedures will depend
principally on the combined company's ability to respond to demand within the
less invasive marketplace and changes thereto. The continued and growing demand
for the combined company's products and procedures depends on, among other
things, the rate at which the medical community becomes adequately trained in
and adopts the
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combined company's particular products and procedures. While Boston Scientific
and Target expect that their products and procedures will meet the demand for
less invasive products and procedures, the combined company's business and
results of operations will be adversely affected if it fails to anticipate and
properly respond to shifts within the less invasive marketplace.
POSSIBLE EFFECTS OF CONTROLLING INTERESTS OF PRINCIPAL STOCKHOLDERS
Boston Scientific's principal stockholders are John E. Abele and his family
trusts (collectively, the "Abele Stockholders") and Peter M. Nicholas and his
family trusts and a limited partnership of which Mr. Nicholas is the general
partner (collectively, the "Nicholas Stockholders"). At the Effective Time, the
Abele Stockholders will own an aggregate of approximately 16.8% of the
outstanding Boston Scientific Common Stock, and the Nicholas Stockholders will
own an aggregate of approximately 17.1% of the outstanding Boston Scientific
Common Stock. If these stockholders act in concert, their combined ownership may
effectively permit them to have a significant impact on the outcome of proposals
submitted to stockholders, such as the election of directors, amendments to the
Restated Certificate of Incorporation of Boston Scientific and possible business
combinations involving the combined company and a third party. The Abele
Stockholders and the Nicholas Stockholders are not parties to any agreement,
either independently or together, which would require them to act in unison with
respect to any matter.
DEPENDENCE ON KEY PERSONNEL
The combined company's continued success will depend in large part on its
ability to attract and retain highly qualified scientific, management, marketing
and sales personnel. The competition for skilled personnel in Boston
Scientific's and Target's industry and geographical locations is intense. While
consummation of the Merger will increase the combined company's human resources
in these areas, there is an inherent risk in transactions of this type that the
combination process could result in the departure of key employees. There can be
no assurance that the announcement of the proposed Merger will not adversely
affect the combined company's ability to attract and retain personnel. The loss
of a significant group of skilled personnel could adversely affect the combined
company.
CONFLICTS OF INTEREST
In considering the recommendation of the Target Board with respect to the
Merger Agreement, holders of shares of Target Common Stock should be aware that
certain members of Target's management and its Board of Directors have interests
in the Merger that are in addition to the interests of Target stockholders
generally. Gary R. Bang, Target's President and Chief Executive Officer, and
thirteen other executive officers of Target (as described in "The
Merger -- Potential Conflicts of Interest") (each, other than Mr. Bang, a
"Change of Control Officer") are parties to change of control agreements with
Target providing certain benefits upon a change of control of Target, including
the Merger.
Under his change of control agreement, if Mr. Bang is terminated as a
result of an Involuntary Termination other than for Cause, he will be entitled
to receive payments for two years equal to the salary and bonus he was entitled
to receive prior to the change of control. If a Change of Control Officer is
terminated under such conditions, such officer will be entitled to receive
payments for one year equal to the salary and bonus he or she was entitled to
receive prior to the change of control. In addition, Mr. Bang and each Change of
Control Officer will be entitled to receive a pro rata portion of his or her
target bonus for the fiscal year in which the Involuntary Termination occurs.
Mr. Bang will also be entitled to receive certain employee benefits for two
years, and each Change of Control Officer will be entitled to receive certain
employee benefits for one year after such Involuntary Termination. Mr. Bang and
each Change of Control Officer are entitled to receive certain outplacement
services. Because there will be a change in the job duties, responsibilities and
requirements of Mr. Bang as a result of the Merger, any termination of his
employment by Mr. Bang will be treated as an Involuntary Termination other than
for Cause.
Under the terms of an earlier agreement between Target and Mr. Bang, which
was memorialized in resolutions of the Target Board dated April 30, 1993, all
unvested Target Options granted to Mr. Bang will
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immediately vest on the date of a change of control, including the Merger. In
addition, unvested Target Options granted to Robert McNamara, Target's Chief
Financial Officer, pursuant to the initial agreement between Target and Mr.
McNamara on the commencement of his employment with Target, will immediately
vest on the date of a change of control, including the Merger. In the event of a
transaction in which any person becomes the beneficial owner of 50% or more of
Target's outstanding voting securities, without the approval of the Target
Board, all unvested Target Options granted to any Change of Control Officer will
also immediately vest on the date of such transaction. In the event of any other
transaction resulting in a change of control, including the Merger, one-half of
all unvested Target Options granted to a Change of Control Officer (other than
certain Target Options granted to Mr. McNamara on the commencement of his
employment) will immediately vest. The remaining unvested Target Options held by
such officer will vest at the same rate provided for in the agreement pursuant
to which the options were granted. Additionally, if a Change of Control Officer
is terminated as a result of an Involuntary Termination other than for Cause,
such officer's Target Options will immediately vest.
It is expected that Mr. Bang, Target and Boston Scientific will enter into
an employment agreement (the "Employment Agreement") to become effective as of
the Effective Time. The Employment Agreement would supersede both Mr. Bang's
change of control agreement and the earlier agreement between Mr. Bang and
Target, which was memorialized in the resolutions of the Target Board dated
April 30, 1993. The terms of the Employment Agreement are substantially similar
to the terms of these earlier agreements, except that under the Employment
Agreement (i) Mr. Bang may not be terminated by Boston Scientific without cause
prior to December 31, 1997, (ii) five months' prior notice is required for Mr.
Bang or Boston Scientific to terminate Mr. Bang's employment, and (iii) Mr. Bang
has agreed not to compete in the field of interventional neuroradiology for a
period of two (2) years following the Effective Date.
All unvested Target Options held by non-employee directors issued under the
Target 1991 Directors Stock Option Plan will become immediately exercisable on
the date of a merger or sale of Target, including the Merger.
Boston Scientific and the Surviving Corporation have agreed under the
Merger Agreement that the indemnification obligations set forth in Target's
Certificate of Incorporation and By-laws, as of the date of the Merger
Agreement, will survive the Merger and will not be amended, repealed or
otherwise modified after the Effective Time in any manner that would adversely
affect the rights thereunder of the individuals who at the Effective Time or at
any time prior thereto were entitled to indemnification thereunder. From and
after the Effective Time, such obligations will be the joint and several
obligations of Boston Scientific and the Surviving Corporation. Boston
Scientific and the Surviving Corporation also agreed to honor and fulfill in all
respects Target's obligations pursuant to indemnification agreements with
Target's directors and officers existing at or before the Effective Time.
The Merger Agreement also provides that the Surviving Corporation will use
its reasonable best efforts to maintain in effect, for four years from and after
the Effective Time, directors' and officers' liability insurance policies
covering the persons who are currently covered in their capacities as such
directors and officers by Target's current directors' and officers' policies and
on terms not materially less favorable than the existing insurance coverage with
respect to matters occurring prior to the Effective Time.
The Target Board was aware of these interests and considered them, among
other matters, in approving the Merger Agreement. See "The Merger -- Conflicts
of Interest."
EXPOSURES FROM INTERNATIONAL OPERATIONS
As Boston Scientific has expanded its international operations, its sales
and expenses denominated in foreign currencies have expanded and that trend is
expected to continue. Thus, certain sales and expenses have been, and are
expected to be, subject to the effect of foreign currency fluctuations. In
addition, because the percentage of sales denominated in foreign currencies has
been, and is expected to continue to be, somewhat greater than the percentage of
expenses denominated in foreign currencies, foreign currency fluctuations may
have some impact on margins.
Boston Scientific enters into forward foreign exchange contracts to hedge
foreign currency transactions on a continuing basis for periods consistent with
commitments. Boston Scientific does not engage in speculation.
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Boston Scientific's forward foreign exchange contracts, which were immaterial at
September 30, 1996, do not subject Boston Scientific to material risk due to
exchange rate movements because gains and losses on these contracts offset
losses and gains on the assets and liabilities being hedged. Although Boston
Scientific engages in hedging transactions that may offset the effect of
fluctuations in foreign currency exchange rates on foreign currency denominated
assets and liabilities, financial exposure may nonetheless result, primarily
from the timing of transactions and the movement of exchange rates. In addition,
as Boston Scientific expands its international operations, its net foreign
currency denominated sales and expenses will be subject to the effect of foreign
currency fluctuations. Further, any significant changes in the political,
regulatory or economic environment where Boston Scientific conducts
international operations may have a material impact on revenues and profits.
INVESTIGATION BY OFFICE OF THE INSPECTOR GENERAL OF REIMBURSEMENT CLAIMS MADE BY
CERTAIN CUSTOMERS
The Office of the Inspector General ("OIG") of the United States Department
of Health and Human Services ("HHS") has initiated an investigation regarding
the possible submission of improper claims to the Medicare/Medicaid programs for
reimbursement for procedures using cardiovascular medical devices that were not
approved for marketing by the FDA at the time of use. Beginning in June 1994,
approximately 130 hospitals received subpoenas from HHS seeking information with
respect to reimbursement for procedures using cardiovascular medical devices
(including certain products manufactured by Boston Scientific, as well as
numerous other manufacturers) that were subject to investigational exemptions or
may not have been approved for marketing by the FDA at the time of use. The
subpoenas also sought information regarding various types of remuneration,
including payments, gifts, stock and stock options, received by the hospital or
its employees from manufacturers of medical devices. Civil and criminal
sanctions may be imposed against any person participating in an improper claim
for reimbursement under Medicare/Medicaid. The OIG's investigation and any
related change in reimbursement practices may discourage hospitals from
participating in clinical trials or from including Medicare and Medicaid
patients in clinical trials, which could lead to increased costs in the
development of new products. Neither Boston Scientific nor Target is able to
predict the possible outcome of this matter or when it will be resolved. There
can be no assurance that the OIG's investigation or any changes in third-party
payors' reimbursement practices will not materially adversely affect the medical
device industry in general or the combined company in particular.
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COMPANIES
BOSTON SCIENTIFIC CORPORATION
General
Boston Scientific is a worldwide developer, manufacturer and marketer of
medical devices. Boston Scientific sells products in numerous product categories
that are used by physicians to perform less invasive medical procedures. Boston
Scientific's products are used in a broad range of interventional medical
specialties, including cardiology, gastroenterology, pulmonary medicine,
radiology, urology and vascular surgery. Less invasive procedures provide
effective alternatives to traditional surgery by reducing procedural trauma,
complexity, risk to patient, cost and recovery time. Boston Scientific's
products are generally inserted into the human body through natural openings or
small incisions in the skin and can be guided to most areas of the anatomy to
diagnose and treat a wide range of medical problems. The mailing address of
Boston Scientific's principal executive offices is One Boston Scientific Place,
Natick, Massachusetts 01760-1537, and its telephone number is (508) 650-8000.
Current Boston Scientific Divisions
Boston Scientific currently organizes its businesses around cardiology,
vascular and nonvascular lines. Generally, cardiology and vascular products are
employed in procedures affecting the heart and systems which carry blood,
respectively, while nonvascular products are employed in procedures affecting
other systems and organs.
Cardiology. Boston Scientific's cardiology business is conducted
principally through the following two units:
SCIMED Life Systems, Inc. SCIMED, a wholly owned subsidiary of Boston
Scientific, develops, manufactures and markets medical devices that are
used in less invasive procedures, principally for the nonsurgical diagnosis
and treatment of coronary vascular disease. SCIMED's products include
percutaneous transluminal coronary angioplasty catheters and accessories,
coronary stents, coronary angiographic diagnostic catheters and
accessories, and rotational atherectomy devices and accessories.
EP Technologies, Inc. EPT, a wholly owned subsidiary of Boston
Scientific, develops, manufactures and markets advanced electrophysiology
catheters and systems for use in less invasive procedures to diagnose and
treat cardiac tachyarrhythmias (abnormally rapid heart rates resulting from
defective or diseased cardiac tissues that interfere with the normal
conduction of electrical activity responsible for heart muscle
contraction). EPT's products include diagnostic catheters and ablation
systems consisting of an ablation control module and ablation catheters.
Vascular. Boston Scientific's vascular business is conducted principally
through the following two units:
Medi-tech. Boston Scientific's Medi-tech division develops,
manufactures and markets therapeutic and diagnostic medical devices for
less invasive image-guided procedures, primarily in the fields of radiology
and vascular surgery. These products include catheter systems, infusion
devices and guidewires used for peripheral vascular intervention.
Meadox Medicals, Inc. Meadox, a wholly owned subsidiary of Boston
Scientific, develops, manufactures and markets products for vascular
replacement and repair. Meadox, a global leader in textile vascular
prostheses, markets a broad range of woven, knitted and collagen-sealed
grafts to vascular surgeons, cardiothoracic surgeons and general surgeons.
These products are used to bypass or replace blood vessels that have
occluded, been weakened or ruptured due to atherosclerosis.
Non-vascular. Boston Scientific's nonvascular business is conducted
principally through the following two units:
Microvasive Endoscopy. Boston Scientific's Microvasive Endoscopy
division develops, manufactures and markets therapeutic and diagnostic
devices which aid the gastroenterologist and pulmonologist
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in performing flexible endoscopic procedures involving the digestive tract
and lungs. These products include biopsy forceps, drainage catheter systems
and endoscopic dilation balloon systems.
Microvasive Urology. Boston Scientific's Microvasive Urology division
develops, manufactures and markets a broad line of products for urologists
performing endoscopic procedures. These products include ureteral dilation
balloon systems, stents (implantable devices that maintain the opening of a
vessel or organ), drainage catheter systems, stone retrieval devices and
guidewires.
PATRIOT ACQUISITION CORP.
Merger Sub, a wholly owned subsidiary of Boston Scientific, was formed in
January 1997 by Boston Scientific solely for the purpose of effecting the
Merger. Upon consummation of the Merger, Merger Sub will be merged into Target,
and Merger Sub's separate corporate existence will thereupon cease. The mailing
address of Merger Sub's principal executive offices is c/o Boston Scientific
Corporation, One Boston Scientific Place, Natick, Massachusetts 01760-1537, and
its telephone number is (508) 650-8000.
TARGET THERAPEUTICS, INC.
Target develops, manufactures and markets disposable and implantable
medical devices used in minimally invasive procedures to treat vascular diseases
of the brain associated with stroke and other disease sites accessible through
small vessels of the circulatory system. Interventional physicians can navigate
Target's variable stiffness microcatheters and guidewires through tortuous blood
vessels not accessible using conventional catheters. Target's products are used
to treat diseased, ruptured or blocked blood vessels in the brain responsible
for stroke, the third leading cause of death in the United States. One of these
products, the Guglielmi Detachable Coil ("GDC") system, is used to treat and
prevent the rupture of cerebral aneurysms that are otherwise considered to be
either inoperable or very high risk for surgery. In September 1995, Target
obtained clearance from the United States Food and Drug Administration ("FDA")
to market the GDC system in the United States. Target's products are also used
in regions of the body other than the brain. Target's products are used prior to
or in lieu of surgery and can significantly reduce procedural trauma,
complexity, risk to the patient, cost and recovery time. In May 1996, Target
completed the acquisition of Interventional Therapeutics Corporation ("ITC"), a
manufacturer of specialized disposable catheters and embolization devices.
Target currently markets its products through a direct sales force in North
America and internationally through a network of 44 specialty distributors, its
German subsidiary, Target Therapeutics International (Deutschland) GmbH, its
joint venture in France, Target Guerbet Bio, and its joint venture in Japan with
Century Medical, Inc. ("CMI"), a subsidiary of ITOCHU International, Inc.
RECENT DEVELOPMENTS
Boston Scientific's 1996 Earnings
On February 25, 1997, Boston Scientific announced financial results for its
fourth quarter and year ended December 31, 1996. Net sales for the fourth
quarter increased 34% to $409 million as compared to $305 million in the fourth
quarter of 1995. Net income for the fourth quarter of 1996 increased 39% to $77
million, or $0.42 per share, compared to $55 million, exclusive of special
charges, in the fourth quarter of 1995.
Net sales for the year ended December 31, 1996 increased 29.5% to $1.462
billion as compared to $1.129 billion in 1995. Net income for the year ended
December 31, 1996, exclusive of merger-related and special charges, increased
39% to $281 million compared to $202 million in 1995. Boston Scientific reported
net income for 1996 of $167 million, or $0.92 per share, inclusive of
merger-related and special charges of $114 million net-of-tax.
Approval in Japan of the Guglielmi Detachable Coil
On February 20, Target announced that it had received clearance from the
Ministry of Health and Welfare in Japan to market the latest generation of the
GDC System in Japan. Target intends to commercially launch the GDC system in
Japan immediately, including a comprehensive training program in conjunction
with leading Japanese neurointerventionalists.
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THE SPECIAL MEETING
GENERAL
This Proxy Statement/Prospectus is being furnished to stockholders of
Target in connection with the solicitation of proxies by the Target Board for
use at the Target Special Meeting to be held on Tuesday, April 8, 1997 at 9:30
a.m., local time, at Target's principal offices located at 47201 Lakeview
Boulevard, Fremont, California 94538, and any adjournments or postponements
thereof.
Representatives of Ernst & Young LLP, the independent auditors for Target,
are expected to be present at the Target Special Meeting.
MATTERS TO BE CONSIDERED
At the Target Special Meeting, holders of Target Common Stock will consider
and vote upon a proposal to adopt the Merger Agreement, and such other matters
as may properly be brought before the Target Special Meeting or any adjournments
or postponements thereof. Target does not intend to bring any business other
than the adoption of the Merger Agreement before the Target Special Meeting or
any adjournments or postponements thereof. See "The Merger" and "Certain
Provisions of the Merger Agreement."
VOTE REQUIRED
Adoption of the Merger Agreement requires the affirmative vote of at least
a majority of the outstanding shares of Target Common Stock. A vote by a
stockholder of Target to adopt the Merger Agreement will constitute a vote to
adopt the terms of, and the transactions contemplated by, the Merger Agreement
(including the Merger).
A majority of the shares entitled to vote at the Target Special Meeting,
represented in person or by proxy, constitutes a quorum. The Target Special
Meeting may be adjourned if a quorum is not present for the purpose of obtaining
additional proxies or votes or for any other purpose, and, at any subsequent
reconvening of the Target Special Meeting, all proxies will be voted in the same
manner as such proxies would have been voted at the original convening of the
Target Special Meeting (except for any proxies that have theretofore been
revoked or withdrawn), notwithstanding that they may have been voted on the same
or any other matter at a previous meeting.
Under the DGCL, in determining whether the proposal regarding the adoption
of the Merger Agreement has received the requisite number of affirmative votes,
abstentions and broker nonvotes will be counted and will have the same effect as
a vote against such proposal. Holders of Target Common Stock are entitled to one
vote at the Target Special Meeting for each share of Target Common Stock held of
record at the close of business on the Record Date. As of the Record Date,
directors and executive officers of Target and their affiliates, in the
aggregate, were entitled to vote approximately 1,530,609 shares of Target Common
Stock, representing approximately 10.2% of the total shares entitled to vote at
the Target Special Meeting. Of these shares, Collagen Corporation was entitled
to vote approximately 1,275,888 shares, representing approximately 8.5% of the
total shares entitled to vote at the Target Special Meeting.
THE BOARD OF DIRECTORS OF TARGET HAS DETERMINED THAT THE TERMS OF THE
MERGER AGREEMENT ARE FAIR TO, AND IN THE BEST INTERESTS OF, TARGET AND ITS
STOCKHOLDERS. THE TARGET BOARD RECOMMENDS UNANIMOUSLY THAT STOCKHOLDERS OF
TARGET VOTE FOR ADOPTION OF THE MERGER AGREEMENT.
RECORD DATE; PROXIES
The Target Board has fixed the close of business on February 28, 1997 as
the Record Date for determining the stockholders of Target entitled to notice of
and to vote at the Target Special Meeting. At the close of business on the
Record Date, there were approximately 15,007,371 shares of Target Common Stock
outstanding and entitled to vote, held of record by approximately 155 holders.
Holders of shares of Target Common Stock entitled to vote at the Target Special
Meeting (including any adjournments or postponements thereof) and which are
represented by properly executed proxies in the form enclosed with this Proxy
Statement/
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Prospectus will, unless such proxies have previously been revoked, be voted in
accordance with the instructions indicated in such proxies. To the extent
instructions are not indicated on an otherwise properly executed proxy, shares
will be voted in favor of the adoption of the Merger Agreement and in the
discretion of the proxy holder as to any other matter that may properly come
before the Target Special Meeting. A Target stockholder who has given a proxy
may revoke such proxy at any time prior to its exercise at the Target Special
Meeting by (i) giving written notice of revocation bearing a later date than the
proxy to the Secretary of Target, (ii) properly submitting to Target a duly
executed proxy card relating to the same shares bearing a later date or (iii)
attending the Target Special Meeting and voting in person. Attendance at the
Target Special Meeting will not in and of itself revoke a proxy. All written
notices of revocation and other communications with respect to revocation of
proxies by Target stockholders should be addressed as follows: Target
Therapeutics, Inc., 47201 Lakeview Boulevard, Fremont, CA 94538 Attention:
Secretary, or hand-delivered to the Secretary of Target before the vote is taken
at the Target Special Meeting.
HOLDERS OF TARGET COMMON STOCK SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR
PROXY CARDS. IF THE MERGER AGREEMENT IS ADOPTED, HOLDERS OF TARGET COMMON STOCK
WILL BE SENT A LETTER OF TRANSMITTAL WITH INSTRUCTIONS FOR SURRENDERING THEIR
CERTIFICATES REPRESENTING SHARES OF TARGET COMMON STOCK.
SOLICITATION OF PROXIES
In addition to solicitation of proxies by mail, the directors, officers and
employees of Target may solicit proxies from stockholders personally or by
telephone, telegraph or facsimile transmission. Such directors, officers and
employees will not be compensated for such solicitation but may be reimbursed
for reasonable out-of-pocket expenses. Arrangements will also be made with
banks, brokerage houses and other custodians, nominees and fiduciaries for
forwarding proxy solicitation materials to beneficial owners of shares held of
record by such persons, and Target will reimburse such custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses in connection therewith.
Additionally, Target may decide to employ a third party to assist in the
solicitation of proxies.
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THE MERGER
GENERAL
The discussion in this Proxy Statement/Prospectus of the Merger and the
description of the principal terms of the Merger are subject to and qualified in
their entirety by reference to the Merger Agreement, a copy of which is attached
to this Proxy Statement/Prospectus as Exhibit A and is incorporated herein by
reference.
BACKGROUND OF THE MERGER
On or about May 17, 1996, Peter M. Nicholas, Director, Co-Founder, Chairman
and Chief Executive Officer of Boston Scientific, telephoned Gary R. Bang,
President and Chief Executive Officer of Target, and suggested that they meet in
order to renew their acquaintance, share perspectives on the future of health
care and explore opportunities for a relationship between the two companies. Mr.
Nicholas and Mr. Bang met in San Jose, California, on June 11, 1996, and
discussed general business principles, current and anticipated trends in health
care, their perspectives on the patent dispute between Target and Boston
Scientific, and the characteristics of their respective organizations.
On several occasions during the period between June 11 and October 2, 1996,
Mr. Nicholas and Mr. Bang spoke briefly by telephone concerning Target's
position with respect to current industry and market conditions. During these
conversations, the two agreed to meet again on October 2.
On October 2, 1996, Mr. Nicholas and Mr. Bang had an informal business
lunch in Oakland, California, and engaged in a general discussion about industry
and market conditions and trends.
On October 9, 1996, Mr. Nicholas and Mr. Bang met in Oakland and discussed
general market conditions and the potential for a strategic relationship between
the companies. They also discussed for the first time the possibility of
combining the two companies. They held a lengthy discussion of their respective
strategies and personnel, as well as the cultural issues involved in a potential
transaction. They talked extensively about Target's international business and
structure and had an initial discussion concerning valuation. Following this
meeting, Mr. Nicholas and Mr. Bang engaged in several telephone conversations
during the remainder of October. They further discussed a possible combination
of the companies, personnel matters, Target's joint venture relationships
(particularly Target's Japanese joint venture) and how to proceed. They agreed
to hold a meeting involving a limited number of attendees from each company for
a business due diligence session.
On October 22, 1996, at Boston Scientific's regular Board meeting,
management advised the Directors of the discussions between Mr. Nicholas and Mr.
Bang, and reviewed Target's history, its business and its markets. The Directors
discussed the strategic fit between the two companies, the possible terms of a
combination, and valuation issues.
On November 6, 1996, at a regularly scheduled meeting of the Target Board,
Mr. Bang introduced the possibility of a strategic transaction with Boston
Scientific. The Target Board discussed the various available strategic options
and alternatives involving relationships with third parties, as well as the
benefits of retaining a financial advisor to assist the Target Board in
evaluating these matters. The Target Board unanimously authorized Mr. Bang to
seek an investment banking firm to represent Target. The Target Board also
authorized Mr. Bang to continue preliminary discussions with Mr. Nicholas.
On November 7, 1996, Mr. Nicholas and Mr. Bang spoke by telephone and
agreed upon a due diligence process and a timetable for exploring a business
combination.
At a November 18, 1996 special meeting held by conference telephone, the
Target Board unanimously authorized the engagement of Goldman Sachs as Target's
financial advisor. On November 25, 1996, the Target Board held a special meeting
in Chicago. At this meeting, the Target Board heard presentations from Goldman
Sachs and Target's legal advisors regarding the strategic alternatives available
to Target. Goldman Sachs presented information regarding the general market
environment, recent and historical merger activity
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in the medical device industry, comparative stock price histories of Target
relative to other medical device companies and broader market indices, and
potential business combination partners. The Target Board also reviewed possible
alternative courses of action. Goldman Sachs then reviewed the status of
preliminary discussions with Boston Scientific, and the Target Board authorized
management to enter into a confidentiality agreement with Boston Scientific.
Beginning in late November, 1996, and throughout the remainder of the
process resulting in the execution of the Merger Agreement, J. Daniel Cole,
Senior Vice President and Group President for Vascular Business at Boston
Scientific, spoke periodically to Mr. Bang by telephone, and discussed issues
related to those being covered in the conversations between Mr. Nicholas and Mr.
Bang during the same period.
On December 2, 1996, the Target Board held a special meeting by conference
telephone. Goldman Sachs again reviewed the status of discussions with Boston
Scientific, noting that Boston Scientific had provided a preliminary and
estimated valuation of Target, subject to further discussions and due diligence.
Goldman Sachs also noted that Boston Scientific had requested a due diligence
meeting, which would be held after execution of confidentiality agreements by
the parties. The Target Board then reviewed with Goldman Sachs the preliminary
valuation proposal, Target's financial projections and the related underlying
assumptions, and the alternative courses of action available to Target. The
Target Board authorized Mr. Bang and the company's other senior managers to
proceed with the proposed due diligence meeting with Boston Scientific.
On December 17, 1996, representatives of senior management and the
financial advisors of the two companies met in Boston and reviewed the business
and prospects of the two companies. Mr. Nicholas and Mr. Bang met alone after
the meeting to review the information exchanged and to discuss scheduling and
organizational issues. Following this meeting, the parties began to exchange
non-public information and documents. This process continued up to the execution
of the Merger Agreement. Before and after the December 17 meeting, the parties'
financial advisors held periodic discussions regarding valuation issues and
other terms of the potential transaction.
On December 20, 1996, the Target Board held a special meeting by conference
telephone. Mr. Bang reviewed the status of discussions with Boston Scientific
regarding the possible combination of the companies. He noted that the parties
had signed confidentiality agreements with standstill provisions dated as of
November 27, 1996. He then discussed the business due diligence session held on
December 17, 1996, and the subsequent meeting that evening between Mr. Bang and
Mr. Nicholas. The Target Board then reviewed and discussed possible valuations
for the company, business strategies, reasons for the proposed transaction,
possible transaction structures, terms and pricing mechanisms and other
potential acquirors. Mr. Bang noted that he had been informed by Target's
financial advisor that another potential party had expressed interest in
scheduling a meeting to discuss a possible transaction. The Target Board
unanimously authorized Mr. Bang to continue discussions with Boston Scientific.
On December 27, 1996, the Target Board held a special meeting by conference
telephone. The Board unanimously agreed to form a Strategic Transaction
Committee, consisting of directors Mr. Bang, Bill Davis and Richard Egen, to
assist management in the negotiation of the possible transaction with Boston
Scientific and/or any other potential transaction party. The Target Board noted
that the appointment of the Committee was intended solely to facilitate the
process by using a smaller group of directors, experienced in major merger and
acquisition transactions, which could be convened more easily and quickly than
the full Target Board. At this meeting, Goldman Sachs reviewed the status of the
discussions with Boston Scientific and discussed with the Target Board various
approaches to structuring the purchase price, as well as the implications of the
different mechanisms. The Target Board also authorized management to schedule a
meeting with the other potential transaction party. This meeting was cancelled
by mutual agreement of Target and the other potential transaction party after
the execution and announcement of the Merger Agreement.
On January 4, 1997, Target's Strategic Transaction Committee met by
conference telephone to review the status of discussions with Boston Scientific.
Dr. Charles M. Strother, the Chairman of the Board of Target, also attended this
meeting. The Committee and Goldman Sachs discussed issues including timing,
scheduling and risks. The Strategic Transaction Committee also reviewed the
potential dilutive effects of the proposed transaction to Boston Scientific's
earnings per share and potential stock market reaction to an announcement
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by Boston Scientific of the proposed transaction. Management also discussed the
potential synergies of a combination of Target with Boston Scientific and with
the other potential strategic transaction partner previously identified to the
Target Board and the Committee.
The Strategic Transaction Committee met on January 11, 1997, via conference
telephone. Dr. Strother also attended this meeting. Goldman Sachs and Target's
legal advisor reviewed various issues relating to the status of Target's
discussions with Boston Scientific and the proposed terms of the merger.
On January 7 and 13, 1997, Mr. Nicholas and Mr. Bang spoke by telephone
regarding the terms of the merger. On January 9, 10 and 11, the parties and
their financial advisors spoke concerning valuation issues. Between January 10
and 16, the parties and their financial advisors held telephone negotiations on
the terms of the transaction and scheduling issues.
On January 14, 1997, the Target Board held a special meeting in Chicago to
review with Target's management and financial and legal advisors the status of
the proposed transaction. Target's financial and legal advisors summarized the
status of negotiations and the results of the management due diligence review of
Boston Scientific. Goldman Sachs then presented a financial analysis (using
earnings estimates for Target prepared by its management and earnings estimates
for Boston Scientific based on certain publicly available information) of Boston
Scientific and Target and the proposed transaction, and Goldman Sachs and
Target's legal counsel reviewed the current draft of the Merger Agreement and
summarized certain of its key provisions.
From January 16 through January 20, 1997, senior management representatives
and counsel and financial advisors for both companies met in San Francisco to
negotiate the Merger Agreement. During this period, representatives of the
senior management of the parties, their counsel and their financial advisors met
and exchanged additional non-public information and documents. Also on January
16, the Boston Scientific Board held a special meeting and approved the form and
terms of the Merger Agreement, and took related actions, subject to the approval
of the Target Board. Between January 17 and 19, 1997, the parties concluded
negotiations concerning the terms the transaction.
On January 20, 1997, the Target Board held a special meeting via conference
telephone. At the meeting, Goldman Sachs, following a review of its financial
analysis of the transaction, delivered to the Target Board its oral opinion that
the Exchange Ratio pursuant to the Merger Agreement was fair to the holders of
Target Common Stock. See "The Merger -- Opinion of Financial Advisor to Target."
Target's legal counsel reviewed the final draft of the Merger Agreement and the
resolution of previously outstanding issues relating to the Merger Agreement.
After considering the presentations of its financial and legal advisors and the
factors described in "The Merger -- Target's Reasons for the Merger;
Recommendation of Target's Board of Directors," the Target Board unanimously (a)
determined that the terms of the Merger were fair to, and in the best interests
of, the holders of Target Common Stock, (b) approved the terms of the Merger
Agreement and authorized Target's officers to execute the Merger Agreement and
to undertake all acts necessary or desirable to complete the Merger, (c)
recommended approval of the Merger Agreement by the holders of Target Common
Stock, and (d) ratified and approved all actions taken previously by Target's
officers and directors in connection with the Merger. In addition, the Target
Board amended the Preferred Shares Rights Agreement, dated September 21, 1994,
between Target and The First National Bank of Boston, as the Rights Agent, as
amended on May 7, 1996, to exclude the Merger from its operation and approved
certain amendments to Change of Control Agreements between Target and its
officers to conform such agreements to the terms adopted and approved by the
Target Board at its meeting of May 8, 1996.
On January 20, 1997, the Merger Agreement was executed.
BOSTON SCIENTIFIC'S REASONS FOR THE MERGER
The Boston Scientific Board has determined that the Merger Agreement and
the transactions contemplated thereby are fair to, and in the best interests of,
Boston Scientific. Accordingly, the Boston Scientific Board has unanimously
approved the Merger Agreement. In reaching its determination, the Boston
Scientific
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Board consulted with Boston Scientific's management, as well as its legal
counsel and financial advisor, and considered a number of factors, including,
without limitation, the following:
1. The Boston Scientific Board believes that its customers are seeking
to do business with fewer vendors and only those suppliers that can deliver
a high volume of broad-based technologies that are truly cost-effective,
and where possible, improve outcomes. The Merger responds to the changing
needs of this evolving customer base by filling gaps in Boston Scientific's
existing catheter product line, thereby allowing the combined company to
offer one of the broadest product lines in the world for less invasive
diagnosis and therapy.
2. The Boston Scientific Board believes that combining Boston
Scientific and Target will create a company that is better positioned than
either company would be separately to adapt to, and benefit from,
technological and other developments in less invasive diagnosis and therapy
resulting in the acceleration of product and technological innovation. In
addition, the Boston Scientific Board believes that the Merger will help to
achieve a speedier development of the products and markets on which Target
is focused.
3. The Boston Scientific Board believes that the Merger will offer
potential cost advantages through the consolidation and integration of
certain manufacturing, distribution and administrative operations and
functions. The Boston Scientific Board also believes that the Merger will
result in greater sales of Target's products because of Boston Scientific's
more extensive marketing and sales organization and its larger network of
established customers for less invasive diagnosis and therapy.
4. The Boston Scientific Board believes that the changing health care
environment, including the increasing emphasis on cost containment, the
emergence of large managed-care buying groups, the consolidation of
hospitals and other providers and the potential for increased federal
regulation, requires a successful medical device company to have a certain
strategic mass to compete effectively in the market and to absorb the
pressures of the managed-care structure. This belief is supported by the
consolidation and refocusing taking place among manufacturers and suppliers
of pharmaceuticals and medical devices. This Merger is expected to assist
the combined company to achieve the necessary strategic mass.
In view of the wide variety of factors considered by the Boston Scientific
Board, it did not find it practicable to quantify or otherwise attempt to assign
relative weights to the specific factors considered in making its determination.
Consequently, the Boston Scientific Board did not quantify the assumptions and
results of its analysis in reaching its determination that the Merger is fair
to, and in the best interest of, Boston Scientific.
TARGET'S REASONS FOR THE MERGER; RECOMMENDATION OF TARGET'S BOARD OF DIRECTORS
The Target Board has determined that the terms of the Merger Agreement and
the transactions contemplated thereby are fair to, and in the best interests of,
Target and its stockholders. Accordingly, the Target Board has unanimously
approved the Merger Agreement and recommends unanimously that the stockholders
of Target vote FOR adoption of the Merger Agreement. In reaching its
determination, the Target Board consulted with Target's management, as well as
its legal counsel and financial advisor, and considered the following material
factors:
1. the opportunity that the Merger affords Target's stockholders to
reduce their exposure to the risks inherent in Target's reliance on a
limited number of products, primarily in the international neuroradiology
market, and the difficulties in competing against larger companies with
more diversified product lines and greater financial resources, and the
fact that the consideration per share of Target Common Stock appropriately
recognizes the significant value of Target's business;
2. the changing health care environment and the increasing emphasis on
cost containment, including the emergence of large managed care buying
groups and hospital consolidations;
3. the consolidation taking place among suppliers of medical devices
and equipment, which suggests that large companies will be better able to
compete in these industries and that it is an attractive time for smaller
companies to consider strategic alternatives;
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4. the fact that a number of Target's competitors in the
interventional neuroradiology market have already been acquired by large
medical device companies;
5. the possible opportunity for Target to gain greater market strength
and market recognition with the consolidating health care customer base by
combining with a large company; and the opportunity for Target as a result
of the Merger to offer its products as part of a broad range of medical
products and devices;
6. the ability the Merger affords Target to utilize the resources of
the combined companies to develop additional products and new applications
for existing products for customers and to develop those products more
rapidly;
7. potential revenue synergies, including the ability to market
Target's products through Boston Scientific's international distribution
channels and to sell Target's products together with Boston Scientific's
products;
8. potential cost synergies, through consolidation and integration of
certain manufacturing, distribution, sales and administrative operations
and functions;
9. the role that Target management, which the Target Board believes is
experienced and proven in interventional neuroradiology products, will play
in the overall management of the interventional neuroradiology business of
the combined company;
10. information concerning the financial performance and condition,
business operations and prospects of each of Boston Scientific and Target;
11. the fact that the Merger would allow holders of Target Common
Stock to retain an equity interest in the combined company and to achieve
greater liquidity than could be achieved by continuing to hold Target
Common Stock;
12. the Exchange Ratio and recent trading prices for Target Common
Stock and Boston Scientific Common Stock; and the fact that the
consideration per share of Target Common Stock that may be received under
the Merger Agreement represents a substantial premium over recent
historical trading prices of Target Common Stock and appropriately
recognizes the significant value of Target's business;
13. the likelihood of consummation of the Merger, including the terms
and conditions of the Merger Agreement, and the limited conditions to the
consummation of the Merger;
14. the relative lack of impediments to Target's ability to accept
another offer at a higher price included in the Merger Agreement;
15. the expectation that the Merger will be nontaxable to the
stockholders of Target for federal income tax purposes;
16. the financial analyses of Goldman Sachs described herein and the
oral opinion of Goldman Sachs that, as of January 20, 1997, the Exchange
Ratio was fair to the stockholders of Target (See "The Merger -- Opinion of
Financial Advisor to Target"); and
17. the opportunity for stockholders of Target to vote on whether to
adopt the Merger Agreement.
In view of the wide variety of factors considered by the Target Board, it
did not find it practicable to quantify, or otherwise attempt to assign relative
weights to, the specific factors considered in making its determination.
Consequently, the Target Board did not quantify the assumptions and results of
its analysis in reaching its determination that the Merger is fair to, and in
the best interests of, Target and its stockholders. THE TARGET BOARD UNANIMOUSLY
RECOMMENDS THAT TARGET STOCKHOLDERS VOTE FOR ADOPTION OF THE MERGER AGREEMENT.
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EFFECTIVE TIME
If the Merger Agreement is adopted by the requisite vote of Target's
stockholders and all other conditions to the Merger are satisfied or waived
(other than those conditions that can be satisfied on the closing date), the
Merger will be consummated and effected at the time of the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware (or
at such later time as agreed to by the parties to the Merger Agreement and
specified in such Certificate of Merger). The Merger Agreement provides that
Boston Scientific and Target will cause the Effective Time to occur as promptly
as practicable, but in no event later than the fifth business day following the
satisfaction or waiver of all of the conditions (other than those conditions
that can be satisfied on the closing date) set forth in the Merger Agreement.
The directors of Merger Sub immediately prior to the Effective Time will be the
initial directors of the Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and By-laws of the Surviving
Corporation, and the officers of Target immediately prior to the Effective Time
will be the initial officers of the Surviving Corporation, in each case until
their respective successors are duly elected or appointed and qualified. Subject
to the terms of the Merger Agreement concerning the indemnification of officers
and directors, at the Effective Time, (a) the Certificate of Incorporation of
the Surviving Corporation will be the Certificate of Incorporation of Merger Sub
as in effect immediately prior to the Effective Time, except that Article I
thereof will be amended as of the Effective Time to read as follows: "the name
of the Corporation is Target Therapeutics, Inc.," and (b) the By-laws of Merger
Sub, as in effect immediately prior to the Effective Time, will be the By-laws
of the Surviving Corporation until thereafter amended as provided by law, the
Certificate of Incorporation of the Surviving Corporation and such By-laws. See
"Risk Factors -- Conflicts of Interest." The Merger Agreement may be terminated
prior to the Effective Time by either Boston Scientific or Target in certain
circumstances, whether before or after adoption of the Merger Agreement by the
Target stockholders. See "Certain Provisions of the Merger
Agreement -- Termination."
CONVERSION OF SHARES OF TARGET COMMON STOCK
If the required adoption of the Merger Agreement by Target's stockholders
is obtained and all other conditions to the Merger are satisfied or waived, then
Merger Sub will be merged into Target, which will be the Surviving Corporation
and which will thereupon become a wholly owned subsidiary of Boston Scientific.
In the Merger, each share of Target Common Stock outstanding immediately prior
to the Effective Time (other than shares to be cancelled pursuant to the Merger
Agreement) will be converted into the right to receive 1.07 shares of Boston
Scientific Common Stock, and any cash to be paid in lieu of fractional shares of
Boston Scientific Common Stock. The Exchange Ratio is fixed and, accordingly,
will not vary with either increases or decreases in the price per share of
Boston Scientific Common Stock.
OPINION OF FINANCIAL ADVISOR TO TARGET
On January 20, 1997, Goldman Sachs delivered its oral opinion to the Board
of Directors of Target that as of the date of such opinion, the Exchange Ratio
pursuant to the Merger Agreement was fair to the holders of Target Common Stock.
Goldman Sachs confirmed its oral opinion by delivery of its written opinion
dated January 20, 1997.
THE FULL TEXT OF THE WRITTEN OPINION OF GOLDMAN SACHS DATED JANUARY 20,
1997, WHICH SETS FORTH ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON
THE REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED HERETO AS
EXHIBIT B TO THIS PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY
REFERENCE. STOCKHOLDERS OF TARGET ARE URGED TO, AND SHOULD, READ SUCH OPINION IN
ITS ENTIRETY.
In connection with this opinion, Goldman Sachs reviewed, among other
things, (i) the Merger Agreement; (ii) Annual Reports to Stockholders and Annual
Reports on Form 10-K of Target for the five fiscal years ended March 31, 1996;
(iii) certain interim reports to stockholders and Quarterly Reports on Form 10-Q
of Target; (iv) certain other communications from Target to its stockholders;
(v) certain internal financial analyses and forecasts for Target prepared by its
management; (vi) Annual Reports to Stockholders and Annual Reports on Form 10-K
of Boston Scientific for the four years ended December 31, 1995; (vii) certain
interim reports to stockholders and Quarterly Reports on Form 10-Q of Boston
Scientific; and
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(viii) certain other communications from Boston Scientific to its stockholders.
Goldman Sachs also held discussions with members of the senior management of
Target and Boston Scientific regarding the past and current business operations,
financial condition and future prospects of their respective companies. In
addition, Goldman Sachs reviewed the reported price and trading activity for the
Target Common Stock and Boston Scientific Common Stock, compared certain
financial and stock market information for Target and Boston Scientific with
similar information for certain other companies the securities of which are
publicly traded, reviewed the financial terms of certain recent business
combinations in the medical device industry specifically and in other industries
generally and performed such other studies and analyses as it considered
appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial and other information reviewed by it and assumed such accuracy and
completeness for purposes of its opinion. Boston Scientific did not make
available to Goldman Sachs its projections of expected future performance.
Accordingly, Goldman Sachs' review with respect to such information was limited
to discussions with management of Boston Scientific of research analysts'
estimates for 1996 and 1997. In addition, Goldman Sachs has not made an
independent evaluation or appraisal of the assets and liabilities of Target or
Boston Scientific or any of their respective subsidiaries and Goldman Sachs has
not been furnished with any such evaluation or appraisal. Goldman Sachs did not
solicit other bids or offers for Target. Goldman Sachs' opinion does not
constitute a recommendation as to how any holder of Target Common Stock should
vote with respect to such transaction.
The following is a summary of certain of the financial analyses used by
Goldman Sachs in connection with providing its oral opinion to Target's Board of
Directors on January 20, 1997. Goldman Sachs utilized substantially the same
type of financial analyses in connection with providing the written opinion
attached hereto as Exhibit B.
(i) Historical Stock Trading Analysis. Goldman Sachs reviewed the
historical trading prices and volumes for the Target Common Stock. Such
analysis indicated that the price per share of Target Common Stock to be
paid pursuant to the Merger Agreement represented a premium of 63.7% based
on the Exchange Ratio pursuant to the Merger Agreement and a price of
$46.75 per share of Target Common Stock (the per share closing price of
Target on January 17, 1997) and $71.50 per share of Boston Scientific (the
per share closing price of Boston Scientific on January 17, 1997).
(ii) Selected Companies Analysis. Goldman Sachs reviewed and compared
certain financial information relating to Target and Boston Scientific to
corresponding financial information, ratios and public market multiples for
two groups of publicly traded corporations: C. R. Bard, Inc., Guidant
Corporation, Medtronic, Inc., St. Jude Medical, Inc., Thermo Cardiosystems
Inc., Johnson & Johnson, Pfizer Inc., Becton, Dickinson and Company, and
Abbott Laboratories (the "Large Cap Selected Companies") and Arterial
Vascular Engineering, Inc., Arrow International, Inc., CardioThoracic
Systems, Inc., Endosonics Corporation, Heartport, Inc., InControl, Inc.,
Physio-Control International Corporation, PLC Systems Inc., and Ventritex,
Inc. (the "Small and Medium Cap Selected Companies"). The Large Cap
Selected Companies were chosen because they are publicly-traded companies
with operations that for purposes of analysis may be considered similar in
certain respects to Target and Boston Scientific and the Small and Medium
Cap Selected Companies were chosen because they are publicly-traded
companies with operations that for purposes of analysis may be considered
similar in certain respects to Target. Goldman Sachs calculated and
compared various financial multiples and ratios. The multiples of Target
and Boston Scientific were calculated using a price of $46.75 per share of
Target Common Stock and a price of $71.50 per share of Boston Scientific
Common Stock, the respective closing prices of the Target Common Stock on
the Nasdaq and the Boston Scientific Common Stock on the NYSE on January
17, 1997, the last full trading day prior to the date that the Merger
Agreement was executed. The multiples and ratios for Target and Boston
Scientific and for each of the Large Cap Selected Companies and Small and
Medium Cap Selected Companies were based on the most recent publicly
available information. This analysis showed, among other things, that (i)
the price/earnings ratios using estimated 1997 earnings (based on
Institutional Brokers Estimate System ("IBES") estimates as of January 17,
1997, calendarized to a December year end) of the Large Cap Selected
Companies and the Small and Medium Cap Selected Companies ranged from 13.9x
to 58.0x and 18.5x to 362.5x, respectively, compared to 40.7x for Target
and 33.3x for Boston Scientific, (ii) the
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price/earnings ratios using estimated 1998 earnings (based on IBES
estimates as of January 17, 1997, calendarized to a December year end) of
the Large Cap Selected Companies and the Small and Medium Cap Selected
Companies ranged from 12.5x to 31.5x and 14.9x to 32.7x, respectively,
compared to 31.2x for Target and 26.3x for Boston Scientific, and (iii) the
five-year earnings per share ("EPS") growth rate (provided by IBES) of the
Large Cap Selected Companies and the Small and Medium Cap Selected
Companies ranged from 11.5% to 20.0% and 17.8% to 100.0%, respectively,
compared to 30.0% for Target and 25.0% for Boston Scientific.
(iii) Discounted Cash Flow Analysis. Goldman Sachs performed a
discounted cash flow analysis under the following two scenarios: (a) using
the management of Target's projections through fiscal year 2002 (the "First
Management Case") and (b) using the management of Target's projections
through fiscal year 2000 (the "Second Management Case").
Goldman Sachs calculated a net present value of free cash flows for
the fiscal years 1997 through 2002 using discount rates ranging from 25% to
40%. Goldman Sachs calculated Target's terminal values in fiscal year 2002
based on forward price/earnings multiples ranging from 20x to 30x. These
terminal values were then discounted to present value using discount rates
ranging from 25% to 40%. Using Target's terminal values in fiscal year 2002
based on forward price/earnings multiples ranging from 20x to 30x and
discounting these terminal values to present value using discount rates
ranging from 25% to 40%, the implied per share values of Target Common
Stock ranged from $45.77 to $113.07 in the First Management Case.
Goldman Sachs calculated a net present value of free cash flows for
the fiscal years 1997 through 2000 using discount rates ranging from 19% to
25%. Goldman Sachs calculated Target's terminal values in fiscal year 2000
based on forward price/earnings multiples ranging from 20x to 30x. These
terminal values were then discounted to present value using discount rates
ranging from 19% to 25%. Using Target's terminal values in fiscal year 2000
based on forward price/earnings multiples ranging from 20x to 30x and
discounting these terminal values to present value using discount rates
ranging from 19% to 25%, the implied per share values of Target Common
Stock ranged from $40.06 to $66.21 in the Second Management Case.
(iv) Selected Acquisitions Analysis. Goldman Sachs analyzed certain
information relating to selected acquisitions in the medical device
industry since 1990 in which the aggregate consideration was greater than
$750 million (the "Selected Acquisitions"). Such analysis indicated that
for the Selected Acquisitions (i) levered aggregate consideration as a
multiple of latest twelve month ("LTM") sales ranged from 1.6x to 5.2x,
with a mean of 3.2x, as compared to 13.5x for the levered aggregate
consideration to be received in the Merger, (ii) the multiple of LTM net
income ranged from 20.7x to 28.4x, with a mean of 25.5x, as compared to
91.2x for the equity consideration to be paid in the Merger, (iii) levered
aggregate consideration as a multiple of LTM earnings before interest and
taxes ("EBIT") ranged from 12.0x to 27.8x, with a mean of 17.2x, as
compared to 68.1x for the levered aggregate consideration to be paid in the
Merger, and (iv) the percentage premium paid based on the stock prices of
the companies involved four weeks prior to announcement of the acquisition
(as provided by Securities Data Corporation) ranged from 22.1% to 46.2%,
with a mean of 27.1%, as compared to the 63.7% premium being paid for
Target Common Stock pursuant to the Merger Agreement.
(v) Pro Forma Merger Analysis. Goldman Sachs prepared pro forma
analyses of the financial impact of the Merger. Using calendarized earnings
estimates for Target prepared by its management and earnings estimates for
Boston Scientific based on median IBES estimates for the years 1997, 1998
and 1999, Goldman Sachs compared the EPS of Boston Scientific Common Stock,
on a standalone basis, to the EPS of the common stock of the combined
companies on a pro forma basis under the following three scenarios: (a)
before taking into account estimates by the managements of Boston
Scientific and/or Target of potential pre-tax synergies (the "No Synergies
Case"), (b) assuming the recognition of $20.5 million of synergies in 1997
and $41 million in each of 1998 and 1999 (the "High Synergies Case"), and
(c) assuming the recognition of $17.9 million of synergies in each of 1997,
1998 and 1999 (the "Low Synergies Case"). The analyses assume that the
Merger and the realization of synergies occurred on
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January 1, 1997. Goldman Sachs assumed that the Merger would be accounted
for using "pooling-of-interests" accounting. Goldman Sachs performed this
analysis based on a price of $71.50 per share of Boston Scientific (the per
share price of Boston Scientific on January 17, 1997). Based on such
analyses, the proposed transaction would provide EPS dilution of 4.3%, 4.2%
and 3.9% to Boston Scientific's stockholders in 1997, 1998 and 1999,
respectively, in the No Synergies Case, dilution of 1.1% to Boston
Scientific's stockholders in 1997 and accretion 0.8% and 0.0% to Boston
Scientific's stockholders in 1998 and 1999, respectively, in the High
Synergies Case, and dilution of 1.5%, 2.0% and 2.2% to Boston Scientific's
stockholders in 1997, 1998 and 1999, respectively, in the Low Synergies
Case.
(vi) Contribution Analysis. Goldman Sachs reviewed certain historical
and estimated future operating and financial information (including, among
other things, sales, EBIT and net income for Target and Boston Scientific
and the pro forma combined entity resulting from the Merger based, in the
case of Target, on the management of Target's financial projections
calendarized, and, in the case of Boston Scientific, on the most current
research analyst estimates of sales and EBIT projections of Boston
Scientific (dated as of October 14, 1996) and IBES estimates of net income
projections of Boston Scientific. The analysis indicated that the
stockholders of Target would receive 8.9% of the outstanding common equity
of the combined companies after the Merger (based on the Exchange Ratio).
Goldman Sachs also analyzed the relative income statement contribution of
Target and Boston Scientific to the combined companies on a pro forma basis
before taking into account any of the possible benefits that may be
realized following the Merger based on estimated calendarized years 1996,
1997, 1998 and 1999, based on financial data with respect to Target
provided to Goldman Sachs by Target and certain publicly available
information with respect to Boston Scientific. This analysis indicated that
Target would have contributed 5.6%, 5.8%, 6.0% and 6.4% to combined sales,
4.0%, 4.0%, 4.3% and 4.6% to combined EBIT, and 4.9%, 4.8%, 4.9% and 5.2%
to combined net income in estimated calendar years 1996, 1997, 1998 and
1999, respectively.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of all such analyses. No company or
transaction used in the above analyses as a comparison is directly comparable to
Target or Boston Scientific or the contemplated transaction. The analyses were
prepared solely for purposes of Goldman Sachs' providing its opinion to the
Target Board of Directors as to the fairness of the Exchange Ratio pursuant to
the Merger Agreement to the holders of Target Common Stock and do not purport to
be appraisals or necessarily reflect the prices at which businesses or
securities actually may be sold. Analyses based upon forecasts of future results
are not necessarily indicative of actual future results, which may be
significantly more or less favorable than suggested by such analyses. Because
such analyses are inherently subject to uncertainty, being based upon numerous
factors or events beyond the control of the parties or their respective
advisors, none of Target, Boston Scientific, Goldman Sachs or any other person
assumes responsibility if future results are materially different from those
forecasted. As described above, Goldman Sachs' opinion to the Board of Directors
of Target was one of many factors taken into consideration by the Target Board
of Directors in making its determination to approve the Merger Agreement. The
foregoing summary does not purport to be a complete description of the analysis
performed by Goldman Sachs and is qualified by reference to the written opinion
of Goldman Sachs set forth in Exhibit B hereto.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements,
and valuations for estate, corporate and other purposes. Goldman Sachs is
familiar with Target having acted as its financial advisor in connection with,
and having participated in certain of the negotiations leading to, the Merger
Agreement. Goldman Sachs have also provided certain investment banking services
to Boston Scientific from time to time including acting as lead managing
underwriter of its initial public offering in 1992 and may provide investment
banking services to Boston Scientific in the future. Target selected Goldman
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Sachs as its financial advisor because it is a nationally recognized investment
banking firm that has substantial experience in transactions similar to the
Merger.
Goldman Sachs provides a full range of financial, advisory and brokerage
services and in the course of its normal trading activities may from time to
time effect transactions and hold positions in the securities or options on
securities of Target and/or Boston Scientific for its own account and for the
account of customers. As of January 20, 1997, for its own account, Goldman Sachs
was short 284,776 shares of Boston Scientific Common Stock and long 4,000 call
option contracts to purchase Boston Scientific Common Stock and long 6,000 put
option contracts to sell Boston Scientific Common Stock.
Pursuant to a letter agreement dated November 8, 1996 (the "Engagement
Letter"), Target engaged Goldman Sachs to act as its financial advisor in
connection with the possible sale of Target. Pursuant to the terms of the
Engagement Letter, Target has agreed to pay Goldman Sachs upon consummation of
the Merger a transaction fee of 0.75% of the aggregate consideration paid in the
Merger. Target has agreed to reimburse Goldman Sachs for its reasonable
out-of-pocket expenses, including attorney's fees, and to indemnify Goldman
Sachs against certain liabilities, including certain liabilities under the
federal securities laws.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary describes the material federal income tax
consequences of the Merger to Boston Scientific, Target and holders of Target
Common Stock who are citizens or residents of the United States. It does not
discuss all the tax consequences that may be relevant to Target stockholders in
special tax situations (such as insurance companies, financial institutions,
dealers in securities, tax-exempt organizations or non-U.S. persons) or to
Target's stockholders who acquired their shares of Target Common Stock pursuant
to the exercise of employee stock options or warrants, or otherwise as
compensation. The summary also does not discuss tax consequences to holders of
outstanding Target warrants or stock options.
Neither Boston Scientific nor Target has requested a ruling from the
Internal Revenue Service (the "IRS") with regard to any of the federal income
tax consequences of the Merger, and the opinion of counsel to Target as to the
federal income tax consequences of the Merger set forth in the next paragraph
will not be binding on the IRS.
Venture Law Group, outside counsel to Target, is of the opinion that, under
present federal income tax law, and based on (i) the receipt prior to the
Effective Time of certain representations of Boston Scientific, Target and
Collagen Corporation (a significant stockholder of Target), in form and
substance satisfactory to Venture Law Group, (ii) the assumption that the
continuity of interest requirement (described below) will be satisfied, and
(iii) the assumption that the Merger and related transactions will take place as
described in the Merger Agreement, the Merger will constitute a reorganization
for federal income tax purposes within the meaning of Section 368(a) of the
Code. Under the Merger Agreement, it is a condition precedent to Target's
obligation to consummate the Merger that Venture Law Group deliver to Target an
opinion to the effect of the foregoing, and, if the condition is not waived by
Target, a copy of such opinion to Boston Scientific, prior to the Effective
Time. To satisfy the "continuity of interest" requirement, Target stockholders
must not, pursuant to a plan or intent existing at or prior to the Merger,
dispose of or transfer so much of either (i) their Target Common Stock in
anticipation of the Merger or (ii) the Boston Scientific Common Stock to be
received in the Merger such that Target stockholders, as a group, would no
longer have a significant equity interest in the Target business being conducted
after the Merger. No assurance can be made that the "continuity of interest"
requirement will be satisfied.
Provided that the Merger qualifies as a reorganization, (i) no gain or loss
will be recognized by Target's stockholders upon the conversion of their shares
of Target Common Stock into shares of Boston Scientific Common Stock pursuant to
the terms of the Merger (except to the extent cash is received in lieu of
fractional shares), (ii) the tax basis of the shares of Boston Scientific Common
Stock into which shares of Target Common Stock are converted pursuant to the
Merger (including any fractional shares of Boston Scientific Common Stock deemed
received) will be the same as the tax basis of such Target Common Stock
exchanged therefor, and (iii) the holding period for shares of Boston Scientific
Common Stock into which shares of Target Common Stock are converted pursuant to
the Merger will include the period that such shares of Target
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Common Stock were held by the holder, provided that such shares were held as a
capital asset by the holder at the Effective Time. In addition, neither Boston
Scientific nor Target will recognize any taxable gain or loss as a result of the
Merger.
Any Target stockholder who receives cash in lieu of a fractional share of
Boston Scientific Common Stock will be treated for federal income tax purposes
as if the cash was received in payment for a fractional share, and such Target
stockholder will therefore recognize gain or loss equal to the difference
between the cash received and such stockholder's tax basis in the fractional
share. If such Target Common Stock was held as a capital asset, the gain or loss
will be capital gain or loss if the payment is considered substantially
disproportionate or not essentially equivalent to a dividend under Section
302(b) of the Code.
A successful IRS challenge to the reorganization status of the Merger (as a
result of a failure of the "continuity of interest" requirement or otherwise)
would result in Target stockholders recognizing taxable gain or loss with
respect to each share of Target Common Stock surrendered equal to the difference
between the stockholder's basis in such share and the fair market value, as of
the Effective Time, of the Boston Scientific Common Stock received in exchange
therefor. In such event, a stockholder's aggregate basis in the Boston
Scientific Common Stock so received would equal fair market value of such stock
as of the Effective Time, and the stockholder's holding period for such stock
would begin the day after the Merger.
THE DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY.
THE DISCUSSION IS BASED ON CURRENTLY EXISTING PROVISIONS OF THE CODE, EXISTING
AND PROPOSED TREASURY REGULATIONS THEREUNDER AND CURRENT ADMINISTRATIVE RULINGS
AND COURT DECISIONS. ALL THE FOREGOING IS SUBJECT TO CHANGE, AND ANY SUCH CHANGE
COULD AFFECT THE CONTINUING VALIDITY OF THIS DISCUSSION. NO INFORMATION IS
PROVIDED HEREIN WITH RESPECT TO THE TAX CONSEQUENCES, IF ANY, OF THE MERGER
UNDER APPLICABLE FOREIGN, STATE AND LOCAL LAWS. TARGET'S STOCKHOLDERS ARE URGED
TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF
THE MERGER, INCLUDING TAX RETURN REPORTING REQUIREMENTS, THE APPLICABILITY AND
EFFECT OF FOREIGN, STATE, LOCAL AND OTHER APPLICABLE TAX LAWS AND THE POSSIBLE
EFFECT OF ANY PROPOSED CHANGES IN THE TAX LAWS.
ACCOUNTING TREATMENT
The Merger will be accounted for using the "pooling-of-interests" method of
accounting pursuant to Opinion No. 16 of the Accounting Principles Board. The
"pooling-of-interests" method of accounting is intended to present as a single
interest two or more common stockholder interests which were previously
independent. The "pooling-of-interests" method of accounting assumes that the
combining companies have been merged from inception. Consequently, the
historical financial statements for periods prior to consummation of the Merger
are restated as though the companies had been combined. See "The
Merger -- Conditions to the Consummation of the Merger" and "Unaudited Pro Forma
Combined Condensed Financial Information."
Under the Merger Agreement, Target and Boston Scientific must use their
best efforts to cause the Merger to qualify, and will not take any actions which
could prevent the Merger from qualifying, for "pooling-of-interests" accounting
treatment. In addition, it is a condition precedent to the Merger that Boston
Scientific and Target receive letters from Ernst & Young LLP regarding that
firm's concurrence with Boston Scientific management's and Target management's
conclusions, as to the appropriateness of "pooling-of-interests" accounting for
the Merger, under Accounting Principles Board No. 16, if closed and consummated
in accordance with the terms of the Merger Agreement. See "Certain Provisions of
the Merger Agreement -- Conditions to Consummation of the Merger."
RESALE OF BOSTON SCIENTIFIC COMMON STOCK; AGREEMENTS WITH AFFILIATES OF TARGET
AND BOSTON SCIENTIFIC
The shares of Boston Scientific Common Stock to be issued in the Merger
will be registered under the Securities Act on a registration statement of which
this Proxy Statement/Prospectus is a part (the
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"Registration Statement"), thereby allowing such shares of Boston Scientific
Common Stock to be traded without restriction by all holders not deemed to be
affiliates of Target prior to the consummation of the Merger.
Target has obtained from each principal executive officer, each director
and each other person who may be deemed to be an affiliate of Target as of the
date of the Merger Agreement an agreement (a "Target Affiliates Agreement")
pursuant to which, among other things, such person has agreed not to sell,
transfer or otherwise reduce risk with respect to any shares of Target Common
Stock or Boston Scientific Common Stock during the 30-day period immediately
preceding the Effective Time and until such time after the Effective Time as
Boston Scientific has publicly released a report including the combined
financial results of Boston Scientific and Target for a period of at least 30
days of combined operations of Boston Scientific and Target within the meaning
of Accounting Series Release No. 130, as amended, of the Commission. Compliance
with the Target Affiliates Agreement is an element required for the Merger to be
accounted for as a "pooling-of-interests."
Boston Scientific has obtained from each person who may be deemed to be an
affiliate of Boston Scientific as of the date of the Merger Agreement an
agreement (a "Boston Scientific Affiliates Agreement") pursuant to which, among
other things, such person has agreed not to sell, transfer or otherwise reduce
risk with respect to any shares of Target Common Stock or Boston Scientific
Common Stock during the 30-day period immediately preceding the Effective Time
and until such time after the Effective Time as Boston Scientific has publicly
released a report including the combined financial results of Boston Scientific
and Target for a period of at least 30 days of combined operations of Boston
Scientific and Target within the meaning of Accounting Series Release No. 130,
as amended, of the Commission. Compliance with the Boston Scientific Affiliates
Agreement is an element required for the Merger to be accounted for as a
"pooling-of-interests."
It is a condition of the Merger that Boston Scientific receive a Target
Affiliates Agreement and Target receive a Boston Scientific Affiliates Agreement
from each person who becomes an affiliate of Target or Boston Scientific between
the date of the Merger Agreement and the Effective Time.
REGULATORY APPROVALS
The Merger is subject to the requirements of the HSR Act and the rules
promulgated thereunder by the FTC, which prohibit consummation of the Merger
unless notice has been given and certain information has been furnished to the
Antitrust Division and the FTC and certain waiting period requirements have been
satisfied.
Boston Scientific and Target each filed notification and report forms under
the HSR Act with the FTC and the Antitrust Division on January 28, 1997. The
required waiting period under the HSR Act expired on February 27, 1997.
Nevertheless, at any time before or after the Effective Time, the FTC or the
Antitrust Division could take such action under federal antitrust laws as it
deems necessary or desirable in the public interest, including seeking to enjoin
the Merger or seeking the divestiture of Target by Boston Scientific, in whole
or in part, or the divestiture of substantial assets of Boston Scientific, its
subsidiaries or Target. State Attorneys General and private parties may also
bring legal actions under the federal or state antitrust laws under certain
circumstances. Based on an examination of information available to Boston
Scientific and Target relating to the businesses in which Boston Scientific, its
subsidiaries and Target are engaged, Boston Scientific and Target believe that
consummation of the Merger will not violate any antitrust laws. There can be no
assurance, however, that a challenge to the proposed Merger on antitrust grounds
will not be made or, if such a challenge is made, that Boston Scientific and
Target will prevail.
Neither Boston Scientific nor Target is aware of any other governmental
approvals or actions that may be required for consummation of the Merger, except
for the filing and recordation of appropriate Merger documents as required by
the DGCL. Pursuant to the Merger Agreement, Boston Scientific and Target each
have agreed to use reasonable best efforts to do all things necessary, proper or
advisable to consummate the transaction contemplated by the Merger Agreement as
promptly as possible. Boston Scientific and Target have agreed to use their
reasonable best efforts to obtain in a timely manner from any governmental
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authorities any consents, licenses, permits, waivers, approvals, authorizations
or orders required to be obtained or made by Boston Scientific or Target or any
of their subsidiaries in connection with the authorization, execution and
delivery of the Merger Agreement and the consummation of the Merger.
STOCK EXCHANGE LISTING
Boston Scientific will file an application to list the shares of Boston
Scientific Common Stock to be issued in connection with the Merger on the NYSE.
Such listing is a condition to consummation of the Merger.
CONFLICTS OF INTEREST
In considering the recommendation of the Target Board with respect to the
Merger Agreement and the transactions contemplated thereby, stockholders of
Target Common Stock should be aware that certain members of Target's management
and of the Target Board have interests in the Merger that are in addition to the
interest of Target stockholders generally.
Change of Control Agreements. Target has entered into change of control
agreements with the following officers of Target: Gary R. Bang, President and
Chief Executive Officer, and Richard Cappetta, Jeani Delagardelle, William H.
Dippel, Ray H. Dormandy, Jr., Erik Engelson, John Meyer, Timothy Mills, Kevin
Riley, Patrick Rivelli, Hiram Chee, John G. Schulte, Abhijit Acharya, and Robert
McNamara (each, other than Mr. Bang, a "Change of Control Officer"). The
agreements provide for certain benefits in the event of a Change of Control (as
defined below) and in the event that Mr. Bang's or a Change of Control Officer's
employment with Target is terminated at any time within two years after a Change
of Control (as defined below).
Under his change of control agreement, if Mr. Bang is terminated as a
result of an Involuntary Termination (as defined below) other than for Cause (as
defined below), he will be entitled to receive payments for two years equal to
the salary and bonus he was entitled to receive prior to the Change of Control.
If a Change of Control Officer is terminated under such conditions, such officer
will be entitled to receive payments for one year equal to the salary and bonus
he or she was entitled to receive prior to the Change of Control. In addition,
Mr. Bang and each Change of Control Officer will be entitled to receive a pro
rata portion of his or her target bonus for the fiscal year in which the
Involuntary Termination occurs. Mr. Bang will also be entitled to receive
certain employee benefits for two years, and all the Change of Control Officers
will be entitled to receive benefits for one year after such Involuntary
Termination. Mr. Bang and each Change of Control Officer will also be entitled
to receive certain outplacement services. Because there will be a change in the
job duties, responsibilities and requirements of Mr. Bang as a result of the
Merger, any termination of his employment by Mr. Bang will be treated as an
Involuntary Termination other than for Cause.
Under the terms of an earlier agreement between Target and Mr. Bang, which
was memorialized in resolutions of the Target Board dated April 30, 1993, all
unvested Target Options granted to Mr. Bang will immediately vest on the date of
a Change of Control, including the Merger. In addition, unvested Target Options
granted to Robert McNamara, Target's Chief Financial Officer, pursuant to the
initial agreement between Target and Mr. McNamara on the commencement of his
employment with Target, will immediately vest on the date of a change of
control, including the Merger. In the event of a transaction in which one person
becomes the beneficial owner of 50% or more of Target's outstanding voting
securities without the approval of the Target Board, all unvested Target Options
granted to a Change of Control Officer will also immediately vest on the date of
such transaction. In the event of any other transaction resulting in a Change of
Control, including the Merger, one-half of all unvested Target Options granted
to any Change of Control Officer (other than certain Target Options granted to
Mr. McNamara on the commencement of his employment) will immediately vest on the
date of such Change of Control. The remaining unvested Target Options held by
such officer will vest at the same rate provided for in the agreement pursuant
to which the options were granted. Additionally, if a Change of Control Officer
is terminated as a result of an Involuntary Termination other than for Cause,
such officer's Target Options will immediately vest.
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If any payments under the change of control agreements result in the
imposition of an excise tax under Section 4999 of the Code, such payments will
be reduced to the extent necessary to avoid the imposition of such excise tax.
The term "Involuntary Termination" of Mr. Bang or any Change of Control
Officer, as used in each agreement, includes any termination by Target other
than for Cause and Mr. Bang's or any of the Change of Control Officer's
voluntary termination in the following circumstances: a material reduction of
job duties inconsistent with Mr. Bang's or a Change of Control Officer's
position with Target and Mr. Bang's or a Change of Control Officer's prior
duties, responsibilities and requirements, a reduction of base salary that is
not part of a general decrease in base salaries for most officers of the
successor corporation, and refusal to relocate to a facility more than 30 miles
from Target's current location. Because there will be a change in the job
duties, responsibilities and requirements of Mr. Bang as a result of the Merger,
any termination of his employment will be treated as an Involuntary Termination
other than for Cause.
The term "Change of Control," as used in each agreement, includes the
following events: (i) any "Person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) is or becomes the "Beneficial Owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of
Target representing 15% or more of the total voting power represented by
Target's then outstanding voting securities without the approval of the Target
Board; (ii) a merger or consolidation of Target whether or not approved by the
Target Board, other than a merger or consolidation which would result in the
voting securities of Target outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 50% of the total voting power
represented by the voting securities of Target or such surviving entity
outstanding immediately after such merger or consolidation, or the shareholders
of Target approve a plan of complete liquidation of Target or an agreement for
the sale or disposition by Target of all or substantially all of Target's
assets; or (iii) a change in the composition of the Target Board, as a result of
which fewer than a majority of the directors are Incumbent Directors. The term
"Incumbent Directors," as used in each agreement, means those directors who
either are directors of Target as of the date of that agreement, or who are
elected or nominated for election to the Target Board with the affirmative votes
of at least a majority of the Incumbent Directors at the time of such election
or nomination. Incumbent Directors will not include any individual whose
election or nomination is in connection with an actual or threatened proxy
contest relating to the election of directors of Target.
The term "Cause," as used in each agreement, is defined as (i) gross
negligence or willful misconduct in the performance of Mr. Bang's or a Change of
Control Officer's duties to Target where such gross negligence or willful
misconduct has resulted or is likely to result in substantial and material
damage to Target or its subsidiaries, (ii) repeated unexplained or unjustified
absence from Target, (iii) a material and willful violation of any federal or
state law, (iv) commission of any act of fraud with respect to Target, or (v)
conviction of a felony or a crime involving moral turpitude causing material
harm to the standing and reputation of Target, in each case as determined in
good faith by the Target Board.
It is expected that Mr. Bang, Target and Boston Scientific will enter into
a an employment agreement (the "Employment Agreement") to become effective as of
the Effective Time. The Employment Agreement would supersede both Mr. Bang's
change of control agreement and the earlier agreement between Mr. Bang and
Target, which was memorialized in the resolutions of the Target Board dated
April 30, 1993. The terms of the Employment Agreement are substantially similar
to the terms of these earlier agreements, except that under the Employment
Agreement (i) Mr. Bang may not be terminated by Boston Scientific without cause
prior to December 31, 1997, (ii) five months' prior notice is required for
Boston Scientific or Mr. Bang to terminate Mr. Bang's employment and (iii) Mr.
Bang has agreed not to compete in the field of interventional neuroradiology for
a period of two (2) years following the Effective Date.
Director Stock Options. In accordance with the terms of the Target 1991
Directors Stock Option Plan (the "Directors Plan"), by virtue of the Merger, all
unvested Target Options granted held by non-employee directors under the
Directors Plan shall become immediately exercisable on the Effective Date of the
Merger.
Employee Benefits. The Merger Agreement provides that following the
Effective Time, Boston Scientific will grant all employees of Target and each
subsidiary of Target (each, a "Subsidiary") credit for all service (to the same
extent as service with Boston Scientific or any subsidiary of Boston Scientific
is taken into account with respect to similarly situated employees of Boston
Scientific and the subsidiaries of Boston
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Scientific) with Target and any Subsidiary and their respective predecessors
prior to the Effective Time for all purposes as if such service with Target or
any Subsidiary was service with Boston Scientific or any subsidiary of Boston
Scientific (provided, however, that no such past service credit will be granted
to the extent that it would result in duplicative accrual of benefits for the
same period of service), and, with respect to any medical or dental benefit
plan, Boston Scientific will waive any preexisting condition exclusions and
actively-at-work requirements (provided, however, that no such waiver will apply
to a pre-existing condition of any employee of Target or any Subsidiary who was,
as of the Effective Time, excluded from participation in an employee benefit
plan by virtue of such pre-existing condition) and provided that any covered
expenses incurred on or before the Effective Time by an employee or an
employee's covered dependent will be taken into account for purposes of
satisfying applicable deductible, coinsurance and maximum out-of-pocket
provisions after the Effective Time to the same extent as such expenses are
taken into account for the benefit of similarly situated employees of Boston
Scientific or subsidiaries of Boston Scientific. Boston Scientific will provide
or will cause Target and each Subsidiary to provide benefits to any employee of
Target and each Subsidiary which are not less favorable in the aggregate than
the benefits provided to similarly situated employees of Boston Scientific and
subsidiaries of Boston Scientific.
Employee Stock Purchase Plan. The Merger Agreement provides that Target
will take all actions necessary pursuant to the terms of the 1991 Employee Stock
Purchase Plan (the "ESPP") in order to shorten the offering period under such
plan which includes the Effective Time (the "Current Offering") such that a new
purchase date will occur prior to the Effective Time and shares of Target Common
Stock will be purchased by ESPP participants prior to the Effective Time. The
Current Offering will expire immediately following such new purchase date, and
the ESPP will terminate immediately prior to the Effective Time. Subsequent to
such new purchase date, Target will take no action, pursuant to the terms of the
ESPP, to commence any new offering period.
The Merger Agreement further provides that Boston Scientific will cause
each participant in the ESPP who becomes employed by Boston Scientific or any of
its subsidiaries to become eligible to participate in the Boston Scientific
employee stock purchase plan, with such eligibility to participate commencing no
later than the regular offering commencement date under such Boston Scientific
plan first occurring at least 30 days following the Effective Time; provided,
however, that if the period between the Effective Time and such regular offering
commencement date exceeds three months, then Boston Scientific will cause the
Boston Scientific employee stock purchase plan to be amended, to the extent
necessary, to allow ESPP participants to participate in such plan on the
earliest practicable date within such three-month period.
Indemnification; Insurance and Indemnification Agreements. Under the
Merger Agreement, Boston Scientific and the Surviving Corporation have agreed
that the indemnification obligations set forth in Target's Certificate of
Incorporation and Target's By-Laws, in each case as of the date of the Merger
Agreement, will survive the Merger (and, prior to the Effective Time, Boston
Scientific will cause the Certificate of Incorporation and By-Laws of Merger Sub
to include such provisions), and will not be amended, repealed or otherwise
modified after the Effective Time in any manner that would adversely affect the
rights thereunder of the individuals who on or at any time prior to the
Effective Time were entitled to indemnification thereunder. From and after the
Effective Time, such obligations will be the joint and several obligations of
the Boston Scientific and the Surviving Corporation and, by executing the Merger
Agreement, Boston Scientific hereby expressly assumed such obligations.
Additionally, the Surviving Corporation and Boston Scientific have agreed to
honor and fulfill in all respects the obligations of Target pursuant to
indemnification agreements with Target's directors and officers existing at or
before the Effective Time.
Directors' and Officers' Liability Insurance. Under the Merger Agreement,
the Surviving Corporation agreed to use its reasonable best efforts to maintain
in effect, for four years from and after the Effective Time, directors' and
officers' liability insurance policies covering the persons who are currently
covered in their capacities as such directors and officers by Target's current
directors' and officers' policies and on terms not materially less favorable
than the existing insurance coverage with respect to matters occurring prior to
the Effective Time; provided, however, that in no event will the Surviving
Corporation be required to expend pursuant to this provision more than an amount
per year equal to 200% of current annual premiums paid by Target for such
insurance (which premiums Target represented and warranted to be $227,000 in the
aggregate
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as of the date of the Merger Agreement); and provided further that if the annual
premiums exceed such amount, Boston Scientific will be obligated to obtain a
policy with the greatest coverage available for a cost not exceeding such
amount.
Retention Bonuses. The Merger Agreement provides that Target may, after
consultation with Boston Scientific, enter into agreements with employees of
Target for the purpose of providing retention bonuses. In the aggregate, such
retention bonuses shall not exceed $300,000 or include the grant of options to
purchase in excess of 250,000 shares of Target Common Stock, provided, however,
that the terms of such grant shall be consistent with Target's policy and
otherwise consistent in all material respects with past practice.
Target Year End Bonus Plan. The Merger Agreement provides that Target may,
after consultation with Boston Scientific, grant fiscal year-end (March 31,
1997) bonuses to all employees, including executive officers, in accordance with
the Company's policy outstanding prior to the date of Merger Agreement and
otherwise in a manner consistent in all material respects with past practice.
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CERTAIN PROVISIONS OF THE MERGER AGREEMENT
The following is a summary of the material provisions of the Merger
Agreement not summarized elsewhere in this Proxy Statement/Prospectus. The
Merger Agreement is attached as Exhibit A to this Proxy Statement/Prospectus and
is incorporated herein by reference. This summary is qualified in its entirety
by reference to the Merger Agreement.
CONVERSION OF SECURITIES
At the Effective Time, by virtue of the Merger and without any action on
the part of Merger Sub, Target or the holders of any of Target's securities,
each share of Target Common Stock issued and outstanding immediately prior to
the Effective Time (other than any shares of Target Common Stock owned by Target
as treasury shares or by Boston Scientific or any of its subsidiaries, which
will be cancelled) will be converted into the right to receive 1.07 shares of
Boston Scientific Common Stock. The Exchange Ratio is fixed and, accordingly,
will not vary with either increases or decreases in the price per share of
Boston Scientific Common Stock.
Each share of Target Common Stock held in the treasury of Target and each
share of Target Common Stock owned by Boston Scientific or any direct or
indirect wholly owned subsidiary of Boston Scientific or of Target immediately
prior to the Effective Time will be cancelled and extinguished without any
conversion thereof and no payment will be made with respect thereto.
Each share of Common Stock of Merger Sub issued and outstanding immediately
prior to the Effective Time will be converted into one validly issued, fully
paid and nonassessable share of common stock of the Surviving Corporation.
EXCHANGE PROCEDURES
As of the Effective Time, Boston Scientific will deposit, or will cause to
be deposited, with The First National Bank of Boston or such other bank or trust
company as may be designated by Boston Scientific and approved by Target, which
approval will not be unreasonably withheld (the "Exchange Agent"), for the
benefit of the holders of Target Common Stock, for exchange in accordance with
the exchange procedures of the Merger Agreement through the Exchange Agent,
certificates representing the shares of Boston Scientific Common Stock (such
certificates for shares of Boston Scientific Common Stock, together with any
dividends or distributions with respect thereto, being hereinafter referred to
as the "Exchange Fund") issuable in exchange for outstanding shares of Target
Common Stock. The Exchange Agent will, pursuant to irrevocable instructions,
deliver the Boston Scientific Common Stock contemplated to be issued out of the
Exchange Fund. Except as provided in the Merger Agreement, the Exchange Fund
will not be used for any other purpose.
As promptly as practicable after the Effective Time, Boston Scientific will
cause the Exchange Agent to mail to each holder of a certificate or certificates
which immediately prior to the Effective Time represented outstanding shares of
Target Common Stock (the "Certificates") (i) a letter of transmittal (which will
specify that delivery will be effected, and risk of loss and title to the
Certificates will pass, only upon proper delivery of the Certificates to the
Exchange Agent, and will be in customary form) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of Boston Scientific Common Stock and cash in lieu of any
fractional shares. Upon surrender to the Exchange Agent of a Certificate for
cancellation, together with such letter of transmittal, duly executed, and such
other documents as may be reasonably required pursuant to such instructions, the
holder of such Certificate will be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Boston Scientific Common
Stock which such holder has the right to receive in respect of the shares of
Target Common Stock formerly represented by such Certificate (after taking into
account all shares of Target Common Stock then held by such holder), cash in
lieu of fractional shares of Boston Scientific Common Stock to which such holder
is entitled and any dividends or other distributions to which such holder is
entitled, and the Certificate so surrendered will then be cancelled. In the
event of a transfer of ownership of shares of Target Common Stock prior to the
Effective Time that is not registered in the transfer records of Target, a
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Certificate representing the proper number of shares of Boston Scientific Common
Stock, and cash in lieu of fractional shares of Boston Scientific Common Stock
to which such holder is entitled and any dividends or other distributions to
which such holder is entitled, may be issued to a transferee if the Certificate
representing such shares of Target Common Stock is presented to the Exchange
Agent, accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by these provisions of the Merger
Agreement, each Certificate will be deemed at any time after the Effective Time
to represent only the right to receive upon such surrender the certificate
representing shares of Boston Scientific Common Stock, cash in lieu of any
fractional shares of Boston Scientific Common Stock to which such holder is
entitled and any dividends or other distributions to which such holder is
entitled.
DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES
No dividends or other distributions declared or made after the Effective
Time with respect to Boston Scientific Common Stock with a record date at or
after the Effective Time will be paid to the holder of any unsurrendered
Certificate with respect to the shares of Boston Scientific Common Stock
represented thereby, and no cash payment in lieu of fractional shares will be
paid to any such holder until the holder of such Certificate surrenders such
Certificate. Subject to the effect of escheat, tax or other applicable laws,
following surrender of any such Certificate, there will be paid to the holder of
the certificates representing whole shares of Boston Scientific Common Stock
issued in exchange therefor, without interest, (i) promptly, the amount of any
cash payable with respect to a fractional share of Boston Scientific Common
Stock to which such holder is entitled and the amount of dividends or other
distributions with a record date at or after the Effective Time and theretofore
paid with respect to such whole shares of Boston Scientific Common Stock, and
(ii) at the appropriate payment date, the amount of dividends or other
distributions, with a record date at or after the Effective Time but prior to
surrender and a payment date occurring after surrender, payable with respect to
such whole shares of Boston Scientific Common Stock.
NO FURTHER RIGHTS IN TARGET COMMON STOCK
All shares of Boston Scientific Common Stock issued upon conversion of the
shares of Target Common Stock in accordance with the terms of the Merger
Agreement (including any cash paid in respect of dividends, distributions and
fractional shares) will be deemed to have been issued in full satisfaction of
all rights pertaining to such shares of Target Common Stock.
NO FRACTIONAL SHARES
No certificates or scrip representing fractional shares of Boston
Scientific Common Stock will be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle the owner
thereof to vote or to any other rights of a stockholder of Boston Scientific.
Each holder of a fractional share interest will be paid, upon submission of his
or her Certificates, an amount in cash equal to the product obtained by
multiplying (i) such fractional share interest to which such holder (after
taking into account all fractional share interests then held by such holder)
would otherwise be entitled by (ii) $71. From time to time after the Effective
Time, as promptly as practicable after the determination of the amount of cash,
if any, to be paid to any holders of fractional share interests who have
surrendered their Certificates to the Exchange Agent, the Exchange Agent will so
notify Boston Scientific, and Boston Scientific will deposit such amount with
the Exchange Agent and will cause the Exchange Agent to forward payments to such
holders.
TARGET STOCK OPTIONS
All Target Options, whether or not exercisable, whether or not vested, at
the Effective Time under Target's 1988 Stock Option Plan and 1991 Director
Option Plan, will remain outstanding following the Effective Time. As discussed
in "The Merger -- Conflicts of Interest," certain Target Options held by
directors and officers of Target will vest at the Effective Time. Also at the
Effective Time, Target Options will, by virtue of the Merger and without any
further action on the part of Target or the holder thereof, be assumed by Boston
Scientific in such manner that Boston Scientific (i) is a corporation "assuming
a stock option in a
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transaction to which Section 424(a) applied" within the meaning of Section 424
of the Code, or (ii) to the extent that Section 424 of the Code does not apply
to any such Company Options, would be such a corporation were Section 424 of the
Code applicable to such Target Options. From and after the Effective Time, all
references to Target in Target Stock Option Plans and the applicable stock
option agreements issued thereunder will be deemed to refer to Boston
Scientific. Each Target Option assumed by Boston Scientific will be exercisable
upon the same terms and conditions as under the applicable Target Stock Option
Plan and the applicable option agreement issued thereunder, except that (A) each
such Target Option will be exercisable for that whole number of shares of Boston
Scientific Common Stock (rounded to the nearest whole share) into which the
number of shares of Target Common Stock subject to such Target Option
immediately prior to the Effective Time would have been converted; and (B) the
option price per share of Boston Scientific Common Stock will be an amount equal
to the option price per share of Company Common Stock subject to such Company
Option in effect immediately prior to the Effective Time divided by the Exchange
Ratio (the option price per share, as so determined, being rounded to the
nearest full cent). As discussed in "The Merger -- Conflicts of Interest,"
certain Target Options granted to Mr. Bang and Change of Control Officers will
immediately vest at the Effective Time. Boston Scientific will file promptly,
but in any event within ten business days after the Effective Time, and keep
current, a Form S-8 or other appropriate registration statement for as long as
the Target Options remain outstanding.
NO LIABILITY
Neither Boston Scientific nor Target will be liable to any holder of shares
of Target Common Stock for any such shares of Target Common Stock (or dividends
or distributions with respect hereto), or cash delivered to a public official
pursuant to any abandoned property, escheat or similar law.
TERMINATION OF EXCHANGE FUND
Any portion of the Exchange Fund which remains undistributed to the holders
of Target Common Stock for one (1) year after the Effective Time will be
delivered to Boston Scientific, upon demand, and any holders of Target Common
Stock who have not theretofore complied with the exchange procedures of the
Merger Agreement will thereafter look only to Boston Scientific for the shares
of Boston Scientific Common Stock, any cash in lieu of fractional shares of
Boston Scientific Common Stock to which they are entitled and any dividends or
other distributions with respect to Boston Scientific Common Stock to which they
are entitled. Any portion of the Exchange Fund remaining unclaimed by holders of
shares of Target Common Stock as of a date which is immediately prior to such
time as such amounts would otherwise escheat to or become property of any
government entity will, to the extent permitted by applicable law, become the
property of Boston Scientific free and clear of any claims or interest of any
person previously entitled thereto.
CERTAIN REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of
Boston Scientific, Merger Sub and Target relating to, among other things, the
following matters (which representations and warranties are subject, in certain
cases, to specified exceptions): (i) the due organization, power, authority and
good standing of, and similar corporate matters with respect to, each of Boston
Scientific, Target, Merger Sub and subsidiaries of Target; (ii) each of Boston
Scientific's and Target's capital structure; (iii) the authorization, execution,
delivery, performance and enforceability of the Merger Agreement by each party
thereto; (iv) the absence of conflict with Target's Amended and Restated
Certificate of Incorporation, Target's By-laws, Boston Scientific's Amended and
Second Restated Certificate of Incorporation, Boston Scientific's Restated
By-laws and with applicable law or any contracts to which Target, Boston
Scientific or Merger Sub, as the case may be, is a party; (v) reports and other
documents filed with the Commission and other regulatory authorities and the
accuracy of the information contained therein; (vi) the absence of certain
changes or events prior to the date of the Merger Agreement having a material
adverse effect on Boston Scientific and its subsidiaries, taken as a whole, or
Target and its subsidiaries, taken as a whole, as the case may be; (vii) the
absence of pending or threatened litigation reasonably likely to have a material
adverse effect on Boston Scientific or any of its subsidiaries, or on Target or
any of the Subsidiaries; (viii) the absence of actions taken
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by Boston Scientific or Target that would prevent the Merger either from being
accounted for as a "pooling-of-interests" or from qualifying as a tax-free
reorganization; and (ix) the absence of any brokerage, finder's or other fee due
in connection with the Merger (except in the case of Goldman Sachs and Lehman
Brothers, Inc.).
In addition, the Merger Agreement contains certain additional
representations and warranties of Target and the Subsidiaries relating to (i)
the possession of all permits, franchises, grants, authorizations, licenses,
easements, variances, exceptions, consents, certificates, approvals and orders
of any governmental authority necessary to carry on Target's business; (ii) the
absence of any written notices, citations or decisions by any governmental body
that any product produced, manufactured, marketed or distributed by Target is
defective or fails to meet any applicable standards promulgated by such
governmental body; (iii) certain employee benefit plans and ERISA matters; (iv)
the absence of any collective bargaining agreements or other labor contracts;
(v) certain real estate and environmental matters; (vi) Target's and the
Subsidiaries' ownership and right to use certain intellectual property and the
absence of (A) any challenges to Target's intellectual property rights, except
such challenges as may have been initiated by Boston Scientific, or (B) any
infringements or conflicts with Target's business and the intellectual property
rights of third parties; (vii) certain tax matters; (viii) certain of Target's
and the Subsidiaries' material contracts; (ix) the receipt of an opinion of
Target's financial advisor as to the fairness of the consideration to be
received by holders of Target Common Stock; (x) the status of Target's and the
Subsidiaries' ongoing relationship with its suppliers; (xi) the votes required
by Target's stockholders to approve the Merger Agreement; and (xii) the
amendment of the Preferred Shares Rights Agreement, dated September 21, 1994,
between Target and The First National Bank of Boston, as the rights agent, as
amended on May 7, 1996, to provide that neither Boston Scientific nor Merger Sub
will become an "Acquiring Person" and that no "Share Acquisition Date" or
"Distribution Date" (as defined in such Agreement) will occur as a result of the
Merger Agreement, and that the Final Expiration Date (as defined in such
Agreement) will occur immediately prior to the Effective Time.
CONDUCT OF BUSINESS PENDING THE MERGER
In the Merger Agreement, Target has agreed that, between the date of the
Merger Agreement and the Effective Time, except as disclosed in the Merger
Agreement, unless Boston Scientific shall have otherwise agreed in writing,
which agreement shall not be unreasonably withheld, (i) Target's and the
Subsidiaries' business will be conducted only in, and Target and the
Subsidiaries will not take any action except in, the ordinary course of business
and in a manner consistent in all material respects with past practice; and (ii)
Target will use its reasonable best efforts to preserve substantially intact its
business organization, to keep available the services of the current officers,
employees and consultants of Target and the Subsidiaries and to preserve the
current relationships of Target and the Subsidiaries with customers,
distributors, suppliers and other persons with which Target or any Subsidiary
has significant business relations.
Without limiting the generality of the foregoing, Target and the
Subsidiaries will not, except as disclosed in the Merger Agreement: (a) amend or
otherwise change its Certificate of Incorporation or By-laws or equivalent
organizational documents; (b) issue, sell, pledge, dispose of, grant or
encumber, or authorize the issuance, sale, pledge, disposition, grant or
encumbrance of, (i) any shares of capital stock of any class of Target or any
Subsidiary, or any options, warrants, convertible securities or other rights of
any kind to acquire any shares of such capital stock, or any other ownership
interest (including, without limitation, any phantom interest), of Target or any
Subsidiary or (ii) any assets of Target or any Subsidiary, except for sales in
the ordinary course of business and in a manner consistent in all material
respects with past practice and other asset sales for consideration aggregating
not more than $500,000; (c) declare, set aside, make or pay any dividend or
other distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock, except that a United States Subsidiary may, after
consultation with Boston Scientific, declare and pay a dividend to Target; (d)
reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire,
directly or indirectly, any of its capital stock; (e) (i) acquire (including,
without limitation, by merger, consolidation or acquisition of stock or assets)
any corporation, partnership, limited liability company, other business
organization or any division thereof, or any material amount of assets; (ii)
incur any indebtedness for borrowed money or issue any debt securities or
assume, guarantee or endorse, or otherwise as an accommoda-
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tion become responsible for, the obligations of any person, or make any loans or
advances, except in the ordinary course of business and consistent in all
material respects with past practice in an amount not in excess of $1 million;
(iii) enter into any contract or agreement other than in the ordinary course of
business, consistent in all material respects with past practice; (iv) authorize
capital expenditures which are, in the aggregate, in excess of $2 million for
Target and the Subsidiaries taken as a whole; or (v) enter into or amend any
contract, agreement, commitment or arrangement with respect to any matter set
forth in this clause (e); (f) increase (except in the ordinary course of
business and consistent in all material respects with past practice) the
compensation payable or to become payable to its officers or employees generally
or to any employee with an annual salary in excess of $100,000, or grant any
bonus, severance or termination pay to, or enter into any employment or
severance agreement with any director, officer or other employee of Target or
any Subsidiary, or establish, adopt, enter into or amend any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, officer or employee; (g) take any
action, other than reasonable and usual actions in the ordinary course of
business and consistent in all material respects with past practice, with
respect to accounting policies or procedures (including, without limitation,
procedures with respect to the payment of accounts payable and collection of
accounts receivable); (h) knowingly take any action that could reasonably be
expected to prevent the Merger's qualification for "pooling-of-interests"
accounting treatment or could reasonably be expected to prevent the Merger from
constituting a transaction qualifying under Section 368(a) of the Code; or (i)
pay, discharge or satisfy any claim, liability or obligation (absolute, accrued,
asserted or unasserted, contingent or otherwise) in an amount in excess of
$500,000 in the aggregate, other than the payment, discharge or satisfaction, in
the ordinary course of business and consistent in all material respects with
past practice, of liabilities reflected or reserved against on the consolidated
balance sheet of Target and the consolidated Subsidiaries as of March 31, 1996,
including the notes thereof (the "Target 1996 Balance Sheet") or subsequently
incurred in the ordinary course of business and consistent in all material
respects with past practice.
Boston Scientific has agreed that, unless Target otherwise agrees in
writing, Boston Scientific will not, between the date of the Merger Agreement
and the Effective Time, directly or indirectly, knowingly take any action that
could reasonably be expected to prevent the Merger's qualification for
"pooling-of-interests" accounting treatment or could reasonably be expected to
prevent the Merger from constituting a transaction qualifying under Section
368(a) of the Code.
NO SOLICITATION OF TRANSACTIONS
Pursuant to the Merger Agreement, neither Target nor any Subsidiary will,
directly or indirectly, through any officer, director, agent or otherwise,
initiate, solicit or knowingly encourage (including by way of furnishing
nonpublic information or assistance), or take any other action to facilitate
knowingly, any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Competing Transaction (as defined below),
or enter into or maintain or continue discussions or negotiate with any person
or entity in furtherance of such inquiries or to obtain a Competing Transaction,
or agree to or endorse any Competing Transaction, or authorize or permit any of
the officers, directors or employees of Target or any Subsidiary or any
investment banker, financial advisor, attorney, accountant or other agent or
representative of Target or any Subsidiary to take any such action. Target will
notify Boston Scientific orally (within one business day) and in writing (as
promptly as practicable) of all of the relevant details relating to any inquiry
or proposal which Target or any Subsidiary or any such officer, director,
employee, investment banker, financial advisor, attorney, accountant or other
agent or representative may receive relating to any of such matters, and if such
inquiry or proposal is in writing, Target will deliver to Boston Scientific a
copy of such inquiry or proposal.
Notwithstanding the foregoing, Target may (i) furnish information
(including non-public information) to, or enter into discussions or negotiations
with, any person or entity that makes an unsolicited, bona fide proposal of a
Competing Transaction if, and only to the extent that, (A) the Board of
Directors of Target determines in good faith after consultation with independent
legal counsel (who may be Target's regularly
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engaged independent legal counsel) that such action is necessary to comply with
their fiduciary duties to Target or its stockholders under applicable law and
(B) prior to furnishing such information to, or entering into discussions or
negotiations with, such person or entity, Target (1) provides reasonable notice
to Boston Scientific that it is furnishing information to, or entering into
discussions or negotiations with, such person or entity and provides in any such
notice to Boston Scientific in reasonable detail, the identity of the person or
entity making such proposal and the terms and conditions of such proposal, (2)
provides Boston Scientific with all information to be provided to such person or
entity which Boston Scientific has not previously been provided, and (3)
receives from such person or entity an executed confidentiality agreement on
terms not less favorable in any material respect to Target than those contained
in the confidentiality agreements entered into by Target and Boston Scientific
on November 27, 1996, (ii) comply with Rule 14e-2 promulgated under the Exchange
Act with regard to a tender or exchange offer, (iii) refer any third party to
this provision of the Merger Agreement or make a copy of this provision
available to any third party, or (iv) fail to make or withdraw or modify its
recommendation in favor of the Merger Agreement following the making of a
proposal that constitutes, or may reasonably be expected to lead to, a Competing
Transaction if the Board of Directors of Target, after consultation with
independent legal counsel (who may be Target's regularly engaged independent
legal counsel), determines in good faith that such action is necessary for the
directors of Target to comply with their fiduciary duties to Target or its
stockholders under applicable law. Target agrees not to release any third party
from, or waive any provision of, any confidentiality or standstill agreement to
which Target is a party, unless the Target Board determines in good faith after
consultation with independent legal counsel (who may be Target's regularly
engaged independent legal counsel) that such action is necessary to comply with
fiduciary duties to Target or its stockholders under applicable law.
For purposes of the Merger Agreement, "Competing Transaction" will mean any
of the following involving Target or any Subsidiary: (i) any merger,
consolidation, share exchange, business combination, or other similar
transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of 15% or more of the assets of Target and the Subsidiaries, taken
as a whole, in a single transaction or series of transactions; (iii) any tender
offer or exchange offer for 15% or more of the shares of Target Common Stock or
the filing of a registration statement under the Securities Act in connection
therewith; or (iv) any person having acquired beneficial ownership or the right
to acquire beneficial ownership of, or any "group" (as such term is defined
under Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder) having been formed which beneficially owns or has the
right to acquire beneficial ownership of, 15% or more of the shares of Target
Common Stock.
TARGET DISTRIBUTION AGREEMENTS
Under the terms of the Merger Agreement, unless provided otherwise, neither
Target nor any of the Subsidiaries will, without the prior written consent of
Boston Scientific, enter into any distribution agreement or similar agreement or
amend any existing distribution agreement, or similar agreement to which Target
or any of the Subsidiaries is party. Additionally, except as provided for in the
Merger Agreement, Target will, and will cause each of the Subsidiaries to, give
notice of its intention not to renew any of its distribution agreements or
similar agreements. Each such notice will be given in accordance with such
agreements so as to prevent such agreement from being renewed for any period of
time after the date of the Merger Agreement. In the event that Target is unable
to make arrangements for the distribution of its products in any country
following the termination of a distribution agreement as provided under these
provisions, Boston Scientific will either act as, or arrange for, a distributor
of Target's products in such country on terms and conditions that are
substantially similar to the terms and conditions with that of the former
distributor.
CONDITIONS TO CONSUMMATION OF THE MERGER
The obligations of Target, Boston Scientific and Merger Sub to consummate
the Merger are subject to the satisfaction or, if permitted by applicable law,
waiver of the following conditions: (a) the Merger Agreement and the Merger
shall have been approved and adopted by the affirmative vote of the stockholders
of Target in accordance with the DGCL and Target's Certificate of Incorporation;
(b) any applicable waiting period under the HSR Act relating to the Merger shall
have expired or been terminated; (c) no order, statute,
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rule, regulation, executive order, stay, decree, judgment or injunction shall
have been enacted, entered, issued, promulgated or enforced by any governmental
authority or a court of competent jurisdiction which has the effect of making
the Merger illegal or otherwise prohibiting consummation of the Merger; (d) the
Registration Statement shall have been declared effective, and no stop order
suspending the effectiveness of the Registration Statement will be in effect and
no proceedings for such purpose will be pending before or threatened by the SEC;
(e) Boston Scientific and Target shall have received letters from Ernst & Young
LLP, independent auditors to each of Boston Scientific and Target, dated as of
the date on which the Registration Statement will become effective and the
Effective Time, regarding that firm's concurrence with Boston Scientific
management's and Target management's conclusions, as to the appropriateness of
"pooling-of-interests" accounting for the Merger, under Accounting Principles
Board No. 16, if closed and consummated in accordance with the Merger Agreement;
and (f) the shares of Boston Scientific Common Stock to be issued in the Merger
shall have been authorized for listing on the NYSE, subject to official notice
of issuance.
The obligations of Boston Scientific and Merger Sub to consummate the
Merger are subject to the satisfaction or, if permitted by applicable law,
waiver of the following further conditions: (a) (i) Target will have performed
in all material respects all of its obligations hereunder required to be
performed by it at or prior to the Effective Time; (ii) each of the
representations and warranties of Target contained in the Merger Agreement
(disregarding for this purpose any qualifications with respect to materiality or
any material adverse effect on Target) will be true and correct, in each case as
of the date of the Merger Agreement and at and as of the Effective Time as if
made at and as of such time, it being understood and agreed by Boston Scientific
and Merger Sub that this clause (a)(ii) shall be deemed to have been satisfied
unless any failures to be so true and correct, individually or in the aggregate,
are reasonably likely to have a material adverse effect on Target; and (iii)
Boston Scientific shall have received a certificate signed by an executive
officer of Target to the foregoing effect; (b) Boston Scientific shall have
received "comfort" letters of Ernst & Young LLP dated the date on which the
Registration Statement shall become effective and the Effective Time,
respectively, and addressed to Boston Scientific, such "comfort" letters being
in such form and substance as is reasonably customary for letters delivered by
independent auditors in connection with registration statements similar to the
Registration Statement; (c) unless Target waives its closing condition set forth
in clause (b) of the next paragraph, a copy of such opinion received by Target
shall have been provided to Boston Scientific; and (d) Boston Scientific shall
have received from any person who may be deemed to have become an affiliate of
Target, after the date of the Merger Agreement and on or prior to the Effective
Time, a signed affiliate agreement substantially in the form described in the
Merger Agreement.
The obligations of Target to consummate the Merger are subject to the
satisfaction of the following conditions: (a) (i) Boston Scientific and Merger
Sub shall have performed in all material respects all of their respective
obligations under the Merger Agreement required to be performed by them at or
prior to the Effective Time; (ii) each of the representations and warranties of
Boston Scientific contained in the Merger Agreement (disregarding for this
purpose any qualifications with respect to materiality or any material adverse
effect on Boston Scientific) will be true and correct, in each case as of the
date of the Merger Agreement and at and as of the Effective Time as if made at
and as of such time; it being understood and agreed by Target that this clause
will be deemed to have been satisfied unless any failures to be so true and
correct, individually or in the aggregate, are reasonably likely to have a
material adverse effect on Boston Scientific; and (iii) Target shall have
received a certificate signed by an executive officer of Boston Scientific to
the foregoing effect; (b) Target shall have received the opinion of Venture Law
Group, dated on or about the date that is two business days prior to the date
the Proxy Statement is first mailed to stockholders of Target, to the effect
that the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, which opinion
will not have been withdrawn or modified in any material respect; provided,
however, that each of the representations of Boston Scientific, Target and
Collagen Corporation contained in the representation letters provided to Venture
Law Group will be true and correct, in each case at and as of the Effective Time
as if made at and as of such time; and (c) Target shall have received from any
person who may be deemed to have become an affiliate of Boston Scientific after
the date of the Merger Agreement and on or prior to the Effective Time a signed
agreement substantially in the form described in the Merger Agreement.
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TERMINATION
The Merger Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time, notwithstanding any requisite adoption of
Merger Agreement and the transactions contemplated hereby by the stockholders of
Target: (a) by written consent duly authorized by the Boards of Directors of
each of Boston Scientific, Merger Sub and Target; (b) by any of Boston
Scientific, Merger Sub or Target if either (i) the Effective Time will not have
occurred on or before June 30, 1997; provided that the right to terminate the
Merger Agreement under this clause will not be available to any party whose
failure to fulfill any obligation under the Merger Agreement has been the cause
of, or resulted in, the failure of the Effective Time to occur on or before such
date; provided further that, if a request for additional information is received
from a governmental authority pursuant to the HSR Act, such date will be
extended to the 90th day following acknowledgment by such governmental authority
that Boston Scientific and Target have complied with such request, but in any
event not later than September 30, 1997; provided further that, if any actions
taken by Boston Scientific after the date of the Merger Agreement and prior to
the Effective Time will have caused the delay of, or resulted in the failure of,
the Effective Time to occur on or before June 30, 1997, such date with respect
to Boston Scientific's right to terminate the Merger Agreement will be extended
by the amount of time of such delay, but in no event later than September 30,
1997 (an "Expiration Date Termination"); or (ii) there shall be any law that
makes consummation of the Merger illegal or otherwise prohibited or if any court
or competent jurisdiction or any governmental authority shall have issued an
order, decree or ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or other action
will have become final and nonappealable.
The Merger Agreement may also be terminated by Boston Scientific, if (a)
the Target Board withdraws, modifies or changes its recommendation of the Merger
Agreement or the Merger in a manner adverse to Boston Scientific or Merger Sub
or shall have resolved to do any of the foregoing or the Target Board shall have
recommended to the stockholders of Target any Competing Transaction or resolved
to do so (a "Competing Transaction Termination by Boston Scientific"); and (b) a
tender offer or exchange offer for 30% or more of the outstanding shares of
capital stock of Target is commenced, and the Target Board, within ten (10)
business days after such tender offer or exchange offer is so commenced, either
fails to recommend against acceptance of such tender offer or exchange offer by
its stockholders or takes no position with respect to the acceptance of such
tender offer or exchange offer by its stockholders (a "Tender Offer
Termination"); or (c) Target fails to perform in all material respects its
obligations under the Merger Agreement before the Effective Time, or a
representation, warranty, or agreement by Target (disregarding for this purpose
any qualifications with respect to materiality or a material adverse effect on
Target) is not true and correct, as of the date of the Merger Agreement and the
Effective Time and such failures to be so true and correct, individually or in
the aggregate, are reasonably likely to have a material adverse effect on Target
(a "Terminating Company Breach"); provided, however, that, if such Terminating
Company Breach is curable by Target through the exercise of its best efforts and
Target continues to exercise such best efforts, Boston Scientific may not
terminate the Merger Agreement under this clause (c) for a period of thirty (30)
days from the date on which Boston Scientific delivers to Target written notice
setting forth in reasonable detail the circumstances giving rise to such
Terminating Company Breach (a "Breach of Representation Termination by Boston
Scientific").
The Merger Agreement may also be terminated by Target (a) in order to enter
into a definitive agreement for a Competing Transaction, upon three business
days' prior written notice to Boston Scientific setting forth, in reasonable
detail, the identity of the person making the Competing Transaction and the
final terms and conditions of such Competing Transaction, if, as a result of an
unsolicited proposal for such Competing Transaction, the Target Board, after
consultation with independent legal counsel (who may be Target's regularly
engaged independent legal counsel), determines in good faith that, after giving
effect to any concessions which may be offered by Boston Scientific, their
fiduciary duties under applicable law require that such Competing Transaction be
accepted; provided, however, that any termination of the Merger Agreement by
Target pursuant to this clause will not be effective until Target has made
payment of the full Termination Fee (as defined below) (a "Competing Transaction
Termination by Target"); or (b) Boston Scientific fails to perform in all
material respects its obligations under the Merger Agreement before the
Effective Time, or a
52
<PAGE> 66
representation, warranty, or agreement by Boston Scientific (disregarding for
this purpose any qualifications with respect to materiality or a material
adverse effect on Target) is not true and correct, as of the date of the Merger
Agreement and the Effective Time and such failures to be so true and correct,
individually or in the aggregate, are reasonably likely to have a material
adverse effect on Target (a "Terminating Boston Scientific Breach"); provided,
however, that, if such Terminating Boston Scientific Breach is curable by Boston
Scientific through the exercise of its best efforts and Boston Scientific
continues to exercise such best efforts, Target may not terminate the Merger
Agreement under this clause (b) for a period of 30 days from the date on which
Target delivers to Boston Scientific written notice setting forth in reasonable
detail the circumstances giving rise to such Terminating Boston Scientific
Breach.
The Merger Agreement may be terminated by either Boston Scientific or
Target, (a) if the Stockholders' Meeting shall have been held and the
stockholders of Target shall have failed to approve and adopt the Merger
Agreement at such meeting (including any adjournment or postponement thereof) (a
"Stockholder Rejection Termination"); or (b) if the average of the closing sale
prices on the NYSE of Boston Scientific Common Stock as reported under Composite
Transactions in The Wall Street Journal for the ten consecutive trading days
immediately preceding the first business day following the satisfaction
(including as a result of a waiver) of all of the conditions set forth in the
Merger Agreement, is less than $55 per share.
EFFECT OF TERMINATION
Except as otherwise provided in the Merger Agreement, in the event of the
termination of the Merger Agreement as described above, the Merger Agreement
will become void, there will be no liability under the Merger Agreement on the
part of Boston Scientific, Merger Sub or Target or any of their respective
officers or directors and all rights and obligations of any party to the Merger
Agreement will cease; provided, however, that nothing in the Merger Agreement
will relieve any party from liability for the willful breach of any of its
representations, warranties, covenants or agreements set forth in the Merger
Agreement. The payment of any Termination Fee (as described below) by Target
will constitute the sole and exclusive remedy of Boston Scientific for such
termination, and, upon receipt of such termination fee, Boston Scientific will
have no further recourse in law or equity against Target as a result of the
Merger Agreement or any breach (willful or otherwise) of the Merger Agreement;
provided, however, that the Termination Fee will not be the sole and exclusive
remedy for any breach by Target of its obligations described above in "The
Merger -- Solicitation of Transactions."
FEES AND EXPENSES
Pursuant to the Merger Agreement, Target will be required to pay Boston
Scientific a fee of $34 million (the "Termination Fee"), which amount is
inclusive of all expenses, if the Merger Agreement is terminated (i) by Target
pursuant to an Expiration Date Termination and a Competing Transaction having a
value per share of Target Common Shock in excess of the value per share of
Target Common Stock to be generated by the Merger Agreement shall have been
consummated within 12 months of such termination; (ii) pursuant to a Competing
Transaction Termination by Boston Scientific; (iii) pursuant to a Tender Offer
Termination by Boston Scientific and such Competing Transaction shall have been
consummated following such termination; (iv) pursuant to a Competing Transaction
Termination by Target; (v) pursuant to a Stockholder Rejection Termination and a
Competing Transaction shall have been publicly proposed prior to such
termination and the transaction contemplated by such Competing Transaction shall
have been consummated within 12 months of such termination; or (vi) pursuant to
a Breach of Representation Termination by Boston Scientific and a Competing
Transaction shall have been consummated within 12 months of such termination.
Any payment required to be made pursuant to the Merger Agreement will be
made as promptly as practicable but not later than five business days after the
final determination by Boston Scientific of such amount and will be made by wire
transfer of immediately available funds to an account designated by Boston
Scientific.
53
<PAGE> 67
Except as set forth in the Merger Agreement, all costs and expenses
incurred in connection with the Merger Agreement and the Merger will be paid by
the party incurring such expenses, whether or not the Merger is consummated.
In the event that Target fails to pay the Termination Fee when due,
interest will be paid on such unpaid Termination Fee, commencing on the date
that the Termination Fee became due, at a rate equal to the rate of interest
publicly announced by Citibank, N.A., from time to time, in the City of New
York, as such bank's Base Rate plus 2%.
AMENDMENT AND WAIVER
The Merger Agreement may be amended by the parties hereto by action taken
by or on behalf of their respective Boards of Directors at any time prior to the
Effective Time; provided, however, that, after the adoption of the Merger
Agreement by the stockholders of Target, no amendment may be made which would
reduce the amount or change the type of consideration to be received by the
stockholders of Target pursuant to the Merger. The Merger Agreement may not be
amended except by an instrument in writing signed by the parties to the Merger
Agreement.
At any time prior to the Effective Time, any party to the Merger Agreement
may (a) extend the time for the performance of any obligation or other act of
any other party thereto, (b) waive any inaccuracy in the representations and
warranties of the other party contained therein or in any document delivered by
the other party pursuant thereto, and (c) waive compliance with any agreement or
condition contained therein. Any such extension or waiver will be valid if set
forth in an instrument in writing signed by the party or parties to be bound
thereby.
54
<PAGE> 68
MANAGEMENT
DIRECTORS
Pursuant to the Merger Agreement, the directors of Target immediately prior
to the Effective Time will, as of the Effective Time, no longer be directors of
the Surviving Corporation. The seven individuals currently serving as directors
of Target are Gary R. Bang, William G. Davis, Kathleen G. Murray, Howard D.
Palefsky, Richard D. Randall, Charles M. Strother, and John C. Villforth.
Pursuant to the Merger Agreement, the directors of Merger Sub immediately
prior to the Effective Time will become the directors of Target, each to hold
office in accordance with the Certificate of Incorporation and By-laws of the
Surviving Corporation then in effect and until the successor of each is duly
elected and qualified. The two individuals currently serving as directors of
Merger Sub are Lawrence C. Best and Paul W. Sandman. Messrs. Best and Sandman
neither currently receive compensation as directors of Merger Sub nor will they
receive compensation as directors of the surviving corporation.
OFFICERS
Pursuant to the Merger Agreement, the officers of Target immediately prior
to the Effective Time will become the officers of the Surviving Corporation.
55
<PAGE> 69
CAPITALIZATION
(IN THOUSANDS)
The following table sets forth the unaudited historical capitalization of
Boston Scientific as of September 30, 1996 and the pro forma capitalization of
Boston Scientific adjusted to give effect to the Merger. The adjustments made to
Boston Scientific's historical consolidated capitalization to arrive at the
adjusted consolidated capitalization are described under "UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL INFORMATION."
<TABLE>
<CAPTION>
BOSTON SCIENTIFIC PRO FORMA
AS REPORTED NINE-MONTH
SEPTEMBER 30, 1996 INTERIM PERIOD
------------------ --------------
<S> <C> <C>
Commercial paper.............................................. $ 199,746 $ 199,746
Bank obligations.............................................. 26,237 26,237
Obligations under capital leases.............................. 1,951 1,951
---------- ----------
227,934 227,934
Long-term debt, net of current portion........................ 383 383
Obligations under capital leases.............................. 6,798 6,798
---------- ----------
7,181 7,181
Contingent stock repurchase obligation........................ 24,855 24,855
Stockholders' Equity:
Preferred stock, $.01 par value -- authorized 25,000,000
shares, none issued and outstanding......................
Common stock, $.01 par value -- authorized 300,000,000
shares, 179,101,866 shares issued; 195,376,685 shares
issued, as adjusted...................................... 1,791 1,954
Additional paid-in capital.................................... 386,828 442,937
Retained earnings............................................. 508,313 518,927
Foreign currency translation adjustment....................... (31,806) (31,776)
Treasury stock, at cost -- 1,186,702 shares................... (46,326) (46,326)
Unrealized gain on equity investments, net.................... 12,329 21,022
---------- ----------
Total Stockholders' Equity.................................... 831,129 906,738
---------- ----------
Total Capitalization.......................................... $1,091,099 $1,166,708
========== ==========
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Information.
56
<PAGE> 70
BOSTON SCIENTIFIC AND TARGET
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The following Unaudited Pro Forma Combined Condensed Financial Information
should be read in conjunction with the audited financial statements, including
the notes thereto, of Boston Scientific and of Target that are contained in
Boston Scientific's Annual Report on Form 10-K for the year ended December 31,
1995 and Target's Annual Report on Form 10-K for the year ended March 31, 1996
and with the unaudited financial statements, including the notes thereto, of
Boston Scientific that are contained in Boston Scientific's Reports on Form 10-Q
for the quarters ended September 30, 1996, June 30, 1996 and March 31, 1996 and
of Target that are contained in Target's Reports on Form 10-Q for the quarters
ended December 31, 1996, September 30, 1996 and June 30, 1996, which reports are
incorporated by reference in this Proxy Statement/Prospectus.
The unaudited Pro Forma Combined Condensed Financial Information for Boston
Scientific was restated to reflect the Target merger which will be accounted for
as a "pooling-of-interests." Under the terms of the Merger Agreement, each share
of Target Common Stock will be converted into the right to receive 1.07 shares
of Boston Scientific Common Stock.
In addition, the Boston Scientific results have been restated for all
periods presented to reflect Boston Scientific's merger with EP Technologies,
Inc. ("EPT"). On January 22, 1996, Boston Scientific completed its merger with
EPT in a stock-for-stock transaction. The transaction, which is accounted for as
a "pooling-of-interests," was effected through the exchange of 0.297 shares of
Boston Scientific Common Stock for each EPT share held. Approximately 3 million
shares of Boston Scientific Common Stock were issued in conjunction with the EPT
merger. EPT designs, develops, manufactures and markets advanced
electrophysiology catheters and systems for use in minimally invasive procedures
to diagnose and treat tachyarrhythmias (abnormally rapid heart rates resulting
from defective or diseased cardiac tissues that interfere with the normal
conduction of electrical activity responsible for heart muscle contraction).
The unaudited financial statements of Boston Scientific for the nine-month
period ended September 30, 1996 include the operations of Symbiosis Corporation
("Symbiosis"), beginning in March 1996, and Endotech, Ltd. and MinTec, Inc.
("Endotech/MinTec"), beginning in May 1996. On March 14, 1996, Boston Scientific
acquired Symbiosis, formerly a wholly owned subsidiary of American Home Products
Corporation. Boston Scientific purchased Symbiosis, a developer and manufacturer
of specialty medical devices, for approximately $153 million in a cash
transaction. On May 3, 1996, Boston Scientific acquired assets from
Endotech/MinTec, a privately held company dedicated to the development of stent
graft technology for the repair of diseased blood vessels. Boston Scientific
purchased Endotech/MinTech's assets for approximately $72 million in a cash
transaction. Both acquisitions were accounted for using the purchase method of
accounting.
The unaudited financial statements of Target for the nine-month period
ended December 31, 1996 include the operations of Interventional Therapeutics
Corporation ("ITC"), beginning in May 1996. On May 23, 1996, Target completed
the closing of the acquisition of ITC, at which time approximately 331,000
shares of Target Common Stock were exchanged for all the outstanding shares and
options to purchase shares of ITC stock. ITC is a developer and manufacturer of
vascular occlusion devices used in neurovascular and vascular embolization. The
acquisition of ITC was accounted for using the purchase method of accounting.
The pro forma information is presented for illustrative purposes only and
is not necessarily indicative of the operating results or financial position
that would have occurred if the Merger or the EPT merger had been consummated,
nor is it necessarily indicative of future operating results or financial
position.
57
<PAGE> 71
BOSTON SCIENTIFIC AND TARGET
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
(IN THOUSANDS)
The Unaudited Pro Forma Combined Condensed Balance Sheet of Boston
Scientific as of September 30, 1996 and Target as of December 31, 1996 set forth
below give effect to the Merger, under the "pooling-of-interests" accounting
method, after giving effect to the number of shares to be exchanged.
<TABLE>
<CAPTION>
PRO FORMA
COMBINED
BOSTON TARGET BOSTON
SCIENTIFIC TARGET PRO FORMA SCIENTIFIC
SEPT. 30, 1996 DEC. 31, 1996 ADJUSTMENTS AND TARGET
-------------- ------------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....... $ 59,420 $ 13,678 $ 73,098
Marketable securities........... 23,699 38,053 61,752
Trade accounts receivable,
net.......................... 283,017 22,139 305,156
Inventories..................... 209,837 10,457 220,294
Deferred income taxes........... 4,231 4,231
Other current assets............ 66,551 1,810 68,361
---------- --------- ----------
Total current assets.... 642,524 90,368 732,892
Property, plant, equipment and
leaseholds...................... 465,585 24,559 490,144
Less: accumulated
depreciation................. 146,235 9,443 155,678
---------- --------- ----------
319,350 15,116 334,466
Intangibles, net.................. 307,068 5,218 312,286
Deferred income taxes............. 4,855 4,855
Other assets...................... 83,354 5,047 88,401
---------- --------- ----------
Total assets............ $1,357,151 $ 115,749 $1,472,900
========== ========= ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Commercial paper................ $ 199,746 $ 199,746
Bank obligations................ 26,237 26,237
Accounts payable and accrued
expenses..................... 147,107 $ 2,424 149,531
Accrual related to special
charge....................... 65,116 $ 13,500(F) 78,616
Other current liabilities....... 54,493 23,281 77,774
---------- --------- --------- ----------
Total current liabilities....... 492,699 25,705 13,500 531,904
Long-term liabilities............. 8,468 935 9,403
Contingent stock repurchase
obligation...................... 24,855 24,855
Stockholders' equity:
Common stock.................... 1,791 38 125(E) 1,954
Additional paid-in capital...... 386,828 70,276 (125)(E) 442,937
(14,042)(B)
Retained earnings............... 508,313 24,114 (13,500)(F) 518,927
Cumulative foreign exchange
translation adjustment....... (31,806) 30 (31,776)
Treasury stock.................. (46,326) (14,042) 14,042(B) (46,326)
Unrealized gain on
available-for-sale
securities, net.............. 12,329 8,693 21,022
---------- --------- --------- ----------
Total stockholders' equity...... 831,129 89,109 (13,500) 906,738
---------- --------- --------- ----------
Total liabilities and
stockholders'
equity................ $1,357,151 $ 115,749 $ -- $1,472,900
========== ========= ========= ==========
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Information.
58
<PAGE> 72
BOSTON SCIENTIFIC AND TARGET
UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The Unaudited Pro Forma Combined Condensed Statements of Income set forth
below combine the results of Boston Scientific and Target for each of the years
in the three-year periods ended December 31, 1995 for Boston Scientific and
March 31, 1996 for Target, and for the nine-month periods ended September 30,
1996 and 1995 for Boston Scientific and for the nine-month periods ended
December 31, 1996 and 1995 for Target. These statements give effect to the
Merger, accounted for under the "pooling-of-interests" accounting method, after
giving effect to an estimated number of shares to be exchanged.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1993
-------------------------------------------------------
PRO FORMA
BOSTON COMBINED
SCIENTIFIC TARGET TARGET BOSTON
DECEMBER 31, MARCH 31, PRO FORMA SCIENTIFIC
1993 1994 ADJUSTMENTS AND TARGET
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net sales.................................. $ 746,983 $ 35,353 $ 782,336
Cost of sales.............................. 231,946 12,925 244,871
------------ ----------- ------------
Gross profit............................. 515,037 22,428 537,465
Selling, general and administrative
expenses................................. 257,391 9,245 266,636
Royalty expenses........................... 24,473 443 24,916
Research and development expenses.......... 62,024 7,624 69,648
Patent litigation loss..................... 67,000 67,000
------------ ----------- ------------
Operating income......................... 104,149 5,116 109,265
Other income, net.......................... 10,536 1,469 12,005
------------ ----------- ------------
Income before income taxes and cumulative
effect of change in method of
accounting for income taxes........... 114,685 6,585 121,270
Income taxes............................... 45,219 2,265 47,484
------------ ----------- ------------
Income before cumulative effect of
accounting change..................... 69,466 4,320 73,786
------------ ----------- ------------
Cumulative effect of accounting change..... 631 631
------------ ----------- ------------
Net income............................... $ 69,466 $ 4,951 $ 74,417
============ =========== ============
Primary net income per common share........ $ 0.40 $ 0.35 $ 0.40
============ =========== ============
Fully diluted net income per common
share.................................... $ 0.40 $ 0.35 $ 0.40
============ =========== ============
Primary weighted average of common and
common equivalent shares outstanding..... 172,123,000 14,206,000 994,000 187,323,000
============ =========== ======= ============
Fully diluted weighted average of common
and common equivalent shares
outstanding.............................. 172,683,000 14,228,000 996,000 187,907,000
============ =========== ======= ============
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Information.
59
<PAGE> 73
BOSTON SCIENTIFIC AND TARGET
UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENTS OF INCOME (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1994
--------------------------------------------------------
PRO FORMA
BOSTON COMBINED
SCIENTIFIC TARGET TARGET BOSTON
DECEMBER 31, MARCH 31, PRO FORMA SCIENTIFIC
1994 1995 ADJUSTMENTS AND TARGET
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales................................. $ 888,572 $ 47,508 $ 936,080
Cost of sales............................. 279,772 14,347 294,119
----------- ---------- -----------
Gross profit............................ 608,800 33,161 641,961
Selling, general and administrative
expenses................................ 299,292 13,556 312,848
Royalty expenses.......................... 25,682 804 26,486
Research and development expenses......... 76,692 10,336 87,028
----------- ---------- -----------
Operating income........................ 207,134 8,465 215,599
Other income, net......................... 1,724 2,063 3,787
----------- ---------- -----------
Income before income taxes................ 208,858 10,528 219,386
Income taxes............................ 73,551 3,150 76,701
----------- ---------- -----------
Net income.............................. $ 135,307 $ 7,378 $ 142,685
=========== ========== ===========
Primary net income per common share....... $ 0.78 $ 0.51 $ 0.75
=========== ========== ===========
Fully diluted net income per common
share................................... $ 0.77 $ 0.51 $ 0.75
=========== ========== ===========
Primary weighted average of common and
common equivalent shares outstanding.... 174,197,000 14,466,000 1,013,000 189,676,000
=========== ========== ========= ===========
Fully diluted weighted average of common
and common equivalent shares
outstanding............................. 174,701,000 14,543,000 1,018,000 190,262,000
=========== ========== ========= ===========
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Information.
60
<PAGE> 74
BOSTON SCIENTIFIC AND TARGET
UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENTS OF INCOME (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1995
--------------------------------------------------------------
PRO FORMA
BOSTON COMBINED
SCIENTIFIC TARGET TARGET BOSTON
DECEMBER 31, MARCH 31, PRO FORMA SCIENTIFIC
1995 1996 ADJUSTMENTS AND TARGET
------------ ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales............................. $ 1,129,185 $ 69,795 $ 1,198,980
Cost of sales......................... 325,063 19,872 344,935
------------ ----------- -----------
Gross profit........................ 804,122 49,923 854,045
Selling, general and administrative
expenses............................ 373,390 20,726 394,116
Royalty expenses...................... 24,874 1,606 26,480
Research and development expenses..... 93,843 12,937 106,780
Purchased research and development.... 32,646 32,646
Special charges....................... 204,448 204,448
------------ ----------- -----------
Operating income.................... 74,921 14,654 89,575
Other income, net..................... 8,884 2,055 10,939
------------ ----------- -----------
Income before income taxes.......... 83,805 16,709 100,514
Income taxes.......................... 77,365 5,007 82,372
------------ ----------- -----------
Net income.......................... $ 6,440 $ 11,702 $ 18,142
============ =========== ===========
Primary net income per common share... $ 0.04 $ 0.77 $ 0.09
============ =========== ===========
Fully diluted net income per common
share............................... $ 0.04 $ 0.76 $ 0.09
============ =========== ===========
Primary weighted average of common and
common equivalent shares
outstanding......................... 177,534,000 15,280,000 1,070,000 193,884,000
============ =========== ========= ===========
Fully diluted weighted average of
common and common equivalent shares
outstanding......................... 177,757,000 15,410,000 1,079,000 194,246,000
============ =========== ========= ===========
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Information.
61
<PAGE> 75
BOSTON SCIENTIFIC AND TARGET
UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENTS OF INCOME (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
----------------------------------------------------------
BOSTON
SCIENTIFIC TARGET PRO FORMA
FOR THE NINE FOR THE NINE COMBINED
MONTHS ENDED MONTHS ENDED TARGET BOSTON
SEPT. 30, DEC. 31, PRO FORMA SCIENTIFIC AND
1995 1995 ADJUSTMENTS TARGET
------------ ------------ ----------- --------------
<S> <C> <C> <C> <C>
Net sales.................................. $ 823,955 $ 48,625 $ 872,580
Cost of sales.............................. 243,334 13,866 257,200
------------ ----------- ------------
Gross profit............................. 580,621 34,759 615,380
Selling, general and administrative
expenses................................. 265,311 14,247 279,558
Royalty expenses........................... 20,151 1,086 21,237
Research and development expenses.......... 68,564 9,081 77,645
Purchased research and development......... 32,646 32,646
Special charge............................. 92,103 92,103
------------ ----------- ------------
Operating income......................... 101,846 10,345 112,191
Other income, net.......................... 8,298 1,724 10,022
------------ ----------- ------------
Income before income taxes............... 110,144 12,069 122,213
Income taxes............................... 75,821 3,615 79,436
------------ ----------- ------------
Net income............................... $ 34,323 $ 8,454 $ 42,777
============ =========== ============
Primary net income per common share........ $ 0.19 $ 0.56 $ 0.22
============ =========== ============
Fully diluted net income per common
share.................................... $ 0.19 $ 0.55 $ 0.22
============ =========== ============
Primary weighted average of common and
common equivalent shares outstanding..... 177,882,000 15,156,000 1,061,000 194,099,000
============ =========== ========= ============
Fully diluted weighted average of common
and common equivalent shares
outstanding.............................. 180,121,000 15,310,000 1,072,000 196,503,000
============ =========== ========= ============
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Information.
62
<PAGE> 76
BOSTON SCIENTIFIC AND TARGET
UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENTS OF INCOME (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
----------------------------------------------------------
BOSTON
SCIENTIFIC TARGET PRO FORMA
FOR THE NINE FOR THE NINE COMBINED
MONTHS ENDED MONTHS ENDED TARGET BOSTON
SEPT. 30, DEC. 31, PRO FORMA SCIENTIFIC AND
1996 1996 ADJUSTMENTS TARGET
------------ ------------ ----------- --------------
<S> <C> <C> <C> <C>
Net sales.................................. $ 1,053,315 $ 68,025 $ 1,121,340
Cost of sales.............................. 284,972 19,191 304,163
------------ ----------- ------------
Gross profit............................. 768,343 48,834 817,177
Selling, general and administrative
expenses................................. 352,910 19,041 371,951
Royalty expenses........................... 11,141 1,661 12,802
Research and development expenses.......... 84,755 14,768 99,523
Purchased research and development......... 96,000 14,000 110,000
Special charge............................. 32,341 32,341
------------ ----------- ------------
Operating income (loss).................. 191,196 (636) 190,560
Other income (expense), net................ (7,994) 1,746 (6,248)
------------ ----------- ------------
Income before income taxes............... 183,202 1,110 184,312
Income taxes............................... 92,840 4,684 97,524
------------ ----------- ------------
Net income (loss)........................ $ 90,362 $ (3,574) $ 86,788
============ =========== ============
Primary net income (loss) per common
share.................................... $ 0.50 $ (0.24) $ 0.44
============ =========== ============
Fully diluted net income (loss) per common
share.................................... $ 0.49 $ (0.24) $ 0.44
============ =========== ============
Primary weighted average of common and
common equivalent shares outstanding..... 180,699,000 14,828,000 1,038,000 196,565,000
============ =========== ========= ============
Fully diluted weighted average of common
and common equivalent shares
outstanding.............................. 183,040,000 14,828,000 1,038,000 198,906,000
============ =========== ========= ============
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Information.
63
<PAGE> 77
BOSTON SCIENTIFIC AND TARGET
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
A. The combination of Boston Scientific and Target will be accounted for using
the "pooling-of-interests" method of accounting. Accordingly, the Unaudited
Pro Forma Combined Condensed Financial Information combines the historical
financial information of Boston Scientific and Target for the periods
presented. Under the terms of the Merger Agreement, each share of Target
Common Stock will be converted into the right to receive 1.07 shares of
Boston Scientific Common Stock.
In addition, the Boston Scientific results have been restated for all periods
presented to reflect Boston Scientific's merger with EP Technologies, Inc.
("EPT"). On January 22, 1996, Boston Scientific completed its merger with EPT
in a stock-for-stock transaction. The transaction, which is accounted for as
a "pooling-of-interests," was effected through the exchange of 0.297 shares
of Boston Scientific Common Stock for each EPT share held. Approximately 3
million shares of Boston Scientific Common Stock were issued in conjunction
with the EPT merger. EPT designs, develops, manufactures and markets advanced
electrophysiology catheters and systems for use in minimally invasive
procedures to diagnose and treat tachyarrhythmias (abnormally rapid heart
rates resulting from defective or diseased cardiac tissues that interfere
with the normal conduction of electrical activity responsible for heart
muscle contraction).
The unaudited financial statements of Boston Scientific for the nine-month
period ended September 30, 1996 include the operations of Symbiosis
Corporation ("Symbiosis"), beginning in March 1996, and Endotech, Ltd. and
MinTec, Inc. ("Endotech/MinTec"), beginning in May 1996. On March 14, 1996,
Boston Scientific acquired Symbiosis, a developer and manufacturer of
specialty medical devices and formerly a wholly-owned subsidiary of American
Home Products Corporation, for approximately $153 million in a cash
transaction. On May 3, 1996, Boston Scientific acquired assets from
Endotech/MinTec, a privately held company dedicated to the development of
stent graft technology for the repair of diseased blood vessels. Boston
Scientific purchased Endotech/MinTec's assets for approximately $72 million
in a cash transaction. Both acquisitions were accounted for using the
purchase method of accounting.
The unaudited financial statements of Target for the nine-month period ended
December 31, 1996 include the operations of Interventional Therapeutics
Corporation ("ITC"), beginning in May 1996. On May 23, 1996, Target completed
the closing of the acquisition of ITC, at which time approximately 331,000
shares of Target Common Stock were exchanged for all of the outstanding
shares and options to purchase shares of ITC stock. ITC is a developer and
manufacturer of vascular occlusion devices used in neurovascular and vascular
embolization. The acquisition of ITC was accounted for using the purchase
method of accounting.
The restated financial data is not necessarily indicative of the operating
results or financial position that would have occurred if the Target or EPT
mergers had been consummated during the periods presented, nor is it
necessarily indicative of future operation results or financial position.
B. The Unaudited Pro Forma Combined Condensed Balance Sheet reflects the
elimination of Target's treasury shares as an increase to additional paid-in
capital.
C. There were no material transactions between Boston Scientific and Target
during any of the periods presented.
D. The Unaudited Pro Forma Combined Condensed Statements of Income reflect the
reclassification of Target's royalty expenses to be consistent with Boston
Scientific's classification. The reclassification has no impact on pro forma
operating income or net income.
E. The Unaudited Pro Forma Combined Condensed Balance Sheets reflect the
conversion of Target Common Stock at the Exchange Ratio. Pro forma per share
amounts are based on historical per share amounts after giving effect to the
pro forma adjustments described elsewhere herein, and converting each share
of Target Common Stock into shares of Boston Scientific Common Stock at the
Exchange Ratio.
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F. Total Merger-related direct expenses are expected to approximate $13.5
million and have been treated as nondeductible for tax purposes.
See Notes to Selected Historical and Pro Forma Financial Data for Boston
Scientific and Target Therapeutics, Inc.
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COMPARISONS OF STOCKHOLDERS' RIGHTS
GENERAL
As a result of the Merger, holders of shares of Target Common Stock will
own shares of Boston Scientific Common Stock. The DGCL is the statute which
governs Delaware corporations. Both Boston Scientific and Target are
corporations incorporated under the laws of the State of Delaware, and there are
no differences between the rights of Boston Scientific and Target stockholders
arising out of the DGCL. The following is a summary of certain significant
similarities and differences between the rights of holders of shares of Target
Common Stock and holders of shares of Boston Scientific Common Stock. These
differences arise from differences between Target's Restated Certificate of
Incorporation, as amended (the "Target Certificate"), and Target's By-laws, as
amended ("Target's By-laws"), and Boston Scientific's Second Restated
Certificate of Incorporation, as amended (the "Boston Scientific Certificate"),
and Boston Scientific's Restated By-laws ("Boston Scientific's By-laws"), the
governing instruments of the two companies. This discussion is not and does not
purport to be complete or to identify all differences that may, under given fact
situations, be material to stockholders. The summaries set forth herein are
qualified in their entirety by reference to the Target Certificate and Target's
By-laws and the Boston Scientific Certificate and Boston Scientific's By-laws.
SIZE AND CLASSIFICATION OF THE BOARD OF DIRECTORS
Boston Scientific
Boston Scientific's By-laws require a Board comprised of not less than
three nor more than fifteen members, which number may be increased or decreased
within such range by the Boston Scientific Board. Boston Scientific currently
has nine directors. The Boston Scientific Board is classified into three classes
which are to be as nearly equal as possible. Directors in each class serve for a
term of three years, and elections are staggered such that one class is elected
each year. Each director serves until his or her successor is elected and
qualified.
Target
Target's By-laws require a Board comprised of seven members. Directors
serve for a term of one year. The Target Board is not classified. Each director
serves until his or her successor is elected and qualified. The Target
Certificate provides for cumulative voting. Every stockholder voting for the
election of directors may cumulate his or her votes and give one candidate the
number of votes equal to the number of directors to be elected multiplied by the
number of votes to which the stockholder's shares are entitled, or may
distribute his or her votes on the same principle among as many candidates as he
or she may select, provided that votes cannot be cast for more than seven
candidates.
CUMULATIVE VOTING FOR DIRECTORS
Boston Scientific
Neither the Boston Scientific Certificate nor Boston Scientific's By-laws
provides for cumulative voting.
Target
The Target Certificate provides for cumulative voting for directors. Every
stockholder voting for the election of directors may cumulate his or her votes
and give one candidate the number of votes equal to the number of directors to
be elected multiplied by the number of votes to which the stockholder's shares
are entitled, or may distribute his or her votes on the same principle among as
many candidates as he or she may select, provided that votes cannot be cast for
more than seven candidates.
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REMOVAL OF DIRECTORS
Boston Scientific
The Boston Scientific Certificate provides that a director or directors may
be removed, with or without cause, by the affirmative vote of 80% of the
combined voting power of holders of shares of capital stock entitled to vote
generally in the election of directors.
Target
Target's By-laws provide that any director or the entire Board of Directors
may be removed, with or without cause, by the holders of a majority of shares
entitled to vote at an election of directors. However, if less than the entire
Board is to be removed, no directors may be removed without cause if the votes
cast against his or her removal would be sufficient to elect him or her if then
cumulatively voted at an election at the entire Board.
SPECIAL MEETINGS OF STOCKHOLDERS
Boston Scientific
Under Boston Scientific's By-laws, a special meeting of stockholders of
Boston Scientific may be called only by the Chairman of the Board, the President
or a majority of the total number of directors which Boston Scientific would
have if no vacancies existed. Business transacted at any special meeting is
limited to the purposes stated in the notice of the special stockholders'
meeting given to stockholders. Boston Scientific's By-laws require notices of
stockholders' meetings to be sent to all stockholders of record entitled to vote
thereat not less than 10 nor more than 60 days prior to the meeting.
Target
Under Target's By-laws, a special meeting of stockholders may be called by:
(i) the President of Target, (ii) the Board of Directors or (iii) stockholders
holding shares in the aggregate entitled to cast not less than 10% of the votes
at such meeting. Target's By-laws require notices of any special meeting to be
sent to all stockholders entitled to vote at such meeting not less than 10 nor
more than 60 days before the date of such meeting.
AMENDMENT OF CHARTER DOCUMENTS
Boston Scientific
The Boston Scientific Certificate may be amended in accordance with the
DGCL. Boston Scientific's By-laws may be amended or repealed or new By-laws
adopted by approval of the holders of a majority of the shares entitled to vote
at any regular or special meeting of Boston Scientific stockholders and by the
majority of the Boston Scientific Board.
Target
The Target Certificate may be amended in accordance with the DGCL. Target's
By-laws may be altered, amended or repealed or new By-laws may be adopted by the
stockholders entitled to vote or by a majority of the Board of Directors at any
regular meeting of the stockholders or of the Board of Directors or at any
special meeting of the stockholders or of the Board of Directors.
PURCHASES FROM 5% OR GREATER STOCKHOLDERS
Boston Scientific
The Boston Scientific Certificate restricts Boston Scientific from making
any purchases of shares of its outstanding capital stock entitled to vote
generally in the election of directors (the "Voting Stock") from any person,
entity or group that beneficially owns 5% or more of the Voting Stock at a price
exceeding the average closing price for the 20 trading business days prior to
the date of purchase of such shares, unless a majority of
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holders of shares of Voting Stock holding less than 5% of the Voting Stock
approve the transaction. Such restriction does not apply to (i) any offer to
purchase shares of a class of Boston Scientific's stock which is made on the
same terms and conditions to all holders of that class of stock; (ii) any
purchase of stock owned by such a 5% stockholder occurring more than two years
after such stockholder's last acquisition of Boston Scientific stock; (iii) any
purchase of Boston Scientific stock in accordance with the terms of any stock
option or employee benefit plan; or (iv) any purchase at prevailing market
prices pursuant to a stock repurchase program.
Target
Neither the Target Certificate nor the Target By-laws contain a restriction
on purchases of Target Common Stock from 5% or greater stockholders.
STOCKHOLDER VOTE REQUIRED FOR CERTAIN TRANSACTIONS
None of the Boston Scientific Certificate, Boston Scientific's By-laws, the
Target Certificate, or Target's By-laws address the vote required to approve a
merger, consolidation or sale of substantially all of the respective
corporation's assets. Accordingly, such transactions will be governed by the
DGCL. The DGCL requires that before a merger, consolidation or sale of
substantially all of a corporation's assets can be approved by the stockholders
of a Delaware corporation, a resolution approving the agreement providing for
such transaction must be adopted by the corporation's board of directors. After
receiving board approval, the agreement providing for such transaction must be
adopted by an affirmative vote of at least a majority of the outstanding shares
entitled to vote thereon. The Target Board has unanimously approved the Merger
Agreement and unanimously recommends that the stockholders of Target vote for
adoption of the Merger Agreement. Therefore, with respect to Target, the
affirmative vote of at least a majority of the outstanding shares held by Target
stockholders is required in order to consummate the Merger. However, because a
wholly owned subsidiary of Boston Scientific rather than Boston Scientific will
be the actual party to the Merger, approval of the stockholders of Boston
Scientific is not required in order to consummate the Merger.
CERTAIN BUSINESS COMBINATIONS
The DGCL prohibits a corporation which has securities traded on an exchange
designated on Nasdaq or held of record by more than 2,000 stockholders from
engaging in certain business combinations, including a merger, sale of
substantial assets, loan or substantial issuance of stock, with an interested
stockholder, or an interested stockholder's affiliates, for a three-year period
beginning on the date the interested stockholder acquires 15% or more of the
outstanding voting stock of the corporation. The restrictions on business
combinations do not apply if the board of directors gives prior approval to the
transaction in which the 15% ownership level is exceeded, the interested
stockholder acquires at one time 85% of the corporation's stock (excluding those
shares owned by persons who are directors and also officers as well as employee
stock plans in which employees do not have a confidential right to vote), or the
business combination is approved by the board of directors and authorized at a
meeting of stockholders by the holders of at least two-thirds of the outstanding
voting stock, excluding shares owned by the interested stockholder. Although a
Delaware corporation may elect, pursuant to its certificate or By-laws, not to
be governed by this provision, none of the Boston Scientific Certificate, Boston
Scientific's By-laws, the Target Certificate or Target's By-laws contain such an
election.
ABSENCE OF DISSENTERS' RIGHTS
Under the DGCL, dissenters' rights of appraisal are limited. Rights of
appraisal are available to a stockholder of a corporation only in connection
with certain mergers or consolidations involving such corporation, amendments to
the Certificate of Incorporation of such corporation (if so provided in the
Certificate of Incorporation) or sales of all or substantially all of the assets
of such corporation. However, appraisal rights are not available under Delaware
law if the corporation's stock is (prior to the relevant transaction) listed on
a national securities exchange or designated on Nasdaq or held of record by more
than 2,000 stockholders. Notwithstanding the foregoing, appraisal rights will be
available if the merger or
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consolidation requires stockholders to exchange their stock for anything other
than shares of the surviving corporation of the merger, shares of another
corporation that will be listed on a national securities exchange, designated on
Nasdaq or held of record by more than 2,000 stockholders, cash in lieu of
fractional shares of any such corporation, or a combination of such shares and
cash. Because the Merger Agreement does not require stockholders of Target to
exchange their stock for anything other than shares of Boston Scientific Common
Stock (and cash in lieu of fractional shares) and because such shares are listed
on a national securities exchange or held of record by more than 2,000
stockholders, stockholders of Target do not have the right to dissent from the
Merger or receive a cash payment for the fair value of their shares. Because a
wholly owned subsidiary of Boston Scientific rather than Boston Scientific will
be the actual party to the Merger, stockholders of Boston Scientific do not have
the right to dissent from the Merger or receive a cash payment for the fair
value of their shares.
LEGAL MATTERS
The legality of the Boston Scientific Common Stock being offered hereby
will be passed upon for Boston Scientific by Shearman & Sterling, New York, New
York. The federal income tax consequences in connection with the Merger will be
passed upon by Venture Law Group, A Professional Corporation, Menlo Park,
California.
EXPERTS
The consolidated financial statements of Boston Scientific incorporated by
reference and the schedule included in Boston Scientific's Annual Report on Form
10-K for the year ended December 31, 1995 have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon included therein
and incorporated herein by reference, which, as to the years 1994 and 1993, are
based in part on the reports of Deloitte & Touche LLP, independent auditors,
Arthur Andersen LLP, independent public accountants, and Price Waterhouse LLP,
independent accountants, incorporated by reference herein. Such consolidated
financial statements and schedule are incorporated herein by reference in
reliance upon such reports given upon the authority of such firms as experts in
accounting and auditing.
The financial statements of SCIMED Life Systems, Inc., not separately
presented in this Proxy Statement/Prospectus, have been audited by Deloitte &
Touche LLP, independent auditors, whose report thereon has been incorporated by
reference herein. Such financial statements to the extent they have been
included in Boston Scientific's financial statements, as referred to above, have
been so included in reliance on such report given upon the authority of such
firm as experts in auditing and accounting.
The financial statements of Heart Technology, Inc., not separately
presented in this Proxy Statement/Prospectus, have been audited by Price
Waterhouse LLP, independent accountants, whose report thereon has been
incorporated by reference herein. Such financial statements to the extent they
have been included in Boston Scientific's financial statements, as referred to
above, have been so included in reliance on such report given upon the authority
of such firm as experts in auditing and accounting.
The financial statements of Meadox Medicals, Inc., not separately presented
in this Proxy Statement/Prospectus, have been audited by Arthur Andersen LLP,
independent public accountants, whose report thereon has been incorporated by
reference herein. Such financial statements to the extent they have been
included in Boston Scientific's financial statements, as referred to above, have
been so included in reliance on such report given upon the authority of said
firm as experts in auditing and accounting.
The financial statements of Symbiosis Corporation as of December 31, 1994
and for the year then ended incorporated by reference herein from Boston
Scientific's Current Report on Form 8-K dated March 14, 1996 have been audited
by Arthur Andersen LLP, independent public accountants, as set forth in their
report thereon included therein and incorporated herein by reference. Such
financial statements are incorporated herein by reference in reliance on said
report given upon the authority of said firm as experts in auditing and
accounting.
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The consolidated financial statements and schedule of Target appearing in
Target's Annual Report on Form 10-K for the fiscal year ended March 31, 1996
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon included therein and incorporated herein by reference. Such
consolidated financial statements and schedule are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
STOCKHOLDER PROPOSALS
If the Merger is not consummated, or is not consummated within the time
period currently contemplated, Target will hold its 1997 Annual Meeting of
Stockholders. As described in Target's proxy statement relating to its 1996
Annual Meeting of Stockholders, stockholder proposals for inclusion in Target's
proxy statement and form of proxy relating to the Target 1997 Annual Meeting of
Stockholders must have been received by Target no later than March 24, 1997.
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EXHIBIT A
CONFORMED COPY
AGREEMENT AND PLAN OF MERGER
<PAGE> 85
CONFORMED COPY
================================================================================
AGREEMENT AND PLAN OF MERGER
AMONG
BOSTON SCIENTIFIC CORPORATION,
PATRIOT ACQUISITION CORP.
AND
TARGET THERAPEUTICS, INC.
DATED AS OF JANUARY 20, 1997
================================================================================
<PAGE> 86
TABLE OF CONTENTS
ARTICLE I
THE MERGER
<TABLE>
<C> <S> <C>
1.01. The Merger..................................................................... A-1
1.02. Effective Time; Closing........................................................ A-1
1.03. Effect of the Merger........................................................... A-1
1.04. Certificate of Incorporation; By-laws.......................................... A-2
1.05. Directors and Officers......................................................... A-2
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
2.01. Conversion of Securities....................................................... A-2
2.02. Exchange of Certificates....................................................... A-2
2.03. Stock Transfer Books........................................................... A-4
2.04. Stock Options.................................................................. A-4
2.05. Adjustments to Prevent Dilution................................................ A-5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.01. Organization and Qualification; Subsidiaries................................... A-5
3.02. Certificate of Incorporation and By-laws....................................... A-6
3.03. Capitalization................................................................. A-6
3.04. Authority Relative to this Agreement........................................... A-6
3.05. No Conflict; Required Filings and Consents..................................... A-7
3.06. Permits; Company Products; Regulation.......................................... A-7
3.07. SEC Filings; Financial Statements.............................................. A-8
3.08. Absence of Certain Changes or Events........................................... A-9
3.09. Absence of Litigation.......................................................... A-9
3.10. Employee Benefit Plans......................................................... A-10
3.11. Labor Matters.................................................................. A-10
3.12. Real Property and Leases....................................................... A-10
3.13. Intellectual Property.......................................................... A-10
3.14. Taxes.......................................................................... A-11
3.15. Environmental Matters.......................................................... A-11
3.16. Material Contracts............................................................. A-12
3.17. Suppliers...................................................................... A-13
3.18. Accounting and Tax Matters..................................................... A-13
3.19. Company Rights Agreement....................................................... A-13
3.20. Vote Required.................................................................. A-13
3.21. Opinion of Financial Advisors.................................................. A-13
3.22. Brokers........................................................................ A-13
</TABLE>
A-i
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<TABLE>
<C> <S> <C>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
4.01. Organization and Qualification; Subsidiaries................................... A-14
4.02. Certificate of Incorporation and By-laws....................................... A-14
4.03. Capitalization................................................................. A-14
4.04. Authority Relative to this Agreement........................................... A-15
4.05. No Conflict; Required Filings and Consents..................................... A-15
4.06. SEC Filings; Financial Statements.............................................. A-15
4.07. Absence of Certain Changes or Events........................................... A-16
4.08. Accounting and Tax Matters..................................................... A-16
4.09. Absence of Litigation.......................................................... A-17
4.10. Brokers........................................................................ A-17
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
5.01. Conduct of Business by the Company Pending the Merger.......................... A-17
5.02. Conduct of Business by Parent Pending the Merger............................... A-18
ARTICLE VI
ADDITIONAL AGREEMENTS
6.01. Registration Statement; Proxy Statement........................................ A-18
6.02. Stockholders' Meeting.......................................................... A-19
6.03. Appropriate Action; Consents; Filings.......................................... A-20
6.04. Access to Information; Confidentiality......................................... A-21
6.05. No Solicitation of Competing Transactions...................................... A-21
6.06. Directors' and Officers' Indemnification and Insurance......................... A-22
6.07. Notification of Certain Matters................................................ A-22
6.08. Stock Exchange Listing......................................................... A-23
6.09. Public Announcements........................................................... A-23
6.10. Plan of Reorganization......................................................... A-23
6.11. Company Distribution Agreements................................................ A-23
6.12. Company Employee Stock Purchase Plan........................................... A-23
6.13. Acceleration of Stock Options.................................................. A-24
6.14. Affiliates; Accounting and Tax Treatment....................................... A-24
6.15. Employees and Employee Benefits................................................ A-24
ARTICLE VII
CONDITIONS TO THE MERGER
7.01. Conditions to the Obligations of Each Party.................................... A-24
7.02. Conditions to the Obligations of Parent and Merger Sub......................... A-25
7.03. Conditions to the Obligations of the Company................................... A-25
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.01. Termination.................................................................... A-26
8.02. Effect of Termination.......................................................... A-27
8.03. Fees and Expenses.............................................................. A-27
8.04. Amendment...................................................................... A-28
8.05. Waiver......................................................................... A-28
</TABLE>
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<TABLE>
<C> <S> <C>
ARTICLE IX
GENERAL PROVISIONS
9.01. Non-Survival of Representations, Warranties and Agreements..................... A-28
9.02. Notices........................................................................ A-28
9.03. Certain Definitions............................................................ A-29
9.04. Severability................................................................... A-30
9.05. Entire Agreement; Assignment................................................... A-30
9.06. Parties in Interest............................................................ A-30
9.07. Specific Performance........................................................... A-30
9.08. Governing Law.................................................................. A-30
9.09. Headings....................................................................... A-30
9.10. Counterparts................................................................... A-31
9.11. Waiver of Jury Trial........................................................... A-31
</TABLE>
EXHIBITS
Exhibit 6.14(a) Form of Company Affiliate Letter
Exhibit 6.14(b) Form of Parent Affiliate Letter
Exhibit 9.03(f) Executive Officers of Company
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<PAGE> 89
INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
DEFINED TERM LOCATION OF DEFINITION
- ------------ ----------------------
<S> <C>
affiliate Section 9.03(a)
Agreement Recitals
beneficial owner Section 9.03(b)
Blue Sky Laws Section 3.05(b)
business day Section 9.03(c)
Certificate of Merger Section 1.02
Certificates Section 2.02(b)
Change of Control Agreements Section 6.13
Code Recitals
Company Recitals
Company Common Stock Section 2.01(a)
Company Disclosure Schedule Article III
Company Financial Advisor Section 3.21
Company Intellectual Property Section 3.13
Company Licenses Section 3.13
Company Material Adverse Effect Section 3.01
Company 1996 Balance Sheet Section 3.07(d)
Company Options Section 2.04(a)
Company Permits Section 3.06(a)
Company Rights Agreement Section 3.19
Company SEC Reports Section 3.07(a)
Company Stock Option Plans Section 2.04(a)
Competing Transaction Section 6.05
Confidentiality Agreement Section 6.04(c)
control Section 9.03(d)
Current Offering Section 6.12(a)
Delaware Law Recitals
Effective Time Section 1.02
Employment Contracts Section 3.10
Environmental Laws Section 3.15(a)
Environmental Permits Section 3.15(b)
ERISA Section 3.10
ESPP Section 3.03
Exchange Act Section 3.05(b)
Exchange Agent Section 2.02(a)
Exchange Fund Section 2.02(a)
Exchange Ratio Section 2.01(a)
FDA Section 3.06(b)
Governmental Authority Section 9.03(e)
</TABLE>
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<TABLE>
<CAPTION>
DEFINED TERM LOCATION OF DEFINITION
- ------------ ----------------------
<S> <C>
Hazardous Substances Section 3.15(a)
HSR Act Section 3.05(b)
IRS Section 3.10
knowledge of the Company Section 9.03(f)
Laws Section 3.05(a)
Material Contracts Section 3.16(a)
Merger Recitals
Merger Sub Recitals
NASD Section 3.05(b)
NYSE Section 4.05(b)
Parent Recitals
Parent Common Stock Section 2.01(a)
Parent Material Adverse Effect Section 4.01
Parent 1995 Balance Sheet Section 4.06(d)
Parent Options Section 2.04(d)
Parent Preferred Stock Section 4.03
Parent SEC Reports Section 4.06(a)
person Section 9.03(g)
Plans Section 3.10
Products Section 3.06(b)
Proxy Statement Section 6.01(a)
Registration Statement Section 6.01(a)
Representatives Section 6.04(a)
SEC Recitals
Securities Act Section 3.05(b)
Shares Section 2.01(a)
Stockholders' Meeting Section 6.02
subsidiary/subsidiaries Section 9.03(h)
Subsidiary Section 3.01
Surviving Corporation Section 1.01
Terminating Company Breach Section 8.01(g)
Terminating Parent Breach Section 8.01(f)
Termination Fee Section 8.03(a)
</TABLE>
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AGREEMENT AND PLAN OF MERGER dated as of January 20, 1997 (this
"Agreement") among BOSTON SCIENTIFIC CORPORATION, a Delaware corporation
("Parent"), PATRIOT ACQUISITION CORPORATION, a Delaware corporation and a wholly
owned subsidiary of Parent ("Merger Sub"), and TARGET THERAPEUTICS, INC., a
Delaware corporation (the "Company").
WHEREAS, Merger Sub, upon the terms and subject to the conditions of this
Agreement and in accordance with the General Corporation Law of the State of
Delaware ("Delaware Law"), will merge with and into the Company (the "Merger");
WHEREAS, the Board of Directors of the Company has (i) determined that the
Merger is fair to the holders of Shares (as defined in Section 2.01) and is in
the best interests of such stockholders and (ii) approved this Agreement and the
transactions contemplated hereby and unanimously has recommended that the
stockholders of the Company adopt this Agreement;
WHEREAS, the Board of Directors of Parent has determined that the Merger is
in the best interests of Parent and its stockholders and has approved and, as
sole stockholder of Merger Sub, has adopted this Agreement and the transactions
contemplated hereby;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization under the provisions of Section 368(a) of the
United States Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for accounting purposes, it is intended that the Merger shall be
accounted for as a "pooling-of-interests" under applicable United States
accounting rules and Securities and Exchange Commission ("SEC ") accounting
standards.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained and intending to be legally bound hereby,
Parent, Merger Sub and the Company hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. The Merger. Upon the terms and subject to the conditions
set forth in Article VII, and in accordance with Section 251 of Delaware Law, at
the Effective Time (as defined below), Merger Sub shall be merged with and into
the Company. As a result of the Merger, the separate corporate existence of
Merger Sub shall cease, and the Company shall be the surviving corporation of
the Merger (the "Surviving Corporation").
SECTION 1.02. Effective Time; Closing. As promptly as practicable, and in
no event later than five business days after the satisfaction or, if
permissible, waiver of the conditions set forth in Article VII (other than those
conditions that can only be satisfied on the closing date), the parties hereto
shall cause the Merger to be consummated by filing a certificate of merger (the
"Certificate of Merger") with the Secretary of State of the State of Delaware,
in such form as is required by, and executed in accordance with, Section 251 of
Delaware Law. The term "Effective Time" means the date and time of the filing of
the Certificate of Merger with the Secretary of State of the State of Delaware
(or such later time as may be agreed by the parties hereto and specified in the
Certificate of Merger). Immediately prior to the filing of the Certificate of
Merger, a closing will be held at the offices of Shearman & Sterling, 599
Lexington Avenue, New York, New York (or such other place as the parties may
agree).
SECTION 1.03. Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in 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
the Company and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities, obligations, restrictions, disabilities and duties of each
of the Company and Merger Sub shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Corporation.
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SECTION 1.04. Certificate of Incorporation; By-laws.
(a) Subject to the terms of Section 6.06, at the Effective Time, the
Certificate of Incorporation of the Surviving Corporation shall be the
Certificate of Incorporation of Merger Sub as in effect immediately prior to the
Effective Time, except that Article I thereof shall be amended as of the
Effective Time to read as follows: "the name of the Corporation is Target
Therapeutics, Inc."
(b) Subject to the terms of Section 6.06, at the Effective Time, the
By-laws of Merger Sub, as in effect immediately prior to the Effective Time,
shall be the By-laws of the Surviving Corporation until thereafter amended as
provided by law, the Certificate of Incorporation of the Surviving Corporation
and such By-laws.
SECTION 1.05. Directors and Officers. The directors of Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Conversion of Securities. At the Effective Time, by virtue
of the Merger and without any action on the part of Merger Sub, the Company or
the holders of any of the following securities:
(a) Each share of common stock, par value $.0025 per share, of the
Company ("Company Common Stock"; all issued and outstanding shares of
Company Common Stock being hereinafter collectively referred to as the
"Shares") issued and outstanding immediately prior to the Effective Time
(other than any Shares to be cancelled pursuant to Section 2.01(b)) and all
rights in respect thereof shall be converted automatically, subject to
Section 2.02(e), into the right to receive 1.07 shares (the "Exchange
Ratio") of common stock, par value $.01 per share, of Parent ("Parent
Common Stock").
(b) Each Share held in the treasury of the Company and each Share
owned by Parent or any direct or indirect wholly owned subsidiary of Parent
or of the Company immediately prior to the Effective Time shall be
cancelled and extinguished without any conversion thereof and no payment
shall be made with respect thereto.
(c) Each share of common stock of Merger Sub issued and outstanding
immediately prior to the Effective Time shall be converted into one validly
issued, fully paid and nonassessable share of common stock of the Surviving
Corporation.
SECTION 2.02. Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, Parent shall deposit, or
shall cause to be deposited, with The First National Bank of Boston or such
other bank or trust company as may be designated by Parent and approved by the
Company, which approval shall not be unreasonably withheld (the "Exchange
Agent"), for the benefit of the holders of Shares, for exchange in accordance
with this Article II through the Exchange Agent, certificates representing the
shares of Parent Common Stock (such certificates for shares of Parent Common
Stock, together with any dividends or distributions with respect thereto, being
hereinafter referred to as the "Exchange Fund") issuable in exchange for
outstanding Shares pursuant to Section 2.01. The Exchange Agent shall, pursuant
to irrevocable instructions, deliver the Parent Common Stock contemplated to be
issued pursuant to Section 2.01 out of the Exchange Fund. Except as contemplated
by Section 2.02(f) hereof, the Exchange Fund shall not be used for any other
purpose.
(b) Exchange Procedures. As promptly as practicable after the Effective
Time, Parent shall cause the Exchange Agent to mail to each holder of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding Shares (the "Certificates") (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 proper delivery of the Certificates to
the Exchange Agent, and shall be in customary form) and (ii) instructions for
use in
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effecting the surrender of the Certificates in exchange for certificates
representing shares of Parent Common Stock and cash in lieu of any fractional
shares. Upon surrender to the Exchange Agent of a Certificate for cancellation,
together with such letter of transmittal, duly executed, and such other
documents as may be reasonably required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Parent Common Stock
which such holder has the right to receive in respect of the Shares formerly
represented by such Certificate (after taking into account all Shares then held
by such holder), cash in lieu of fractional shares of Parent Common Stock to
which such holder is entitled pursuant to Section 2.02(e) and any dividends or
other distributions to which such holder is entitled pursuant to Section
2.02(c), and the Certificate so surrendered shall forthwith be cancelled. In the
event of a transfer of ownership of Shares prior to the Effective Time that is
not registered in the transfer records of the Company, a Certificate
representing the proper number of shares of Parent Common Stock, and cash in
lieu of fractional shares of Parent Common Stock to which such holder is
entitled pursuant to Section 2.02(e) and any dividends or other distributions to
which such holder is entitled pursuant to Section 2.02(c), may be issued to a
transferee if the Certificate representing such Shares is presented to the
Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 2.02, each Certificate
shall be deemed at any time after the Effective Time to represent only the right
to receive upon such surrender the certificate representing shares of Parent
Common Stock, cash in lieu of any fractional shares of Parent Common Stock to
which such holder is entitled pursuant to Section 2.02(e) and any dividends or
other distributions to which such holder is entitled pursuant to Section
2.02(c).
(c) Distributions with Respect to Unexchanged Shares of Parent Common
Stock. No dividends or other distributions declared or made after the Effective
Time with respect to Parent Common Stock with a record date at or after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent Common Stock represented thereby, and no cash
payment in lieu of fractional shares shall be paid to any such holder pursuant
to Section 2.02(e), until the holder of such Certificate shall surrender such
Certificate. Subject to the effect of escheat, tax or other applicable Laws (as
defined in Section 3.05), following surrender of any such Certificate, there
shall be paid to the holder of the certificates representing whole shares of
Parent Common Stock issued in exchange therefor, without interest, (i) promptly,
the amount of any cash payable with respect to a fractional share of Parent
Common Stock to which such holder is entitled pursuant to Section 2.02(e) and
the amount of dividends or other distributions with a record date at or after
the Effective Time and theretofore paid with respect to such whole shares of
Parent Common Stock, and (ii) at the appropriate payment date, the amount of
dividends or other distributions, with a record date at or after the Effective
Time but prior to surrender and a payment date occurring after surrender,
payable with respect to such whole shares of Parent Common Stock.
(d) No Further Rights in Company Common Stock. All shares of Parent Common
Stock issued upon conversion of the Shares in accordance with the terms hereof
(including any cash paid pursuant to Section 2.02(c) or (e)) shall be deemed to
have been issued in full satisfaction of all rights pertaining to such Shares.
(e) No Fractional Shares. No certificates or scrip representing fractional
shares of Parent Common Stock shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle the owner
thereof to vote or to any other rights of a stockholder of Parent. Each holder
of a fractional share interest shall be paid, upon submission of his or her
Certificates, an amount in cash equal to the product obtained by multiplying (i)
such fractional share interest to which such holder (after taking into account
all fractional share interests then held by such holder) would otherwise be
entitled by (ii) $71. From time to time after the Effective Time, as promptly as
practicable after the determination of the amount of cash, if any, to be paid to
any holders of fractional share interests who have surrendered their
Certificates to the Exchange Agent, the Exchange Agent shall so notify Parent,
and Parent shall deposit such amount with the Exchange Agent and shall cause the
Exchange Agent to forward payments to such holder of fractional share interests
subject to and in accordance with the terms of Sections 2.02(b) and (c).
(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the holders of Company Common Stock for one (1) year
after the Effective Time shall be delivered to Parent, upon demand, and any
holders of Company Common Stock who have not theretofore complied with this
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Article II shall thereafter look only to Parent for the shares of Parent Common
Stock, any cash in lieu of fractional shares of Parent Common Stock to which
they are entitled pursuant to Section 2.02(e) and any dividends or other
distributions with respect to Parent Common Stock to which they are entitled
pursuant to Section 2.02(c). Any portion of the Exchange Fund remaining
unclaimed by holders of Shares as of a date which is immediately prior to such
time as such amounts would otherwise escheat to or become property of any
government entity shall, to the extent permitted by applicable Law, become the
property of Parent free and clear of any claims or interest of any person
previously entitled thereto.
(g) No Liability. Neither Parent nor the Company shall be liable to any
holder of Shares for any such Shares (or dividends or distributions with respect
hereto), or cash delivered to a public official pursuant to any abandoned
property, escheat or similar Law.
(h) Withholding Rights. Each of the Surviving Corporation and Parent shall
be entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Agreement to any holder of Shares such amounts as it is
required to deduct and withhold with respect to the making of such payment under
the Code, or any provision of state, local or foreign tax Law. To the extent
that amounts are so withheld by the Surviving Corporation or Parent, as the case
may be, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Shares in respect of which
such deduction and withholding was made by the Surviving Corporation or Parent,
as the case may be.
(i) Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed, and, if required by the
Surviving Corporation, the posting by such person of a bond in such reasonable
amount as the Surviving Corporation may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Certificate the shares
of Parent Common Stock and any cash in lieu of fractional shares, and unpaid
dividends and distributions on shares of Parent Common Stock that are
deliverable in respect thereof pursuant to this Agreement.
SECTION 2.03. Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of Shares thereafter on the records of the Company.
From and after the Effective Time, the holders of Certificates shall cease to
have any rights with respect to such Shares except as otherwise provided herein
or by any Laws. On or after the Effective Time, any Certificates presented to
the Exchange Agent or Parent for any reason shall be converted into shares of
Parent Common Stock, any cash in lieu of fractional shares of Parent Common
Stock to which the holders thereof are entitled pursuant to Section 2.02(e) and
any dividends or other distributions to which the holders thereof are entitled
pursuant to Section 2.02(c).
SECTION 2.04. Stock Options.
(a) All options to purchase capital stock of the Company (the "Company
Options") outstanding, whether or not exercisable, whether or not vested, at the
Effective Time under the Company's 1988 Stock Option Plan and 1991 Director
Option Plan, (collectively, the "Company Stock Option Plans"), shall remain
outstanding following the Effective Time. At the Effective Time, the Company
Options shall, by virtue of the Merger and without any further action on the
part of the Company or the holder thereof, be assumed by Parent in such manner
that Parent (i) is a corporation "assuming a stock option in a transaction to
which Section 424(a) applied" within the meaning of Section 424 of the Code, or
(ii) to the extent that Section 424 of the Code does not apply to any such
Company Options, would be such a corporation were Section 424 of the Code
applicable to such Company Options. From and after the Effective Time, all
references to the Company in the Company Stock Option Plans and the applicable
stock option agreements issued thereunder shall be deemed to refer to Parent.
Each Company Option assumed by Parent shall be exercisable upon the same terms
and conditions as under the applicable Company Stock Option Plan and the
applicable option agreement issued thereunder, except that (A) each such Company
Option shall be exercisable for that whole number of shares of Parent Common
Stock (rounded to the nearest whole share) into which the number of shares of
Company Common Stock subject to such Company Option immediately prior to the
Effective Time would have been converted under Section 2.01; and (B) the option
price per share of Parent Common Stock shall be an amount equal to the option
price per share of Company Common Stock subject to such Company
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Option in effect immediately prior to the Effective Time divided by the Exchange
Ratio (the option price per share, as so determined, being rounded to the
nearest full cent).
(b) In respect of each Company Option assumed by Parent, and the shares of
Parent Common Stock underlying such Company Option, Parent shall file, promptly,
but in any event within ten (10) business days after the Effective Time, and
keep current, a Form S-8 or other appropriate registration statement for as long
as the Company Options remain outstanding.
(c) Except with respect to the agreements set forth in Section 3.10(3) and
(4) of the Company Disclosure Schedule, the Company has not taken, and shall not
take, any action that would result in the accelerated vesting, exercisability or
payment of Company Options as a consequence of the execution of this Agreement
or the transactions contemplated by this Agreement.
(d) Parent shall (i) on or prior to the Effective Time, reserve for
issuance the number of shares of Parent Common Stock that will become subject to
options to purchase shares of Parent Common Stock ("Parent Options") pursuant to
this Section 2.04 and (ii) from and after the Effective Time, upon exercise of
the Parent Options in accordance with the terms thereof, make available for
issuance all shares of Parent Common Stock covered thereby.
(e) It is the intention of the parties that the Company Options assumed by
Parent qualify following the Effective Time of the Merger as incentive stock
options as defined in Section 422 of the Code to the extent that the Company
Options qualified as incentive stock options prior to the Effective Time.
SECTION 2.05. Adjustments to Prevent Dilution. In the event that Parent
changes the number of shares of Parent Common Stock or securities convertible or
exchangeable into or exercisable for shares of Parent Common Stock issued and
outstanding prior to the Effective Time as a result of a reclassification, stock
split (including a reverse split), stock dividend or distribution,
recapitalization, subdivision, or other similar transaction, the Exchange Ratio
shall be equitably adjusted.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as disclosed in a separate disclosure schedule referring to the
Sections contained in this Agreement, which has been delivered by the Company to
Parent prior to the execution of this Agreement (the "Company Disclosure
Schedule") or as specifically disclosed in the Company SEC Reports (as
hereinafter defined) filed subsequent to March 31, 1996, the Company hereby
represents and warrants to the Parent and Merger Sub that:
SECTION 3.01. Organization and Qualification; Subsidiaries. Each of the
Company and each subsidiary of the Company (each, a "Subsidiary") is a
corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has the requisite corporate
power and authority and all necessary governmental approvals to own, lease and
operate its properties and to carry on its business as it is now being
conducted, except where the failure to be so organized, existing or in good
standing or to have such power, authority and governmental approvals would not,
individually or in the aggregate, have a Company Material Adverse Effect (as
defined below). Each of the Company and each Subsidiary is duly qualified or
licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification or
licensing necessary, except for such failures to be so qualified or licensed and
in good standing that would not, individually or in the aggregate, have a
Company Material Adverse Effect. The term "Company Material Adverse Effect"
means any change in or effect on the Company and the Subsidiaries that, when
taken individually or together with all other adverse changes and effects, is
materially adverse to the business, operations or financial condition of the
Company and the Subsidiaries taken as a whole, or prevents consummation of the
Merger, or prevents the Company from performing its obligations under this
Agreement; provided, however, that any such effect resulting from (i) any change
in law, rule or regulation or in economic or business conditions generally or
generally affecting the medical devices industry (as opposed to the
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Company specifically), (ii) any change in generally accepted accounting
principles or interpretations thereof generally affecting the medical devices
industry (as opposed to the Company specifically), (iii) any adverse ruling,
court order, appeal or cross-appeal by any person or other development with
respect to the currently pending lawsuit involving the Company, Cordis
Corporation (a subsidiary of Johnson & Johnson) and SCIMED Life Systems, Inc. (a
subsidiary of Parent), or, (iv) any effect on the Company resulting from actions
taken by the Company at Parent's direction pursuant to Section 6.11 shall not be
considered when determining if a Company Material Adverse Effect has occurred. A
true and complete list of all the Subsidiaries, together with the jurisdiction
of incorporation of each Subsidiary and the percentage of the outstanding
capital stock of each Subsidiary owned by the Company and each other Subsidiary,
is set forth in Section 3.01 of the Company Disclosure Schedule. Except as set
forth in Section 3.01 of the Company Disclosure Schedule, the Company does not
directly or indirectly own any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for any equity or similar
interest in, any corporation, partnership, limited liability company, joint
venture or other business association or entity.
SECTION 3.02. Certificate of Incorporation and By-laws. The Company has
heretofore furnished to Parent complete and correct copies of the Certificates
of Incorporation and the By-laws or equivalent organizational documents, each as
amended to date, of the Company and each Subsidiary. Such Certificates of
Incorporation, By-laws and equivalent organizational documents are in full force
and effect. Neither the Company nor any Subsidiary is in violation of any
provision of its respective Certificate of Incorporation, By-laws or equivalent
organizational documents.
SECTION 3.03. Capitalization. The authorized capital stock of the Company
consists of 120,000,000 shares of Company Common Stock and 2,000,000 shares of
preferred stock of the Company. No shares of preferred stock of the Company are
issued or outstanding. As of December 29, 1996, (a) 14,860,111 shares of Company
Common Stock were issued and outstanding, all of which were validly issued,
fully paid and nonassessable, (b) 350,000 shares of Company Common Stock were
held in the treasury of the Company or by the Subsidiaries, (c) 3,654,609 shares
of Company Common Stock were reserved for future issuance pursuant to the
Company Stock Option Plans, and (d) 82,194 Shares were reserved for future
issuance pursuant to the Company's 1991 Employee Stock Purchase Plan (the
"ESPP"). From December 29, 1996 through the date hereof, the Company has not
issued, sold, pledged, disposed of, granted, encumbered, or authorized the
issuance, sale, pledge, disposition, grant or encumbrance of any shares of
capital stock of any class of the Company or any Subsidiary, except pursuant to
the exercise of Company Options that were outstanding as of December 29, 1996.
Set forth in Section 3.03 of the Company Disclosure Schedule is a summary
setting forth the number of outstanding Company Options, stock incentive rights
or any other rights to acquire shares of Company Common Stock pursuant to the
Company Stock Option Plans and the exercise price therefor as of January 9,
1997. Except as set forth in this Section 3.03 and the Company Rights Agreement
(as defined in Section 3.20), there are no options, warrants or other rights,
agreements, arrangements or commitments of any character relating to the issued
or unissued capital stock of the Company or any Subsidiary or obligating the
Company or any Subsidiary to issue or sell any shares of capital stock of, or
other equity interests in, the Company or any Subsidiary. All shares of Company
Common Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
will be duly authorized, validly issued, fully paid and nonassessable. Except as
disclosed in Section 3.03 of the Company Disclosure Schedule, there are no
outstanding contractual obligations of the Company or any Subsidiary to
repurchase, redeem or otherwise acquire any Shares or any capital stock of or
any equity interests in any Subsidiary. Except as disclosed in Section 3.03 of
the Company Disclosure Schedule, each outstanding share of capital stock of each
Subsidiary is duly authorized, validly issued, fully paid and nonassessable and
each such share owned by the Company or any Subsidiary is free and clear of all
security interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on the Company's or such other Subsidiary's voting
rights, charges and other encumbrances of any nature whatsoever.
SECTION 3.04. Authority Relative to this Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the Merger. The execution
and delivery of this Agreement by the Company and the
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consummation by the Company of the Merger have been duly and validly authorized
by all necessary corporate action and no other corporate proceedings on the part
of the Company are necessary to authorize this Agreement or to consummate the
Merger (other than, with respect to the Merger, the adoption of this Agreement
by the holders of a majority of the Shares and the filing and recordation of
appropriate merger documents as required by Delaware Law). This Agreement has
been duly and validly executed and delivered by the Company and, assuming the
due authorization, execution and delivery by Parent and Merger Sub, constitutes
a legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
SECTION 3.05. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the Company does not,
and the performance of this Agreement by the Company will not, (i) conflict with
or violate the Certificate of Incorporation or By-laws or equivalent
organizational documents of the Company or any Subsidiary, as applicable, (ii)
conflict with or violate any domestic (federal, state or local) or foreign law,
rule, regulation, order, judgment or decree (collectively, "Laws") applicable to
the Company or any Subsidiary or by which any property or asset of the Company
or any Subsidiary is bound or affected, except for such conflicts or violations
that are not reasonably likely, individually or in the aggregate, to have a
Company Material Adverse Effect, or (iii) result in any breach of or constitute
a default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or other
encumbrance on any property or asset of the Company or any Subsidiary pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the Company or any
Subsidiary is a party or by which the Company or any Subsidiary or any property
or asset of the Company or any Subsidiary is bound or affected, except for any
such breaches, defaults or other occurrences that are not reasonably likely,
individually or in the aggregate, to have a Company Material Adverse Effect.
(b) The execution and delivery of this Agreement by the Company do not, and
the performance of this Agreement by the Company will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, domestic, foreign or supranational, except
(i) for applicable requirements, if any, of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), the Securities Act of 1933, as amended (the
"Securities Act"), state securities or "blue sky" laws ("Blue Sky Laws") and
state takeover laws, the pre-merger notification requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules
and regulations thereunder (the "HSR Act"), filing and recordation of
appropriate merger documents as required by Delaware Law and the rules of the
National Association of Securities Dealers ("NASD") and (ii) where failure to
obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications is not reasonably likely, individually or in the
aggregate, to have a Company Material Adverse Effect.
SECTION 3.06. Permits; Company Products; Regulation.
(a) Each of the Company and the Subsidiaries is in possession of all
franchises, grants, authorizations, licenses, permits, easements, variances,
exceptions, consents, certificates, approvals and orders necessary for the
Company or any of its Subsidiaries, to own, lease and operate its properties or
to carry on its business as it is now being conducted (the "Company Permits"),
and no suspension or cancellation of any of the Company Permits is pending or,
to the Company's knowledge, threatened, except where the failure to have, or the
suspension or cancellation of, any of the Company Permits is not reasonably
likely to have a Company Material Adverse Effect. Neither the Company nor any
Subsidiary is in conflict with, or in default or violation of, (i) any Laws
applicable to the Company or any Subsidiary or by which any property or asset of
the Company or any Subsidiary is bound or affected, (ii) any of the Company
Permits or (iii) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which the
Company or any Subsidiary is a party or by which the Company or any Subsidiary
or any property or asset of the Company or any Subsidiary is bound or affected,
except for any such conflicts, defaults or
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violations that are not reasonably likely, individually or in the aggregate, to
have a Company Material Adverse Effect.
(b) Except as is not reasonably likely to have a Company Material Adverse
Effect, since March 31, 1993, there have been no written notices, citations or
decisions by any governmental or regulatory body that any product produced,
manufactured, marketed or distributed at any time by the Company (the
"Products") is defective or fails to meet any applicable standards promulgated
by any such governmental or regulatory body. The Company has complied in all
material respects with the laws, regulations, policies, procedures and
specifications with respect to the design, manufacture, labelling, testing and
inspection of Products and the operation of manufacturing facilities promulgated
by the Food and Drug Administration (the "FDA"), except where the failure so to
comply is not likely to have a Company Material Adverse Effect. Except as
described in the Company SEC Reports (as defined in Section 3.07(a)), since
March 31, 1993, there have been no recalls, field notifications or seizures
ordered or, to the Company's knowledge, threatened by any such governmental or
regulatory body with respect to any of the Products. The Company has not
received, and does not reasonably believe that any facts or circumstances exist
that are reasonably likely to result in, any warning letter, or Section 305
notices from the FDA.
(c) The Company has obtained, in all countries where the Company is
marketing or has marketed its Products, all applicable licenses, registrations,
approvals, clearances and authorizations required by local, state or federal
agencies (including the FDA) in such countries regulating the safety,
effectiveness and market clearance of the Products that are currently marketed
by the Company, except for any such failures that are not reasonably likely,
individually or in the aggregate, to have a Company Material Adverse Effect. The
Company has identified and made available for examination by Parent all material
information relating to regulation of its Products, including licenses,
registrations, approvals, permits, device listings, inspections, the Company's
recalls and product actions, audits and the Company's ongoing clinical studies.
The Company has identified in writing to Parent the international locations
where substantially all regulatory information and documents are kept.
SECTION 3.07. SEC Filings; Financial Statements.
(a) The Company has filed all forms, reports and documents required to be
filed by it with the SEC since March 31, 1993, and has heretofore made available
to Parent, in the form filed with the SEC, (i) its Annual Report on Form 10-K
for the fiscal years ended March 31, 1995 and March 31, 1996, respectively, (ii)
its Quarterly Reports on Form 10-Q for the periods ended June 30, 1996 and
September 30, 1996, respectively, (iii) all proxy statements relating to the
Company's meetings of stockholders (whether annual or special) held since March
31, 1993, (iv) all other forms, reports and other registration statements (other
than Quarterly Reports on Form 10-Q not referred to in clause (ii) above) filed
by the Company with the SEC since March 31, 1993, and prior to the date of this
Agreement (the forms, reports and other documents referred to in clauses (i),
(ii), (iii) and (iv) above being referred to herein, collectively, as the
"Company SEC Reports"), and (v) complete (i.e., unredacted) copies of each
exhibit (which is in effect as of the date hereof) to the Company SEC Reports
filed with the SEC. The Company SEC Reports, as well as all forms, reports and
documents to be filed by the Company with the SEC after the date hereof and
prior to the Effective Time, (i) were or will be prepared in all material
respects in accordance with the requirements of the Securities Act, and the
Exchange Act, as the case may be, and the rules and regulations thereunder and
(ii) did not at the time they were filed, or will not at the time they are
filed, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
(b) No Subsidiary is required to file any form, report or other document
with the SEC.
(c) Each of the consolidated financial statements (including, in each case,
any notes thereto) contained in the Company SEC Reports, as well as all forms,
reports and documents to be filed by the Company with the SEC after the date
hereof and prior to the Effective Time, was or will be prepared in accordance
with United States generally accepted accounting principles applied on a
consistent basis throughout the periods indicated (except as may be indicated in
the notes thereto) and each fairly presented or will fairly present the
consolidated financial position, results of operations and cash flows of the
Company and the consolidated
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Subsidiaries as at the respective dates thereof and for the respective periods
indicated therein in accordance with United States generally accepted accounting
principles (subject, in the case of unaudited statements, to normal and
recurring year-end adjustments which were not and are not expected, individually
or in the aggregate, to have a Company Material Adverse Effect).
(d) Except as and to the extent set forth on the consolidated balance sheet
of the Company and the consolidated Subsidiaries as of March 31, 1996, including
the notes thereto (the "Company 1996 Balance Sheet"), neither the Company nor
any Subsidiary has any liability or obligation of any nature (whether accrued,
absolute, contingent or otherwise) that would be required to be reflected on a
balance sheet, or in the notes thereto, prepared in accordance with United
States generally accepted accounting principles, except for liabilities and
obligations (i) disclosed in any Company SEC Report filed since March 31, 1996
and prior to the date of this Agreement, (ii) incurred since March 31, 1996
which are not reasonably likely, individually or in the aggregate, to have a
Company Material Adverse Effect, or (iii) incurred pursuant to this Agreement.
(e) The Company has heretofore furnished to Parent complete and correct
copies of all material amendments and modifications that have not been filed by
the Company with the SEC to all agreements, documents and other instruments that
previously had been filed by the Company with the SEC and are currently in
effect.
SECTION 3.08. Absence of Certain Changes or Events. Since March 31, 1996,
except as contemplated by this Agreement or disclosed in any Company SEC Report
filed since March 31, 1996, the Company and the Subsidiaries have conducted
their businesses only in the ordinary course and in a manner consistent in all
material respects with past practice and, since March 31, 1996, there has not
been (a) any event or events having, individually or in the aggregate, a Company
Material Adverse Effect, (b) any change by the Company in its accounting
methods, principles or practices, (c) any revaluation by the Company of any
material asset (including, without limitation, any writing down of the value of
inventory or writing off of notes or accounts receivable), other than in the
ordinary course of business consistent with past practice, (d) any entry by the
Company or any Subsidiary into any commitment or transaction material to the
Company and the Subsidiaries taken as a whole, except in the ordinary course of
business and consistent in all material respects with past practice, (e) any
declaration, setting aside or payment of any dividend or distribution in respect
of any capital stock of the Company or any redemption, purchase or other
acquisition of any of its securities, or (f) other than pursuant to the
contracts referred to in Section 3.10 or as expressly provided for in this
Agreement, any increase in or establishment of any bonus, insurance, severance,
deferred compensation, pension, retirement, profit sharing, stock option
(including, without limitation, the granting of stock options, stock
appreciation rights, performance awards, or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any officers or key employees of
the Company or any Subsidiary, except in the ordinary course of business
consistent in all material respects with past practice.
SECTION 3.09. Absence of Litigation.
(a) Except as disclosed in the Company SEC Reports, there is no claim,
action, proceeding or investigation pending or, to the Company's knowledge,
threatened against the Company or any Subsidiary, or any property or asset of
the Company or any Subsidiary, before any court, arbitrator or Governmental
Authority, which, individually or when aggregated with other claims, actions,
proceedings or investigations or product liability claims, actions, proceedings
or investigations which are reasonably likely to result from facts and
circumstances that have given rise to such a claim, action, proceeding or
investigation, is reasonably likely to have a Company Material Adverse Effect.
As of the date hereof, neither the Company nor any Subsidiary nor any property
or asset of the Company or any Subsidiary is subject to any order, writ,
judgment, injunction, decree, determination or award having, individually or in
the aggregate, a Company Material Adverse Effect.
(b) As of the date hereof, to the Company's knowledge, neither the Company
nor any Subsidiary has received notice from any source that the Company or any
Subsidiary may be liable with respect to product liability or worker's
compensation claims, except for such claims that are not reasonably likely to
have a Company Material Adverse Effect.
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SECTION 3.10. Employee Benefit Plans. Section 3.10 of the Disclosure
Schedule lists, as of the date hereof, (i) all material employee benefit plans,
programs and arrangements maintained for the benefit of any current or former
employee, officer or director of the Company or any Subsidiary (the "Plans") and
(ii) all contracts and agreements relating to employment that provide for annual
compensation in excess of $125,000 and all severance agreements, with any of the
directors, officers or employees of the Company or its Subsidiaries (other than,
in each case, any such contract or agreement that is terminable by the Company
or a Subsidiary at will without penalty or other adverse consequence) (the
"Employment Contracts"). Parent has been furnished with a copy of each Plan,
each material document prepared in connection with each Plan, and each
Employment Contract. Except as set forth in Section 3.10 of the Disclosure
Schedule: (i) none of the Plans is subject to Title IV of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"); (ii) none of the
Plans promises or provides retiree medical or life insurance benefits to any
person, except as required pursuant to the provisions of Section 4980B of the
Code; (iii) each Plan intended to be qualified under Section 401(a) of the Code
has received a favorable determination letter from the Internal Revenue Service
(the "IRS") that it is so qualified and nothing has occurred since the date of
such letter to affect the qualified status of such Plan or has a period of time
remaining under applicable law to obtain such determination letter; (iv) none of
the Plans promises or provides severance benefits or benefits contingent upon a
change in ownership or control, within the meaning of Section 280G of the Code;
(v) to the Company's knowledge, each Plan has been operated in all material
respects in accordance with its terms and the requirements of applicable law;
(vi) neither the Company nor any Subsidiary has incurred any direct or indirect
liability under, arising out of or by operation of Title IV of ERISA in
connection with the termination of, or withdrawal from, any Plan or other
retirement plan or arrangement, and no fact or event exists that is reasonably
likely to give rise to any such liability; (vii) the Company and the
Subsidiaries have not incurred any liability under, and have complied in all
respects with, the Worker Adjustment Retraining Notification Act, and no fact or
event exists that is reasonably likely to give rise to liability under such act;
and (viii) no compensation paid or payable to any employee of the Company or any
Subsidiary has been, or is reasonably likely to be, non-deductible by reason of
application of Section 162(m) of the Code.
SECTION 3.11. Labor Matters. Neither the Company nor any Subsidiary is a
party to any collective bargaining agreement or other labor union contract
applicable to persons employed by the Company or any Subsidiary.
SECTION 3.12. Real Property and Leases.
(a) The Company and the Subsidiaries have sufficient title or leasehold
interests to all their properties and assets to conduct their respective
businesses as currently conducted or as contemplated to be conducted, with only
such exceptions as, individually or in the aggregate, are not reasonably likely
to have a Company Material Adverse Effect.
(b) All leases of real property leased for the use or benefit of the
Company or any Subsidiary to which the Company or any Subsidiary is a party
which are material, individually or in the aggregate, to the business of the
Company and the Subsidiaries taken as a whole, and all amendments and
modifications thereto are in full force and effect and have not been modified or
amended, and there exists no default under any such lease by the Company or any
Subsidiary, nor any event which with notice or lapse of time or both would
constitute a default thereunder by the Company or any Subsidiary, which would
permit any such lease to be terminated by the other party thereto.
SECTION 3.13. Intellectual Property. "Company Intellectual Property"
means all trademarks, trademark rights, trade names, trade name rights, patents,
patent rights, industrial models, inventions, copyrights, servicemarks, trade
secrets, applications for trademarks and for servicemarks, know-how and other
proprietary rights and information used or held for use in connection with the
business of the Company and the Subsidiaries as currently conducted or as
currently contemplated by the Company to be conducted through March 31, 1998,
together with all applications currently pending for any of the foregoing. As of
the date hereof and except as disclosed in the Company SEC Reports, the Company
and the Subsidiaries own or possess adequate licenses or other valid rights to
use all of the Company Intellectual Property, and, to the Company's knowledge,
there is no assertion or claim (or basis therefor) challenging the validity of
any
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Company Intellectual Property, and between the date hereof and the Effective
Time, the Company and the Subsidiaries will own or possess adequate licenses or
other valid rights to use all of the Company Intellectual Property, and, to the
Company's knowledge, there will be no assertion or claim (or basis therefor)
challenging the validity of any Company Intellectual Property that is reasonably
likely to have, individually or in the aggregate, a Company Material Adverse
Effect. Section 3.13 of the Company Disclosure Schedule lists each material
license or other agreement pursuant to which the Company has the right to use
Company Intellectual Property utilized in connection with any product of the
Company and the Subsidiaries, the cancellation or expiration of which is
reasonably likely to have a Company Material Adverse Effect (the "Company
Licenses"). As of the date hereof, there are no pending, or to the Company's
knowledge, threatened interferences, re-examinations, oppositions or nullities
involving any patents, patent rights or applications therefor of the Company or
any Subsidiary, except such as may have been commenced by Parent or any
subsidiary of Parent, and between the date hereof and the Effective Time, there
shall not be any pending, or to the Company's knowledge, threatened
interferences, re-examinations, oppositions or nullities involving any patents,
patent rights or applications therefor of the Company or any Subsidiary, except
such as may be commenced by Parent or any subsidiary of Parent and such as are
not reasonably likely to have, individually or in the aggregate, a Company
Material Adverse Effect. There is no breach or violation by the Company under,
and, to the Company's knowledge there is no breach by any other party to, any
Company License that is reasonably likely to give rise to any termination or any
loss of rights thereunder. The Company has taken reasonable measures to maintain
the confidentiality of the processes and formulas, research and development
results and other know-how of the Company, the value of which to the Company is
dependent upon the maintenance of the confidentiality thereof. To the Company's
knowledge, the conduct of the business of the Company and the Subsidiaries as
currently conducted or contemplated does not and will not infringe upon or
conflict with, in any way, any license, trademark, trademark right, trade name,
trade name right, patent, patent right, industrial model, invention, service
mark or copyright of any third party that, individually or in the aggregate, is
reasonably likely to have a Company Material Adverse Effect. Except as disclosed
in the Company SEC Reports, to the Company's knowledge, there are no
infringements of any Company Intellectual Property which, individually or in the
aggregate, are reasonably likely to have a Company Material Adverse Effect.
Except as set forth in Section 3.13 of the Company Disclosure Schedule, to the
Company's knowledge, neither it nor any Subsidiary has licensed or otherwise
permitted the use by any third party of any proprietary information on terms or
in a manner which, individually or in the aggregate, is reasonably likely to
have a Company Material Adverse Effect.
SECTION 3.14. Taxes. The Company and each Subsidiary (a) have properly
prepared and timely filed or will have prepared and filed all federal, state,
local and foreign tax returns and reports in respect of taxes required to be
filed by or with respect to the Company and each Subsidiary through the
Effective Time (taking into account any extension of time to file); (b) paid or
accrued all taxes shown to be due on such returns and reports (and all
applicable ad valorem and value added taxes as are due from the Company and each
Subsidiary have been paid); and (c) paid or accrued all taxes for which a notice
of assessment or collection has been received by the Company or any Subsidiary
(other than those being contested or which the Company intends to contest in
good faith by appropriate proceedings). Neither the Internal Revenue Service nor
any other taxing authority has asserted any claim for taxes, or to the knowledge
of the Company, is threatening to assert any claims for taxes from the Company
or any Subsidiary. The Company and each Subsidiary have withheld or collected
and paid over to appropriate governmental authorities (or are properly holding
for such payment) all taxes required by law to be withheld or collected by them.
There are no liens for taxes upon the assets of the Company or any Subsidiary
(other than liens for taxes that are not yet due or that are being contested in
good faith by appropriate proceedings).
SECTION 3.15. Environmental Matters.
(a) For purposes of this Agreement, the following terms shall have the
following meanings: (i) "Hazardous Substances" means (A) those substances
defined in or regulated under the following United States federal statutes and
their state or foreign counterparts, as each may be amended from time to time,
and all regulations thereunder: the Hazardous Materials Transportation Act, the
Resource Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Clean
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Water Act, the Safe Drinking Water Act, the Toxic Substances Control Act, the
Marine Protection, Research and Sanctuaries Act, the Atomic Energy Act, the
Federal Insecticide, Fungicide, and Rodenticide Act and the Clean Air Act; (B)
petroleum and petroleum products including crude oil and any fractions thereof;
(C) natural gas, synthetic gas, and any mixtures thereof; (D) radon; (E)
asbestos; (F) any other pollutant or contaminant; and (G) any substance with
respect to which a federal, state or local agency requires environmental
investigation, monitoring, reporting or remediation; and (ii) "Environmental
Laws" means any United States or foreign federal, state or local law relating to
(A) releases or threatened releases of Hazardous Substances or materials
containing Hazardous Substances; (B) the manufacture, handling, transport, use,
treatment, storage or disposal of Hazardous Substances or materials containing
Hazardous Substances; or (C) otherwise relating to pollution of the environment
or the protection of human health.
(b) Except as would not, individually or in the aggregate, have a Company
Material Adverse Effect: (i) the Company or any Subsidiary has not violated and
is not in violation of any Environmental Law; (ii) there has been no
contamination, disposal, spilling, dumping, incineration, discharge, storage,
treatment or handling of any Hazardous Substance, on or from any of the
properties owned or leased by the Company (including, without limitation, soils
and surface and ground waters); (iii) the Company or any Subsidiary has not
received notice from any source that it and its Subsidiaries may be liable for
any off-site contamination; (iv) the Company or any Subsidiary has not received
notice from any source that it or its Subsidiaries may be liable under any
Environmental Law; (v) the Company has all permits, licenses and other
authorizations required under any Environmental Law ("Environmental Permits");
(vi) the Company has been and is in compliance with its Environmental Permits;
and (vii) there are no pending, and the Company has not received any notice from
any source of any threatened, claims against the Company or any Subsidiary
relating to any Environmental Law or Hazardous Substance.
SECTION 3.16. Material Contracts.
(a) Subsections (i) through (vi) of Section 3.16(a) of the Company
Disclosure Schedule contain a list of the following types of contracts and
agreements to which the Company or any Subsidiary is a party (such contracts,
agreements and arrangements as are required to be set forth in Section 3.16(a)
of the Company Disclosure Schedule being referred to herein collectively as the
"Material Contracts"):
(i) all distributor, manufacturer's representative, broker, franchise,
agency and dealer contracts and agreements to which the Company or any
Subsidiary is a party;
(ii) all contracts with physicians and any scientific advisory board
members;
(iii) all contracts with independent contractors or consultants (or
similar arrangements) to which the Company or any Subsidiary is a party and
which: (A) are reasonably likely to involve consideration of more than
$150,000 in the aggregate during the calendar year ended December 31, 1997,
or (B) are reasonably likely to involve consideration of more than $150,000
in the aggregate over the remaining term of the contract;
(iv) all contracts and agreements (excluding routine checking account
overdraft agreements involving petty cash amounts) under which the Company
or any Subsidiary has created, incurred, assumed or guaranteed (or may
create, incur, assume or guarantee) indebtedness or under which the Company
or any Subsidiary has imposed (or may impose) a security interest or lien
on any of its assets, whether tangible or intangible, to secure
indebtedness;
(v) all contracts and agreements that limit the ability of the Company
or any Subsidiary or, after the Effective Time, Parent or any of its
affiliates, to compete in any line of business or with any person or in any
geographic area or during any period of time, or to solicit any customer or
client;
(vi) all contracts and agreements between or among the Company or any
Subsidiary, on the one hand, and any affiliate of the Company (other than a
wholly owned subsidiary), on the other hand; and
(vii) all other contracts or agreements (A) which are material to the
Company and its Subsidiaries or the conduct of their respective businesses
or (B) the absence of which would have a Company
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Material Adverse Effect or (C) which are believed by the Company to be of
unique value to the Company even though not material to the business of the
Company.
(b) Except as would not, individually or in the aggregate, have a Company
Material Adverse Effect, each Company License, each contract referred to in
paragraphs (ii) and (vii) above, and each other material contract or agreement
of the Company or any Subsidiary which would have been required to be disclosed
in Sections 3.16(a)(ii) and (vii) of the Company Disclosure Schedule had such
contract or agreement been entered into prior to the date of this Agreement, is
a legal, valid and binding agreement, and none of the Company Licenses or
Material Contracts is in default by its terms or has been cancelled by the other
party; the Company and the Subsidiaries are not in receipt of any claim of
default under any such agreement; and none of the Company or any of the
Subsidiaries anticipates any termination or change to, or receipt of a proposal
with respect to, any such agreement as a result of the Merger or otherwise. The
Company has furnished Parent with true and complete copies of all Company
Licenses and all Material Contracts.
SECTION 3.17. Suppliers. Neither the Company nor any Subsidiary has
received any notice or has any reason to believe that any significant supplier
will not sell raw materials, supplies, merchandise and other goods to the
Company or any Subsidiary at any time after the Effective Time on terms and
conditions substantially similar to those used in its current sales to the
Company and the Subsidiaries, subject only to general and customary price
increases, unless comparable raw materials, supplies, merchandise or other goods
are readily available from other sources on comparable terms and conditions.
SECTION 3.18. Accounting and Tax Matters. Neither the Company nor, to the
Company's knowledge, any of its affiliates has taken, agreed to take, or will
take any action that would prevent the Merger from being effected as a
"pooling-of-interests" or would prevent the Merger from constituting a
transaction qualifying under Section 368(a) of the Code. Neither the Company
nor, to the Company's knowledge, any of its affiliates or agents is aware of any
agreement, plan or other circumstance that would prevent the Merger from
qualifying under Section 368(a) of the Code, and to the Company's knowledge, the
Merger will so qualify.
SECTION 3.19. Company Rights Agreement. The Preferred Shares Rights
Agreement dated September 21, 1994, between the Company and The First National
Bank of Boston, as the rights agent, as amended on May 7, 1996 (the "Company
Rights Agreement"), has been amended so as to provide that neither Parent nor
Merger Sub will become an "Acquiring Person" and that no "Share Acquisition
Date" or "Distribution Date" (as such terms are defined in the Company Rights
Agreement) will occur as a result of the approval, execution or delivery of this
Agreement or the consummation of any of the transactions contemplated hereby.
Additionally, the Board of Directors of the Company has taken such corporate
action as is necessary to amend the Company Rights Agreement so that the Final
Expiration Date (as such term is defined in the Company Rights Agreement) shall
occur immediately prior to the Effective Time.
SECTION 3.20. Vote Required. The affirmative vote of the holders of a
majority of the outstanding Shares is the only vote of the holders of any class
or series of capital stock of the Company necessary to approve the Merger.
SECTION 3.21. Opinion of Financial Advisors. The Company has received the
opinion of Goldman, Sachs & Co. (the "Company Financial Advisor"), to the effect
that, as of the date hereof, the Exchange Ratio is fair to the stockholders of
the Company; it being understood and acknowledged by Parent that such opinion
has been rendered to the Board of Directors of the Company and is not for the
benefit of, and may not be relied upon by, Parent, its affiliates or Parent's
stockholders.
SECTION 3.22. Brokers. No broker, finder or investment banker (other than
the Company Financial Advisor) is entitled to any brokerage, finder's or other
fee or commission in connection with the Merger based upon arrangements made by
or on behalf of the Company. The Company has heretofore furnished to Parent a
complete and correct copy of all agreements between the Company and the Company
Financial Advisor pursuant to which such firm would be entitled to any payment
relating to the Merger.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as specifically disclosed in Parent SEC Reports (as hereinafter
defined) filed subsequent to December 31, 1995, Parent and Merger Sub hereby,
jointly and severally, represent and warrant to the Company that:
SECTION 4.01. Organization and Qualification; Subsidiaries. Each of
Parent and Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and has
the requisite power and authority and all necessary governmental approvals to
own, lease and operate its properties and to carry on its business as it is now
being conducted, except where the failure to be so organized, existing or in
good standing or to have such power, authority and governmental approvals would
not, individually or in the aggregate, have a Parent Material Adverse Effect (as
defined below). Each of Parent and Merger Sub is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its business makes such qualification or licensing
necessary, except for such failures to be so qualified or licensed and in good
standing that would not, individually or in the aggregate, have a Parent
Material Adverse Effect. The term "Parent Material Adverse Effect" means any
change or effect that, when taken individually or together with all other
adverse changes and effects, is materially adverse to the business, operations,
or financial condition of Parent and its subsidiaries, taken as a whole, or
prevents consummation of the Merger, or prevents Parent from performing its
obligations under this Agreement; provided, however, that any such effect
resulting from (i) any change in law, rule or regulation or in economic or
business conditions generally or generally affecting the medical devices
industry (as opposed to Parent specifically) or (ii) any change in generally
accepted accounting principles or interpretations thereof generally affecting
the medical devices industry (as opposed to Parent specifically) shall not be
considered when determining if a Parent Material Adverse Effect has occurred.
SECTION 4.02. Certificate of Incorporation and By-laws. Parent has
heretofore furnished to the Company a complete and correct copy of the
Certificate of Incorporation and the By-laws, each as amended to date, of Parent
and Merger Sub. Such Certificates of Incorporation and By-laws are in full force
and effect. Neither Parent nor Merger Sub is in violation of any provision of
its respective Certificate of Incorporation or By-laws.
SECTION 4.03. Capitalization. The authorized capital stock of Parent
consists of 300,000,000 shares of Parent Common Stock and 25,000,000 shares of
Preferred Stock, par value $.01 per share ("Parent Preferred Stock"). As of
December 31, 1996, (a) 178,457,740 shares of Parent Common Stock were issued and
outstanding, all of which were validly issued, fully paid and nonassessable, (b)
643,991 shares of Parent Common Stock were held in the treasury of Parent or by
subsidiaries of Parent and (c) 25,480,110 shares of Parent Common Stock were
reserved for future issuance pursuant to Parent's stock option plans. No shares
of Parent Preferred Stock were issued and outstanding. From December 31, 1996
through the date of this Agreement, Parent has not issued, sold, pledged,
disposed of, granted, encumbered, or authorized the issuance, sale, pledge,
disposition, grant or encumbrance of any shares of any class of capital stock of
Parent, except pursuant to the exercise of stock options and the issuance of
stock options in the ordinary course of business consistent with past practice.
The authorized capital stock of Merger Sub consists of 1,000 shares of common
stock, par value $.01 per share, of Merger Sub, of which, as of the date of this
Agreement, 100 are issued and outstanding. Except as disclosed in the Parent SEC
Reports (as hereinafter defined), as of the date of this Agreement, there are no
options, warrants or other rights, agreements, arrangements or commitments of
any character relating to the issued or unissued capital stock of Parent or
Merger Sub obligating Parent or Merger Sub to issue or sell any shares of
capital stock of Parent or Merger Sub. Except as disclosed in the Parent SEC
Reports filed prior to the date hereof, there are no outstanding material
contractual obligations of Parent to repurchase, redeem or otherwise acquire any
shares of Parent Common Stock. The shares of Parent Common Stock to be issued
pursuant to the Merger will be duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights created by statute, Parent's
Certificate of Incorporation or By-laws or any agreement to which Parent is a
party or by which Parent is bound and will, when issued, be
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registered under the Securities Act and the Exchange Act and registered or
exempt from registration under applicable Blue Sky Laws.
SECTION 4.04. Authority Relative to this Agreement. Each of Parent and
Merger Sub has all necessary corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the Merger. The execution and delivery of this Agreement by Parent and Merger
Sub and the consummation by Parent and Merger Sub of the Merger have been duly
and validly authorized by all necessary corporate action and no other corporate
proceedings on the part of Parent or Merger Sub are necessary to authorize this
Agreement or to consummate the Merger (other than, with respect to the Merger,
the filing and recordation of appropriate merger documents as required by
Delaware Law). This Agreement has been duly and validly executed and delivered
by Parent and Merger Sub and, assuming the due authorization, execution and
delivery by the Company, constitutes a legal, valid and binding obligation of
each of Parent and Merger Sub enforceable against each of Parent and Merger Sub
in accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
SECTION 4.05. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Parent and Merger Sub
do not, and the performance of this Agreement by Parent and Merger Sub will not,
(i) conflict with or violate the Certificate of Incorporation or By-laws of
Parent or any subsidiary of Parent, (ii) conflict with or violate any Law
applicable to Parent or any subsidiary of Parent or by which any property or
asset of either of them is bound or affected, except for such conflicts or
violations which would not, individually or in the aggregate, have a Parent
Material Adverse Effect, (iii) prevent or materially delay the consummation of
the Merger or (iv) result in any breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of Parent or any subsidiary of Parent pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Parent or any subsidiary of
Parent is a party or by which Parent or any subsidiary of Parent or any property
or asset of either of them is bound or affected, except for any such breaches,
defaults or other occurrences which are not reasonably likely, individually or
in the aggregate, to have a Parent Material Adverse Effect.
(b) The execution and delivery of this Agreement by Parent and Merger Sub
do not, and the performance of this Agreement by Parent and Merger Sub will not,
require any consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority, domestic, foreign or
supranational, except (i) for applicable requirements, if any, of the Exchange
Act, the Securities Act, Blue Sky Laws and state takeover laws, the HSR Act,
filing and recordation of appropriate merger documents as required by Delaware
Law and the rules of the New York Stock Exchange, Inc. ("NYSE"), and (ii) where
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, is not reasonably likely to prevent or delay
consummation of the Merger, and is not reasonably likely, individually or in the
aggregate, to have a Parent Material Adverse Effect.
SECTION 4.06. SEC Filings; Financial Statements.
(a) Parent has filed all forms, reports and documents required to be filed
by it with the SEC since January 1, 1994, and has heretofore made available to
the Company, in the form filed with the SEC, (i) its Annual Report on Form 10-K
for the fiscal years ended December 31, 1994 and December 31, 1995, (ii) its
Quarterly Reports on Form 10-Q for the periods ended March 31, 1996, June 30,
1996 and September 30, 1996, (iii) all proxy statements relating to Parent's
meetings of stockholders (whether annual or special) held since January 1, 1994,
(iv) all other forms, reports and other registration statements (other than
Quarterly Reports on Form 10-Q not referred to in clause (ii) above) filed by
Parent with the SEC since January 1, 1994 and prior to the date hereof (the
forms, reports and other documents referred to in clauses (i), (ii), (iii) and
(iv) above being referred to herein, collectively, as the "Parent SEC Reports"),
and (v) complete (i.e., unredacted) copies of each exhibit (which is in effect
as of the date of this Agreement) to the Parent SEC
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Reports filed with the SEC. The Parent SEC Reports, as well as all forms,
reports and documents to be filed by the Company with the SEC after the date
hereof and prior to the Effective Time, (i) were or will be prepared in
accordance with the requirements of the Securities Act and the Exchange Act, as
the case may be, and the rules and regulations thereunder, (ii) did not at the
time they were filed, or will not at the time they are filed, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading and (iii)
did not at the time they were filed, or will not at the time they are filed,
omit any documents required to be filed as exhibits thereto.
(b) Except for annual reports on Form 11-K for plans sponsored by SCIMED
Life Systems, Inc. that are required to be filed with the SEC, no subsidiary of
Parent is required to file any form, report or other document with the SEC.
(c) Each of the consolidated financial statements (including, in each case,
any notes thereto) contained in the Parent SEC Reports, as well as all forms,
reports and documents to be filed by the Company with the SEC after the date
hereof and prior to the Effective Time, was or will be prepared in accordance
with United States generally accepted accounting principles applied on a
consistent basis throughout the periods indicated (except as may be indicated in
the notes thereto) and each fairly presented or will fairly present the
consolidated financial position, results of operations and cash flows of Parent
and its consolidated subsidiaries as at the respective dates thereof and for the
respective periods indicated therein in accordance with United States generally
accepted accounting principles (subject, in the case of unaudited statements, to
normal and recurring year-end adjustments that were not and are not expected,
individually or in the aggregate, to have a Parent Material Adverse Effect).
(d) Except as and to the extent set forth on the consolidated balance sheet
of Parent and its consolidated subsidiaries as at December 31, 1995, including
the notes thereto (the "Parent 1995 Balance Sheet"), neither Parent nor any of
its consolidated subsidiaries has any liability or obligation of any nature
(whether accrued, absolute, contingent or otherwise) which would be required to
be reflected on a balance sheet, or in the notes thereto, prepared in accordance
with United States generally accepted accounting principles, except for
liabilities and obligations disclosed in any Parent SEC Report filed since
December 31, 1995 and prior to the date hereof, or incurred since December 31,
1995 which are not reasonably likely, individually or in the aggregate, to have
a Parent Material Adverse Effect.
(e) Parent has heretofore furnished to the Company complete and correct
copies of all material amendments and modifications that have not been filed by
Parent with the SEC to all material agreements, documents and other instruments
that previously had been filed by Parent with the SEC and are currently in
effect.
SECTION 4.07. Absence of Certain Changes or Events. Since December 31,
1995, except as contemplated by this Agreement or disclosed in any Parent SEC
Report filed since December 31, 1995, Parent and its consolidated subsidiaries
have conducted their businesses only in the ordinary course and in a manner
consistent in all material respects with past practice and, since December 31,
1995 except as disclosed in any Parent SEC Report filed since December 31, 1994,
there has not been (a) any event or events having, individually or in the
aggregate, a Parent Material Adverse Effect, (b) except for purchases of shares
of Parent Common Stock made pursuant to Parent's systematic share repurchase
program, any declaration, setting aside or payment of any dividend or
distribution in respect of any capital stock of Parent or any redemption,
purchase or other acquisition of any of its securities, (c) any change by Parent
in its accounting methods, principles or practices, (d) any revaluation by
Parent of any material asset (including, without limitation, any writing down of
the value of inventory or writing off of notes or accounts receivable), other
than in the ordinary course of business consistent in all material respects with
past practice, or (e) as of the date hereof, any entry by Parent or any
subsidiary of Parent into any commitment or transaction material to Parent and
the subsidiaries of Parent taken as a whole, except in the ordinary course of
business and consistent in all material respects with past practice.
SECTION 4.08. Accounting and Tax Matters. Neither Parent nor, to Parent's
knowledge, any of its affiliates has taken, agreed to take, or will take any
action that would prevent the Merger from being effected
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as a "pooling-of-interests" or would prevent the Merger from constituting a
transaction qualifying under Section 368(a) of the Code. Neither Parent nor, to
Parent's knowledge, any of its affiliates or agents is aware of any agreement,
plan or other circumstance that would prevent the Merger from qualifying under
Section 368(a) of the Code and, to Parent's knowledge, the Merger will so
qualify.
SECTION 4.09. Absence of Litigation. Except as disclosed in the Parent
SEC Reports, there is no claim, action, proceeding or investigation pending or,
to Parent's knowledge, threatened against Parent or any subsidiary of Parent, or
any property or asset of Parent or any subsidiary of Parent, before any court,
arbitrator or Governmental Authority, which, individually or when aggregated
with other claims, actions, proceedings or investigations or potential claims,
actions, proceedings or investigations which are reasonably likely to result
from similar facts and circumstances, is reasonably likely to have a Parent
Material Adverse Effect. As of the date hereof, neither Parent nor any
subsidiary of Parent nor any property or asset of Parent or any subsidiary of
Parent is subject to any order, writ, judgment, injunction, decree,
determination or award having, individually or in the aggregate, a Parent
Material Adverse Effect.
SECTION 4.10. Brokers. No broker, finder or investment banker (other than
Lehman Brothers, Inc.) is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger based upon arrangements made by or on
behalf of Parent or Merger Sub.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. Conduct of Business by the Company Pending the Merger. The
Company covenants and agrees that, between the date of this Agreement and the
Effective Time, except as set forth in Section 5.01 of the Company Disclosure
Schedule or as otherwise expressly provided for in this Agreement, unless Parent
shall otherwise agree (which agreement shall not be unreasonably withheld) in
writing, the businesses of the Company and the Subsidiaries shall be conducted
only in, and the Company and the Subsidiaries shall not take any action except
in, the ordinary course of business and in a manner consistent in all material
respects with past practice; and the Company shall use its reasonable best
efforts to preserve substantially intact its business organization, to keep
available the services of the current officers, employees and consultants of the
Company and the Subsidiaries and to preserve the current relationships of the
Company and the Subsidiaries with customers, distributors, suppliers and other
persons with which the Company or any Subsidiary has significant business
relations. By way of amplification and not limitation, except as contemplated by
this Agreement, or as set forth in Section 5.01 of the Company Disclosure
Schedule, neither the Company nor any of the Subsidiaries shall, between the
date of this Agreement and the Effective Time, directly or indirectly do, or
propose to do, any of the following without the prior written consent of Parent,
which consent shall not be unreasonably withheld:
(a) amend or otherwise change its Certificate of Incorporation or
By-laws or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant or encumber, or authorize
the issuance, sale, pledge, disposition, grant or encumbrance of, (i) any
shares of capital stock of any class of the Company or any Subsidiary, or
any options, warrants, convertible securities or other rights of any kind
to acquire any shares of such capital stock, or any other ownership
interest (including, without limitation, any phantom interest), of the
Company or any Subsidiary (except as set forth in Section 5.01(b) of the
Company Disclosure Schedule) or (ii) any assets of the Company or any
Subsidiary, except for sales in the ordinary course of business and in a
manner consistent in all material respects with past practice and other
asset sales for consideration aggregating not more than $500,000;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock, except that a United States Subsidiary may,
after consultation with Parent, declare and pay a dividend to the Company;
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(d) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(e) (i) acquire (including, without limitation, by merger,
consolidation or acquisition of stock or assets) any corporation,
partnership, limited liability company, other business organization or any
division thereof, or any material amount of assets; (ii) except as set
forth in Section 5.01(e) of the Company Disclosure Schedule, incur any
indebtedness for borrowed money or issue any debt securities or assume,
guarantee or endorse, or otherwise as an accommodation become responsible
for, the obligations of any person, or make any loans or advances, except
in the ordinary course of business and consistent in all material respects
with past practice in an amount not in excess of $1 million; (iii) except
as set forth in Section 5.01(e) of the Company Disclosure Schedule, enter
into any contract or agreement other than in the ordinary course of
business, consistent in all material respects with past practice; (iv)
except as set forth in Section 5.01(e) of the Company Disclosure Schedule,
authorize capital expenditures which are, in the aggregate, in excess of $2
million for the Company and the Subsidiaries taken as a whole; or (v) enter
into or amend any contract, agreement, commitment or arrangement with
respect to any matter set forth in this subsection (e);
(f) except as set forth in Section 5.01(f) of the Company Disclosure
Schedule, increase (except in the ordinary course of business and
consistent in all material respects with past practice) the compensation
payable or to become payable to its officers or employees generally or to
any employee with an annual salary in excess of $100,000, or grant any
bonus, severance or termination pay to, or enter into any employment or
severance agreement with any director, officer or other employee of the
Company or any Subsidiary, or establish, adopt, enter into or amend any
collective bargaining, bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund,
policy or arrangement for the benefit of any director, officer or employee;
(g) take any action, other than reasonable and usual actions in the
ordinary course of business and consistent in all material respects with
past practice, with respect to accounting policies or procedures
(including, without limitation, procedures with respect to the payment of
accounts payable and collection of accounts receivable);
(h) knowingly take any action that could reasonably be expected to
prevent the Merger's qualification for "pooling-of-interests" accounting
treatment or could reasonably be expected to prevent the Merger from
constituting a transaction qualifying under Section 368(a) of the Code; or
(i) pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise) in an
amount in excess of $500,000 in the aggregate, other than the payment,
discharge or satisfaction, in the ordinary course of business and
consistent in all material respects with past practice, of liabilities
reflected or reserved against in the Company 1996 Balance Sheet or
subsequently incurred in the ordinary course of business and consistent in
all material respects with past practice.
SECTION 5.02. Conduct of Business by Parent Pending the Merger. Parent
covenants and agrees that, between the date of this Agreement and the Effective
Time, unless the Company shall otherwise agree in writing, Parent shall not,
directly or indirectly, knowingly take any action that could reasonably be
expected to prevent the Merger's qualification for "pooling-of-interests"
accounting treatment or could reasonably be expected to prevent the Merger from
constituting a transaction qualifying under Section 368(a) of the Code.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Registration Statement; Proxy Statement.
(a) As promptly as practicable after the execution of this Agreement, the
Company and Parent shall prepare and file with the SEC preliminary proxy
materials relating to the meeting of the Company's
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stockholders to be held in connection with the Merger (together with any
amendments thereof or supplements thereto, the "Proxy Statement"). As promptly
as practicable after comments are received from the SEC on the preliminary proxy
materials and after the furnishing by the Company and Parent of all information
required to be contained therein, the Company and Parent shall prepare and file
with the SEC a registration statement on Form S-4 (together with all amendments
thereto, the "Registration Statement"), in which the Proxy Statement shall be
included, as a prospectus, in connection with the registration under the
Securities Act of the shares of Parent Common Stock to be issued to the
stockholders of the Company pursuant to the Merger. Parent shall use all
reasonable efforts to have or cause the Registration Statement to become
effective as promptly as practicable, and shall take all or any action required
under any applicable federal or state securities laws in connection with the
issuance of shares of Parent Common Stock pursuant to the Merger. The Company
shall furnish all information concerning the Company as Parent may reasonably
request in connection with such actions and the preparation of the Registration
Statement. As promptly as practicable after the Registration Statement shall
have become effective, the Company shall mail the Proxy Statement to its
stockholders. The Proxy Statement shall include the unanimous recommendation of
the Board of Directors of the Company in favor of the Merger, unless otherwise
necessary due to the applicable fiduciary duties of the directors of the
Company, as determined by such directors in good faith after consultation with
independent legal counsel (who may be the Company's regularly engaged
independent legal counsel).
(b) The Registration Statement and the information supplied by Parent for
inclusion in the Proxy Statement shall not, at (i) the time the Registration
Statement is declared effective by the SEC; (ii) the time the Proxy Statement
(or any amendment thereof or supplement thereto) is first mailed to stockholders
of the Company; (iii) the time of the Stockholders' Meeting (as defined in
Section 6.02); and (iv) the Effective Time, 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 not misleading. If at any
time prior to the Effective Time any event or circumstance relating to Parent or
any of its subsidiaries, or their respective officers or directors, should be
discovered by Parent which should be set forth in an amendment or a supplement
to the Registration Statement or Proxy Statement, Parent shall promptly inform
the Company, and the Company shall make appropriate amendments or supplements to
the Proxy Statement. The Proxy Statement shall comply in all material respects
as to form and substance with the requirements of the Securities Act, the
Exchange Act and the rules and regulations thereunder. Notwithstanding the
foregoing, the Company makes no representation or warranty with respect to any
information supplied by Parent or Merger Sub which is contained in, or furnished
in connection with the preparation of, any of the foregoing documents.
(c) The Proxy Statement and the information supplied by the Company for
inclusion in the Registration Statement shall not, at (i) the time the
Registration Statement is declared effective by the SEC; (ii) the time the Proxy
Statement (or any amendment thereof or supplement thereto) is first mailed to
the stockholders of the Company; (iii) the time of the Stockholders' Meeting;
and (iv) the Effective Time, 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 not misleading. If at any time prior to the
Effective Time any event or circumstance relating to the Company or any of its
subsidiaries, or their respective officers or directors, should be discovered by
the Company which should be set forth in an amendment or a supplement to the
Registration Statement or Proxy Statement, the Company shall promptly inform
Parent. The Registration Statement and the Proxy Statement shall comply in all
material respects as to form and substance with the requirements of the
Securities Act, the Exchange Act and the rules and regulations thereunder.
Notwithstanding the foregoing, Parent and Merger Sub make no representations or
warranties with respect to any information supplied by the Company which is
contained in, or furnished in connection with the preparation of, any of the
foregoing documents.
SECTION 6.02. Stockholders' Meeting.
(a) The Company shall, consistent with applicable law, call and hold a
special meeting of its stockholders (the "Stockholders' Meeting") as promptly as
practicable for the purpose of voting upon the adoption of this Agreement and
the Company shall use its reasonable best efforts to hold the Stockholders'
Meeting as soon as practicable after the date on which the Registration
Statement becomes effective. The
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Company shall use its reasonable best efforts to solicit from its stockholders
proxies in favor of the adoption of the Merger, and shall take all other action
necessary or advisable to secure the vote or consent of stockholders required by
Delaware Law to obtain such approvals, unless otherwise necessary under the
applicable fiduciary duties of the directors of the Company, as determined by
such directors in good faith after consultation with independent legal counsel
(who may be the Company's regularly engaged independent legal counsel).
(b) Parent shall vote (or consent with respect to) any shares of common
stock of Merger Sub beneficially owned by it, or with respect to which it has
the power (by agreement, proxy or otherwise) to cause to be voted (or to provide
a consent), in favor of the adoption of this Agreement at any meeting of the
stockholders of Merger Sub at which this Agreement shall be submitted for
adoption and at all adjournments or postponements thereof (or, if applicable, by
any action of the stockholders of Merger Sub by consent in lieu of a meeting).
SECTION 6.03. Appropriate Action; Consents; Filings.
(a) The Company and Parent shall use their reasonable best efforts to (i)
take, or cause to be taken, all appropriate action and do, or cause to be done,
all things necessary, proper or advisable under applicable Law or otherwise to
consummate and make effective the Merger as promptly as practicable, (ii) obtain
in a timely manner from any Governmental Authorities any consents, licenses,
permits, waivers, approvals, authorizations or orders required to be obtained or
made by Parent or the Company or any of their subsidiaries in connection with
the authorization, execution and delivery of this Agreement and the consummation
of the Merger, and (iii) as promptly as practicable, make all necessary filings,
and thereafter make any other required submissions, with respect to this
Agreement and the Merger required under (A) the Securities Act and the Exchange
Act, and any other applicable federal or state securities Laws, (B) the HSR Act
and any related governmental request thereunder and (C) any other applicable
Law; provided that Parent and the Company shall cooperate with each other in
connection with the making of all such filings, including providing copies of
all such documents to the non-filing party and its advisors prior to filing and,
if requested, accepting all reasonable additions, deletions or changes suggested
by the other party in connection therewith. The Company and Parent shall furnish
to each other all information required for any application or other filing to be
made pursuant to the rules and regulations of any applicable Law (including all
information required to be included in the Proxy Statement and the Registration
Statement) in connection with the transactions contemplated by this Agreement.
(b) (i) Each of Parent and the Company shall give (or shall cause its
respective subsidiaries to give) any notices to third parties and use, and cause
its respective subsidiaries to use, their reasonable best efforts to obtain any
third party consents, (A) necessary, proper or advisable to consummate the
transactions contemplated in this Agreement, (B) disclosed or required to be
disclosed in the Company Disclosure Schedule or the Parent Disclosure Schedule
or (C) required to prevent a Company Material Adverse Effect from occurring
prior to or after the Effective Time or a Parent Material Adverse Effect from
occurring after the Effective Time.
(ii) In the event that Parent or the Company shall fail to obtain any third
party consent described in subsection (b)(i) above, it shall use its reasonable
best efforts, and shall take any such actions reasonably requested by the other
party, to minimize any adverse effect upon the Company and Parent, their
respective subsidiaries, and their respective businesses resulting, or which
could reasonably be expected to result after the Effective Time, from the
failure to obtain such consent.
(c) From the date of this Agreement until the Effective Time, each party
shall promptly notify the other party in writing of any pending or, to the
knowledge of the first party, threatened action, proceeding or investigation by
any Governmental Authority or any other person (i) challenging or seeking
material damages in connection with the Merger or the conversion of the Company
Common Stock into Parent Common Stock pursuant to the Merger or (ii) seeking to
restrain or prohibit the consummation of the Merger or otherwise limit the right
of Parent or, to the knowledge of such party, Parent's subsidiaries to own or
operate all or any portion of the businesses or assets of the Company or its
Subsidiaries, which in either case is reasonably likely to have a Company
Material Adverse Effect prior to or after the Effective Time, or a Parent
Material Adverse Effect after the Effective Time.
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SECTION 6.04. Access to Information; Confidentiality.
(a) Subject to the Confidentiality Agreements (as hereinafter defined),
from the date hereof to the Effective Time, Parent and the Company each will
provide to the other (and its respective officers, directors, employees,
accountants, consultants, legal counsel, agents and other representatives,
collectively, "Representatives") access, to the extent appropriate with regard
to each of Parent's and the Company's relative size, to all information and
documents which the Company or Parent, as the case may be, may reasonably
request regarding the business, assets, liabilities, employees and other aspects
of the other (except information or documents that in the opinion of such other
party's counsel may not be disclosed under applicable law).
(b) From the date hereof to the Effective Time, the Company shall: (i)
provide to Parent and its Representatives access at reasonable times upon prior
notice to the officers, employees, agents, properties, offices and other
facilities of the Company and its Subsidiaries and to the books and records
thereof and (ii) furnish promptly such information concerning the business,
properties, contracts, assets, liabilities, personnel and other aspects of the
Company and its Subsidiaries as Parent or its Representatives may reasonably
request.
(c) The parties shall comply with, and shall cause their respective
Representatives to comply with, to the extent permitted by applicable Law, all
of their respective obligations under the Confidentiality Agreements dated
November 27, 1996 (each, a "Confidentiality Agreement") between the Company and
Parent.
(d) No investigation pursuant to this Section 6.04 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.
SECTION 6.05. No Solicitation of Competing Transactions. Neither the
Company nor any Subsidiary shall, directly or indirectly, through any officer,
director, agent or otherwise, initiate, solicit or knowingly encourage
(including by way of furnishing non-public information or assistance), or take
any other action to facilitate knowingly, any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Competing Transaction (as defined below), or enter into or maintain or continue
discussions or negotiate with any person or entity in furtherance of such
inquiries or to obtain a Competing Transaction, or agree to or endorse any
Competing Transaction, or authorize or permit any of the officers, directors or
employees of the Company or any Subsidiary or any investment banker, financial
advisor, attorney, accountant or other agent or representative of the Company or
any Subsidiary to take any such action, and the Company shall notify Parent
orally (within one business day) and in writing (as promptly as practicable) of
all of the relevant details relating to any inquiry or proposal which the
Company or any Subsidiary or any such officer, director, employee, investment
banker, financial advisor, attorney, accountant or other agent or representative
may receive relating to any of such matters, and if such inquiry or proposal is
in writing, the Company shall deliver to Parent a copy of such inquiry or
proposal; provided, however, that nothing contained in this Section 6.05 shall
prohibit the Company from (i) furnishing information (including non-public
information) to, or entering into discussions or negotiations with, any person
or entity that makes an unsolicited, bona fide proposal of a Competing
Transaction if, and only to the extent that, (A) the Board of Directors of the
Company determines in good faith after consultation with independent legal
counsel (who may be the Company's regularly engaged independent legal counsel)
that such action is necessary to comply with their fiduciary duties to the
Company or its stockholders under applicable law and (B) prior to furnishing
such information to, or entering into discussions or negotiations with, such
person or entity, the Company (1) provides reasonable notice to Parent that it
is furnishing information to, or entering into discussions or negotiations with,
such person or entity and provides in any such notice to Parent in reasonable
detail, the identity of the person or entity making such proposal and the terms
and conditions of such proposal, (2) provides Parent with all information to be
provided to such person or entity which Parent has not previously been provided,
and (3) receives from such person or entity an executed confidentiality
agreement on terms not less favorable in any material respect to the Company
than those contained in the Confidentiality Agreements, (ii) complying with Rule
14e-2 promulgated under the Exchange Act with regard to a tender or exchange
offer, (iii) referring any third party to this Section 6.05 or making a copy of
this Section 6.05 available to any third party, or (iv) failing to make or
withdrawing or modifying its recommendation referred to in Section
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6.01(a) following the making of a proposal that constitutes, or may reasonably
be expected to lead to, a Competing Transaction if the Board of Directors of the
Company, after consultation with independent legal counsel (who may be the
Company's regularly engaged independent legal counsel), determines in good faith
that such action is necessary for the directors of the Company to comply with
their fiduciary duties to the Company or its stockholders under applicable law.
The Company agrees not to release any third party from, or waive any provision
of, any confidentiality or standstill agreement to which the Company is a party,
unless the Board of Directors of the Company determines in good faith after
consultation with independent legal counsel (who may be the Company's regularly
engaged independent legal counsel) that such action is necessary to comply with
fiduciary duties to the Company or its stockholders under applicable law. For
purposes of this Agreement, "Competing Transaction" shall mean any of the
following involving the Company or any Subsidiary: (i) any merger,
consolidation, share exchange, business combination, or other similar
transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of 15% or more of the assets of the Company and the Subsidiaries,
taken as a whole, in a single transaction or series of transactions; (iii) any
tender offer or exchange offer for 15% or more of the Shares or the filing of a
registration statement under the Securities Act in connection therewith; or (iv)
any person having acquired beneficial ownership or the right to acquire
beneficial ownership of, or any "group" (as such term is defined under Section
13(d) of the Exchange Act and the rules and regulations promulgated thereunder)
having been formed which beneficially owns or has the right to acquire
beneficial ownership of, 15% or more of the Shares.
SECTION 6.06. Directors' and Officers' Indemnification and Insurance.
(a) Parent and the Surviving Corporation agree that the indemnification
obligations set forth in the Company's Certificate of Incorporation and the
Company's By-Laws, in each case as of the date of this Agreement, shall survive
the Merger (and, prior to the Effective Time, Parent shall cause the Certificate
of Incorporation and Bylaws of Merger Sub to include such provisions) and shall
not be amended, repealed or otherwise modified after the Effective Time in any
manner that would adversely affect the rights thereunder of the individuals who
on or at any time prior to the Effective Time were entitled to indemnification
thereunder. From and after the Effective Time, such obligations shall be the
joint and several obligations of Parent and the Surviving Corporation and, by
executing this Agreement, Parent hereby expressly assumes such obligations.
(b) The Surviving Corporation shall use its reasonable best efforts to
maintain in effect, for four (4) years from and after the Effective Time,
directors' and officers' liability insurance policies covering the persons who
are currently covered in their capacities as such directors and officers by the
Company's current directors' and officers' policies and on terms not materially
less favorable than the existing insurance coverage with respect to matters
occurring prior to the Effective Time; provided, however, that in no event shall
the Surviving Corporation be required to expend pursuant to this Section 6.06
more than an amount per year equal to 200% of current annual premiums paid by
the Company for such insurance (which premiums the Company represents and
warrants currently to be $227,000 in the aggregate); provided further that if
the annual premiums exceed such amount, Parent shall be obligated to obtain a
policy with the greatest coverage available for a cost not exceeding such
amount.
(c) The Surviving Corporation and Parent shall honor and fulfill in all
respects the obligations of the Company pursuant to indemnification agreements
with the Company's directors and officers existing at or before the Effective
Time.
SECTION 6.07. Notification of Certain Matters. From and after the date of
this Agreement until the Effective Time, each party hereto shall promptly notify
the other parties hereto of (a) the occurrence, or nonoccurrence, of any event
the occurrence or non-occurrence of which would be reasonably likely to cause
any condition to the obligations of any party to effect the Merger not to be
satisfied, or (b) the failure of the Company or Parent, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it pursuant to this Agreement which would be reasonably likely
to result in any condition to the obligations of any party to effect the Merger
not to be satisfied; provided, however, that the delivery of any notice pursuant
to this Section 6.07 shall not be deemed to be an amendment of this Agreement or
any Section in the Parent Disclosure Schedule or the Company Disclosure Schedule
and shall not cure any breach of any representation or warranty requiring
disclosure of such matter prior to the date of
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this Agreement. No delivery of any notice pursuant to this Section 6.07 shall
limit or affect the remedies available hereunder to the party receiving such
notice, including the rights of Parent under Section 7.02(a) and those of the
Company under Section 7.03(a), in the event that a representation or warranty
made by the Company or Parent herein shall not be true and correct (giving
effect to any standards of materiality set forth in such Sections) as of the
date hereof or as of the date when made (if a different date) and as of the
Effective Time.
SECTION 6.08. Stock Exchange Listing. Parent shall as promptly as
reasonably practicable prepare and submit to the NYSE a listing application
covering the shares of Parent Common Stock to be issued in the Merger and shall
use its reasonable best efforts to cause such shares to be approved for listing
on the NYSE prior to the Effective Time.
SECTION 6.09. Public Announcements. Parent and the Company shall consult
with each other before issuing any press release or otherwise making any public
statements with respect to this Agreement or any transaction contemplated
hereby. Parent and the Company shall not issue any such press release or make
any such public statement without the prior consent of the other (which consent
shall not be unreasonably withheld), except as may be required by Law or any
listing agreement with the NYSE, the NASD or any national securities exchange to
which Parent or the Company is a party. The parties have agreed on the text of a
joint press release by which Parent and the Company will announce the execution
of this Agreement.
SECTION 6.10. Plan of Reorganization. This Agreement is intended to
constitute a "plan of reorganization" within the meaning of Section 1.368-2(g)
of the income tax regulations promulgated under the Code.
SECTION 6.11. Company Distribution Agreements.
(a) Except as specifically provided in Section 6.11(a) of the Company
Disclosure Schedule, neither the Company nor any of the Subsidiaries shall,
without the prior written consent of Parent, enter into any distribution
agreement or similar agreement or amend any existing distribution agreement or
similar agreement to which the Company or any of the Subsidiaries is party.
(b) Except as set forth in Section 6.11(b) of the Company Disclosure
Schedule, the Company shall, and shall cause each of the Subsidiaries to, give
notice of its intention not to renew any of its distribution agreements or
similar agreements. Each such notice shall be given in accordance with such
agreements so as to prevent such agreement from being renewed for any period of
time after the date hereof.
(c) In the event that the Company is unable to make arrangements for
distribution of its products in any country following the termination of a
distribution agreement as provided in this Section 6.11, Parent will either act
as, or arrange for, a distributor of the Company's products in such country on
terms and conditions that are substantially similar to the terms and conditions
with that of the former distributor.
SECTION 6.12. Company Employee Stock Purchase Plan.
(a) The Company shall take all actions necessary pursuant to the terms of
the ESPP in order to shorten the offering period under such plan which includes
the Effective Time (the "Current Offering") such that a new purchase date shall
occur prior to the Effective Time and Shares shall be purchased by ESPP
participants prior to the Effective Time. The Current Offering shall expire
immediately following such new purchase date, and the ESPP shall terminate
immediately prior to the Effective Time. Subsequent to such new purchase date,
the Company shall take no action, pursuant to the terms of the ESPP, to commence
any new offering period.
(b) Parent shall cause each participant in the ESPP who becomes employed by
Parent or any of its subsidiaries to become eligible to participate in the
Parent employee stock purchase plan, with such eligibility to participate
commencing no later than the regular offering commencement date under such
Parent plan first occurring at least 30 days following the Effective Time;
provided, however, that if the period between the Effective Time and such
regular offering commencement date exceeds three (3) months, then Parent shall
cause the Parent employee stock purchase plan to be amended, to the extent
necessary, to allow ESPP participants to participate in such plan on the
earliest practicable date within such three-month period.
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SECTION 6.13. Acceleration of Stock Options. In the event that it is
determined by Ernst & Young LLP, independent accountants to the Company and
Parent, that the enforcement of any provision of any Change of Control Agreement
listed in Section 3.10 of the Company Disclosure Schedule (the "Change of
Control Agreements") (which allows for the acceleration of vesting of stock
options granted for the Company's securities) would preclude accounting for the
Merger and the transactions contemplated thereby as a "pooling-of-interests,"
then the Board of Directors of the Company shall take all actions necessary
pursuant to the terms of such Change of Control Agreements to ensure that all
such acceleration provisions are null and void.
SECTION 6.14. Affiliates; Accounting and Tax Treatment. Within thirty
(30) days from the date hereof, each of Parent and the Company shall obtain from
any person who may be deemed to be an affiliate, as of the date of this
Agreement, of Parent or the Company, respectively, as applicable (under Rule 145
of the Securities Act or otherwise under applicable SEC accounting releases with
respect to "pooling-of-interests" accounting treatment), a written agreement
substantially in the appropriate form attached hereto as Exhibit 6.14. Each
party hereto shall use its best efforts to cause the Merger to qualify, and
shall not take any actions which could prevent the Merger from qualifying, for
"pooling-of-interests" accounting treatment and as a reorganization qualifying
under the provisions of Section 368(a) of the Code.
SECTION 6.15. Employees and Employee Benefits. From and after the
Effective Time, Parent shall grant all employees of the Company and any
Subsidiaries credit for all service (to the same extent as service with Parent
or any subsidiary of Parent is taken into account with respect to similarly
situated employees of Parent and the subsidiaries of Parent) with the Company
and any Subsidiary and their respective predecessors prior to the Effective Time
for all purposes as if such service with the Company or any Subsidiary was
service with Parent or any subsidiary of Parent (provided, however, that no such
past service credit shall be granted to the extent it would result in
duplicative accrual of benefits for the same period of service), and, with
respect to any medical or dental benefit plan, Parent shall waive any
pre-existing condition exclusions and actively-at-work requirements (provided,
however, that no such waiver shall apply to a pre-existing condition of any
employee of the Company or any Subsidiary who was, as of the Effective Time,
excluded from participation in a Plan by virtue of such pre-existing condition)
and provide that any covered expenses incurred on or before the Effective Time
by an employee or an employee's covered dependent shall be taken into account
for purposes of satisfying applicable deductible, coinsurance and maximum
out-of-pocket provisions after the Effective Time to the same extent as such
expenses are taken into account for the benefit of similarly situated employees
of Parent and subsidiaries of Parent. Parent shall provide or shall cause the
Company and each Subsidiary to provide benefits to any employee of the Company
and each Subsidiary which are not less favorable in the aggregate than the
benefits provided to similarly situated employees of the Parent and subsidiaries
of Parent.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01. Conditions to the Obligations of Each Party. The
obligations of the Company, Parent and Merger Sub to consummate the Merger are
subject to the satisfaction or, if permitted by applicable Law, waiver of the
following conditions:
(a) this Agreement and the transaction contemplated hereby shall have
been approved and adopted by the affirmative vote of the stockholders of
the Company in accordance with Delaware Law and the Company's Certificate
of Incorporation;
(b) any applicable waiting period under the HSR Act relating to the
Merger shall have expired or been terminated;
(c) no order, statute, rule, regulation, executive order, stay,
decree, judgment or injunction shall have been enacted, entered, issued,
promulgated or enforced by any Governmental Authority or a court of
competent jurisdiction which has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger;
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(d) the Registration Statement shall have been declared effective, and
no stop order suspending the effectiveness of the Registration Statement
shall be in effect and no proceedings for such purpose shall be pending
before or threatened by the SEC;
(e) Parent and the Company shall have received the opinion of Ernst &
Young LLP, independent accountants to each of Parent and the Company, dated
as of the date on which the Registration Statement shall become effective
and the Effective Time, to the effect that the Merger qualifies for
"pooling-of-interests" accounting treatment if consummated in accordance
with this Agreement; and
(f) the shares of Parent Common Stock to be issued in the Merger shall
have been authorized for listing on the NYSE, subject to official notice of
issuance.
SECTION 7.02. Conditions to the Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to consummate the Merger are subject to the
satisfaction or, if permitted by applicable Law, waiver of the following further
conditions:
(a) (i) the Company shall have performed in all material respects all
of its obligations hereunder required to be performed by it at or prior to
the Effective Time; (ii) each of the representations and warranties of the
Company contained in this Agreement (disregarding for this purpose any
qualifications with respect to materiality or Company Material Adverse
Effect) shall be true and correct, in each case as of the date hereof and
at and as of the Effective Time as if made at and as of such time, it being
understood and agreed by Parent and Merger Sub that this Section
7.02(a)(ii) shall be deemed to have been satisfied unless any failures to
be so true and correct, individually or in the aggregate, are reasonably
likely to have a Company Material Adverse Effect; and (iii) Parent shall
have received a certificate signed by an executive officer of the Company
to the foregoing effect;
(b) Parent shall have received "cold comfort" letters of Ernst &
Young, LLP dated the date on which the Registration Statement shall become
effective and the Effective Time, respectively, and addressed to Parent,
such "cold comfort" letters being in such form and substance as is
reasonably customary for letters delivered by independent public
accountants in connection with registration statements similar to the
Registration Statement;
(c) unless the Company waives its closing condition set forth in
Section 7.03(b) hereof, a copy of such opinion received by the Company
shall have been provided to Parent; and
(d) Parent shall have received from any person who may be deemed to
have become an affiliate of the Company, as reasonably determined by the
Company, pursuant to Rule 145 under the Securities Act or otherwise under
applicable SEC accounting releases with respect to "pooling-of-interests"
accounting treatment, after the date of this Agreement and on or prior to
the Effective Time, a signed agreement substantially in the form of Exhibit
6.14(b) hereto.
SECTION 7.03. Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Merger are subject to the
satisfaction or, if permitted by applicable Law, waiver of the following further
conditions:
(a) (i) Parent and Merger Sub shall have performed in all material
respects all of their respective obligations hereunder required to be
performed by them at or prior to the Effective Time; (ii) each of the
representations and warranties of Parent contained in this Agreement
(disregarding for this purpose any qualifications with respect to
materiality or Parent Material Adverse Effect) shall be true and correct,
in each case as of the date hereof and at and as of the Effective Time as
if made at and as of such time; it being understood and agreed by the
Company that this Section 7.03(a)(ii) shall be deemed to have been
satisfied unless any failures to be so true and correct, individually or in
the aggregate, are reasonably likely to have a Parent Material Adverse
Effect; and (iii) the Company shall have received a certificate signed by
an executive officer of Parent to the foregoing effect;
(b) the Company shall have received the opinion of Venture Law Group,
dated on or about the date that is two business days prior to the date the
Proxy Statement is first mailed to stockholders of the Company, to the
effect that the Merger will be treated for federal income tax purposes as a
reorganization
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within the meaning of Section 368(a) of the Code, which opinion shall not
have been withdrawn or modified in any material respect; provided, however,
that each of the representations of Parent, the Company and Collagen
Corporation contained in the representation letters provided to Venture Law
Group shall be true and correct, in each case at and as of the Effective
Time as if made at and as of such time; and
(c) the Company shall have received from any person who may be deemed
to have become an affiliate of Parent pursuant to Rule 145 under the
Securities Act or otherwise under applicable SEC accounting releases with
respect to "pooling-of-interests" accounting treatment after the date of
this Agreement and on or prior to the Effective Time a signed agreement
substantially in the form of Exhibit 6.14(b) hereto.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, notwithstanding
any requisite approval and adoption of this Agreement and the transactions
contemplated hereby by the stockholders of the Company:
(a) by written consent duly authorized by the Boards of Directors of
each of Parent, Merger Sub and the Company;
(b) by any of Parent, Merger Sub or the Company if either (i) the
Effective Time shall not have occurred on or before June 30, 1997; provided
that the right to terminate this Agreement under this Section 8.01(b) shall
not be available to any party whose failure to fulfill any obligation under
this Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before such date; provided further , that, if
a request for additional information is received from a Governmental
Authority pursuant to the HSR Act, such date shall be extended to the 90th
day following acknowledgment by such Governmental Authority that Parent and
the Company have complied with such request, but in any event not later
than September 30, 1997; provided further, that, if any actions taken by
Parent after the date hereof and prior to the Effective Time shall have
caused the delay of, or resulted in the failure of, the Effective Time to
occur on or before June 30, 1997, such date with respect to Parent's right
to terminate this Agreement shall be extended by the amount of time of such
delay, but in no event later than September 30, 1997; or (ii) there shall
be any Law that makes consummation of the Merger illegal or otherwise
prohibited or if any court of competent jurisdiction or Governmental
Authority shall have issued an order, decree or ruling or taken any other
action restraining, enjoining or otherwise prohibiting the Merger and such
order, decree, ruling or other action shall have become final and
nonappealable;
(c) by Parent, if (i) the Board of Directors of the Company withdraws,
modifies or changes its recommendation of this Agreement or the Merger in a
manner adverse to Parent or Merger Sub or shall have resolved to do any of
the foregoing or the Board of Directors of the Company shall have
recommended to the stockholders of the Company any Competing Transaction or
resolved to do so; and (ii) a tender offer or exchange offer for 30% or
more of the outstanding shares of capital stock of the Company is
commenced, and the Board of Directors of the Company, within ten (10)
business days after such tender offer or exchange offer is so commenced,
either fails to recommend against acceptance of such tender offer or
exchange offer by its stockholders or takes no position with respect to the
acceptance of such tender offer or exchange offer by its stockholders;
(d) by the Company in order to enter into a definitive agreement for a
Competing Transaction, upon three (3) business days' prior written notice
to Parent setting forth, in reasonable detail, the identity of the person
making the Competing Transaction and the final terms and conditions of such
Competing Transaction, if, as a result of an unsolicited proposal for such
Competing Transaction, the Board of Directors of the Company, after
consultation with independent legal counsel (who may be the Company's
regularly engaged independent legal counsel), determines in good faith
that, after giving effect to any
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concessions which may be offered by Parent, their fiduciary duties under
applicable Law require that such Competing Transaction be accepted;
provided, however , that any termination of this Agreement by the Company
pursuant to this Section 8.01(d) shall not be effective until the Company
has made payment of the full fee required by Section 8.03(a) hereof;
(e) by either Parent or the Company, if the Stockholders' Meeting
shall have been held and the stockholders of the Company shall have failed
to approve and adopt this Agreement at such meeting (including any
adjournment or postponement thereof);
(f) by the Company, upon a breach of any representation, warranty, or
agreement set forth in this Agreement such that the condition set forth in
Section 7.03(a) would not be satisfied (a "Terminating Parent Breach");
provided, however, that, if such Terminating Parent Breach is curable by
Parent through the exercise of its best efforts and Parent continues to
exercise such best efforts, the Company may not terminate this Agreement
under this Section 8.01(f) for a period of 30 days from the date on which
the Company delivers to Parent written notice setting forth in reasonable
detail the circumstances giving rise to such Terminating Parent Breach;
(g) by Parent, upon a breach of any representation, warranty, or
agreement set forth in this Agreement such that the condition set forth in
Section 7.02(a) would not be satisfied (a "Terminating Company Breach");
provided, however, that, if such Terminating Company Breach is curable by
the Company through the exercise of its best efforts and the Company
continues to exercise such best efforts, Parent may not terminate this
Agreement under this Section 8.01(g) for a period of 30 days from the date
on which Parent delivers to the Company written notice setting forth in
reasonable detail the circumstances giving rise to such Terminating Company
Breach; or
(h) by the Company or Parent, if the average of the closing sale
prices on the NYSE of Parent Common Stock as reported under Composite
Transactions in the Wall Street Journal for the ten (10) consecutive
trading days immediately preceding the first business day following the
satisfaction (including as a result of a waiver) of all of the conditions
set forth in Article VII, is less than $55 per share.
SECTION 8.02. Effect of Termination. Except as provided in Section 9.01,
in the event of the termination of this Agreement pursuant to Section 8.01, this
Agreement shall forthwith become void, there shall be no liability under this
Agreement on the part of Parent, Merger Sub or the Company or any of their
respective officers or directors and all rights and obligations of any party
hereto shall cease; provided, however, that nothing herein shall relieve any
party from liability for the willful breach of any of its representations,
warranties, covenants or agreements set forth in this Agreement. The payment of
any termination fee under any provision of Section 8.03(a) by the Company shall
constitute the sole and exclusive remedy of Parent for such termination and,
upon receipt of such termination fee, Parent shall have no further recourse in
law or equity against the Company as a result of this Agreement or any breach
(willful or otherwise) hereof; provided, however, that the Termination Fee shall
not be the sole and exclusive remedy for any breach by the Company of its
obligations under Section 6.05.
SECTION 8.03. Fees and Expenses.
(a) The Company shall pay Parent a fee of $34 million (the "Termination
Fee"), which amount is inclusive of all expenses, if this Agreement is
terminated:
(i) by the Company pursuant to Section 8.01(b)(i) and a Competing
Transaction having a value per Share in excess of the value per Share to be
generated hereby shall have been consummated within twelve (12) months of
such termination;
(ii) pursuant to Section 8.01(c)(i);
(iii) pursuant to Section 8.01(c)(ii) and such Competing Transaction
shall have been consummated following such termination;
(iv) pursuant to Section 8.01(d);
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(v) pursuant to Section 8.01(e) and a Competing Transaction shall have
been publicly proposed prior to such termination and the transaction
contemplated by such Competing Transaction shall have been consummated
within twelve (12) months of such termination; or
(vi) pursuant to Section 8.01(g) and a Competing Transaction shall
have been consummated within twelve (12) months of such termination.
(b) Any payment required to be made pursuant to Section 8.03(a) shall be
made as promptly as practicable but not later than five (5) business days after
the final determination by Parent of such amount and shall be made by wire
transfer of immediately available funds to an account designated by Parent.
(c) Except as set forth in this Section 8.03, all costs and expenses
incurred in connection with this Agreement and the Merger shall be paid by the
party incurring such expenses, whether or not the Merger is consummated.
(d) In the event that the Company shall fail to pay the Termination Fee
when due, interest shall be paid on such unpaid Termination Fee, commencing on
the date that the Termination Fee became due, at a rate equal to the rate of
interest publicly announced by Citibank, N.A., from time to time, in the City of
New York, as such bank's Base Rate plus 2%.
SECTION 8.04. Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Effective Time; provided that, after the adoption of
this Agreement by the stockholders of the Company, no amendment may be made
which would reduce the amount or change the type of consideration to be received
by the stockholders of the Company pursuant to the Merger. This Agreement may
not be amended except by an instrument in writing signed by the parties hereto.
SECTION 8.05. Waiver. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any obligation or other
act of any other party hereto, (b) waive any inaccuracy in the representations
and warranties of the other party contained herein or in any document delivered
by the other party pursuant hereto and (c) waive compliance with any agreement
or condition contained herein. Any such extension or waiver shall be valid if
set forth in an instrument in writing signed by the party or parties to be bound
thereby.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
and any certificate delivered pursuant hereto by any person shall terminate at
the Effective Time or upon the termination of this Agreement pursuant to Section
8.01, as the case may be, except that the agreements set forth in Articles I and
II and Sections 6.06, 6.11, 6.12 and 6.15 shall survive the Effective Time
indefinitely, and those set forth in Sections 6.09, 8.02, 8.03, 8.04, 8.05 and
this Article IX shall survive termination indefinitely.
SECTION 9.02. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
facsimile, telegram or telex or by registered or certified mail (postage
prepaid, return receipt requested) or by a nationally recognized overnight
courier service to the respective parties at the
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following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 9.02):
if to Parent or Merger Sub:
Boston Scientific Corporation
One Boston Scientific Place
Natick, Massachusetts 01760-1537
Facsimile: (508) 650-8960
Attention: General Counsel
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Facsimile: (212) 848-7666
Attention: Peter D. Lyons, Esq.
if to the Company:
Target Therapeutics, Inc.
47201 Lakeview Blvd.
Fremont, California 94538
Facsimile: (510) 440-7610
Attention: Chief Financial Officer
with a copy to:
Venture Law Group
2800 Sand Hill Road
Menlo Park, California 94025
Facsimile: (415) 233-8386
Attention: Michael W. Hall, Esq.
SECTION 9.03. Certain Definitions. For purposes of this Agreement, the
term:
(a) "affiliate" of a specified person means a person who directly or
indirectly through one or more intermediaries controls, is controlled by,
or is under common control with, such specified person;
(b) "beneficial owner" with respect to any shares means a person who
shall be deemed to be the beneficial owner of such shares (i) which such
person or any of its affiliates or associates (as such term is defined in
Rule 12b-2 promulgated under the Exchange Act) beneficially owns, directly
or indirectly, (ii) which such person or any of its affiliates or
associates has, directly or indirectly, (A) the right to acquire (whether
such right is exercisable immediately or subject only to the passage of
time), pursuant to any agreement, arrangement or understanding or upon the
exercise of consideration rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any agreement, arrangement
or understanding or (iii) which are beneficially owned, directly or
indirectly, by any other persons with whom such person or any of its
affiliates or associates or any person with whom such person or any of its
affiliates or associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any such
shares;
(c) "business day" means any day on which the principal offices of the
SEC in Washington, D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day on which banks are not
required or authorized to close in the City of Boston, Massachusetts or San
Jose, California;
(d) "control" (including the terms "controlled by" and "under common
control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of
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the management and policies of a person, whether through the ownership of
voting securities, as trustee or executor, by contract or credit
arrangement or otherwise;
(e) "Governmental Authority" means any United States (federal, state
or local) or foreign government, or governmental, regulatory or
administrative authority, agency or commission;
(f) "knowledge of the Company" means the knowledge of the individuals
listed on Exhibit 9.03(f) attached hereto.
(g) "person" means an individual, corporation, limited liability
company, partnership, limited partnership, syndicate, person (including,
without limitation, a "person" as defined in Section 13(d)(3) of the
Exchange Act), trust, association or entity or government, political
subdivision, agency or instrumentality of a government; and
(h) "subsidiary" or "subsidiaries" of any person means any
corporation, partnership, joint venture or other legal entity of which such
person (either above or through or together with any other subsidiary),
owns, directly or indirectly, 50% or more of the stock or other equity
interests, the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such
corporation or other legal entity.
SECTION 9.04. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Merger is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that the
Merger be consummated as originally contemplated to the fullest extent possible.
SECTION 9.05. Entire Agreement; Assignment. This Agreement (including the
Exhibits, the Company Disclosure Schedule and the Parent Disclosure Schedule
which are hereby incorporated herein and made a part hereof for all purposes as
if fully set forth herein) and the Confidentiality Agreements constitute the
entire agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and undertakings, both written and oral, among
the parties, or any of them, with respect to the subject matter hereof. This
Agreement shall not be assigned by operation of law or otherwise, except that
Parent and Merger Sub may assign all or any of their rights and obligations
hereunder to any affiliate of Parent provided that no such assignment shall
relieve the assigning party of its obligations hereunder if such assignee does
not perform such obligations.
SECTION 9.06. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, other than Section 6.06 (which is intended to be for the
benefit of the persons covered thereby and may be enforced by such persons).
SECTION 9.07. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
SECTION 9.08. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware applicable to
contracts executed in and to be performed in that state. All actions and
proceedings arising out of or relating to this Agreement shall be heard and
determined exclusively in the Court of Chancery for the State of Delaware in and
for the County of New Castle.
SECTION 9.09. Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
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SECTION 9.10. Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
and delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
SECTION 9.11. WAIVER OF JURY TRIAL. EACH OF PARENT, THE COMPANY AND
MERGER SUB HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, THE
COMPANY OR MERGER SUB IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND
ENFORCEMENT THEREOF.
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
<TABLE>
<S> <C>
BOSTON SCIENTIFIC CORPORATION
Attest:
/s/ LAWRENCE J. KNOPF By: /s/ LAWRENCE C. BEST
- --------------------------------------------- -----------------------------------------
Title: Lawrence J. Knopf Name: Lawrence C. Best
Vice President and Assistant General Title: Chief Financial Officer
Counsel
PATRIOT ACQUISITION CORP.
Attest:
/s/ LAWRENCE J. KNOPF By: /s/ LAWRENCE C. BEST
- --------------------------------------------- -----------------------------------------
Title: Lawrence J. Knopf Name: Lawrence C. Best
Assistant Secretary Title: President
TARGET THERAPEUTICS, INC.
Attest:
By: /s/ GARY R. BANG
- --------------------------------------------- -----------------------------------------
Title: Name: Gary R. Bang
Title: President and Chief Executive
Officer
</TABLE>
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EXHIBIT 6.14(A)
TO THE MERGER AGREEMENT
FORM OF COMPANY AFFILIATE LETTER
January , 1997
Boston Scientific Corporation
One Boston Scientific Place
Natick, MA 01760-1537
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to
be an "affiliate" of Target Therapeutics, Inc., a Delaware corporation (the
"Company"), as the term "affiliate" is (i) defined for purposes of paragraphs
(c) and (d) of Rule 145 of the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Act"), and/or (ii) used in and for
purposes of Accounting Series Releases 130 and 135, as amended, of the
Commission. Pursuant to the terms of the Agreement and Plan of Merger, dated as
of January 20, 1997, among Boston Scientific Corporation, a Delaware corporation
("Parent"), Patriot Acquisition Corp., a Delaware corporation ("Merger Sub"),
and the Company (together with the Exhibits and Schedules thereto, the "Merger
Agreement"), Merger Sub will be merged with and into the Company (the "Merger"),
and the surviving corporation will become a wholly owned subsidiary of Parent.
As a result of the Merger, I may receive shares of common stock, par value
$0.01 per share, of Parent ("Parent Shares"). I would receive such Parent Shares
in exchange for the shares (or upon exercise of options for shares) owned by me
of common stock, par value $.0025 per share, of the Company (the "Company
Shares").
1. I represent, warrant and covenant to Parent that in the event I receive
any Parent Shares as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of Parent
Shares in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of
Parent Shares, to the extent I felt necessary, with my counsel or counsel
for the Company.
C. I have been advised that the issuance of Parent Shares to me
pursuant to the Merger has been registered with the Commission under the
Act on a Registration Statement on Form S-4. However, I have also been
advised that, because at the time the Merger is submitted for a vote of the
stockholders of the Company I may be deemed to be an affiliate of the
Company I may not sell, transfer or otherwise dispose of Parent Shares
issued to me in the Merger unless (i) such sale, transfer or other
disposition is made in conformity with the volume and other limitations of
Rule 145 promulgated by the Commission under the Act, (ii) such sale,
transfer or other disposition has been registered under the Act or (iii) in
the written opinion of counsel reasonably acceptable to Parent, such sale,
transfer or other disposition is otherwise exempt from registration under
the Act.
D. I understand that stop transfer instructions will be given to
Parent's transfer agents with respect to Parent Shares issued to me and
that Parent is under no obligation to register the sale, transfer or other
disposition of Parent Shares by me or on my behalf under the Act or, except
as provided in paragraph 2.A below, to take any other action necessary in
order to make compliance with an exemption from such registration
available.
A-Exh-1
<PAGE> 123
E. I also understand that there will be placed on the certificates for
Parent Shares issued to me, or any substitutions therefor, a legend stating
in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION
TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES.
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE TRANSFERRED IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED JANUARY , 1997 BETWEEN
THE REGISTERED HOLDER HEREOF AND BOSTON SCIENTIFIC CORPORATION, A COPY
OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF BOSTON
SCIENTIFIC CORPORATION."
F. I also understand that unless the transfer by me of my Parent
Shares has been registered under the Act or is a sale made in conformity
with the provisions of Rule 145, Parent reserves the right to put the
following legend on the certificates issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN ACQUIRED
BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY
DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933
AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN
ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933."
It is further understood and agreed that the legends set forth in
paragraphs E and F above shall be removed by delivery of substitute
certificates without such legend if the undersigned shall have delivered to
Parent a copy of a letter from the staff of the Commission, or a written
opinion of counsel who is reasonably acceptable to Parent and in form and
substance reasonably satisfactory to Parent, to the effect that such legend
is not required for purposes of the Act.
G. I further represent to, and covenant with, Parent that I will not,
during the 30 days prior to the Effective Time (as defined in the Merger
Agreement), sell, transfer or otherwise dispose of, or reduce my risk with
respect to, Parent Shares or shares of the capital stock of the Company
that I may hold until after such time as results covering at least 30 days
of combined operations of the Company and Parent have been published by
Parent, in the form of a quarterly earnings report, an effective
registration statement filed with the Commission, a report to the
Commission on Form 10-K, 10-Q, or 8-K, or any other public filing or
announcement which includes the combined results of operations. Parent
shall notify the "affiliates" of the publication of such results.
H. Execution of this letter should not be considered an admission on
my part that I am an "affiliate" of the Company as described in the first
paragraph of this letter, nor as a waiver of any rights I may have to
object to any claim that I am such an affiliate on or after the date of
this letter.
2. By Parent's acceptance of this letter, Parent hereby agrees with me as
follows:
A. For so long as and to the extent necessary to permit me to sell
Parent Shares pursuant to Rule 145 under the Act, Parent shall (a) use its
best reasonable efforts to (i) file, on a timely basis, all reports and
data required to be filed with the Commission by it pursuant to Section 13
of the Securities Exchange Act of 1934, as amended (the "1934 Act"), and
(ii) furnish to me upon request a written statement as to whether Parent
has complied with such reporting requirements during the 12 months
preceding any proposed sale of Parent Shares by me under Rule 145 and (b)
otherwise use its reasonable best efforts to permit such sales pursuant to
Rule 145.
A-Exh-2
<PAGE> 124
B. It is understood and agreed that the legends set forth in
paragraphs E and F above shall be removed by delivery of substitute
certificates without such legend if (i) two years shall have elapsed from
the date the undersigned acquired Parent Shares pursuant to the Merger and
the provisions of Rule 145(d)(2) are then available to the undersigned, or
(ii) Parent has received either a written opinion of counsel, which opinion
of counsel shall be reasonably satisfactory to Parent, or a "no action"
letter obtained by the undersigned from the staff of the Commission, to the
effect that the restrictions imposed by Rule 145 under the Act no longer
apply to the undersigned.
Very truly yours,
--------------------------------------
Name:
Agreed and accepted this day
of January, 1997, by
BOSTON SCIENTIFIC CORPORATION
By
--------------------------------------------------------
Name:
Title:
A-Exh-3
<PAGE> 125
EXHIBIT 6.14(B)
TO THE MERGER AGREEMENT
FORM OF PARENT AFFILIATE LETTER
January , 1997
Boston Scientific Corporation
One Boston Scientific Place
Natick, MA 01760-1537
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to
be an "affiliate" of Boston Scientific Corporation, a Delaware corporation,
("Parent"), as the term "affiliate" is (i) defined for purposes of paragraphs
(c) and (d) of Rule 145 of the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Act"), and/or (ii) used in and for
purposes of Accounting Series Releases 130 and 135, as amended, of the
Commission. Pursuant to the terms of the Agreement and Plan of Merger dated as
of January 20, 1997, among Parent, Patriot Acquisition Corp., a Delaware
corporation ("Merger Sub"), and Target Therapeutics, Inc., a Delaware
corporation (the "Company") (together with the Exhibits and Schedules thereto,
the "Merger Agreement"), Merger Sub will be merged with and into the Company
(the "Merger"), and the surviving corporation will become a wholly owned
subsidiary of Parent.
I represent, warrant and covenant to Parent that, with respect to shares of
common stock, par value $.01 per share, of Parent ("Parent Shares"):
A. I shall not make any sale, transfer or other disposition of Parent
Shares in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed the requirements of such documents and other applicable
limitations upon my ability to sell, transfer or otherwise dispose of
Parent Shares, to the extent I felt necessary, with my counsel or counsel
for Parent.
C. I further represent to, and covenant with, Parent that I will not,
during the 30 days prior to the Effective Time (as defined in the Merger
Agreement), sell, transfer or otherwise dispose of, or reduce my risk with
respect to, Parent Shares or shares of the capital stock of the Company
that I may hold until after such time as results covering at least 30 days
of combined operations of the Company and Parent have been published by
Parent, in the form of a quarterly earnings report, an effective
registration statement filed with the Commission, a report to the
Commission on Form 10-K, 10-Q, or 8-K, or any other public filing or
announcement which includes the combined results of operations. Parent
shall notify the "affiliates" of the publication of such results.
Notwithstanding the foregoing, I understand that I will not be prohibited
from selling up to 10% of Parent Shares owned by me during the
aforementioned period.
A-Exh-4
<PAGE> 126
Execution of this letter should not be considered an admission on my part
that I am an "affiliate" of Parent as described in the first paragraph of this
letter, or as a waiver of any rights I may have to object to any claim that I am
such an affiliate on or after the date of this letter.
Very truly yours,
--------------------------------------
Name:
Accepted this day of
January, 1997, by
BOSTON SCIENTIFIC CORPORATION
By
--------------------------------------------------------
Name:
Title:
A-Exh-5
<PAGE> 127
EXHIBIT 9.03(F)
TO THE MERGER AGREEMENT
Executive Officers
Gary Bang CEO
Erik Engelson Sr VP R&D
Abhi Acharya VP Regulatory
Robert McNamara CFO
Rich Cappetta VP Europe
Pat Rivelli VP Strategic Planning
Timothy Mills VP NBD
Kevin Riley VP Sales Mktg No Amer
John Meyer VP HR
Bill Dormandy VP Silicon & Technologies
Hiram Chee VP Peripheral Products
Jeani Delagardelle VP Global Mktg
A-Exh-6
<PAGE> 128
EXHIBIT B
OPINION OF GOLDMAN, SACHS & CO.
<PAGE> 129
[GOLDMAN, SACHS & CO. LETTERHEAD]
PERSONAL AND CONFIDENTIAL
January 20, 1997
Board of Directors
Target Therapeutics, Inc.
47201 Lakeview Boulevard
Fremont, CA 94538
Gentlemen and Madame:
You have requested our opinion as to the fairness to the holders of the
outstanding shares of Common Stock, par value $.0025 per share (the "Shares"),
of Target Therapeutics, Inc. (the "Company") of the exchange ratio of 1.07
shares of Common Stock, par value $.01 per share (the "Boston Scientific Common
Stock") of Boston Scientific Corporation ("Boston Scientific") to be received
for each Share (the "Exchange Ratio") pursuant to the Agreement and Plan of
Merger dated as of January 20, 1997 among Patriot Acquisition Corp., a
wholly-owned subsidiary of Boston Scientific, and the Company (the "Agreement").
Goldman, Sachs & Co., as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. We are familiar with
the Company having acted as its financial advisor in connection with, and having
participated in certain of the negotiations leading to, the Agreement. We also
have provided certain investment banking services to Boston Scientific from time
to time including acting as lead managing underwriter of its initial public
offering in 1992 and may provide investment banking services to Boston
Scientific in the future.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of the
Company for the five fiscal years ended March 31, 1996; certain interim reports
to stockholders and Quarterly Reports on Form 10-Q of the Company; certain other
communications from the Company to its stockholders; and certain internal
financial analyses and forecasts for the Company prepared by its management. We
have also reviewed the Annual Reports to Stockholders and Annual Reports on Form
10-K of Boston Scientific for the four years ended December 31, 1995; certain
interim reports to stockholders and Quarterly Reports on Form 10-Q of Boston
Scientific and certain other communications from Boston Scientific to its
stockholders. We also have held discussions with members of the senior
management of the Company and Boston Scientific regarding the past and current
business operations, financial condition and future prospects of their
respective companies. In addition, we
[GOLDMAN, SACHS & CO. LETTERFOOT]
B-1
<PAGE> 130
have reviewed the reported price and trading activity for the Shares and Boston
Scientific Common Stock, compared certain financial and stock market information
for the Company and Boston Scientific with similar information for certain other
companies the securities of which are publicly traded, reviewed the financial
terms of certain recent business combinations in the medical device industry
specifically and in other industries generally and performed such other studies
and analyses as we considered appropriate.
We have relied upon the accuracy and completeness of all of the financial and
other information reviewed by us and assumed such accuracy and completeness for
purposes of this opinion. As you are aware, Boston Scientific did not make
available to us its projections of expected future performance. Accordingly, we
note that our review with respect to such information was limited to discussions
with management of Boston Scientific of research analysts' estimates for 1996
and 1997. In addition, we have not made an independent evaluation or appraisal
of the assets and liabilities of the Company or Boston Scientific or any of
their subsidiaries and we have not been furnished with any such evaluation or
appraisal. We did not solicit other bids or offers for the Company. Our advisory
services and the opinion expressed herein are provided for the information and
assistance of the Board of Directors of the Company in connection with its
consideration of the transaction contemplated by the Agreement and our opinion
does not constitute a recommendation as to how any holder of Shares should vote
with respect to such transaction.
Based upon and subject to the foregoing and based upon such other matters as we
considered relevant, it is our opinion that as of the date hereof the Exchange
Ratio pursuant to the Agreement is fair to the holders of Shares.
Very truly yours,
/s/ Goldman, Sachs & Co.
[GOLDMAN, SACHS & CO. LETTERFOOT]
B-2
<PAGE> 131
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law empowers a Delaware
corporation to indemnify any person who was or is, or is threatened to be made,
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of such corporation), by reason of the fact that such person
is or was a director, officer, employee or agent of such corporation, or is or
was serving at the request of such corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, provided that such person acted in good faith and in a manner that
such person reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, such
person had no reasonable cause to believe his conduct was unlawful. The
indemnity may include expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding. A Delaware corporation may also
indemnify such persons against expenses (including attorneys' fees) in actions
brought by or in the right of the corporation to procure a judgment in its
favor, subject to the same conditions set forth in the immediately preceding
sentences, except that no indemnification is permitted in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable to
the corporation unless and to the extent the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought will determine
upon application that, in view of all the circumstances of the case, such person
is fairly and reasonably entitled to indemnity for such expenses as the Court of
Chancery or other such court will deem proper. To the extent such person has
been successful on the merits or otherwise in defense of any action referred to
above, or in defense of any claim, issue or matter therein, the corporation must
indemnify such person against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith. The indemnification
and advancement of expenses provided for in, or granted pursuant to, Section 145
is not exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 145 of the DGCL also provides that a corporation may maintain
insurance against liabilities for which indemnification is not expressly
provided by the statute. The Registrant is insured against liabilities which it
may incur by reason of its indemnification obligations under its Certificate of
Incorporation, By-laws and indemnification agreements.
Article Tenth of the Boston Scientific Certificate of Incorporation
provides that the Registrant shall indemnify, defend and hold harmless
directors, officers, employees and agents of the Registrant to the fullest
extent currently permitted under the DGCL.
In addition, Article Ninth of the Registrant's Second Restated Certificate
of Incorporation, as amended, as permitted by Section 102(b) of the DGCL,
provides that neither the Registrant nor its stockholders may recover damages
from the Registrant's directors for a breach of their fiduciary duty in the
performance of their duties as directors of the Registrant, unless such breach
relates to (i) the director's duty of loyalty, (ii) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the DGCL or (iv) any transactions for
which the director derived an improper personal benefit. The Registrant's
Restated By-laws provide for indemnification of the Registrant's directors,
officers, employees and agents on the terms permitted under Section 145 of the
DGCL described above.
The Registrant has entered into indemnification agreements with certain of
its directors and executive officers. These agreements provide rights of
indemnification that are substantially similar to those provided by the
Registrant's Second Restated Certificate of Incorporation, as amended, and the
Registrant's Restated By-laws. Additionally, the agreements provide that within
thirty days of a written demand for indemnification, and within five business
days of a request for an advance of expenses, the Registrant shall either make
payment or determine that the relevant standards for indemnification have not
been met; that in any action brought by an
II-1
<PAGE> 132
indemnitee to enforce the right to indemnification or advances, the burden of
proving that any indemnification or advance is not appropriate shall be on the
Registrant; that neither the timing of the Registrant's decision whether to
indemnify nor any determination by the Registrant that the indemnitee has not
met such standards shall create any presumption in such an action that the
indemnitee has not met such standards; and that the indemnitee's expenses
incurred in bringing such an action and/or in an action seeking recovery under
any directors' and officers' liability insurance policies maintained by the
Registrant shall also be indemnified by the Registrant.
ITEM 21. EXHIBITS
<TABLE>
<S> <C>
2 Agreement and Plan of Merger dated January 20, 1997 (attached as Exhibit A to the
Proxy Statement/Prospectus)
5 Opinion of Shearman & Sterling, counsel to the Registrant, regarding legality of
the shares of Boston Scientific Common Stock
8 Opinion of Venture Law Group, A Professional Corporation, counsel to Target,
regarding certain tax matters
23.1(a) Consent of Ernst & Young LLP, independent auditors, with respect to Boston
Scientific's Consolidated Financial Statements
23.1(b) Consent of Ernst & Young LLP, independent auditors, with respect to Target's
Consolidated Financial Statements
23.1(c) Consent of Deloitte & Touche LLP, independent auditors, with respect to Boston
Scientific's Consolidated Financial Statements
23.1(d) Consent of Price Waterhouse LLP, independent accountants, with respect to Boston
Scientific's Consolidated Financial Statements
23.1(e) Consent of Arthur Andersen LLP, independent public accountants, with respect to
Symbiosis' Consolidated Financial Statements
23.1(f) Consent of Arthur Andersen LLP, independent public accountants, with respect to
Boston Scientific's Consolidated Financial Statements
23.1(g) Consent of Frank, Rimerman & Co., independent auditors, with respect to
Interventional Therapeutics Corporation Financial Statements
23.2 Consent of Shearman & Sterling (filed herewith as part of Exhibit 5)
23.3 Consent of Venture Law Group, A Professional Corporation (filed herewith as part of
Exhibit 8)
23.4 Consent of Goldman, Sachs & Co.
99 Proxy Card
</TABLE>
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
II-2
<PAGE> 133
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the registrant's annual report pursuant to
section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(5) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus shall contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.
(6) That every prospectus (i) that is filed pursuant to paragraph (5)
immediately preceding, or (ii) that purports to meet the requirements of
section 10(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415, shall be filed as a part of an
amendment to the registration statement and shall not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(7) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the registrant shall, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and shall be
governed by the final adjudication of such issue.
(8) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(9) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
II-3
<PAGE> 134
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the Town of Natick, Commonwealth of
Massachusetts, on February 27, 1997.
BOSTON SCIENTIFIC CORPORATION
By: /s/ Peter M. Nicholas
----------------------------------
Name: Peter M. Nicholas
Title: Director, Co-Founder,
Chief Executive Officer
and Chairman of the Board
POWER OF ATTORNEY AND SIGNATURES
Each person whose signature appears below constitutes and appoints Peter M.
Nicholas, Lawrence C. Best and Paul W. Sandman, and each of them singly, his
true and lawful attorneys-in-fact and agents, with full power of substitution
and resubstitution in each of them, for him and in his name, place and stead,
and in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement on Form S-4 of Boston
Scientific Corporation, and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
necessary or desirable to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them or any of
their substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on February 27, 1997.
II-4
<PAGE> 135
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ JOHN E. ABELE Director and Founder Chairman
- -----------------------------------
John E. Abele
/s/ CHARLES J. ASCHAUER, JR. Director
- -----------------------------------
Charles J. Aschauer, Jr.
/s/ RANDALL F. BELLOWS Director
- -----------------------------------
Randall F. Bellows
/s/ LAWRENCE C. BEST Senior Vice President -- Finance and Administration
- ----------------------------------- and Chief Financial Officer (Principal Financial and
Lawrence C. Best Accounting Officer)
/s/ JOSEPH A. CIFFOLILLO Director
- -----------------------------------
Joseph A. Ciffolillo
/s/ JOEL L. FLEISHMAN Director
- -----------------------------------
Joel L. Fleishman
/s/ LAWRENCE L. HORSCH Director
- -----------------------------------
Lawrence L. Horsch
/s/ N.J. NICHOLAS, JR. Director
- -----------------------------------
N.J. Nicholas, Jr.
/s/ PETER M. NICHOLAS Director, Co-Founder, Chief Executive Officer and
- ----------------------------------- Chairman of the Board
Peter M. Nicholas
/s/ DALE A. SPENCER Director
- -----------------------------------
Dale A. Spencer
</TABLE>
II-5
<PAGE> 136
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C> <C>
2 -- Agreement and Plan of Merger dated January 20, 1997 (attached as Exhibit A to the
Proxy Statement/Prospectus)
5 -- Opinion of Shearman & Sterling, counsel to the Registrant, regarding legality of
the shares of Boston Scientific Common Stock
8 -- Opinion of Venture Law Group, A Professional Corporation, counsel to Target,
regarding certain tax matters
23.1(a) -- Consent of Ernst & Young LLP, independent auditors, with respect to Boston
Scientific's Consolidated Financial Statements
23.1(b) -- Consent of Ernst & Young LLP, independent auditors, with respect to Target's
Consolidated Financial Statements
23.1(c) -- Consent of Deloitte & Touche LLP, independent auditors, with respect to Boston
Scientific's Consolidated Financial Statements
23.1(d) -- Consent of Price Waterhouse LLP, independent accountants, with respect to Boston
Scientific's Consolidated Financial Statements
23.1(e) -- Consent of Arthur Andersen LLP, independent public accountants, with respect to
Symbiosis' Consolidated Financial Statements
23.1(f) -- Consent of Arthur Andersen LLP, independent public accountants, with respect to
Boston Scientific's Consolidated Financial Statements
23.1(g) -- Consent of Frank, Rimerman & Co., independent auditors, with respect to
Interventional Therapeutics Corporation Financial Statements
23.2 -- Consent of Shearman & Sterling (filed herewith as part of Exhibit 5)
23.3 -- Consent of Venture Law Group, A Professional Corporation (filed herewith as part
of Exhibit 8)
23.4 -- Consent of Goldman, Sachs & Co.
99 -- Proxy Card
</TABLE>
II-6
<PAGE> 1
Exhibit 5
[Shearman & Sterling Letterhead]
February 28, 1997
Boston Scientific Corporation
One Boston Scientific Place
Natick, MA 01760-1537
Merger of Patriot Acquisition Corp.
and Target Therapeutics, Inc.
Ladies and Gentlemen:
We have acted as counsel for Boston Scientific Corporation, a Delaware
corporation ("Boston Scientific"), in connection with the Registration Statement
on Form S-4 (the "Registration Statement") being filed by Boston Scientific on
the date hereof with the Securities and Exchange Commission under the Securities
Act of 1933, as amended (the "Act"), with respect to 17,129,327 shares of Common
Stock, par value $.01 per share (the "Common Stock"), of Boston Scientific. The
Common Stock is being registered in connection with the merger of Patriot
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Boston Scientific, with and into Target Therapeutics, Inc., a Delaware
corporation. The Common Stock is described in the Proxy Statement/Prospectus
(the "Prospectus") included in the Registration Statement, to which this opinion
is an exhibit.
In that connection, we have examined the Registration Statement and
originals, or copies certified or otherwise identified to our satisfaction, of
such other documents, corporate records, certificates and other instruments as
we have deemed necessary or appropriate for purposes of this opinion. In such
examination, we have assumed the genuineness of all signatures, the authenticity
of all documents, certificates, and instruments submitted to us as originals and
the conformity with the originals of all documents submitted to us as copies.
Based upon the foregoing, we are of the opinion that the shares of Common
Stock to which the Registration Statement relates, when issued as described in
the Prospectus, will be duly authorized, validly issued, fully paid and
nonassessable.
<PAGE> 2
2
Our opinion expressed herein is limited to the General Corporation Law of
the State of Delaware, and we do not express any opinion herein concerning any
other law.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and the reference to us under the heading "Legal Matters"
contained in the Prospectus.
Very truly yours,
/s/ Shearman & Sterling
[PDL/wtb/bd]
<PAGE> 1
EXHIBIT 8
[Venture Law Group Letterhead]
February 28, 1997
Target Therapeutics, Inc.
47201 Lakeview Blvd.
Fremont, CA 94538
Ladies and Gentlemen:
This opinion is being delivered to you pursuant to Section 7.03(b) of the
Agreement and Plan of Merger (the "Agreement") among Boston Scientific
Corporation, a Delaware corporation ("Parent"), its wholly owned subsidiary,
Patriot Acquisition Corporation, a Delaware corporation ("Merger Sub"), and
Target Therapeutics, Inc., a Delaware corporation (the "Company"), dated as of
January 20, 1997. Pursuant to the Agreement, Merger Sub will merge with and into
the Company (the "Merger"), and the Company will become a wholly owned
subsidiary of Parent.
Except as otherwise provided, capitalized terms referred to herein have the
meanings set forth in the Agreement. All section references, unless otherwise
indicated, are to the Internal Revenue Code of 1986, as amended (the "Code").
We have acted as legal counsel to the Company in connection with the
Merger. As such, and for the purpose of rendering this opinion, we have examined
(or will examine on or prior to the Effective Time of the Merger) and are
relying (or will rely) upon (without any independent investigation or review
thereof) the truth and accuracy, at all relevant times, of the statements,
covenants, representations and warranties contained in the following documents
(including all schedules and exhibits thereto):
1. The Agreement (including Exhibits and Schedules);
2. Representations made to us (or to be made at or prior to the Effective Time
of the Merger) in a letter from Parent and Merger Sub;
3. Representations made to us (or to be made at or prior to the Effective Time
of the Merger) in a letter from the Company;
4. Representations made (or to be made at or prior to the Effective Time of the
Merger) to the Company in "Affiliate Agreements" executed by certain
stockholders of the Company; and
5. Such other instruments and documents related to the formation, organization
and operation of Parent, the Company and Merger Sub or to the consummation of
the Merger and the transactions contemplated thereby as we have deemed necessary
or appropriate.
<PAGE> 2
Target Therapeutics, Inc.
February 28, 1997
Page 2
In connection with rendering this opinion, we have assumed or obtained
representations (and are relying thereon, without any independent investigation
or review thereof) that:
A. Original documents (including signatures) are authentic, documents submitted
to us as copies conform to the original documents, and there has been (or will
be by the Effective Time of the Merger) due execution and delivery of all
documents where due execution and delivery are prerequisites to effectiveness
thereof.
B. Any representation or statement made "to the knowledge of" or otherwise
similarly qualified is correct without such qualification. As to all matters in
which a person or entity making a representation has represented that such
person or entity either is not a party to, does not have, or is not aware of,
any plan, intention, understanding or agreement to take an action, there is in
fact no such plan, intention, understanding or agreement and such action will
not be taken.
C. The Merger will be consummated pursuant to the Agreement and will be
effective under the laws of the State of Delaware.
D. The stockholders of the Company do not, and will not on or before the
Effective Time of the Merger, have an existing plan or intent to dispose of an
amount of Parent Common Stock to be received in the Merger (or to dispose of
Company capital stock in anticipation of the Merger) such that the stockholders
of the Company will not receive and retain a meaningful continuing equity
ownership in Parent that is sufficient to satisfy the continuity of interest
requirement as specified in Treas. Reg. degrees 1.368-1(b) and as interpreted in
certain Internal Revenue Service rulings and federal judicial decisions.
E. After the Merger, the Company will hold "substantially all" of its and Merger
Sub's properties within the meaning of Section 368(a)(2)(E)(i) of the Code and
the regulations promulgated thereunder and will continue its historic business
or use a significant portion of its historic business assets in a business.
F. To the extent any expenses relating to the Merger (or the "plan of
reorganization" within the meaning of Treas. Reg. degrees 1.368-1(e) with
respect to the Merger) are funded directly or indirectly by a party other than
the incurring party, such expenses will be within the guidelines established in
Revenue Ruling 73-54, 1973-1 C.B. 187; any expenses paid on behalf of the
Company's stockholders will not exceed one percent (1%) of the total
consideration that will be issued in the Merger to the Company's stockholders in
exchange for their shares of the Company's stock.
<PAGE> 3
Target Therapeutics, Inc.
February 28, 1997
Page 3
G. No Company stockholder guaranteed any Company indebtedness outstanding during
the period immediately prior to the Merger, and at all relevant times, including
as of the Effective Time of the Merger, (i) no outstanding indebtedness of the
Company, Parent or Merger Sub has or will represent equity for tax purposes;
(ii) no outstanding equity of the Company, Parent or Merger Sub has or will
represent indebtedness for tax purposes; (iii) and no outstanding security,
instrument, agreement or arrangement that provides for, contains, or represents
either a right to acquire Company stock or to share in the appreciation thereof
constitutes or will constitute "stock" for purposes of Section 368(c) of the
Code.
Based on our examination of the foregoing items and subject to the
assumptions, exceptions, limitations and qualifications set forth herein, we are
of the opinion that, for federal income tax purposes, the Merger will be a
"reorganization" as defined in Section 368(a) of the Code.
In addition to the assumptions set forth above, this opinion is subject to
the exceptions, limitations and qualifications set forth below.
1. This opinion represents and is based upon our best judgment regarding the
application of federal income tax laws arising under the Code, existing judicial
decisions, administrative regulations and published rulings and procedures. Our
opinion is not binding upon the Internal Revenue Service or the courts, and
there is no assurance that the Internal Revenue Service will not successfully
assert a contrary position. Furthermore, no assurance can be given that future
legislative, judicial or administrative changes, on either a prospective or
retroactive basis, would not adversely affect the accuracy of the conclusions
stated herein. Nevertheless, we undertake no responsibility to advise you of any
new developments in the application or interpretation of the federal income tax
laws.
2. This opinion addresses only the classification of the Merger as a
reorganization under Section 368(a) of the Code, and does not address any other
federal, state, local or foreign tax consequences that may result from the
Merger or any other transaction (including any transaction undertaken in
connection with the Merger). In particular, except as expressly stated in the
preceding sentence, we express no opinion regarding (i) whether and the extent
to which any Company stockholder who has provided or will provide services to
the Company, Parent or Merger Sub will have compensation income under any
provision of the Code; (ii) the effects of such compensation income, including
but not limited to the effect upon the basis and holding period of the Parent
stock received by any such stockholder in the Merger; (iii) the potential
application of the "golden parachute" provisions (Sections 280G, 3121 (v)(2) and
4999) of the Code, the alternative minimum tax provisions (Sections 55, 56 and
57) of the Code or Sections 305, 306, 357, 424, and 708, or the regulations
promulgated thereunder; (iv) the corporate level tax consequences of the Merger
to Parent, Merger Sub or
<PAGE> 4
Target Therapeutics, Inc.
February 28, 1997
Page 4
the Company, including without limitation the recognition of any gain and the
survival and/or availability, after the Merger, of any of the federal income tax
attributes or elections of the Company, after application of any provision of
the Code, as well as the regulations promulgated thereunder and judicial
interpretations thereof; (v) the basis of any equity interest in the Company
acquired by Parent in the Merger; (vi) the tax consequences of any transaction
in which Company stock or a right to acquire Company stock was received; and
(vii) the tax consequences of the Merger (including the opinion set forth above)
as applied to stockholders of the Company with special tax status or
circumstances and/or holders of options or warrants for Company stock or that
may be relevant to particular classes of Company stockholders and/or holders of
options or warrants for Company stock such as dealers in securities, corporate
stockholders subject to the alternative minimum tax, foreign persons, and
holders of shares acquired upon exercise of stock options or in other
compensatory transactions.
3. No opinion is expressed as to any transaction other than the Merger as
described in the Agreement or to any transaction whatsoever, including the
Merger, if all the transactions described in the Agreement are not consummated
in accordance with the terms of such Agreement and without waiver or breach of
any material provision thereof or if all of the representations, warranties,
statements and assumptions upon which we relied are not true and accurate at all
relevant times. In the event any one of the statements, representations,
warranties or assumptions upon which we have relied to issue this opinion is
incorrect, our opinion might be adversely affected and may not be relied upon.
In addition, in the event that executed copies of the letters and agreements
referred to in 2, 3 or 4 of the third paragraph of this letter are not furnished
to us (or are withdrawn) at or prior to the Effective Time, this opinion shall
be void and of no further effect, and may not be relied upon.
4. This opinion has been delivered to you for the purpose of satisfying the
conditions set forth in Section 7.03(b) of the Agreement. We hereby consent to
the filing of this opinion as an exhibit to the Registration Statement on Form
S-4 filed with the Securities and Exchange Commission with respect to the
transactions described herein and to the references to this firm in the section
thereof entitled "The Merger -- Certain Federal Income Tax Consequences."
Very truly yours,
VENTURE LAW GROUP
A Professional Corporation
/s/ Venture Law Group
<PAGE> 1
Exhibit 23.1(a)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Experts," and
"Selected Historical and Pro Forma Financial Data for Boston Scientific and
Target" in the Registration Statement (Form S-4) and related Prospectus of
Boston Scientific Corporation and to the incorporation by reference therein of
our report dated March 14, 1996, with respect to the consolidated financial
statements of Boston Scientific Corporation incorporated by reference in its
Annual Report (Form 10-K) for the year ended December 31, 1995 and the related
financial statement schedule included therein, filed with the Securities and
Exchange Commission.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Boston, Massachusetts
February 25, 1997
<PAGE> 1
Exhibit 23.1(b)
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected Historical
Pro Forma Financial Data" and "Experts," in the Registration Statement (Form
S-4) and related Prospectus of Boston Scientific Corporation and to the
incorporation by reference therein of our report dated April 26, 1996, with
respect to the consolidated financial statements and schedule of Target
Therapeutics, Inc., included in its Annual Report (Form 10-K) for the year
ended March 31, 1996, filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Palo Alto, California
February 25, 1997
<PAGE> 1
Exhibit 23.1(c)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Boston Scientific Corporation on Form S-4 of the report of Deloitte & Touche
LLP dated April 13, 1995 (August 24, 1995 as to Note G)(relating to the
consolidated financial statements of SCIMED Life Systems, Inc., not presented
separately therein) appearing in and incorporated by reference in the Annual
Report on Form 10-K of Boston Scientific Corporation for the year ended
December 31, 1995. We also consent to the reference to us under the
heading "Experts" in such Registration Statement and related Prospectus.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
February 25, 1997
<PAGE> 1
Exhibit 23.1(d)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Proxy
Statement/Prospectus constituting part of this Registration Statement on Form
S-4 of Boston Scientific Corporation of our report dated January 25, 1995,
appearing on Exhibit 13.5 of Boston Scientific Corporation's Annual Report on
Form 10-K for the year ended December 31, 1995. We also consent to the
reference to us under the heading "Experts" in such Proxy Statement/Prospectus.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Seattle, Washington
February 25, 1997
<PAGE> 1
Exhibit 23.1(e)
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
---------------------------------------------------
As independent certified public accountants, we hereby consent to the
incorporation by reference in this registration statement of our report dated
June 2, 1995 (except with respect to the matters discussed in Note 5 and Note
1, as to which the dates are November 2, 1995 and March 14, 1996, respectively)
included in Boston Scientific Corporation's Form 8-K dated March 14, 1996 and
to all references to our Firm included in this registration statement.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Miami, Florida,
February 25, 1997.
<PAGE> 1
Exhibit 23.1(f)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated May 15, 1995, on
the December 31, 1993 and 1994, consolidated financial statements of Meadox
Medicals, Inc., which has been included in Boston Scientific Corporation's Form
10-K for the year ended December 31, 1995, and to all references to our Firm
included in this Registration Statement.
/s/ Arthur Andersen LLP
New York, New York
February 25, 1997
<PAGE> 1
Consent of Frank, Rimerman & Co. LLP, Independent Auditors
We consent to the incorporation by reference of our report dated October 23,
1995 (except for the second paragraph of Note 1, the fifth paragraph of Note 3
and the last two paragraphs of Note 7, as to which the date is July 11, 1996) in
the Registration Statement (Form S-4) and related Prospectus of Boston
Scientific Corporation with respect to the consolidated financial statements of
Interventional Therapeutics Corporation included in the Current Report on Form
8-K/A of Target Therapeutics, Inc., filed with the Securities and Exchange
Commission on July 25, 1996.
/s/ Frank, Rimerman & Co. LLP
Menlo Park, California
February 25, 1997
<PAGE> 1
EXHIBIT 23.4
[GOLDMAN SACHS LETTERHEAD]
February 25, 1997
Board of Directors
Target Therapeutics, Inc.
47201 Lakeview Boulevard
Fremont, CA 94538
Re: Registration Statement of Boston Scientific Corporation relating to the
shares of Common Stock, par value $.01 per share ("Boston Scientific
Common Stock"), of Boston Scientific Corporation ("Boston Scientific")
being registered in connection with the Agreement and Plan of Merger
(the "Merger Agreement"), dated as of January 20, 1997, among Boston
Scientific, Patriot Acquisition Corp., a wholly owned subsidiary of
Boston Scientific, and Target Therapeutics, Inc. (the "Company").
Gentlemen and Madame:
Attached is our opinion letter dated January 20, 1997 with respect to the
fairness to the holders of the outstanding shares of Common Stock, par value
$.0025 per share (the "Shares"), of the Company of the exchange ratio of 1.07
shares of Boston Scientific Common Stock to be received for each Share pursuant
to the Merger Agreement.
The foregoing opinion letter is provided for the information and assistance of
the Board of Directors of the Company in connection with its consideration of
the transaction contemplated therein and is not to be used, circulated, quoted
or otherwise referred to for any other purpose, nor is it to be filed with,
included in or referred to in whole or in part in any registration statement,
proxy statement or any other document, except in accordance with our prior
written consent. We understand that the Company has determined to include our
opinion in the above-referenced Registration Statement.
In that regard, we hereby consent to the reference to the opinion of our Firm
under the caption "Opinion of Financial Advisor to Target" and to the inclusion
of the foregoing opinion in the Proxy Statement included in the above-mentioned
Registration Statement. In giving such consent, we do not thereby admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933 or the rules and regulations of the Securities and
Exchange Commission thereunder.
Very truly yours,
/s/ Goldman, Sachs & Co.
<PAGE> 1
TARGET THERAPEUTICS, INC.
SPECIAL MEETING OF STOCKHOLDERS -- APRIL 8, 1997
P THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF
R DIRECTORS OF TARGET THERAPEUTICS, INC.
O
X The undersigned stockholder of Target Therapeutics, Inc., a Delaware
Y corporation ("Target"), hereby appoints Gary R. Bang and Robert E.
McNamara, and each of them, proxies and attorneys-in-fact of the
undersigned, each with full power of substitution, to attend and act for
the undersigned at the Special Meeting of Stockholders to be held on
Tuesday, April 8, 1997, at 9:30 a.m. local time, at Target's offices
located at 47201 Lakeview Boulevard, Fremont, California 94538, and at any
adjournments or postponements thereof, and in connection therewith to
represent and vote all of the shares of common stock of Target which the
undersigned would be entitled to vote.
Said proxies and attorneys, and each of them, shall have all the powers
which the undersigned would have if voting in person, and the undersigned
hereby ratifies and confirms all that said proxies and attorneys, and each
of them, may lawfully do by virtue hereof. Said proxies, without hereby
limiting their general authority, are specifically authorized to vote in
accordance with their best judgment with respect to all matters incident
to the conduct of the Special Meeting and all matters which may properly
come before the meeting but which are not specified by the Board of
Directors at the time of the solicitation of this proxy. The undersigned
hereby revokes any other proxies to vote at such meeting.
Each of the above-named proxies present at said meeting, either in
person or by substitute, shall have and exercise all the powers of said
proxies hereunder. This proxy will be voted in accordance with the choices
specified by the undersigned on this proxy. This proxy when properly
executed will be voted in the manner directed herein by the undersigned
stockholder. IF NO INSTRUCTIONS ARE INDICATED HEREIN, THIS PROXY WILL BE
TREATED AS A GRANT OF AUTHORITY TO VOTE "FOR" PROPOSAL 1 AND WITH RESPECT
TO ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING, OR AT ANY
POSTPONEMENTS OR ADJOURNMENTS THEREOF, THIS PROXY WILL BE VOTED IN THE
DISCRETION OF THE PERSONS NAMED AS PROXIES.
-----------
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
-----------
/X/ Please mark
votes as in
this example.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF PROPOSAL 1.
FOR AGAINST ABSTAIN
1. PROPOSAL TO ADOPT AN AGREEMENT AND PLAN OF MERGER, / / / / / /
DATED AS OF JANUARY 20, 1997, AMONG TARGET
THERAPEUTICS, INC., BOSTON SCIENTIFIC CORPORATION
AND PATRIOT ACQUISITION CORP.
MARK HERE
FOR ADDRESS / /
CHANGE AND
NOTE AT LEFT
The undersigned acknowledges receipt of the
copy of the Notice of Special Meeting and Proxy
Statement/Prospectus (with all enclosures and
attachments) dated April 8, 1997, relating to
the special meeting.
(This proxy should be dated, signed by the
stockholder(s) exactly as his or her name(s)
appears hereon, and returned promptly in the
enclosed envelope. Persons signing in a
fiduciary capacity should so indicate. If
shares are held by joint tenants or as
community property, both should sign.)
Signature:____________________ Date_____________
Signature:____________________ Date_____________
PLEASE VOTE, SIGN, DATE AND
PROMPTLY RETURN THIS CARD
IN THE ENVELOPE PROVIDED.
