<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 28, 1997
REGISTRATION NO. 333-06363
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2
ON FORM S-4
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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GUIDANT CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
INDIANA 3841 35-1931722
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
111 MONUMENT CIRCLE, 29TH FLOOR
INDIANAPOLIS, INDIANA 46204
317-971-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
J.B. KING, ESQ.
GUIDANT CORPORATION
111 MONUMENT CIRCLE, 29TH FLOOR
INDIANAPOLIS, INDIANA 46204
317-971-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
BERNARD E. KURY, ESQ. ROBERT V. GUNDERSON, ESQ.
JONATHAN L. FREEDMAN, ESQ. BROOKS STOUGH, ESQ.
DEWEY BALLANTINE LLP GUNDERSON DETTMER STOUGH
1301 AVENUE OF THE AMERICAS VILLENEUVE
NEW YORK, NEW YORK 10019-1035 FRANKLIN & HACHIGIAN, LLP
155 CONSTITUTION DRIVE
MENLO PARK, CA 94025
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effectiveness of this Registration
Statement and the satisfaction or waiver of all other conditions to the merger
of a wholly-owned subsidiary of the Registrant with and into EndoVascular
Technologies, Inc. pursuant to the Merger Agreement described in the Proxy
Statement/Prospectus forming part of this Registration Statement.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the
"Securities Act"), check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the
same offering. [_]
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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 THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
PRELIMINARY COPY
[EVT LETTERHEAD]
, 1997
Dear Fellow Stockholder:
You are cordially invited to attend a special meeting (the "Special
Meeting") of stockholders of EndoVascular Technologies, Inc. ("EVT") on ,
1997, at a.m. at . At the Special Meeting, you will be asked to approve
an Agreement and Plan of Merger pursuant to which EVT will merge with a newly-
formed subsidiary of Guidant Corporation ("Guidant") and become a wholly-owned
subsidiary of Guidant.
Upon consummation of the merger, EVT stockholders will have the right to
receive, in exchange for each share of EVT common stock they own, the number
of shares of Guidant common stock determined by dividing $20.00 by the average
price of a share of Guidant common stock during a specified period prior to
the Special Meeting. However, if the average price of a share of Guidant
common stock during such specified period is greater than or equal to $46.63
but less than or equal to $51.75, then EVT stockholders will have the right to
receive, in exchange for each share of EVT common stock they own, 0.3865 of a
share of Guidant common stock, and if the average price of a share of Guidant
common stock during such specified period is less than $46.63, then EVT
stockholders will have the right to receive, in exchange for each share of EVT
common stock they own, the number of shares of Guidant common stock determined
by dividing $18.00 by the average price of a share of Guidant common stock
during such specified period.
The Board has received a written opinion of NationsBanc Montgomery
Securities, Inc., to the effect that the consideration to be received by EVT
stockholders pursuant to the merger was fair to the holders of EVT common
stock from a financial point of view as of the date of such opinion.
THE BOARD HAS UNANIMOUSLY DETERMINED THAT THE MERGER IS FAIR TO YOU AND IN
YOUR BEST INTERESTS AND RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE MERGER.
Your vote is important, and whether or not you plan to attend the Special
Meeting, I respectfully urge all stockholders to complete, sign and date the
enclosed proxy card and return it in the enclosed prepaid envelope as soon as
possible. If you attend the Special Meeting, you may vote in person if you
wish, even though you have previously returned your proxy. You should not send
in the stock certificate(s) for your EVT common stock at this time.
On behalf of the Board of Directors of EVT, I thank you for your support and
urge you to vote for approval of the Merger Agreement and the consummation of
the merger.
Sincerely yours,
W. James Fitzsimmons
President and Chief Executive
Officer
<PAGE>
PRELIMINARY COPY
[EVT LOGO]
----------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
----------------
, 1997
Notice is hereby given that a special meeting of stockholders (together with
any adjournment or postponement thereof, the "Special Meeting") of
EndoVascular Technologies, Inc. ("EVT") will be held starting at a.m.,
local time, on , 1997, at .
The purposes of the Special Meeting are:
1. To consider and vote upon a proposal to approve an Agreement and Plan
of Merger (the "Merger Agreement"), providing for the merger (the "Merger")
of Ski Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of Guidant Corporation ("Guidant") with and into EVT. EVT shall
be the surviving corporation in the Merger (sometimes hereinafter referred
to as the "Surviving Corporation") and will be a wholly-owned subsidiary of
Guidant. Upon the consummation of the Merger, each share of common stock,
par value $.00001 per share, of EVT (the "EVT Common Stock") issued and
outstanding immediately prior to the Effective Time (as defined in the
Merger Agreement) shall, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into the right to receive such
number or fraction of a number, rounded to four decimal places (the
"Exchange Ratio"), of shares of common stock, without par value, of Guidant
(the "Guidant Common Stock"), that equals the result obtained by dividing
$20.00 by the "Closing Price" (as defined below) (the "Exchange
Consideration"); provided, however, that if the Closing Price shall be
greater than or equal to $46.63 but less than or equal to $51.75, then the
Exchange Ratio shall be fixed at 0.3865; provided, further, that if the
Closing Price shall be less than $46.63, then the Exchange Ratio shall be
the result obtained by dividing $18.00 by the Closing Price.
"Closing Price" means the average closing price of Guidant Common Stock,
rounded to four decimal places, as reported in The Wall Street Journal's
New York Stock Exchange Composite Transaction Reports, for each of the 10
consecutive Trading Days immediately preceding the third Trading Day prior
to the Special Meeting. "Trading Day" means a day on which the New York
Stock Exchange, Inc. is open for trading.
2. To transact such other business as may properly come before the
Special Meeting.
The terms of the Merger Agreement and the Merger contemplated thereby are
described in detail in the accompanying Proxy Statement/Prospectus, which you
are urged to read in its entirety.
The Board of Directors of EVT has unanimously approved the Merger and
believes that the terms of the Merger are fair to, and in the best interests
of, EVT and its stockholders. The Board of Directors of EVT recommends
unanimously that EVT stockholders vote FOR approval of the Merger Agreement at
the Special Meeting.
Holders of record of shares of EVT Common Stock at the close of business on
, 1997, the record date for the Special Meeting, are entitled to notice of
and to vote at the Special Meeting. 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 EVT's principal executive office located at 1360
O'Brien Drive, Menlo Park, California 94025 for examination by any stockholder
and will also be available for inspection at the Special Meeting. Approval of
the Merger Agreement and the Merger will require the affirmative vote of the
holders of EVT Common Stock representing a majority of the outstanding shares
of EVT Common Stock entitled to vote.
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TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE SPECIAL MEETING, YOU ARE
URGED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY
IN THE POSTAGE-PAID ENVELOPE PROVIDED, WHETHER OR NOT YOU PLAN TO ATTEND THE
SPECIAL MEETING IN PERSON. YOU MAY REVOKE YOUR PROXY IN THE MANNER DESCRIBED
IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS AT ANY TIME BEFORE IT HAS BEEN
VOTED AT THE SPECIAL MEETING. ANY STOCKHOLDER ATTENDING THE SPECIAL MEETING
MAY VOTE IN PERSON EVEN IF SUCH STOCKHOLDER HAS RETURNED A PROXY.
By Order of the Board of Directors
-------------------------------------
W. James Fitzsimmons
President and Chief Executive
Officer
Menlo Park, California
, 1997
<PAGE>
PRELIMINARY COPY
ENDOVASCULAR TECHNOLOGIES, INC.
PROXY STATEMENT
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GUIDANT CORPORATION
PROSPECTUS
This Proxy Statement/Prospectus is being furnished to the stockholders of
EndoVascular Technologies, Inc., a Delaware corporation ("EVT"), in connection
with the solicitation of proxies by the Board of Directors of EVT for use at
the special meeting together with any adjournment or postponement thereof (the
"Special Meeting") of EVT stockholders to be held at ., local time, on ,
1997, at .
This Proxy Statement/Prospectus constitutes the Prospectus of Guidant
Corporation ("Guidant") for use in connection with the offer and issuance of
shares of common stock of Guidant, without par value ("Guidant Common Stock"),
pursuant to the merger (the "Merger") of Ski Acquisition Corporation, a
Delaware corporation and a newly formed, wholly-owned subsidiary of Guidant
("Merger Sub"), with and into EVT under the terms of the Agreement and Plan of
Merger (the "Merger Agreement"), dated as of October 5, 1997, by and among
Guidant, Merger Sub and EVT. As a result of the Merger and without any action
on the part of the holders of EVT common stock (the "EVT Common Stock"), each
share of EVT Common Stock issued and outstanding immediately prior to the
Effective Time (as hereinafter defined) shall be converted into the right to
receive such number or fraction of a number, rounded to four decimal places
(the "Exchange Ratio"), of shares of Guidant Common Stock that equals the
result obtained by dividing $20.00 by the "Closing Price" (the "Exchange
Consideration"); provided, however, that if the Closing Price shall be greater
than or equal to $46.63 but less than or equal to $51.75, then the Exchange
Ratio shall be fixed at 0.3865; provided, further, that if the Closing Price
shall be less than $46.63, then the Exchange Ratio shall be the result
obtained by dividing $18.00 by the Closing Price. A copy of the Merger
Agreement is attached hereto as Appendix A. As a result of the Merger, EVT
will become a wholly-owned subsidiary of Guidant.
"Closing Price" means the average closing price of Guidant Common Stock,
rounded to four decimal places, as reported in The Wall Street Journal's New
York Stock Exchange Composite Transaction Reports, for each of the ten (10)
Trading Days immediately preceding the third Trading Day prior to the Special
Meeting. "Trading Day" means a day on which the New York Stock Exchange, Inc.
(the "NYSE") is open for trading.
This Proxy Statement/Prospectus and the accompanying forms of proxy are
first being mailed to stockholders of EVT on or about , 1997.
EVT STOCKHOLDERS ARE STRONGLY URGED TO READ AND CONSIDER CAREFULLY THIS
PROXY STATEMENT/PROSPECTUS IN ITS ENTIRETY, PARTICULARLY THE MATTERS REFERRED
TO UNDER "RISK FACTORS" STARTING ON PAGE 17.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/ PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS , 1997.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER.................................... 1
AVAILABLE INFORMATION..................................................... 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... 4
TRADEMARKS................................................................ 5
FORWARD LOOKING STATEMENTS--SAFE HARBOR PROVISIONS........................ 5
SUMMARY................................................................... 7
The Companies........................................................... 7
The Special Meeting..................................................... 7
Recommendation to Stockholders.......................................... 8
The Merger ............................................................. 8
MARKET PRICE AND DIVIDEND INFORMATION..................................... 11
Dividend Information.................................................... 11
Recent Closing Prices................................................... 12
Number of Stockholders.................................................. 12
SELECTED CONSOLIDATED FINANCIAL DATA AND COMPARATIVE PER SHARE DATA....... 13
RISK FACTORS.............................................................. 17
Volatility of Stock Prices; Value of Consideration Depends on Price of
Guidant Common Stock................................................... 17
Rapid Technological Change and Intense Competition...................... 17
FDA and Other Governmental Regulation................................... 17
Challenges to Patents and Proprietary Rights............................ 18
Possible Denial of Third-Party Reimbursement............................ 18
Possible Adverse Impact of Health Care Reform Proposals................. 19
Substantial Reliance on the Trend Toward Less Invasive Surgical
Procedures............................................................. 19
Potential Product Liability; Product Recalls ........................... 19
Dependence on Sole Sources of Supply.................................... 20
Dependence on Key Personnel............................................. 20
Uncertainties Relating to Coordination of Operations.................... 20
Transaction Expenses; Costs of Integration.............................. 21
Shares Eligible for Future Sale......................................... 21
Potential Conflicts of Interest......................................... 21
THE SPECIAL MEETING....................................................... 22
Time and Place; Purposes................................................ 22
Matters to be Considered at the Special Meeting......................... 22
Record Date and Shares Entitled to Vote................................. 22
Votes Required.......................................................... 22
Quorum; Abstention and Broker Non-Votes................................. 23
Solicitation of Proxies and Expenses.................................... 23
Board Recommendation.................................................... 23
THE MERGER................................................................ 25
Background of the Merger................................................ 25
Reasons for the Merger.................................................. 28
Guidant's Reasons for the Merger........................................ 28
EVT Reasons for the Merger.............................................. 29
</TABLE>
i
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
Operations Following the Merger.......................................... 30
Opinion of Financial Advisor............................................. 30
Interests of Certain Persons in the Merger............................... 34
Accounting Treatment..................................................... 37
Certain Federal Income Tax Consequences.................................. 37
Regulatory Approvals..................................................... 39
Resale Restrictions...................................................... 39
No Appraisal Rights...................................................... 40
THE MERGER AGREEMENT....................................................... 41
The Merger............................................................... 41
Exchange Procedures...................................................... 42
Representations and Warranties........................................... 43
Conduct of Business Pending the Merger................................... 44
No Solicitation of Transactions.......................................... 45
Certain Covenants........................................................ 46
Stock Purchase Plan; Benefit Matters..................................... 46
Indemnification and Insurance............................................ 46
Conditions............................................................... 47
Termination.............................................................. 47
Termination Fees......................................................... 48
Expenses................................................................. 49
Amendment................................................................ 49
SUPPORT AGREEMENT.......................................................... 49
BUSINESS OF GUIDANT........................................................ 51
Cardiac Rhythm Management................................................ 51
Vascular Intervention.................................................... 51
Minimally Invasive Systems............................................... 52
BUSINESS OF EVT............................................................ 53
Recent Developments...................................................... 53
COMPARISON OF SHAREHOLDERS' RIGHTS......................................... 54
CERTAIN TRANSACTIONS....................................................... 61
LEGAL MATTERS.............................................................. 62
EXPERTS.................................................................... 62
FUTURE STOCKHOLDER PROPOSALS............................................... 62
APPENDICES
A--Agreement and Plan of Merger
B--Opinion of NationsBanc Montgomery Securities, Inc.
</TABLE>
ii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
THE BOARD OF DIRECTORS OF EVT UNANIMOUSLY RECOMMENDS VOTING IN FAVOR OF THE
PROPOSED MERGER AND BELIEVES IT TO BE IN THE BEST INTERESTS OF THE EVT
STOCKHOLDERS.
Q: WHAT DO I NEED TO DO NOW?
A: After you have carefully read this Proxy Statement/Prospectus, just indicate
on your proxy card how you want to vote, and sign and mail it in the
enclosed return envelope as soon as possible, so that your shares of EVT
Common Stock will be represented at the Special Meeting. If you sign and
send in your proxy and do not indicate how you want to vote, your proxy will
be counted as a vote in favor of the Merger. If you do not vote in favor of
the Merger or you abstain, it will have the effect of a vote against the
Merger.
The Special Meeting will take place on , 1997 at . You may attend
and vote your shares in person, even after submitting the enclosed proxy
card. In addition, you may take back your proxy up to and including the day
of the Special Meeting by following the directions on page 22 and either
change your vote or attend the Special Meeting and vote in person.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your shares only if you provide instructions on how to
vote. You should instruct your broker to vote your shares, following the
directions provided by your broker. Without instructions, your shares will
not be voted which for purposes of voting on the proposed Merger is the same
as voting against the proposed merger.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the Merger is completed, we will send former EVT stockholders
written instructions for exchanging their share certificates.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: If the Merger is approved, EVT stockholders will have the right to receive,
in exchange for each share of EVT Common Stock they own, the number of
shares of Guidant Common Stock determined by dividing $20.00 by the average
selling price of a share of Guidant Common Stock during a specified period
prior to the Special Meeting (the "Average Selling Price"). However, if the
Average Selling Price of a share of Guidant Common Stock during this period
is greater than or equal to $46.63 but less than or equal to $51.75, then
EVT stockholders will have the right to receive, in exchange for each share
of EVT Common Stock they own, 0.3865 of a share of Guidant Common Stock and
if the Average Selling Price of a share of Guidant Common Stock is less than
$46.63, then EVT stockholders will have the right to receive, in exchange
for each share of EVT Common Stock they own, the number of shares of Guidant
Common Stock determined by dividing $18.00 by the Average Selling Price.
Guidant will not issue fractional shares. Instead, EVT stockholders will
receive cash for any fractional share of Guidant Common Stock owed to them
based on the market value on a date close to the date the Merger occurs.
Examples:
The following examples are based on various prices of a share of Guidant
Common Stock (which are, of course, not assured). Assuming that you own 10,000
shares of EVT Common Stock:
1. If the applicable Average Selling Price of a share of Guidant Common
Stock is $62.00, then after the Merger you will receive 3,225 shares of
Guidant Common Stock and a check for $50.00.
1
<PAGE>
2. If the applicable Average Selling Price of a share of Guidant Common
Stock is $51.00, then after the Merger you will receive 3,865 shares of
Guidant Common Stock.
3. If the Average Selling Price of a share of Guidant Common Stock is
$46.00, then after the Merger you will receive 3,913 shares of Guidant
Common Stock and a check for $2.00.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working toward completing the Merger as quickly as possible. We hope
to complete the Merger by the first quarter of 1998.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO ME?
A: The exchange of shares by EVT stockholders is intended generally to be tax-
free to EVT stockholders for federal income tax purposes. However, EVT
stockholders will have to pay taxes on cash received for fractional shares.
To review the tax consequences to stockholders in greater detail, see pages
37 through 39. EVT stockholders are urged to consult their own tax advisors
as to the specific tax consequences to them of the Merger, including the
applicable federal, state, local and foreign tax consequences.
Q: ARE THERE ANY RISKS ASSOCIATED WITH THE MERGER?
A: The Merger does involve risks. For a discussion of certain risk factors that
should be considered in evaluating the Merger, see "Risk Factors," beginning
on page 17.
WHO CAN HELP ANSWER YOUR QUESTIONS
If you have more questions about the Merger you should contact:
EndoVascular Technologies, Inc.
1360 O'Brien Drive
Menlo Park, CA 94025
Attention: G. Bradley Cole, Senior Vice President of Operations and
Chief Financial Officer
Phone Number: 415-325-1600
If you would like additional copies of the Proxy Statement/Prospectus you
should contact:
MacKensie Partners, Inc.
156 5th Avenue
New York, New York 10010
Attention: Daniel H. Burch
Phone Number: 212-929-5550
2
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROXY STATEMENT/PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY GUIDANT OR
EVT. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY THE SECURITIES COVERED BY THIS PROXY
STATEMENT/PROSPECTUS OR A SOLICITATION OF A PROXY IN ANY JURISDICTION WHERE, OR
TO OR FROM ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER, SOLICITATION
OF AN OFFER OR PROXY SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF
THIS PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF GUIDANT OR EVT SINCE THE DATE HEREOF OR THAT
THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO ITS DATE.
AVAILABLE INFORMATION
Guidant and EVT are each subject to the information 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 Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed with the Commission can be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and at
the following Regional Offices of the Commission: Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661; and 7 World Trade Center,
Suite 1300, New York, New York 10048. Copies of such material can be obtained
at prescribed rates from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. The Commission
also maintains a Website at http://www.sec.gov which contains reports, proxy
statements and other information regarding registrants that file electronically
with the Commission. In addition, such reports, proxy statements and other
information with respect to Guidant may be inspected at the offices of the
NYSE, 20 Broad Street, New York, New York 10005. This Proxy
Statement/Prospectus does not include all of the information set forth in the
Registration Statement filed by Guidant with the Commission under the
Securities Act of 1933, as amended (the "Securities Act"), as permitted by the
rules and regulations of the Commission.
Under the rules and regulations of the Commission, the solicitation of
proxies from stockholders of EVT to approve and adopt the Merger Agreement and
the consummation of the Merger, constitutes an offering of Guidant Common Stock
to be issued in connection with the Merger. Accordingly, Guidant has filed with
the Commission a Registration Statement on Form S-4 (the "Registration
Statement") under the Securities Act, with respect to such offering. This Proxy
Statement/Prospectus constitutes the prospectus of Guidant that is filed as
part of the Registration Statement. Other parts of the Registration Statement
are omitted from this Proxy Statement/Prospectus in accordance with the rules
and regulations of the Commission. Copies of the Registration Statement,
including the exhibits to the Registration Statement and other material that is
not included herein, may be inspected, without charge, at the regional offices
of the Commission referred to above, obtained at the Commission's World Wide
Web site set forth above or obtained at prescribed rates from the Public
Reference Section of the Commission at the address set forth above.
Statements made in this Proxy Statement/Prospectus concerning the contents of
any contract or other document are not necessarily complete. With respect to
each contract or other document filed as an exhibit to the Registration
Statement, reference is hereby made to that exhibit for a more complete
description of the matter involved, and each such statement is hereby qualified
in its entirety by such reference.
3
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by Guidant with the Commission under
the Exchange Act are incorporated herein by reference:
(a) Guidant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 (the "Guidant Form 10-K");
(b) Guidant's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1997, and June 30, 1997 (the "Guidant Form 10-Qs" and collectively with
the Guidant Form 10-K, the "Guidant Reports"); and
(c) The description of Guidant's capital stock contained in Guidant's
Registration Statement on Form 8-A, dated October 6, 1994, including any
amendment or report filed for the purpose of updating such description.
The following documents previously filed by EVT with the Commission under the
Exchange Act are incorporated herein by reference:
(a) EVT's Annual Report on Form 10-K for the fiscal year ended December
31, 1996 (the "EVT Form 10-K");
(b) EVT's Quarterly Reports on Form 10-Q for the quarters ended March 31,
1997 and June 30, 1997 (the "EVT Form 10-Qs");
(c) EVT's Current Report on Form 8-K filed October 17, 1997 (the "EVT
Form 8-K" and collectively with the EVT Form 10-K and the EVT Form 10-Qs,
the "EVT Reports"); and
(d) The description of EVT's capital stock contained in EVT's
Registration Statement on Form 8-A filed January 19, 1996, including any
amendment or report filed for the purpose of updating such description.
All documents filed by Guidant or EVT pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Proxy Statement/Prospectus
and prior to the Special Meeting shall be deemed to be incorporated by
reference into this Proxy Statement/Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes hereof to the extent that a statement
contained herein (or in any other subsequently filed document that is or is
deemed to be incorporated by reference herein) modifies or supersedes such
previous statement. Any statement so modified or superseded shall not be deemed
to constitute a part hereof except as so modified or superseded.
All information contained or incorporated by reference in this Proxy
Statement/Prospectus relating to Guidant has been supplied by Guidant and all
such information relating to EVT has been supplied by EVT.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE THAT ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED
BY REFERENCE HEREIN) ARE AVAILABLE WITHOUT CHARGE, UPON WRITTEN OR ORAL REQUEST
BY ANY PERSON TO WHOM THIS PROXY STATEMENT/PROSPECTUS HAS BEEN DELIVERED, IN
THE CASE OF DOCUMENTS RELATING TO GUIDANT, FROM TODD MCKINNEY, VICE PRESIDENT,
INVESTOR RELATIONS, GUIDANT CORPORATION, 111 MONUMENT CIRCLE, 29TH FLOOR;
INDIANAPOLIS, IN 46204, AND IN THE CASE OF DOCUMENTS RELATING TO EVT FROM G.
BRADLEY COLE, SENIOR VICE PRESIDENT, ENDOVASCULAR TECHNOLOGIES, INC. 1360
O'BRIEN DRIVE, MENLO PARK, CALIFORNIA 94025. IN ORDER TO ENSURE TIMELY DELIVERY
OF THE DOCUMENTS, ANY SUCH REQUEST SHOULD BE MADE BY , 1997 [5 BUSINESS
DAYS PRIOR TO SPECIAL MEETING].
4
<PAGE>
TRADEMARKS
ACS MULTI-LINK, Guidant, Guidant Corporation, and the Guidant logo are
registered trademarks of Guidant Corporation. Ancure, EndoSoc, EndoWeave and
AngioScale are trademarks, and EVT, EndoGraft, EGS, and the EVT logo are
registered trademarks of EndoVascular Technologies, Inc.
FORWARD LOOKING STATEMENTS--SAFE HARBOR PROVISIONS
From time to time, Guidant may publish (including, without limitation in this
Proxy Statement/Prospectus and in documents incorporated by reference herein)
forward-looking statements relating to such matters as anticipated financial
performance, business prospects, technological developments, new products,
research and development activities and similar matters. The Private Securities
Litigation Reform Act of 1995 provides a safe harbor for forward-looking
statements. In order to comply with the terms of the safe harbor, Guidant notes
that a variety of factors could cause Guidant's actual results and experience
to differ materially from the anticipated results or other expectations
expressed in Guidant's forward-looking statements. The risks and uncertainties
that may affect the operations, performance, development and results of
Guidant's business including the following:
(i) economic factors over which Guidant has no control, including changes
in inflation, interest rates and foreign currency exchange rates;
(ii) delays and uncertainties in the regulatory approval process in the
United States and other countries, resulting in lost market opportunities;
(iii) unexpected safety, performance or efficacy concerns arising with
respect to marketed products, whether or not scientifically justified,
leading to product recalls, withdrawals or declining sales;
(iv) unexpected interruptions of manufacturing operations as a result of
regulatory enforcement actions by the Food and Drug Administration ("FDA")
or other regulatory authorities;
(v) the difficulties and uncertainties inherent in new product
development, including new products that appear promising during
development but fail to reach the market as a result of safety, performance
or efficacy concerns, inability to obtain necessary regulatory approvals,
unanticipated restrictions imposed on approved indications, excessive costs
to manufacture, infringement of patents or other intellectual property
rights of others, or technological advances by a competitor of Guidant;
(vi) litigation and other legal factors which could preclude
commercialization of products or negatively affect the level of sales or
profitability of existing products, including unanticipated litigation of
product liability claims, antitrust litigation, environmental matters and
patent disputes;
(vii) future difficulties obtaining necessary components or materials
used in manufacturing Guidant's products;
(viii) future difficulties obtaining or the inability to obtain
appropriate levels of product liability insurance;
(ix) competitive factors including the ability of Guidant to obtain
patent rights or other intellectual property rights sufficient to keep
competitors from marketing competing products, the introduction of new
products or therapies by competitors or scientific or medical developments
that render Guidant's products obsolete, uneconomical or otherwise non-
competitive or the acquisition of patents by competitors that prevent
Guidant from selling a product or including key features in Guidant's
products;
(x) governmental factors including laws and regulations and judicial
decisions that affect the regulation of medical devices, product liability,
health care reform or tax laws;
(xi) health care industry factors, including increased customer demands
for price concessions, reductions in third-party (Medicare, Medicaid and
other governmental programs, private health care
5
<PAGE>
insurance and managed care plans) reimbursement levels for procedures using
Guidant's products and limits imposed by customers on the number of
manufacturers or vendors which the customer will purchase products from;
(xii) accounting requirements to write off obsolete inventory or goodwill
which reduces reported earnings or changes in accounting standards
applicable to Guidant;
(xiii) internal factors such as retention of key employees, change in
business strategies and the impact of restructuring and business
combinations; and
(xiv) the ability of Guidant to implement its strategy that includes the
potential acquisition of one or more businesses.
Important factors that could cause actual results to vary materially from
those anticipated in the forward looking statements made by EVT are described
in the EVT Reports.
EVT stockholders should also carefully review the factors set forth in this
Proxy Statement/Prospectus under "Risk Factors" beginning on page 17 hereof.
6
<PAGE>
SUMMARY
This summary highlights certain information from this document and may not
contain all of the information that is important to you. To understand the
acquisition fully and for a more complete description of the legal terms of the
Merger, you should read carefully this entire document, the documents referred
to in the "Incorporation of Certain Documents by Reference" section at the
beginning of this document, the Appendices hereto, and the Exhibits. The
summary does not contain a complete statement of material information relating
to the Merger Agreement, the Merger, or other matters discussed in this
document.
THE COMPANIES
Guidant Corporation (page 51)
111 Monument Circle, 29th Floor
Indianapolis, IN 46204-5129
317-971-2000
Guidant is a multi-national company that designs, develops, manufactures and
markets a broad range of products for use in cardiac rhythm management ("CRM"),
vascular intervention ("VI"), and other forms of minimally invasive systems
("MIS"). In CRM, Guidant is a worldwide leader in automatic implantable
cardioverter defibrillator systems. Guidant also designs, manufactures and mar-
kets a full line of implantable pacemaker systems used in the treatment of slow
or irregular arrhythmias. In VI, Guidant is a worldwide leader in minimally
invasive procedures used for opening blocked coronary arteries. In addition,
Guidant develops, manufactures and markets products for use in MIS procedures.
EndoVascular Technologies, Inc. (page 53)
1360 O'Brien Drive
Menlo Park, CA 94025
415-325-1600
EVT designs, develops and manufactures minimally invasive endovascular sys-
tems to repair diseased or damaged vascular structures. EVT's first product,
the Ancure system, provides catheter-based delivery and implantation of a spe-
cialized prosthesis to repair abdominal aortic aneurysms ("AAAs"). The Ancure
system represents a less invasive alternative to the open surgical procedure
performed today. The Ancure system is approved for marketing in Europe and Aus-
tralia and is currently in Phase II clinical trials in the United States.
THE SPECIAL MEETING (PAGE 22)
When and where the meeting will be held. The Special Meeting will be held at
a.m., local time, on , 1997, at .
Purposes of the Special Meeting. At the Special Meeting, EVT stockholders
will be asked to approve the Merger Agreement and the consummation of the Merg-
er.
Record Date; Voting Power. Stockholders who owned shares as of the close of
business on , 1997, the Record Date, are entitled to vote at the Special
Meeting.
On the Record Date, there were shares of EVT Common Stock allowed to vote
at the Special Meeting. EVT stockholders will have one vote at the Special
Meeting for each share of EVT Common Stock held of record on the Record Date
for the approval of the Merger Agreement and the consummation of the Merger.
Votes Required. The affirmative vote of the holders of a majority of the out-
standing shares of EVT Common Stock as of the Record Date is required to ap-
prove the Merger. As of the Record Date, EVT's directors and executive officers
(and their affiliates), as a group, beneficially owned shares (exclusive of
any shares issuable upon the exercise of options unexercised as of such date),
or approximately % of the shares of EVT Common Stock that were issued and
outstanding as of such date. Each of H. DuBose Montgomery, Menlo Ventures and
its affiliated entities, Vaughn D. Bryson, Tony R. Brown and W. James
Fitzsimmons, who, as of October 5, 1997, in the aggregate beneficially owned
2,240,858 shares (exclusive of any shares issuable upon the exercise of op-
tions), or approximately 26% of the shares of EVT Common Stock, have agreed
with Guidant to vote in favor of the Merger Agreement and consummation of the
Merger and have executed irrevocable proxies in connection therewith. See "Sup-
port Agreement." As of the Record Date, there were stockholders of record
who held shares of EVT Common Stock (al-
7
<PAGE>
though EVT has been informed that there are in excess of 1,000 beneficial own-
ers), as shown on the records of EVT's transfer agent for such shares. Based on
the shares of Common Stock outstanding and entitled to vote on the Record
Date, a total of shares are required to be voted in favor of the Merger in
order for the Merger to be approved and consummated. Accordingly, EVT's direc-
tors, executive officers and their affiliates hold shares representing approxi-
mately % of the total number of shares required for approval of the transac-
tion and holders of % of such total number of shares have agreed to vote in
favor of the Merger.
Quorum; Abstentions and Broker Non-Votes. The required quorum for the Special
Meeting is a majority of the shares of EVT Common Stock issued and outstanding
as of the Record Date. Abstentions and broker non-votes each will be included
in determining the number of shares present and voting at the Special Meeting
for the purpose of determining the presence of a quorum. Abstentions and broker
non-votes will have the same effect as votes against the Merger Agreement and
the consummation of the Merger. THE ACTIONS PROPOSED IN THIS PROXY
STATEMENT/PROSPECTUS ARE NOT MATTERS THAT CAN BE VOTED ON BY BROKERS HOLDING
SHARES FOR BENEFICIAL OWNERS WITHOUT THE OWNERS' SPECIFIC INSTRUCTIONS. ACCORD-
INGLY, ALL BENEFICIAL OWNERS OF EVT COMMON STOCK ARE URGED TO RETURN THE EN-
CLOSED PROXY CARD MARKED TO INDICATE THEIR VOTES.
RECOMMENDATION TO STOCKHOLDERS (PAGE 23)
The Board of Directors of EVT (the "EVT Board") believes that the Merger is
fair to, and in the best interests of, EVT stockholders and recommends that EVT
stockholders vote FOR the proposal to approve the Merger Agreement and the con-
summation of the Merger.
Other Interests of Officers and Directors in the Merger. In considering the
EVT Board's recommendations with regard to the Merger, stockholders should be
aware that a number of EVT's officers and directors have option agreements, em-
ployment agreements, severance agreements or benefit plans that provide them
with interests in the Merger that are different from, and in addition to, the
interests of stockholders of EVT generally.
THE MERGER (PAGE 25)
THE MERGER AGREEMENT IS ATTACHED AS APPENDIX A TO THIS DOCUMENT. WE ENCOURAGE
YOU TO READ THE MERGER AGREEMENT IN ITS ENTIRETY. IT IS THE LEGAL DOCUMENT
GOVERNING THE MERGER.
What EVT Stockholders will receive in the Merger. As a result of the Merger,
EVT stockholders will have the right to receive, in exchange for each share of
EVT Common Stock they own, the number of shares of Guidant Common Stock deter-
mined by dividing $20.00 by the Closing Price. However, if the Closing Price of
a share of Guidant Common Stock is greater than or equal to $46.63 but less
than or equal to $51.75, then EVT stockholders will have the right to receive,
in exchange for each share of EVT Common Stock they own, 0.3865 of a share of
Guidant Common Stock, and if the Closing Price of a share of Guidant Common
Stock is less than $46.63, then EVT stockholders will have the right to re-
ceive, in exchange for each share of EVT Common Stock they own, the number of
shares of Guidant Common Stock determined by dividing $18.00 by the Closing
Price. No fractional shares will be issued. Instead, EVT stockholders will re-
ceive a check in payment of any fractional share based on the Closing Price.
Conditions to the Merger. The completion of the Merger depends upon a number
of conditions being met, including the following:
. the approval of the Merger by the holders of a majority of the outstand-
ing common stock of EVT;
. that no law has been enacted or injunction entered which effectively
prohibits the Merger;
. no material adverse changes shall have occurred to the businesses, re-
sults of operations or financial condition of EVT;
. all necessary approvals of governmental authorities shall have been ob-
tained without burdensome demands being placed upon Guidant or EVT;
. the receipt of opinions from tax counsel for each company regarding cer-
tain federal income tax consequences of the Merger; and
. the receipt of a letter from Guidant's independent accountants stating
that they concur with management's conclusion that the Merger will qual-
ify as a transaction to be accounted for as a pooling of interests.
8
<PAGE>
Certain of the conditions to the Merger may be waived by the company
entitled to assert the condition.
Termination of the Merger Agreement. Guidant and EVT can agree to terminate
the Merger Agreement without completing the Merger, and either of the compa-
nies can terminate the Merger Agreement if any of the following occurs:
. the Merger is not completed by March 31, 1998;
. the required approval of the holders of EVT Common Stock is not received;
. a court or other governmental authority permanently prohibits the Merger;
. the other company materially breaches or fails to comply with any of its
representations or warranties or obligations under the Merger Agreement;
or
. the Closing Price of a share of Guidant Common Stock is less than $40.00.
In addition, Guidant can terminate the Merger Agreement if the EVT Board (A)
withdraws or modifies in any materially adverse manner its approval or recom-
mendation in favor of the Merger, or (B) approves or recommends a business
combination with a third party. EVT can terminate the Merger Agreement if it
has received an offer to enter into a business combination with a third party,
and the EVT Board determines that its fiduciary obligations require it to ter-
minate the Merger Agreement.
Termination Fee. The Merger Agreement requires EVT to pay to Guidant a ter-
mination fee of $7 million if the Merger Agreement is terminated under certain
circumstances.
Regulatory Approvals. The Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, prohibits the companies from completing the Merger until af-
ter the companies have furnished certain information and materials to the An-
titrust Division of the Department of Justice and the Federal Trade Commission
and a required waiting period has ended. On October , 1997 the companies fur-
nished that information. However, the Department of Justice and the Federal
Trade Commission may request that the companies furnish additional information
and materials and will continue to have the authority to challenge the Merger
on antitrust grounds before or after the Merger is completed.
Accounting Treatment. EVT and Guidant expect the Merger to qualify as a
pooling of interests, which means that the companies will be treated as if
they had always been combined for accounting and financial reporting purposes.
Opinion of Financial Advisor. In deciding to approve the Merger, the EVT
Board considered an opinion from its financial advisor, NationsBanc Montgomery
Securities, Inc., as to the fairness of the consideration to be received by
holders of EVT Common Stock pursuant to the Merger, as of the date of such
opinion. This opinion is attached as Appendix B to this Proxy
Statement/Prospectus. Stockholders are encouraged to read this opinion in its
entirety.
Federal Income Tax Consequences. The Merger is intended so that EVT
stockholders who receive Guidant Common Stock in the Merger generally will not
recognize any gain or loss for federal income tax purposes in the Merger
(except with respect to cash received instead of fractional shares or certain
transfer taxes paid on behalf of EVT stockholders). The Merger is conditioned
on receipt by each company of legal opinions regarding certain federal income
tax consequences of the Merger. Those opinions are subject to certain
assumptions and qualifications.
TAX MATTERS ARE VERY COMPLICATED AND THE TAX CONSEQUENCES OF THE MERGER TO
STOCKHOLDERS WILL DEPEND ON THE FACTS OF THEIR OWN SITUATION. STOCKHOLDERS
SHOULD CONSULT THEIR OWN TAX ADVISORS FOR A FULL UNDERSTANDING OF THE TAX CON-
SEQUENCES OF THE MERGER.
No Appraisal Rights. Under Delaware law, EVT stockholders have no right to
an appraisal of the value of their shares in connection with the Merger.
Stockholders who do not wish to receive Guidant Common Stock in exchange for
their shares of EVT Common Stock must liquidate their investment by selling
their EVT Common Stock into the public market prior to the consummation of the
Merger.
Listing of Guidant Common Stock. Guidant will list the shares of Guidant
Common Stock to be
9
<PAGE>
issued in connection with the Merger on the New York Stock Exchange, Inc. and
the Pacific Exchange, Inc.
RISK FACTORS (PAGE 17)
In considering whether to approve the Merger Agreement and the consummation
of the Merger, EVT stockholders should carefully review and consider the
information contained below under the caption "Risk Factors."
FORWARD LOOKING STATEMENTS MAY PROVE INACCURATE
THE COMPANY HAS MADE FORWARD LOOKING STATEMENTS IN THIS DOCUMENT (AND IN
DOCUMENTS THAT ARE INCORPORATED BY REFERENCE) THAT ARE SUBJECT TO RISKS AND
UNCERTAINTIES. FORWARD LOOKING STATEMENTS INCLUDE THE INFORMATION CONCERNING
POSSIBLE OR ASSUMED FUTURE RESULTS OF OPERATIONS OF GUIDANT OR EVT. ALSO, WHEN
WORDS SUCH AS "BELIEVES," "EXPECTS," "ANTICIPATES" OR SIMILAR EXPRESSIONS ARE
USED, THEY ARE INTENDED TO IDENTIFY FORWARD LOOKING STATEMENTS. STOCKHOLDERS
SHOULD NOTE THAT MANY FACTORS, SOME OF WHICH ARE DISCUSSED ELSEWHERE IN THIS
DOCUMENT AND IN THE DOCUMENTS WHICH ARE INCORPORATED BY REFERENCE, COULD
AFFECT THE FUTURE FINANCIAL RESULTS OF GUIDANT AND EVT AND COULD CAUSE THOSE
RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN THE FORWARD LOOKING
STATEMENTS CONTAINED OR INCORPORATED BY REFERENCE IN THIS DOCUMENT.
10
<PAGE>
MARKET PRICE AND DIVIDEND INFORMATION
Guidant Common Stock is listed on the NYSE and Pacific Exchange, Inc. (symbol
"GDT"). EVT Common Stock is listed on the Nasdaq National Market (symbol
"EVTI"). The table below sets forth, for the calendar quarters indicated, the
high and low closing sales prices per share of Guidant Common Stock and EVT
Common Stock reported on the NYSE Composite Tape and the Nasdaq National
Market, respectively, and the dividends declared for the Guidant Common Stock
and the EVT Common Stock.
<TABLE>
<CAPTION>
GUIDANT
COMMON STOCK(1) EVT COMMON STOCK
----------------------- ----------------------
HIGH LOW DIVIDENDS HIGH LOW DIVIDENDS
------ ------ --------- ------ ----- ---------
<S> <C> <C> <C> <C> <C> <C>
1995
First Quarter............... $ 9.94 $ 7.75 -- -- -- --
Second Quarter.............. 12.25 9.13 -- -- -- --
Third Quarter............... 14.63 11.31 $0.0125 -- -- --
Fourth Quarter.............. 21.31 13.75 0.0125 -- -- --
1996:
First Quarter(2)............ 27.31 19.75 0.0125 $12.50 $9.50 --
Second Quarter.............. 30.69 23.25 0.0125 15.75 9.37 --
Third Quarter............... 28.13 23.50 0.0125 13.50 9.25 --
Fourth Quarter.............. 28.63 20.00 0.0125 12.75 8.13 --
1997:
First Quarter............... 36.13 26.81 0.0125 15.50 9.13 --
Second Quarter.............. 44.00 29.25 0.0125 13.63 8.25 --
Third Quarter............... 56.56 42.00 0.0125 18.38 9.13 --
Fourth Quarter through
October 24, 1997........... 65.05 56.31 0.0125(3) 19.25 15.50 --
</TABLE>
- --------
(1) All Guidant Common Stock information has been adjusted to reflect a two-
for-one stock split which was effected in September 1997.
(2) EVT Common Stock was not publicly traded prior to February 7, 1996.
(3) On October 23, 1997, the Guidant Board declared a cash dividend of $0.0125
per share of Guidant Common Stock payable December 16, 1997 to shareholders
of record at the close of business on December 2, 1997. EVT stockholders
who receive Guidant Common Stock in connection with the Merger will not be
entitled to receive such dividend.
DIVIDEND INFORMATION
Following the Merger, Guidant expects to continue to pay dividends on the
Guidant Common Stock in the amount of $0.0125 per share per quarter, or $0.05
per share per year. Although Guidant currently expects to pay such dividends,
it cannot assure such payments. The Guidant Board of Directors (the "Guidant
Board") will use its discretion to decide whether to declare dividends and the
amount of any such dividends. In making its decision, the Guidant Board will
consider various factors, including Guidant's business conditions, financial
position and earnings as well as other factors.
EVT has never paid any cash dividends on the EVT Common Stock, and
anticipates that it will continue to retain any earnings for the foreseeable
future for use in the operation of its business.
11
<PAGE>
RECENT CLOSING PRICES
The following table sets forth the closing prices per share of Guidant Common
Stock on the NYSE and EVT Common Stock on the Nasdaq National Market on October
3, 1997, the last trading day before announcement of the proposed Merger, and
on October 24, 1997, the latest practicable trading day before the printing of
this Proxy Statement/Prospectus, and the equivalent per share prices for EVT
Common Stock based on the Guidant Common Stock prices:
<TABLE>
<CAPTION>
GUIDANT STOCK EVT STOCK EVT EQUIVALENT(1)
------------- --------- -----------------
<S> <C> <C> <C>
October 3, 1997.................... $60.88 $16.38 $20.00
October 24, 1997................... 58.88 18.88 $20.00
</TABLE>
- --------
(1) Represents the equivalent of one share of EVT Common Stock calculated by
multiplying the closing price per share of Guidant Common Stock on the
applicable date by an assumed Exchange Ratio calculated as if the Closing
Price were the price per share of Guidant Common Stock on the dates
indicated above, .3285 and .3397, respectively (which represents the result
obtained by dividing $20.00 by such assumed Closing Prices).
Because the market price of Guidant Common Stock is subject to fluctuation,
the market value of the shares of Guidant Common Stock that holders of EVT
Common Stock will receive in the Merger may increase or decrease prior to and
following the Merger. The Merger Agreement contains provisions which address
certain market price fluctuations of Guidant Common Stock prior to the Merger
by adjusting within specified parameters the Exchange Ratio based upon the
Closing Price. See "The Merger Agreement--The Merger." EVT STOCKHOLDERS ARE
URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR GUIDANT COMMON STOCK AND EVT
COMMON STOCK. NO ASSURANCE CAN BE GIVEN AS TO THE FUTURE PRICES OR MARKETS FOR
GUIDANT COMMON STOCK OR EVT COMMON STOCK.
NUMBER OF STOCKHOLDERS
As of the Record Date, there were stockholders of record who held shares
of EVT Common Stock (although EVT has been informed that there are in excess of
beneficial owners), as shown on the records of EVT's transfer agent for
such shares.
12
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA AND COMPARATIVE PER-SHARE DATA
The following selected consolidated financial data of Guidant as of and for
the years ended December 31, 1996, 1995, 1994, 1993 and 1992 are derived from
consolidated financial statements of Guidant which have been audited by Ernst &
Young LLP, independent auditors. The selected consolidated financial data as of
and for the six months ended June 30, 1997 and 1996, are derived from unaudited
consolidated financial statements and, include all adjustments (consisting of
normal recurring accruals) which Guidant considers necessary for a fair
presentation of the consolidated financial position, results of operations and
cash flows. Operating results for the six months ended June 30, 1997, are not
necessarily indicative of the results that may be expected for the entire year
ending December 31, 1997. This information is qualified in its entirety by, and
should be read in conjunction with the consolidated financial statements, the
notes thereto, and "Management's Discussion and Analysis of Results of
Operations and Financial Condition" for Guidant, incorporated by reference in
this Proxy Statement/Prospectus.
SELECTED CONSOLIDATED FINANCIAL DATA OF GUIDANT
(IN MILLIONS, EXCEPT PER-SHARE AND OTHER DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
----------------- --------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- ------- ------- ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net sales:
Cardiac rhythm
management........... $ 313.4 $ 278.0 $ 574.6 $ 452.4 $ 378.6 $336.5 $329.9
Vascular
intervention......... 201.9 216.0 425.6 447.9 464.5 451.6 423.7
Minimally invasive
systems.............. 31.2 23.6 48.3 31.0 19.3 6.6 1.2
-------- -------- -------- ------- ------- ------ ------
Total net sales..... 546.5 517.6 1,048.5 931.3 862.4 794.7 754.8
Cost of sales........... 138.2 177.0(1) 314.5(1) 283.4 270.9 236.2 211.8
-------- -------- -------- ------- ------- ------ ------
Gross profit.......... 408.3 340.6(1) 734.0(1) 647.9 591.5 558.5 543.0
Research and
development............ 84.7 73.0 152.5 134.7 130.9 129.1 117.9
Purchased research and
development(2)......... 57.4 -- -- -- -- -- --
Sales, marketing, and
administrative......... 173.4 159.7 326.0 291.8 268.9 255.1 251.0
Restructuring charges... -- -- -- -- -- 81.5 32.9
-------- -------- -------- ------- ------- ------ ------
Income from operations.. 92.8 107.9 (1) 255.5(1) 221.4 191.7 92.8 141.2
Other expenses, net..... 10.6 94.2 (3) 106.0(3) 51.6 35.8 5.8 20.1
Net income (loss)....... $ 52.2 $ (17.7)(4) $ 65.8(4) $ 101.1 $ 92.1 $ 50.6 $ 76.8
Earnings (loss) per
share.................. $ 0.36 $ (0.12)(4) $ 0.46(4) $ 0.70
Pro forma net
income(5).............. $ 76.2
Pro forma earnings per
share(5)............... $ 0.53
Cash dividends declared
per share.............. $ 0.025 $ 0.025 $ 0.05 $ 0.025
Weighted average shares
outstanding............ 144.47 144.04 144.17 143.75 143.72(5)
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
JUNE 30, YEAR ENDED DECEMBER 31,
----------------- -----------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- ------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
FINANCIAL POSITION:
Working capital......... $ 161.3 $(199.4)(6) $ 110.9 $ 110.3 $ 116.8 $ 143.3 $ 136.9
Total assets............ 1,062.7 988.2 1,003.9 1,057.4 1,103.6 1,288.6 1,118.0
Borrowings.............. 381.9 448.7 363.5 455.0 473.0 -- 2.1
Shareholders' equity.... 490.8 373.2 448.2 384.2 264.4(7) 1,048.3 942.7
OTHER DATA:
Effective income tax
rate................... 36.5% 39.3%(8) 38.4%(8) 40.5% 40.9% 39.8% 36.6%
Capital expenditures,
net.................... 36.2 25.6 62.1 64.7 51.1 43.5 72.1
Borrowings as a
percentage of total
capitalization......... 43.8% 54.6% 44.8% 54.2% 64.1% -- 0.2%
Book value per share.... $ 3.39 $ 2.59 $ 3.11 $ 2.67 $ 1.84
</TABLE>
- --------
(1) Includes the impact of special obsolescence charges of $28.8 million
reported in the second quarter of 1996. Excluding the effect of these
charges, cost of sales was $285.7 million, gross profit was $762.8 million
and income from operations was $284.3 million for the year ended December
31, 1996; and cost of sales was $148.2 million, gross profit was $369.4
million and income from operations was $136.7 million for the six months
ended June 30, 1996.
(2) In conjunction with the asset acquisition of NeoCardia, LLC., the initial
purchase price of $57.4 million, which represented the appraised value of
in-process research and development, was charged to expense. Without this
special charge, net income and earnings per share for the six months ended
June 30, 1997 would have been $88.6 million and $1.23, respectively.
(3) Includes impact of the impairment of atherectomy-related goodwill and other
intangible assets of $66.9 million reported in the second quarter of 1996.
Without the effect of these special charges, other expenses were $39.1
million for the year ended December 31, 1996, and $27.3 million for the six
months ended June 30, 1996.
(4) Excluding the effect of the aforementioned special obsolescence and
impairment charges, net income and earnings per share were $149.9 million
and $1.04, respectively, for the year ended December 31, 1996 and $66.4
million and $0.46, respectively, for the six months ended June 30, 1996.
(5) Pursuant to the formation of Guidant, its Initial Public Offering (IPO),
and resultant transfer of assets from Eli Lilly and Company ("Lilly"),
Guidant reported 1994 earnings on a pro forma basis. Adjustments give
effect to the following transactions as if they occurred on January 1,
1994: (i) borrowings under certain credit agreements of Guidant, (ii)
dividends to Lilly, and (iii) receipt of IPO proceeds.
(6) All outstanding borrowings of $448.7 million as of June 30, 1996 for
Guidant were classified as current in anticipation of a public offering of
additional shares, the proceeds of which were to be used to pay down this
debt. The offering was subsequently canceled.
(7) The decline in shareholders' equity from December 31, 1993 to December 31,
1994, was primarily attributable to dividends to Lilly. See (5) above.
(8) Excludes impact of the aforementioned impairment charges recorded in the
second quarter of 1996.
Per-share data and weighted average number of shares outstanding have been
adjusted for all periods to reflect the two-for-one stock split effected in the
second quarter of 1997.
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The following selected consolidated financial data of EVT as of and for the
years ended December 31, 1996, 1995, 1994, 1993 and 1992 are derived from
consolidated financial statements of EVT which have been audited by Arthur
Andersen LLP, independent auditors. The selected consolidated financial data as
of and for the six months ended June 30, 1997 and 1996 are derived from
unaudited consolidated financial statements and, include all adjustments
(consisting of normal recurring accruals) which EVT considers necessary for a
fair presentation of the consolidated financial position, results of operations
and cash flows. Operating results for the six months ended June 30, 1997 are
not necessarily indicative of the results that may be expected for the entire
year ending December 31, 1997. This information is qualified in its entirety
by, and should be read in conjunction with the consolidated financial
statements, the notes thereto, and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for EVT, incorporated by
reference in this Proxy Statement/Prospectus.
SELECTED CONSOLIDATED FINANCIAL DATA OF EVT
(IN MILLIONS, EXCEPT PER-SHARE AND OTHER DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------ --------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- ------ ------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net sales............... $ 1.7 $ 0.4 $ 1.1 -- -- -- --
Cost of sales........... 1.6 0.4 1.3 -- -- -- --
-------- -------- ------
Gross profit.......... 0.1 (0.0) (0.2) -- -- -- --
Research and
development............ 7.3 5.3 12.1 8.1 7.4 3.5 1.6
Sales, marketing and
administrative......... 2.4 1.1 2.4 1.0 0.9 0.7 0.5
-------- -------- ------ ------ ------ ------ ------
Loss from operations.. (9.6) (6.4) (14.7) (9.1) (8.3) (4.2) (2.1)
Interest income......... 0.4 0.6 1.2 0.8 0.4 0.1 0.2
-------- -------- ------ ------ ------ ------ ------
Net loss.............. $ (9.2) $ (5.8) $(13.5) $ (8.3) $ (7.9) $ (4.1) $ (1.9)
Net loss per share...... $ (1.09) $ (0.73) $(1.66) -- -- -- --
Pro forma net loss per
share(1)............... -- -- -- $(1.31) $(1.40) $(0.90) $(0.51)
Weighted average shares
outstanding............ 8.47 8.05 8.18 6.32 5.63 4.50 3.83
FINANCIAL POSITION:
Working capital......... $ 7.3 $ 19.1 $ 16.7 $ 9.4 $ 17.3 $ 10.6 $ 2.5
Total assets............ 13.1 28.0 21.0 11.7 18.9 11.8 3.3
Shareholders' equity.... 10.0 25.9 18.7 10.3 18.2 11.3 3.2
OTHER DATA:
Capital expenditures,
net.................... 1.0 1.0 1.5 0.2 0.7 0.2 0.2
Book value per share.... $ 1.18 $ 3.12 $ 2.22 $ 1.63 $ 2.99 $ 2.24 $ 0.86
</TABLE>
- --------
(1) EVT completed its initial public offering of common stock on February 7,
1996. As a result, its net loss per share and weighted average shares in
1995 and prior years were reported on a pro forma basis.
15
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COMPARATIVE PER SHARE INFORMATION
The following table sets forth certain earnings, dividend and book value per
share data for EVT and Guidant on an historical basis and historical equivalent
basis. The information set forth below should be read in conjunction with the
historical consolidated financial statements of EVT and Guidant, including the
notes thereto, incorporated by reference or appearing elsewhere in this Proxy
Statement/Prospectus. See "Available Information" and "Incorporation of Certain
Documents By Reference."
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
--------------------- ---------------------------
1997 1996 1996 1995 1994
-------- -------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
EVT HISTORICAL
Net loss per share.... $ (1.09) $ (0.73) $ (1.66) -- --
Pro forma net loss per
share(1)............. -- -- -- $ (1.31) $ (1.40)
Book value per share.. $ 1.18 (2) $ 3.12 $ 2.22 $ 1.63 $ 2.99
GUIDANT HISTORICAL
Earnings per share.... $ 0.36 (5) $ (0.12)(3) $ 0.46(3) $ 0.70 --
Pro forma earnings per
share(4)............. -- -- -- -- $ 0.53
Cash dividends
declared per share... $ 0.025 $ 0.025 $ 0.05 $ 0.025 --
Book value per share.. $ 3.39 $ 2.59 $ 3.11 $ 2.67 $ 1.84
GUIDANT HISTORICAL
EQUIVALENT FOR EVT
STOCKHOLDERS(6)
Earnings per share.... $ 0.11 $ (0.04) $ 0.14 $ 0.22 --
Pro forma earnings per
share(4)............. -- -- -- -- $ 0.16
Cash dividends
declared per share... $ 0.01 $ 0.01 $ 0.02 $ 0.01 --
Book value per share.. $ 1.04 $ 0.80 $ 0.96 $ 0.82 $ 0.57
</TABLE>
- --------
(1) EVT completed its initial public offering (IPO) of common stock on February
7, 1996. As a result its net loss per share in 1995 and 1994 were reported
on a pro forma basis.
(2) The decline in book value per share was due to net losses experienced by
EVT from the date of its IPO.
(3) Included the impact of special obsolescence charges of $28.8 million and
impairment charges on Guidant's atherectomy-related goodwill and other
intangible assets of $66.9 million reported in the second quarter of 1996.
Excluding the effect of these charges, net income and earnings per share
were $149.9 million and $1.04, respectively, for the year ended December
31, 1996, and $66.4 million and $0.46, respectively, for the six months
ended June 30, 1996.
(4) Pursuant to the formation of Guidant Corporation, its Initial Public
Offering (IPO), and resultant transfer of assets from Eli Lilly and Company
("Lilly"), Guidant reported 1994 earnings on a pro forma basis. Adjustments
give effect to the following transactions as if they occurred on January 1,
1994: (i) borrowings under certain credit agreements of Guidant, (ii)
dividends to Lilly, and (iii) receipt of IPO proceeds.
(5) In conjunction with the asset acquisition of NeoCardia, LLC, the initial
purchase price of $57.4 million, which represented the appraised value of
in process research and development, was charged to operations. Without
this special charge, net income and earnings per share for the six months
ended June 30, 1997 would have been $88.6 million and $1.23, respectively.
(6) Represents historical Guidant information per share multiplied by an
assumed Exchange Ratio of .3077 (which represents the result obtained by
dividing $20.00 by an assumed Closing Price of $65.00). The Merger
Agreement contains provisions which address certain market price
fluctuations of Guidant Common Stock prior to the Merger, by adjusting
within specified parameters the Exchange Ratio based upon the Closing
Price. See "The Merger Agreement--The Merger."
All per-share data of Guidant have been adjusted for all periods to reflect
the two-for-one stock split effected in the second quarter of 1997.
EVT has never paid any cash dividends on the EVT Common Stock, and
anticipates that it will continue to retain any earnings for the foreseeable
future for use in the operation of its business.
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<PAGE>
RISK FACTORS
The following risk factors should be considered by holders of EVT Common
Stock in evaluating whether to approve the Merger Agreement and the
consummation of the Merger and thereby become holders of Guidant Common Stock.
These risks should be read in conjunction with the other information included
and incorporated by reference in this Proxy Statement/Prospectus, including,
without limitation, the factors set forth under the heading "Risk Factors" in
the EVT Reports incorporated by reference in this Proxy Statement/Prospectus
and factors that could materially adversely affect the business, operating
results and financial condition of Guidant as described in the Guidant Reports
incorporated by reference in this Proxy Statement/Prospectus.
VOLATILITY OF STOCK PRICES; VALUE OF CONSIDERATION DEPENDS ON PRICE OF GUIDANT
COMMON STOCK
In recent years, the stock market in general has experienced extreme price
and volume fluctuations, which have particularly affected the market price of
many technology and health care companies and which have often been unrelated
to the operating performance of those companies. These broad market
fluctuations have in the past and may in the future adversely affect the
market price of Guidant's Common Stock.
Fluctuations in the price of Guidant Common Stock could affect the value of
the Exchange Consideration and the Exchange Ratio. Under the terms of the
Merger Agreement, the shares of EVT Common Stock issued and outstanding at the
Effective Time (as hereinafter defined) will be converted into the right to
receive shares of Guidant Common Stock. While the Exchange Ratio will be
adjusted under certain circumstances based on the Closing Price, the value of
the consideration to be received by holders of EVT Common Stock upon the
Merger will depend on the value of Guidant Common Stock. See "The Merger
Agreement--The Merger." There can be no assurance that the market price of
Guidant Common Stock on and after the Effective Time will not be higher or
lower than its price on the last trading day prior to the public announcement
of the Merger, the third trading day prior to the Special Meeting, when the
Exchange Ratio will be fixed, or any other date. EVT stockholders should
obtain and consider recent trading prices of Guidant Common Stock in
determining whether to vote in favor of the Merger Agreement and the
consummation of the Merger.
RAPID TECHNOLOGICAL CHANGE AND INTENSE COMPETITION
The medical device market is highly competitive. Guidant and EVT both
compete with many companies, some of which have access to greater financial
and other resources than Guidant or EVT. Furthermore, the medical device
market is characterized by intensive development efforts and rapidly advancing
technology. Guidant's and EVT's present and future products could be rendered
obsolete or uneconomical by technological advances by one or more of Guidant's
and EVT's current or future competitors or by alternative therapies. The
future success of Guidant will depend, in large part, upon its ability to
anticipate and keep pace with other developers of medical devices and
therapies. Competitive market forces may also adversely affect the prices at
which Guidant sells its products.
FDA AND OTHER GOVERNMENTAL REGULATION
The medical devices manufactured and marketed by Guidant and EVT are subject
to rigorous regulation by the FDA and numerous other federal, state and
foreign governmental authorities. Current FDA enforcement policy prohibits the
promotion or labeling of approved medical devices for unapproved uses. Guidant
and EVT are required to adhere to the manufacturing, testing, control,
labeling, documentation and product surveillance requirements of the FDA.
These regulations may have a material impact on Guidant's and EVT's
businesses. Medical device laws are also in effect in many of the foreign
countries where Guidant and EVT do business and such laws may contain similar
or other prohibitions which may have a material impact on Guidant's and EVT's
businesses. 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. EVT does not anticipate filing premarket approval applications ("PMA")
for its Ancure system until at least 1998 and does not anticipate approval for
at least one year after a PMA is accepted, if at all. Foreign and domestic
regulatory approvals, if granted, may include significant limitations on the
indicated uses for which the product may be marketed. While Guidant believes
that it has obtained all necessary clearances for the
17
<PAGE>
manufacture and sale of its current products and that it is in compliance in
all material respects with applicable FDA and other material regulatory
requirements, there can be no assurance that Guidant will be able to continue
such compliance. If the FDA were to believe that Guidant was not in compliance
with applicable laws or regulations, it could institute proceedings to detain
or seize Guidant's products, issue a recall, impose operating restrictions,
enjoin future violations and assess civil and criminal penalties against
Guidant, 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 Guidant. 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 Guidant may be subject to more rigorous
regulation by foreign governmental authorities in the future. Guidant and EVT
cannot predict whether any U.S. or foreign governmental regulation may be
imposed in the future that may have a material adverse effect on Guidant.
CHALLENGES TO PATENTS AND PROPRIETARY RIGHTS
Both Guidant and EVT rely on a combination of patents, trade secrets and
nondisclosure agreements to protect their respective proprietary intellectual
property. Guidant and EVT each hold numerous U.S. and foreign patents and
patent applications. There can be no assurance that pending patent
applications will result in issued patents, that patents issued to or licensed
by Guidant or EVT will not be challenged or circumvented by competitors or
that such patents will be found to be valid or sufficiently broad to protect
Guidant's or EVT'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 on
commercially reasonable terms, on a timely basis, or at all. Guidant also
relies 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 Guidant 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 Guidant'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 Guidant and EVT conduct their businesses.
Guidant has in the past and continues to be involved in claims alleging
infringement of the intellectual property rights of third parties. In the
future, both Guidant and EVT may be forced to defend themselves against claims
and legal actions alleging infringement of the patent rights of others.
Additionally, Guidant may find it necessary to initiate litigation in order 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. Adverse
determinations in any such litigation could subject Guidant to significant
liabilities to third parties, could require Guidant to seek licenses from
third parties and could, if such licenses are not available, prevent Guidant
from manufacturing, selling or using certain of its products, any of which
could have a material adverse effect on Guidant. Patent litigation can be
costly and time-consuming, and there can be no assurance that Guidant's
litigation expenses will not be significant in the future or that the outcome
of such litigation will be favorable to the combined company.
POSSIBLE DENIAL OF THIRD-PARTY REIMBURSEMENT
Guidant's and EVT'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.
If hospitals respond to such pressures by substituting lower cost products or
other therapies for Guidant's or EVT's products, Guidant or EVT could be
adversely affected. The ability of customers to obtain appropriate
reimbursement for their products and services from government and third-party
payors is critical to
18
<PAGE>
the success of all medical device companies around the world. Several foreign
governments (most notably Germany and Spain) have attempted to dramatically
reshape reimbursement policies affecting medical devices. Further restrictions
on reimbursement of Guidant's or EVT's customers would have an impact on the
products, including clinical products, purchased by customers and the prices
they are willing to pay. There can be no assurance that Guidant's or EVT'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 Guidant's or EVT's ability to
sell its products profitably.
POSSIBLE ADVERSE IMPACT OF HEALTH CARE REFORM PROPOSALS
From time to time health care reform proposals have been introduced in the
United States Congress that generally attempt to expand health care coverage
and reduce total health care expenditures. Different proposals use various
techniques to achieve these goals. Proposals often include such features as
universal health care coverage, mandatory employer health insurance premiums,
global expenditure limits, procedures for the review of new technologies,
portability of insurance coverage and the creation of large buying groups
intended to have considerable purchasing power. Currently, legislative
attention has focused particularly on certain proposed Medicare and Medicaid
reforms. The ultimate scope of these reforms, if any, cannot yet be
ascertained. Certain states have already made significant changes to their
Medicaid programs and have adopted health care reforms. Other states have
reform proposals under consideration. Implementation of such health care
reforms may limit the price of, or the level at which reimbursement is
provided for, Guidant's products. In addition, such health care reform
initiatives may accelerate the growing trend toward involvement by hospital
administrators, purchasing managers and buying groups in purchasing decisions.
This trend is expected to lead to increased emphasis on the cost-effectiveness
of any treatment regimen. Health care reform and the trend toward managed care
may adversely affect the prices at which Guidant sells its products and the
volume of products sold.
These changes may also cause the marketplace in general to place increased
emphasis on the utilization of less invasive surgical procedures and the
delivery of more cost-effective medical therapies. However, certain health
care reform initiatives, if enacted, may lead to increased expenses or reduced
revenue in connection with bringing new products to market, which may create a
disincentive toward technological innovation. Regardless of whether any
additional reform proposals are ultimately adopted, the trend toward cost
controls and the requirement of more efficient utilization of medical
therapies and procedures is expected to continue. Similar initiatives to limit
the growth of health care costs, including price regulation, are also underway
in several other countries in which Guidant and EVT currently do, or expect to
do, business. Guidant and EVT are unable to predict at this time whether any
such additional health care initiatives will be enacted or, if enacted, the
final form such reforms would take or which such reforms would be implemented.
SUBSTANTIAL RELIANCE ON THE TREND TOWARD LESS INVASIVE SURGICAL PROCEDURES
Demand for Guidant's products will depend in part on continued and growing
demand within the health care system for less invasive surgical procedures,
and on Guidant's ability to respond to that demand. The continued and growing
demand for less invasive surgical procedures depends on, among other things,
the rate at which the medical community becomes adequately trained in and
adopts less invasive procedures. While Guidant and EVT expect the trend toward
less invasive medical procedures to continue, Guidant'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.
POTENTIAL PRODUCT LIABILITY; PRODUCT RECALLS
Guidant's and EVT's businesses expose them to potential product liability
risks which are inherent in the design, manufacture and marketing of medical
devices. Guidant's and EVT's products are often used in intensive care
settings with seriously ill patients. In addition, many of the medical devices
manufactured and sold by Guidant and EVT are designed to be implanted in the
human body for long periods of time. Component failures,
19
<PAGE>
manufacturing flaws, design defects or inadequate disclosure of product-
related risks or product-related information with respect to these or other
products manufactured or sold by Guidant and EVT could result in an unsafe
condition or injury to, or death of, the patient. The occurrence of such a
problem could result in product liability claims and/or a recall of, or safety
alert relating to, one or more of Guidant's and EVT's products which could
ultimately result, in certain cases, in the removal from the body of such
products. There can be no assurance that Guidant's and EVT's current product
liability insurance will be adequate or that Guidant and EVT will be able to
obtain insurance in the future at satisfactory rates or in adequate amounts.
Product liability claims or product recalls in the future, regardless of their
ultimate outcome, could have a material adverse effect on Guidant's and EVT's
business and reputation and on their ability to attract and retain customers
for their products.
DEPENDENCE ON SOLE SOURCES OF SUPPLY
Guidant and EVT purchase certain of the materials and components used in
manufacturing their products. Certain of these supplies are custom-made for
Guidant and EVT. In addition, Guidant and EVT purchase certain supplies from
single sources due to quality considerations, costs or constraints resulting
from regulatory requirements. Agreements with certain suppliers are terminable
by either party upon short notice. The establishment of additional or
replacement suppliers for certain components or materials cannot be
accomplished quickly, largely due to the FDA approval system and the complex
nature of manufacturing processes employed by many suppliers. In addition, in
recent years, in the wake of litigation, certain companies have ceased
supplying chemical raw materials for use in implantable medical devices. There
can be no assurance that materials used by Guidant or EVT will not be
restricted in the future. The inability to develop satisfactory alternatives,
if required, or a reduction or interruption in supply or a significant
increase in the price of materials or components used by Guidant and EVT could
have a material adverse effect on Guidant and EVT.
DEPENDENCE ON KEY PERSONNEL
Guidant'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 Guidant's and EVT's
industry is intense. While consummation of the Merger will increase Guidant'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 Guidant's ability to attract and retain
personnel. The loss of a significant group of skilled personnel could
adversely affect Guidant.
UNCERTAINTIES RELATING TO COORDINATION OF OPERATIONS
Guidant and EVT have entered into the Merger Agreement with the expectation
that the Merger will result in operating and strategic benefits. The
anticipated benefits of the Merger may not be achieved unless the operations
of EVT are successfully combined with those of Guidant in a coordinated,
timely and efficient manner, and there can be no assurance this will occur.
The transition to a combined company will require substantial attention from
management. The diversion of the attention of management and any difficulties
encountered in the transition process could have a material adverse impact on
the revenues and operating results of Guidant. The integration of the two
companies will also require coordination of their operations. The difficulties
of coordination may be increased by the necessity of combining personnel with
disparate business backgrounds and different corporate cultures. In addition,
the process of combining the two organizations could cause the interruption
of, or a loss of momentum in, the activities of either or both of the
companies' businesses, which could have an adverse effect on their combined
operations. There can be no assurance that either company will retain its key
management, technical, sales and marketing personnel or that Guidant will
realize any of the other anticipated benefits of the Merger. Failure to
achieve the anticipated benefits of the Merger or to successfully integrate
the operations of the companies could have a material adverse effect upon the
business, operating results and financial condition of Guidant. Even if the
benefits of the Merger are achieved and the two companies' operations are
successfully integrated, there can be no assurance that in the future the
operating
20
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results and financial condition of Guidant will not be materially adversely
affected by any number of economic, market or other factors that are not
related to the Merger.
TRANSACTION EXPENSES; COSTS OF INTEGRATION
Guidant and EVT estimate they will together incur direct transaction costs
(including investment banking, legal, accounting, registration and printing
fees) of approximately $ million associated with the Merger. In addition,
following the Merger, Guidant expects to incur a significant additional charge
to operations of approximately $ to reflect the costs associated with
integrating the two companies. These estimates are preliminary and subject to
change. These costs are expected to be charged against income of Guidant in
the fiscal quarter ending , 1998. The Merger will have a short-term adverse
effect on the net income of Guidant due to the aforementioned expenses. There
can be no assurance that Guidant will not incur additional material charges in
subsequent quarters to reflect additional costs associated with the Merger.
SHARES ELIGIBLE FOR FUTURE SALE
Guidant will issue approximately shares of Guidant Common Stock in the
Merger, based upon an assumed Closing Price of $65.00. In general, such shares
will be freely tradable following the Merger, except those held by affiliates
of EVT. The sale of any of these shares may cause substantial fluctuations in
the price of Guidant Common Stock over short time periods. See "The Merger--
Resale Restrictions."
POTENTIAL CONFLICTS OF INTEREST
In considering the recommendation of the EVT Board with respect to the
Merger, stockholders of EVT should be aware that certain officers and
directors of EVT have interests in the Merger that are in addition to the
interests of EVT's stockholders generally. EVT's Officer Severance Plan
provides severance benefits for eligible officers of EVT, one of whom, W.
James Fitzsimmons, EVT's President and Chief Executive Officer, is also a
member of the EVT Board, upon an Involuntary Termination (as defined in such
plan) of employment within the 24 month period following a Change in Control
of EVT, which as defined in the Officer Severance Plan, includes the Merger.
Also, pursuant to the terms of the EVT Stock Option Plans, as defined below,
options held by outside directors of EVT will vest in full upon the Merger.
Upon the Merger, Guidant will substitute its options for all of EVT's
outstanding stock options, including outstanding options held by officers and
directors. Furthermore, Guidant has discussed proposed employment terms to be
in effect after the Merger with the officers of EVT. See "The Merger--
Interests of Certain Persons in the Merger." Furthermore, the Merger Agreement
provides that, after the Effective Time, the surviving corporation shall
provide certain indemnification and insurance rights. See "The Merger
Agreement--Indemnification and Insurance." The EVT Board was aware of these
interests and considered them, among other matters, in approving the Merger
Agreement.
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THE SPECIAL MEETING
This Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies from the holders of EVT Common Stock to be voted at the
Special Meeting of stockholders of EVT.
TIME AND PLACE; PURPOSES
The Special Meeting will be held at , on , 1997, starting at .m.,
local time. At the Special Meeting, the stockholders of EVT will be asked to
consider and vote upon the Merger and such other matters as may properly come
before the Special Meeting. A copy of the Merger Agreement is included as
Appendix A to this Proxy Statement/Prospectus.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting stockholders of EVT will be asked to consider and vote
upon proposals (i) to approve and adopt the Merger Agreement and to approve the
consummation of the Merger and (ii) to transact such other business as may
properly come before the Special Meeting or any postponements or adjournments
thereof.
RECORD DATE AND SHARES ENTITLED TO VOTE
The Board has fixed the close of business on November , 1997, as the Record
Date. Only holders of record of shares of EVT Common Stock on the Record Date
are entitled to notice of and to vote at the Special Meeting and any
adjournments or postponements thereof. On the Record Date, there were
shares of EVT Common Stock outstanding and entitled to vote at the Special
Meeting held by approximately stockholders of record (although EVT has been
informed that there are in excess of beneficial owners), as shown on the
records of EVT's transfer agent for such shares.
Each holder of record, as of the Record Date, is entitled to vote in
accordance with the terms of EVT's Eighth Amended and Restated Certificate of
Incorporation (the "EVT Certificate"), which provides that holders of EVT
Common Stock will be entitled to one vote per share of Common Stock. The
presence, in person or by proxy, of the holders of a majority of the voting
power represented by the outstanding shares of EVT Common Stock entitled to
vote is necessary to constitute a quorum at the Special Meeting.
VOTES REQUIRED
Under the EVT Certificate and Delaware General Corporation Law (the "DGCL"),
the affirmative vote, in person or by proxy, of the holders of a majority of
the votes represented by the shares of EVT Common Stock outstanding on the
Record Date and entitled to vote on the Merger is required to approve and adopt
the Merger Agreement and the consummation of the Merger.
As of the Record Date, directors and executive officers of EVT and their
affiliates as a group beneficially owned shares of EVT Common Stock, or
approximately % of the shares of the outstanding EVT Common Stock. Certain
stockholders of EVT, including Menlo Ventures and its affiliated entities and
all of the directors of EVT, who held in the aggregate, as of the Record Date,
over % of the combined voting power of the outstanding EVT Common Stock,
have entered into an agreement (the "Support Agreement") in which they have
agreed, among other things, to vote all of their shares of EVT Common Stock in
favor of the Merger. See "Support Agreement". Based on the shares of EVT
Common Stock outstanding and entitled to vote on the Record Date, a total of
shares are required to be voted in favor of the Merger in order for the
Merger to be approved and consummated. Accordingly, EVT's directors, executive
officers and their affiliates hold shares representing approximately % of
the total number of shares required for approval of the Merger and holders of
% of such total number of shares have agreed to vote in favor of the Merger.
If fewer shares of EVT Common Stock are voted in favor of the Merger than the
number required for approval, it is expected that the Special Meeting will be
postponed or adjourned for the purpose of allowing additional time for
soliciting and obtaining additional proxies or votes, and, at any subsequent
reconvening of the Special Meeting, all proxies will be voted in the same
manner as such proxies would have been voted at the original convening of the
Special Meeting, except for any proxies that have theretofore effectively been
revoked or terminated.
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QUORUM; ABSTENTION AND BROKER NON-VOTES
All shares of EVT Common Stock represented by properly executed proxies
received prior to or at the Special Meeting and not revoked will be voted in
accordance with the instructions indicated in such proxies. If no instructions
are indicated on a properly executed returned proxy, such proxy will be voted
"FOR" the Merger. A properly executed proxy marked "ABSTAIN," although counted
for purposes of determining whether there is a quorum, will not be voted.
Accordingly, since the affirmative vote of a majority of the votes represented
by the shares of EVT Common Stock outstanding on the Record Date is required
for approval of the Merger, a proxy marked "ABSTAIN" will have the effect of a
vote against the Merger. In accordance with Nasdaq National Market rules,
brokers and nominees are precluded from exercising their voting discretion on
the Merger and thus, absent specific instructions from the beneficial owner of
such shares, are not empowered to vote such shares on the Merger. Therefore,
because the affirmative vote of a majority of the votes represented by the
shares of EVT Common Stock outstanding on the Record Date is required for
approval of the Merger, abstentions and a broker non-vote with respect to the
Merger will have the effect of a vote against the Merger. Shares represented
by abstentions and broker non-votes will, however, be counted for purposes of
determining whether there is a quorum at the Special Meeting.
It is not expected that any matter not referred to herein will be presented
for action at the Special Meeting. If any other matters are properly brought
before the Special Meeting, the persons named in the proxies will have
discretion to vote on such matters in accordance with their best judgment. The
grant of a proxy will also confer discretionary authority on the persons named
in the proxy as proxy appointees to vote in accordance with their best
judgment on matters incident to the conduct of the Special Meeting, including
(except as stated in the following sentence) postponement or adjournment for
the purpose of soliciting additional votes. However, shares represented by
proxies that have been voted "AGAINST" the Merger will not be used to vote
"FOR" postponement or adjournment of the Special Meeting for the purposes of
allowing additional time for soliciting additional votes "FOR" the Merger.
A stockholder may revoke his or her proxy at any time prior to its use by
delivering to the Secretary of EVT a signed notice of revocation or a later
dated signed proxy or by attending the Special Meeting and voting in person.
Attendance at the Special Meeting will not in itself constitute the revocation
of a proxy. All written notices of revocation and other communications with
respect to revocation of proxies by EVT stockholders should be addressed as
follows: EndoVascular Technologies, Inc., 1360 O'Brien Drive, Menlo Park,
California 94024, Attention: Secretary, or hand delivered to the Secretary or
the Secretary's designated agent before the vote is taken at the Special
Meeting.
SOLICITATION OF PROXIES AND EXPENSES
Guidant will pay the cost of printing and mailing this Proxy
Statement/Prospectus. EVT will pay the cost of solicitation of proxies. In
addition to solicitation by mail, proxies may be solicited in person by
directors, officers and employees of EVT without additional compensation, and
by telephone, telegram, facsimile or similar method. Arrangements will be made
with brokerage houses and other custodians, nominees and fiduciaries to send
proxy material to beneficial owners; and EVT will, upon request, reimburse
them for their reasonable expenses in so doing. EVT has retained MacKensie
Partners, Inc. to aid in the solicitation of proxies at a fee of $ plus
expenses. To the extent necessary in order to ensure sufficient representation
at the Special Meeting, EVT may request by telephone or telegram the return of
proxies. The extent to which this will be necessary depends entirely upon how
promptly proxies are returned.
BOARD RECOMMENDATION
THE EVT BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE MERGER
AND BELIEVES THAT THE TERMS OF THE MERGER AGREEMENT ARE FAIR TO, AND THAT THE
MERGER IS IN THE BEST INTERESTS OF, EVT AND ITS STOCKHOLDERS AND THEREFORE
RECOMMENDS THAT THE HOLDERS OF EVT COMMON STOCK VOTE FOR APPROVAL AND ADOPTION
OF THE MERGER AGREEMENT AND THE CONSUMMATION OF THE MERGER. In considering
such recommendation, EVT stockholders should be aware that EVT has in place
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certain employment, severance and indemnification arrangements with certain
directors and officers of EVT. See "The Merger--Interests of Certain Persons
in the Merger" and "The Merger Agreement--Indemnification and Insurance."
THE MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING ARE OF GREAT IMPORTANCE
TO THE STOCKHOLDERS OF EVT. ACCORDINGLY, EVT STOCKHOLDERS ARE URGED TO READ
AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS PROXY
STATEMENT/PROSPECTUS, AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE
ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
STOCKHOLDERS SHOULD NOT SEND ANY STOCK
CERTIFICATES WITH THEIR PROXY CARDS
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THE MERGER
BACKGROUND OF THE MERGER
During its annual strategic planning process in 1996, Guidant prepared an
analysis of the medical device industry. The analysis reviewed various
technologies and their potential market size, growth, clinical need, and fit
with Guidant in terms of technology and customer. The analysis showed the
emergence and growth of an endovascular abdominal aortic aneurysm ("AAA")
market which would use catheter-based technologies by potential Guidant
customers. The analysis suggested that Guidant could potentially leverage its
catheter know-how to an emerging Guidant customer. Guidant management
determined that endovascular AAA technology was one of the many technologies
that would complement Guidant's existing and future product offerings. Since
internal development required significant research and development expenditure
and given the lead established in product development by existing companies,
Guidant management determined that acquisitions would be a key element of
pursuing Guidant's strategic goals in this area.
Guidant from time to time has studied publicly available information of the
various endovascular graft companies to determine if these companies would fit
Guidant's operations and product line. EVT was identified as a company whose
strategic goals and product offerings complemented those of Guidant.
EVT has recognized that there could be value in partnering with a larger
medical device company as an attractive way to realize EVT's long-term
potential. In August 1994, EVT entered into an agreement with St. Jude
Medical, Inc. ("St. Jude") whereby St. Jude acquired an equity interest in EVT
and was granted certain preferred negotiating rights with respect to an
acquisition of EVT by St. Jude over a two year period. St. Jude's rights
expired in August 1996.
On August 8, 1996, senior representatives of Guidant met with senior
representatives of EVT to discuss generally the endovascular AAA market.
On September 24, 1996, EVT held a regularly scheduled EVT Board meeting and
the visit with Guidant was reported to the EVT Board.
On September 30, 1996, at a meeting of Guidant's "Compass" business
development group ("Compass"), the Guidant Compass Board ("Compass Board"),
the decision-making authority for Compass, a broad overview was provided of
the endovascular AAA market and the potential of a Guidant and EVT merger. The
Compass Board authorized further exploration of such a combination.
On October 1, 1996, Guidant and EVT entered into a confidentiality
agreement. Pursuant to the confidentiality agreement, the two companies began
exchanging information to determine the desirability of a combination. During
this time, each company met with its advisors to discuss the benefits of a
potential business combination.
On October 25, 1996, EVT's financial statements and long range forecasts
were sent to Guidant.
On November 5, 1996, at a Compass Board meeting, an overview was presented
of EVT's patents, products, financial statements, and EVT's management team.
The Compass Board was also apprised of discussions between the two parties and
Guidant management was encouraged to proceed.
On November 19, 1996, at a regularly scheduled meeting of Guidant's Board,
an overview was provided of the possible combination of Guidant and EVT.
Guidant's Board authorized Guidant's management to continue discussions on a
possible transaction.
On November 21, 1996, Mr. Ronald W. Dollens, President and Chief Executive
Officer of Guidant, Mr. Jay Watkins, President of Compass and Mr. W. James
Fitzsimmons, President and Chief Executive Officer of EVT,
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met in Boston, Massachusetts to discuss the possible combination of the two
companies. At the end of the meeting it was decided that the parties would
continue exchanging information and pursue acquisition discussions. At that
time valuation discussions began to take place.
On November 27, 1996, EVT convened a special meeting of the EVT Board and
reported on the status of discussions regarding a potential business
combination with Guidant, as well as EVT's financing needs. During the
meeting, members of the Board discussed at length the potential risks and
benefits of a transaction with Guidant, evaluated other alternatives,
including possible business combinations with other entities, as well as the
alternative of pursuing a public equity financing and continuing as an
independent company. After reviewing these alternatives, the EVT Board
authorized EVT's management to continue discussions with Guidant.
On December 5, 1996, Messrs. W. James Fitzsimmons and G. Bradley Cole, EVT's
Senior Vice President of Operations and Chief Financial Officer, met with Mr.
Jay Watkins and Ms. Carolyn Bates, Vice President of Business Development-
Compass, in Redwood Shores, California. At the meeting, Messrs. Fitzsimmons
and Cole presented EVT's position regarding the terms of a possible merger.
On January 6, 1997, Guidant retained BT Alex. Brown, Inc. ("Alex. Brown") to
act as an advisor in connection with a possible strategic combination.
On January 9, 1997, EVT retained NationsBanc Montgomery Securities, Inc.
("NationsBanc Montgomery") as its financial advisor on possible approaches to
a strategic combination and a follow-on public offering of EVT Common Stock.
On January 15, 1997, Guidant sent a letter to EVT outlining broad terms for
a combination between the two parties.
On January 16, 1997, EVT specially convened the EVT Board to discuss
Guidant's proposal.
On January 20, 1997, EVT, following discussions with the EVT Board and
financial advisors, sent a letter to Mr. Dollens proposing alternative terms
for a merger.
Between January 21, 1997 and February 7, 1997, through a series of
conversations between Alex. Brown and Guidant management it was determined
that EVT's terms were not in the best interest of Guidant and its stockholders
and that the merger discussions should be terminated.
On February 12, 1997, Guidant sent EVT a letter closing all conversations on
the possibility of a combination due to an inability to agree on a transaction
structure and value.
On February 13, 1997, Guidant and EVT began discussions on a possible arm's
length credit arrangement between the two companies as a financing vehicle for
EVT. Individuals from both parties met to conduct due diligence to identify
the credit risks to Guidant in such an agreement.
On February 17, 1997, at a regularly scheduled meeting, Guidant's Board
authorized Guidant's management to loan EVT up to $30 million at a market rate
of interest and upon prevailing market terms.
Between February 17, 1997, and February 26, 1997, Guidant and EVT
representatives met to negotiate the terms of the credit agreement.
On February 26, 1997, EVT convened a special meeting of the EVT Board to
review terms of the proposed credit agreement. During the meeting, the members
of the EVT Board discussed the advantages of entering into the credit
agreement versus undertaking a public equity financing. After lengthy
discussions, the EVT Board approved the credit agreement.
On February 27, 1997, a definitive credit agreement (the "Credit Agreement")
was executed. See "Certain Transactions".
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On March 12, 1997, EVT and NationsBanc Montgomery entered into an engagement
letter covering NationsBanc Montgomery's role as financial advisor to EVT.
Between April and August 1997, Guidant spoke periodically with EVT
concerning the Credit Agreement. In addition, during that time, Guidant
continued to evaluate the AAA endovascular market, and conducted discussions
with several companies during that period.
On September 8, 1997, prior to EVT's first drawdown under the Credit
Agreement, Guidant met with EVT personnel regarding administration of and
compliance with the Credit Agreement.
On September 16, 1997, EVT borrowed $7 million pursuant to the Credit
Agreement.
On September 30, 1997, Guidant's Compass Board held a meeting where Guidant
management presented to the Compass Board an overview of EVT, the clinical
evaluation and financial statements. Additionally, EVT senior executives
presented clinical, product development and competitive information.
During September 1997, Guidant began to reevaluate the value of an
acquisition with EVT.
On October 1, 1997, Guidant's Board convened by telephone to discuss the
strategic benefits of a merger and the related financial considerations. The
Guidant Board was also advised of the financial impact of such a merger. The
Guidant Board was also advised by counsel concerning the terms of the Merger
Agreement and certain regulatory aspects of the Merger. Thereafter, the
Guidant Board authorized the execution and delivery of the Merger Agreement
subject to satisfactory completion of negotiations.
On October 1, 1997, Alex. Brown delivered an offer to NationsBanc Montgomery
and EVT with respect to a potential combination between EVT and Guidant.
During the evening of October 1, 1997, Messrs. Dollens and Fitzsimmons had
telephone conversations regarding the terms and conditions of the combination
of the businesses of Guidant and EVT.
On October 2, 1997, Guidant submitted a written proposal reflecting terms
discussed by Messrs. Dollens and Fitzsimmons. Mr. Fitzsimmons spoke with each
of the members of the EVT Board, informing them of the proposed terms. After
extensive discussion of the terms and conditions of the proposal, each member
of the EVT Board authorized negotiations toward a definite agreement with
Guidant along the basic terms outlined.
On October 2, 1997, counsel for Guidant distributed to EVT and its counsel
drafts of the Merger Agreement and Support Agreement.
On October 4, 1997, financial and legal advisors and management of Guidant
and EVT met for detailed discussions regarding the terms of the Merger
Agreement and Support Agreement.
On October 5, 1997, representatives of Guidant and EVT met during a series
of meetings to discuss the terms and conditions of the Merger.
During the afternoon of October 5, 1997, the EVT Board held a special
telephone meeting with senior executives of EVT and EVT's financial and legal
advisors to discuss the terms and conditions of the Merger Agreement.
During the evening of October 5, 1997, the EVT Board held a special
telephone meeting with EVT's outside financial and legal advisors to consider
approval of the Merger Agreement. W. James Fitzsimmons, President and Chief
Executive Officer of EVT, summarized briefly the background of the Merger and
EVT's reasons for considering the sale of EVT at the present time. EVT's
outside financial advisor, NationsBanc Montgomery, reviewed its financial
analysis of the terms and conditions of the Merger and, at the conclusion of
its presentation, delivered to the EVT Board its oral opinion that the
consideration to be received by EVT's shareholders in the Merger was fair to
EVT's stockholders from a financial point of view as of the date of such
opinion. See "--Opinion of Financial Advisor". EVT's legal advisor reviewed
the terms of the Merger Agreement, including
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the resolution of previously outstanding issues related thereto. Thereafter,
the EVT Board unanimously (i) determined that the Merger was fair to, and in
the best interests of, EVT and its stockholders, (ii) approved the Merger
Agreement and (iii) determined to recommend to EVT's stockholders that they
vote for approval of the Merger Agreement.
On the evening of October 5, 1997, the Merger Agreement and Support Agreement
were executed and delivered.
On the morning of October 6, 1997, Guidant and EVT issued a joint press
release announcing the execution of the Merger Agreement and the proposed
Merger.
REASONS FOR THE MERGER
Guidant's Reasons for the Merger
The Guidant Board has determined that the terms of the Merger Agreement and
the Merger are in the best interests of Guidant. In the course of reaching its
decision to approve the Merger Agreement and the transactions contemplated
thereby, the Guidant Board consulted with Guidant's legal and financial
advisors as well as with Guidant's management, and considered a number of
factors, including among others:
(i) EVT's lead over comparable companies with respect to bringing to the
United States market an endovascular AAA system;
(ii) the strategic fit between EVT's research and development of
endovascular AAA systems and Guidant's distribution networks;
(iii) the business synergies between EVT's and Guidant's product lines;
(iv) the growth potential in the area of endovascular AAA systems and the
related opportunities for additional revenue and profit margin enhancement;
(v) the opportunity to retain EVT's management, which Guidant believes
has valuable experience developing and marketing endovascular AAA systems;
(vi) the detailed financial analyses of Alex. Brown, Guidant's financial
advisor in connection with the Merger, and its opinion that the Exchange
Ratio is fair, from a financial point of view, to Guidant; and
(vii) the intended treatment of the Merger as a tax-free reorganization
and as a pooling-of-interests transaction for accounting purposes.
The Guidant Board also considered a number of potentially negative factors in
its deliberations concerning the Merger, including:
(i) the long term risks that EVT may not remain competitive in the market
for endovascular AAA system;
(ii) the fact that the development of marketable endovascular AAA systems
may be more expensive or require more time than currently anticipated; and
(iii) the fact that Guidant's management and financial advisors
anticipate that the Merger would initially cause earnings dilution.
In view of the wide variety of factors, both positive and negative,
considered by the Guidant Board, the Guidant Board did not find it practicable
to quantify or otherwise assign relative weight to the specific factors
considered in making its determination. However, after taking into
consideration all of the factors set forth above, the Guidant Board concluded
that the terms of the Merger Agreement and the Merger are in the best interests
of Guidant.
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EVT's Reasons for the Merger
The EVT Board has determined that the terms of the Merger Agreement are fair
to, and in the best interests of, EVT and its stockholders. Accordingly, the
EVT Board has unanimously approved the Merger Agreement and recommends that
the stockholders of EVT vote FOR the adoption of the Merger Agreement and
consummation of the Merger. In reaching its determination, the EVT Board
consulted with EVT's management team, financial advisor, and legal counsel.
The EVT Board considered the following material factors:
(i) an opportunity for EVT stockholders to reduce their exposure to the
risks associated with EVT's reliance on a single product line and the
difficulty of competing against larger, more diversified companies with
substantially greater financial resources;
(ii) an opportunity for EVT stockholders to reduce their exposure to the
risks and dilution associated with EVT's needs to obtain additional capital
resources in order to finance EVT to a cash flow positive position;
(iii) an opportunity for EVT stockholders to reduce their exposure to the
risks associated with a changing and unpredictable regulatory environment
in the United States and its potential impact on the timely receipt of
approvals necessary for product commercialization;
(iv) the changing healthcare environment with its increasing focus on
cost containment, coupled with the trend of consolidation in the medical
device industry resulting in the emergence of large companies with broad
product lines which are able to more effectively compete in such a market
environment;
(v) the fact that EVT's two major competitors have already been acquired
by companies of the profile discussed in (iv) above and the resulting
impact on EVT's current competitiveness in international markets;
(vi) potential revenue synergies, including the ability to market EVT's
products through Guidant's direct distribution network and sell its
products along with a much broader portfolio of less invasive therapeutic
devices;
(vii) the ability to accelerate product development and product line
diversification by leveraging the resources and technological expertise of
the combined company;
(viii) the ability for EVT to more readily secure critical raw materials
from suppliers who have become increasingly hesitant to deal with smaller
companies in light of litigation concerns;
(ix) the continued role that EVT management, which the EVT Board believes
has valuable experience developing and marketing endovascular AAA systems,
will play in the combined company. See "The Merger--Interests of Certain
Persons in the Merger";
(x) the fact that, although the EVT Board did not conduct a formal
auction process, a prior corporate relationship with certain preferred
negotiating rights did not result in the acquisition of EVT, and no one
else made a bone fide offer to acquire EVT or expressed serious interest in
acquiring EVT;
(xi) the fact that, although closing prices for EVT Common Stock during
the week prior to public announcement of the Merger ranged from $15.50 to
$17.13 per share, the consideration per share of EVT Common Stock that may
be received under the Merger Agreement represents a substantial premium
over historical trading prices of EVT Common Stock;
(xii) the downside protection offered to the EVT stockholder in the event
that Guidant Common Stock substantially declines in value prior to the
Effective Time;
(xiii) the fact that the Merger will afford EVT stockholders an
opportunity to retain an equity interest in the combined company in a tax
free exchange and achieve substantially greater liquidity than could be
achieved by holding EVT Common Stock;
(xiv) the lack of any substantial impediments to the ability of the EVT
Board to entertain alternative proposals for a business combination
transaction, negotiate with, and give information to, third parties and
terminate the Merger Agreement in the event of an alternative proposal, if
required by the EVT Board's fiduciary duties to EVT stockholders, although
the EVT Board did note in this regard that a termination fee would be
payable in certain circumstances upon such a termination, as described
below in "The Merger Agreement--Termination Fees";
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(xv) the likelihood of consummation of the Merger resulting from limited
conditions to consummation outlined in the terms of the Merger Agreement;
(xvi) the financial analyses of NationsBanc Montgomery described herein
and the written opinion of NationsBanc Montgomery dated October 5, 1997,
that the consideration to be received by holders of EVT Common Stock
pursuant to the Merger Agreement was fair from a financial point of view,
as of such date; and
(xvii) the opportunity for the stockholders of EVT to vote on whether to
approve the Merger.
The EVT Board also considered the following potentially negative factors in
its deliberations concerning the Merger:
(i) the loss of control over future operations of EVT following the
Merger;
(ii) the risk that the combined company would be unable to retain key
employees;
(iii) the risk that the benefits sought to be achieved in the Merger may
not be achieved;
(iv) the fact that Guidant Common Stock was trading at or near historical
highs and that recent price/earnings multiples for Guidant are high
relative to historical multiples and among the highest in the medical
device industry generally;
(v) the fact that Guidant is currently engaged in patent litigation with
a number of competitors and that an adverse outcome in certain of these
cases could have a material adverse effect on the price of Guidant Common
Stock;
(vi) the potential negative impact on EVT's ability to readily complete
an equity financing or attract other interest in the event that, for any
reason, the Merger is not consummated; and
(vii) the other risks described under "Risk Factors".
The EVT Board discussed with EVT's management and financial advisors the
prospects for combinations with companies other than Guidant and whether
incremental or superior benefits could be achieved through such combinations.
The EVT Board also discussed the risks and benefits of a stand-alone strategy.
After reviewing the potentially negative factors, the EVT Board concluded that
they were outweighed by the positive factors and, accordingly determined that
the Merger is fair to, and in the best interests of, EVT and its stockholders.
In view of the wide variety of factors, both positive and negative,
considered by the EVT Board, the EVT Board did not find it practicable to
quantify or otherwise assign relative weight to the specific factors
considered in making its determination. However, after taking into
consideration all of the factors set forth above, the EVT Board agreed that
the Merger is fair to, and in the best interests of, EVT and its stockholders.
THE EVT BOARD UNANIMOUSLY RECOMMENDS THAT EVT STOCKHOLDERS VOTE FOR APPROVAL
OF THE MERGER AGREEMENT AND THE CONSUMMATION OF THE MERGER.
OPERATIONS FOLLOWING THE MERGER
Following the Merger, EVT will continue its operations as a wholly-owned
subsidiary of Guidant. The membership of the Guidant Board will remain
unchanged as a result of the Merger, and the members of the EVT Board as a
result of the Merger will be replaced by officers of Guidant. The stockholders
of EVT will become stockholders of Guidant, and their rights as stockholders
will be governed by Guidant's Amended and Restated Articles of Incorporation
(the "Guidant Articles") and Guidant's bylaws the ("Guidant Bylaws") and the
laws of the State of Indiana. See "Comparison of Rights of Stockholders of
Guidant and EVT."
OPINION OF FINANCIAL ADVISOR
Pursuant to an engagement letter dated March 12, 1997 (the "Engagement
Letter"), EVT engaged NationsBanc Montgomery to act as its financial advisor
in connection with identifying opportunities for maximizing stockholder value,
including the potential sale of EVT. NationsBanc Montgomery is a nationally
recognized firm and, as part of its investment banking activities, is
regularly engaged in the valuation of businesses and their securities in
connection with merger transactions and other types of acquisitions,
negotiated
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underwritings, secondary distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes. EVT
selected NationsBanc Montgomery as its financial advisor on the basis of its
experience and expertise in transactions similar to the Merger, its reputation
in the health care and investment communities and its existing investment
banking relationship with EVT. NationsBanc Montgomery was not requested to nor
did it solicit or assist EVT in soliciting indications of interest from third
parties for all or any part of EVT. Further, NationsBanc Montgomery was not
retained to nor did it advise EVT with respect to EVT's underlying decision to
proceed with or effect the Merger.
At the October 5, 1997 meeting of EVT's Board, NationsBanc Montgomery
delivered its oral opinion, subsequently confirmed in writing as of such date,
that the consideration to be received by EVT's stockholders in the Merger was
fair to EVT's stockholders from a financial point of view, as of the date of
such opinion. NationsBanc Montgomery did not determine the form or amount of
consideration to be offered to stockholders in the Merger. The amount of such
consideration was agreed to as a result of negotiations between EVT and its
financial and legal advisors (including NationsBanc Montgomery) and Guidant
and its financial and legal advisors. No limitations were imposed by EVT on
NationsBanc Montgomery with respect to the investigations made or procedures
followed in rendering its opinion.
THE FULL TEXT OF NATIONSBANC MONTGOMERY'S WRITTEN OPINION TO EVT'S BOARD,
DATED OCTOBER 5, 1997 WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS
CONSIDERED AND LIMITATIONS OF REVIEW BY NATIONSBANC MONTGOMERY, IS ATTACHED
HERETO AS APPENDIX B AND IS INCORPORATED HEREIN BY REFERENCE. THE FOLLOWING
SUMMARY OF NATIONSBANC MONTGOMERY'S OPINION IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE FULL TEXT OF THE OPINION, WHICH SHOULD BE READ CAREFULLY AND
IN ITS ENTIRETY. NATIONSBANC MONTGOMERY'S OPINION IS ADDRESSED TO EVT'S BOARD,
COVERS ONLY THE FAIRNESS OF THE CONSIDERATION TO BE RECEIVED BY HOLDERS OF
EVT'S COMMON STOCK, AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF
EVT'S COMMON STOCK AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE SPECIAL
MEETING. IN FURNISHING SUCH OPINION, NATIONSBANC MONTGOMERY DOES NOT ADMIT
THAT IT IS AN EXPERT WITHIN THE MEANING OF SECTION 11 OF THE SECURITIES ACT
NOR DOES IT ADMIT THAT ITS OPINION CONSTITUTES A REPORT OR VALUATION WITHIN
THE MEANING OF SECTION 11 OF THE SECURITIES ACT, AND STATEMENTS TO SUCH EFFECT
ARE INCLUDED IN NATIONSBANC MONTGOMERY'S OPINION.
In connection with its opinion, NationsBanc Montgomery, among other things:
(i) reviewed certain publicly available financial and other data with respect
to EVT and Guidant, including the consolidated financial statements for recent
years and interim periods to June 30, 1997 and certain other relevant
financial and operating data relating to EVT and Guidant made available to
NationsBanc Montgomery from published sources and, with respect to EVT, from
internal records; (ii) reviewed the Merger Agreement; (iii) reviewed certain
publicly available information concerning the trading of, and the trading
market for, EVT Common Stock and Guidant Common Stock; (iv) compared EVT and
Guidant from a financial point of view with certain other companies in the
medical technology industry which NationsBanc Montgomery deemed to be
relevant; (v) considered the financial terms, to the extent publicly
available, of selected recent business combinations of companies in the
medical technology industry which NationsBanc Montgomery deemed to be
comparable, in whole or in part, to the Merger; (vi) reviewed and discussed
with representatives of the management of EVT certain information of a
business and financial nature regarding EVT, furnished to NationsBanc
Montgomery by them, including financial forecasts and related assumptions of
EVT; (vii) reviewed certain third-party analysts' reports, including financial
forecasts, regarding Guidant; (viii) made inquiries regarding and discussed
the Merger and the Merger Agreement and other matters related thereto with
EVT's counsel; and (ix) performed such other analyses and examinations as
NationsBanc Montgomery deemed appropriate.
In connection with its review, NationsBanc Montgomery did not assume any
obligation independently to verify the foregoing information and relied on
such information being accurate and complete in all material respects. With
respect to the financial forecasts for EVT provided to NationsBanc Montgomery
by EVT's management, upon their advice and with EVT's consent NationsBanc
Montgomery assumed for purposes of its opinion that the forecasts (including,
without limitation, the assumptions regarding regulatory approval timelines,
revenue growth rates and operating margins) were reasonably prepared on bases
reflecting the best available
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estimates and judgments of EVT's management at the time of preparation as to
the future financial performance of EVT. NationsBanc Montgomery also assumed
that there were no material changes in EVT's or Guidant's assets, financial
condition, results of operations, business or prospects since the respective
dates of their last financial statements made available to it. NationsBanc
Montgomery relied on advice of counsel and independent accountants to EVT as
to all legal and financial reporting matters with respect to EVT and Guidant,
the Merger and the Merger Agreement, including the legal status and financial
reporting of litigation involving EVT and Guidant. NationsBanc Montgomery
assumed that the Merger would be consummated in a manner that complies in all
respects with the applicable provisions of the Securities Act, the Exchange
Act and all other applicable federal and state statutes, rules and
regulations. EVT informed NationsBanc Montgomery, and NationsBanc Montgomery
assumed, that the Merger would be recorded as a pooling of interests under
generally accepted accounting principles. NationsBanc Montgomery further
assumed with EVT's consent that the Merger would be consummated in accordance
with the terms in the Merger Agreement, without any further amendment thereto
and without waiver by EVT of any of the conditions to its obligations
thereunder. In addition, NationsBanc Montgomery did not assume responsibility
for making an independent evaluation, appraisal or physical inspection of any
of the assets or liabilities (contingent or otherwise) of EVT or Guidant, nor
was NationsBanc Montgomery furnished with any such appraisals. Finally,
NationsBanc Montgomery's opinion was based on economic, monetary, market and
other conditions as in effect on, and the information made available to it as
of, October 5, 1997. Accordingly, although subsequent developments may affect
NationsBanc Montgomery's opinion, NationsBanc Montgomery has not assumed any
obligation to update, revise or reaffirm its opinion.
The following is a summary of the report presented by NationsBanc Montgomery
to EVT's Board on October 5, 1997 in connection with its opinion.
Discounted Cash Flow Analysis. NationsBanc Montgomery performed a discounted
cash flow analysis on certain projected financial statements that were
provided to NationsBanc Montgomery by the management of EVT.
In performing this analysis, NationsBanc Montgomery calculated the net
present value of projected cash flows for the fiscal years 1998 through 2007.
NationsBanc Montgomery calculated EVT's terminal values in fiscal year 2007
based on price/EBIT (earnings before interest and taxes) multiples ranging
from 14x to 16x. These terminal values were then discounted to present value
using discount rates ranging from 32.5% to 37.5%. Using these projections and
assumptions, NationsBanc Montgomery determined that the implied per share
value of EVT's Common Stock ranged from $12.72 to $21.33. Montgomery placed
particular emphasis on its analysis utilizing a 35% discount rate, which
resulted in an implied per share value of EVT's Common Stock ranging from
$15.51 to $17.51.
Comparable Public Company Analysis. NationsBanc Montgomery reviewed and
analyzed the estimated calendar year 2000 revenue, EBIT and fully-taxed
earnings for certain publicly traded companies that it considered comparable
to EVT, based upon publicly available analyst information. NationsBanc
Montgomery examined the market value to estimated calendar year 2000 revenue,
EBIT and fully-taxed earnings multiples for: Cambridge Heart Inc., Cardiac
Pathways Corp., Cardima, Inc., CardioGenesis Corp., CardioThoracic Systems
Inc., Computer Motion, Inc., Endocardial Solutions, Inc., Heartport, Inc.,
Heartstream, Inc., InControl, Inc. and Novoste Corp (the "Comparable
Companies").
NationsBanc Montgomery computed an average market value to estimated
calendar year 2000 revenue multiple for the Comparable Companies of 1.4x.
NationsBanc Montgomery then applied this multiple to EVT's estimated 2000 year
revenue, which resulted in an implied valuation for EVT of $15.88 per share.
Application of this multiple to NationsBanc Montgomery's research analyst's
estimated 2000 year revenue for EVT resulted in an implied valuation for EVT
of $12.32 per share.
NationsBanc Montgomery computed an average market value to estimated
calendar year 2000 EBIT multiple for the Comparable Companies of 5.4x.
NationsBanc Montgomery then applied this multiple to EVT's projected 2000 year
EBIT, which resulted in an implied valuation for EVT of $19.60 per share.
Application of this multiple to Montgomery's research analyst's estimated 2000
year EBIT for EVT resulted in an implied valuation for EVT of $13.55 per
share.
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NationsBanc Montgomery computed an average market value to estimated
calendar year 2000 fully-taxed earnings multiple for the Comparable Companies
of 8.8x. NationsBanc Montgomery then applied this multiple to EVT's projected
2000 fully-taxed earnings, which resulted in an implied valuation for EVT of
$20.29 per share. Application of this multiple to NationsBanc Montgomery's
research analyst's estimated 2000 fully-taxed earnings for EVT resulted in an
implied valuation for EVT of $14.14 per share.
Premiums Paid Analysis. NationsBanc Montgomery reviewed select recent
medical technology and cardiovascular related transactions which it considered
relevant. NationsBanc Montgomery analyzed the following transactions (listed
below by acquiror/target): Endosonics Corp./Cardiometrics, Inc., Boston
Scientific Corp./Target Therapeutics, St. Jude Medical, Inc./Ventritex, Inc.,
Pfizer, Inc./Corvita Corp., Medtronic Inc./InStent, Inc., St. Jude Medical,
Inc./Daig Corporation, Johnson & Johnson/Cordis Corp., Boston Scientific
Corp./EP Technologies, Inc., Boston Scientific Corp./Heart Technology, Inc.,
Boston Scientific Corp./SciMed Life Systems, Inc., Boston Scientific
Corp./Cardiovascular Imaging Systems, and Medtronic Inc./Electromedics Inc.
(the "Comparable Transactions").
NationsBanc Montgomery analyzed the price paid per share by acquirors (the
"Purchase Price Per Share") in the Comparable Transactions. The Purchase Price
Per Share for each of these transactions was compared to the target stock
price one day, one week and one month prior to announcement of the transaction
in order to calculate the premium over such stock price. NationsBanc
Montgomery computed the average one day prior, one week prior and one month
prior premium paid in the Comparable Transactions to be 22.0%, 25.0% and
39.3%, respectively. Applying these percentages to EVT's stock prices one day
prior, one week prior and one month prior to the announcement of the Merger
Agreement resulted in an implied valuation for EVT of $19.97, $16.56 and
$16.02, respectively, per share. NationsBanc Montgomery calculated the one
day, one week and one month prior premium to be paid in the Merger (assuming
Exchange Consideration valued at $20.00 per share of EVT Common Stock) to
EVT's stock price to be 22.1%, 50.9% and 73.9%, respectively, compared to the
one day, one week and one month prior premiums of 22.0%, 25.0% and 39.3%,
respectively, for the Comparable Transactions.
NationsBanc Montgomery also analyzed the average closing price of EVT's
Common Stock over various periods since EVT's initial public offering in
February of 1996. NationsBanc Montgomery noted that the assumed consideration
of $20.00 per share represented a 78.6% premium to the average closing price
of $11.20 per share since EVT's initial public offering. NationsBanc
Montgomery noted that the assumed consideration of $20.00 per share
represented an 81.5% premium to the average closing price of $11.02 per share
for the latest twelve months prior to October 5, 1997. NationsBanc Montgomery
noted that the assumed consideration of $20.00 per share represented a 72.1%
premium to the average closing price of $11.62 per share for the latest 90
trading days prior to October 5, 1997. NationsBanc Montgomery noted that the
assumed consideration of $20.00 per share represented a 49.8% premium to the
average closing price of $13.35 per share for the latest 30 trading days prior
to October 5, 1997.
Discounted Future Earnings. NationsBanc Montgomery reviewed and analyzed the
estimated year 2000 earnings for EVT based on EVT's projections and
NationsBanc Montgomery's research analyst's estimates. NationsBanc Montgomery
applied a range of one year forward earnings multiples ranging from 18x to 22x
to the estimated year 2000 fully taxed net income and discounted the range of
values back two years at 35%. Utilizing these earnings multiples and discount
rate, the implied per share value of EVT's Common Stock utilizing EVT's
projections ranged from $22.76 to $27.82, and the implied per share value of
EVT's Common Stock utilizing NationsBanc Montgomery's research analyst's
projections ranged from $15.87 to $19.39.
The summary set forth above does not purport to be a complete description of
the presentation by NationsBanc Montgomery to the Board of Directors or the
analyses performed by NationsBanc Montgomery. The preparation of a fairness
opinion is not necessarily susceptible to partial analysis or summary
description. NationsBanc Montgomery believes that its analysis and the summary
set forth above must be considered as a whole and that selecting portions of
its analyses and of the factors considered, without considering all analyses
and factors, would create an incomplete view of the process underlying the
analyses set forth in its presentation
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to the EVT Board. In addition, NationsBanc Montgomery may have given various
analyses more or less weight than other analyses, and may have deemed various
assumptions more or less probable than other assumptions so that the ranges of
valuations resulting from any particular analysis described above should not
be taken to be NationsBanc Montgomery's view of the actual value of EVT. The
fact that any specific analysis has been referred to in the summary above is
not meant to indicate that such analysis was given greater weight than any
other analysis. In arriving at its opinion, NationsBanc Montgomery did not
ascribe a specific range of values to EVT, but rather made its determination
as to the fairness, from a financial point of view, of the consideration
received by the holders of EVT's Common Stock in the Merger on the basis of
the financial and comparative analyses described above.
In performing its analyses, NationsBanc Montgomery made numerous assumptions
with respect to industry performance, general business and economic conditions
and other matters, many of which are beyond the control of EVT. The analyses
performed by NationsBanc Montgomery are not necessarily indicative of actual
values or actual future results, which may be significantly more or less
favorable than suggested by such analyses. Such analyses were prepared solely
as part of NationsBanc Montgomery's analysis of the fairness of the
transaction contemplated by the Merger Agreement to EVT's stockholders and
were provided to EVT's Board in connection with the delivery of NationsBanc
Montgomery's opinion. The analyses do not purport to be appraisals or to
reflect the prices at which a company might actually be sold or the prices at
which any securities may trade at the present time or at any time in the
future. NationsBanc Montgomery used in its analyses various projections of
future performance prepared by the management of EVT and by NationsBanc
Montgomery's research analyst. The projections are based on numerous variables
and assumptions which are inherently unpredictable and must be considered not
certain of occurrence as projected. Accordingly, actual results could vary
significantly from those set forth in such projections.
Pursuant to the Engagement Letter, EVT has agreed to pay NationsBanc
Montgomery a fee equal to 1% of the total consideration involved in the
Merger. EVT has agreed to pay NationsBanc Montgomery $350,000 upon rendering
its opinion to the Board and will be obligated to pay NationsBanc Montgomery
the remainder of its fee upon closing of the Merger. Accordingly, a
significant portion of NationsBanc Montgomery's fee is contingent upon the
closing of the Merger. EVT has also agreed to reimburse NationsBanc Montgomery
for its reasonable out-of-pocket expenses, including counsel fees, up to a
maximum of $25,000. Pursuant to a separate letter agreement, EVT has agreed to
indemnify NationsBanc Montgomery, its affiliates, and their respective
partners, directors, officers, agents, consultants, employees and controlling
persons against certain liabilities, including liabilities under federal
securities laws.
In the ordinary course of business, NationsBanc Montgomery actively trades
the equity securities of EVT for its own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities. NationsBanc Montgomery also has in the past performed certain
investment banking services for EVT, which included participation as an
underwriter in EVT's initial public offering in February 1996.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the EVT Board, EVT stockholders should
be aware that certain members of EVT's management and the EVT Board have
certain interests in the Merger that are in addition to the interests of EVT
stockholders generally.
Stock Option Plans. Under the EVT 1995 Stock Option Plan ("1995 Option
Plan"), EVT options granted after the initial public offering of EVT to
outside members of the EVT Board will become fully exercisable and vested in
connection with the Merger. EVT Board members, employees, consultants and
officers of EVT, including, but not limited to, W. James Fitzsimmons, G.
Bradley Cole, Elizabeth McDermott, Ronald R. Giannotti, Lori A. Adels, and Dr.
Victor Bernhard (collectively, the "EVT Officers"), hold outstanding options
granted under the 1995 Option Plan. Pursuant to the 1995 Option Plan and the
Merger Agreement, Guidant will substitute new options to purchase shares of
Guidant Common Stock in exchange for all outstanding options under the 1995
Option Plan and such new options will be exercisable for the number of shares
of Guidant Common Stock equal to the number of shares of EVT Common Stock
purchasable under the original option
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multiplied by the Exchange Ratio and rounded down to the nearest whole number
and at an exercise price calculated by dividing the original exercise price by
the Exchange Ratio and rounding up to the nearest whole cent. Each officer,
director, employee or consultant who exercises his or her EVT options prior to
the Merger will receive in the Merger shares of Guidant Common Stock, which
stock will be freely tradable immediately following the consummation of the
Merger, subject only to contractual restrictions on the optionee's ability to
resell the Guidant Common Stock and the limitations set forth under Rule 145
under the Securities Act.
In the event that the employment of an EVT Officer is Involuntarily
Terminated (as defined below) within twenty-four (24) months following the
Merger, then under the terms of the 1995 Option Plan and certain letter
agreements entered into by EVT with each of the EVT Officers in 1996, the
exercisability or vesting of each outstanding option held by such officer will
automatically accelerate and the EVT Officer will have up to a one (1)-year
period from the date of the Involuntary Termination in which to exercise the
option. Involuntary Termination is defined in the 1995 Option Plan to include
a termination by EVT without cause or a voluntary termination by the EVT
Officer following (I) a change in the officer's position with EVT which
materially reduces the officer's level of responsibility, (II) a reduction by
more than 15% in the officer's level of compensation (including base salary,
fringe benefits and bonuses) or (III) a change in the officer's place of
employment which is more than 50 miles from the officer's place of employment
prior to the change, provided such change or reduction is effected without the
officer's consent.
As of October 5, 1997, options to purchase a total of 1,269,207 shares of
EVT Common Stock, at exercise prices ranging from $1.008 to $15.50 per share,
were held by 180 EVT employees and consultants. The EVT Officers hold the
following options to purchase shares of EVT Common Stock: W. James
Fitzsimmons: 244,288 shares at exercise prices ranging from $1.008 to $9.25
per share, G. Bradley Cole: 126,428, at exercise prices ranging from $1.47 to
$12.625 per share, Elizabeth McDermott: 90,000, at exercise prices ranging
from $9.125 to $12.625 per share, Ronald R. Giannotti: 85,000, at exercise
prices ranging from $9.25 to $10.00 per share, and Lori A. Adels: 89,520, at
exercise prices ranging from $1.008 to $9.25 per share. Dr. Victor M. Bernhard
exercised an option to purchase shares, of which 18,849 shares were unvested
as of October 5, 1997. Vaughn D. Bryson exercised an option to purchase
shares, of which 7,936 shares were unvested as of October 5, 1997, but will
become fully vested upon the Merger. In addition, each of the outside members
of the EVT Board, Tony R. Brown, Vaughn D. Bryson and H. DuBose Montgomery,
hold options exercisable for 12,000 shares of EVT Common Stock at exercise
prices ranging from $11.25 to $12.00 per share.
Employment Agreements. Guidant has not entered into employment agreements
with any of the EVT Officers. However, Guidant has discussed the terms of
employment it proposes to offer to each of the EVT Officers should they agree
to continue in the employ of EVT after the Merger. In each case Guidant has
offered to continue the EVT Officer as a vice president of Guidant at the same
salary that he or she is earning currently at EVT. Each of the EVT Officers
would be eligible for an annual cash bonus pursuant to the existing terms of
Guidant's officer bonus plan. Each of the EVT Officers has also been informed
that he or she would be offered an option to purchase shares of Guidant Common
Stock after the Merger is consummated, subject to vesting and other
conditions. Guidant proposes to grant an option to purchase a number of shares
of Guidant Common Stock currently expected to be 40,000 shares or less with
respect to any one EVT Officer. Each of the EVT Officers has signed an
agreement with Guidant dated as of October 5, 1997 in which the EVT Officer
indicated that he or she had no present intention to terminate his or her
employment with EVT.
EVT's bylaws provide for mandatory indemnification of its directors and
officers and permissible indemnification of employees including officers and
other agents to the maximum extent permitted by the Delaware General
Corporation Law. EVT's Certificate of Incorporation provides that, pursuant to
Delaware law, its directors shall not be liable for monetary damages for
breach of their fiduciary duty of care as directors to EVT and its
stockholders. EVT has entered into Indemnification Agreements with its
officers and directors. These agreements require EVT, among other things, to
indemnify its directors and officers against certain liabilities that arise by
reason of their status or service as directors or officers (other than
liabilities arising from
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actions not taken in good faith or in a manner the indemnitee believed to be
in the best interests of EVT) and, with respect to any criminal proceeding,
provided indemnitee had no reasonable cause to believe his conduct was
unlawful, and to advance their expenses incurred as a result of any proceeding
against them as to which they could be indemnified. Guidant has agreed to
continue certain indemnification rights following consummation of the Merger.
See "The Merger Agreement--Indemnification and Insurance."
Employee Stock Purchase Plan. The Merger Agreement provides that, prior to
the Effective Time, all outstanding purchase rights under EVT's Employee Stock
Purchase Plan (the "Stock Purchase Plan") will be exercised upon the earlier
of January 30, 1998 or immediately prior to the Effective Time, provided that
if the Effective Time is later than January 31, 1998, then a new purchase
period will commence on February 2, 1998 and will end upon the earlier of July
31, 1998 or immediately prior to the Effective Time, and each participant in
the Stock Purchase Plan will be issued shares of EVT Common Stock at that time
pursuant to the terms of the Employee Stock Purchase Plan and each share of
EVT Common Stock so issued shall by virtue of the Merger be converted into the
right to receive the Exchange Consideration. Each of the EVT Officers
contributes through payroll deduction to the Employee Stock Purchase Plan and
will purchase a maximum of 1,500 shares of EVT Common Stock immediately prior
to the Effective Time.
Severance Plan. Each of the EVT Officers is eligible for certain severance
benefits under the EVT Officers Severance Plan ("Severance Plan"), upon the
EVT Officer's termination of employment without cause, provided the officer
executes a general release of claims in favor of EVT. Under the Severance
Plan, if the EVT Officer's employment is involuntarily terminated within 12
months of a Change in Control, then the EVT Officer will be entitled to 24
months' salary plus 200% of such officer's target bonus payable in a lump sum
and continuation of certain health benefits for up to 18 months. If the EVT
Officer's employment is involuntarily terminated more than 12 months but less
than 24 months following a Change in Control, then the EVT Officer will be
entitled to 12 months' salary plus such officer's annual target bonus payable
in a lump sum, and continuation of certain health benefits for up to 12
months. The Merger will constitute a Change in Control for purposes of the
Severance Plan. Involuntary termination is defined in the Severance Plan to
include a termination by EVT without cause or a voluntary termination by the
EVT Officer following (I) a change in the officer's position with EVT which
materially reduces the officer's level of responsibility, (II) a reduction in
the officer's level of cash compensation (including base salary and bonuses)
or (III) a change in the officer's place of employment which is more than 25
miles from the officer's place of employment prior to the change, provided
such change or reduction is effected without the officer's written
concurrence. Each of the EVT Officers has agreed pursuant to a letter
agreement dated October 5, 1997 between the EVT Officer and Guidant that, to
the extent the officer continues in the employ of Guidant or EVT following the
Merger in a vice president-level position, then the EVT Officer will not have
suffered a material reduction in responsibilities for purposes of the
Severance Plan. The Severance Plan provides for a reduction in the cash
severance benefit payable under the Severance Plan if the EVT Officer would be
subject to the parachute excise tax imposed under Section 280G of the Code (as
hereinafter defined), but only to the extent that such reduction results in
the receipt of a greater after-tax benefit by the officer.
Employee Benefits. The Merger Agreement provides that following the
Effective Time, Guidant will provide benefits to EVT's employees and officers
that are substantially identical to the benefits provided to similarly
situated employees of Guidant and its other subsidiaries and Guidant will
grant all EVT employees credit for all service (to the same extent as service
with Guidant is taken into account with respect to similarly situated
employees of Guidant) with EVT prior to the Effective Time for (i) vesting
purposes and (ii) for purposes of vacation accrual after the Effective Time as
if such service with EVT was service with Guidant. Where applicable with
respect to any medical or dental benefit plan of Guidant, Guidant will waive
any pre-existing condition exclusion and actively-at-work requirements and
provide that any covered expenses incurred on or before the Effective Time by
an employee or an employee's covered dependents shall be taken into account
for purposes of satisfying applicable deductible, coinsurance and maximum out
of pocket provisions after the Effective Time to the same extent as such
expenses are taken into account for the benefit of similarly situated
employees of Guidant. Pursuant to the Merger Agreement, prior to the Effective
Time, Guidant will consult with
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appropriate officers of EVT with respect to the benefits that will be provided
to EVT's employees and officers by Guidant. The Merger Agreement further
provides that EVT's employees who are terminated without cause after the
Effective Time will receive severance payments in accordance with the
Severance Plan or the EVT Key Employees Severance Plan, to the extent such
individual is eligible under either of the plans.
ACCOUNTING TREATMENT
The Merger is expected to be accounted for as a pooling of interests in
accordance with Accounting Principles Board Opinion No. 16 ("APB No. 16"), the
interpretive releases issued thereto, and the pronouncements of the
Commission. Under the pooling-of-interests method of accounting, the recorded
assets and liabilities of Guidant and EVT will be carried forward to the
combined company at their historical recorded amounts, income of the combined
company will include income of EVT and Guidant for the entire fiscal year in
which the combination occurs, and the reported income of the separate
companies for previous periods will be combined and restated as income of the
combined company. It is a condition to the consummation of the Merger that
Guidant receive a letter of its independent auditors, in form and substance
reasonably satisfactory to it, stating that they concur with Guidant
management's conclusion that the Merger will qualify as a transaction to be
accounted for as a pooling of interests.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following general discussion summarizes the material federal income tax
consequences of the Merger to certain holders of EVT Common Stock who receive
Guidant Common Stock in exchange for EVT Common Stock pursuant to the Merger
and is based upon the Internal Revenue Code of 1986, as amended (the "Code"),
the applicable Treasury Department regulations thereunder, judicial authority
and current administrative rulings and practice, all as in effect as of the
date hereof. Future legislation, regulations, administrative rulings or court
decisions could significantly change such authorities either prospectively or
retroactively. Except for the discussion of transfer taxes below, the
following discussion does not address the consequences of the Merger under
state, local or foreign law nor does the discussion address all aspects of
federal income taxation that may be important to a holder of EVT Common Stock
in light of such holder's particular circumstances or to holders of EVT Common
Stock subject to special rules including, without limitation, financial
institutions, insurance companies, foreign persons or entities, tax-exempt
entities, dealers in securities, persons who acquired EVT Common Stock
pursuant to the exercise of an employee option (or otherwise as compensation)
or persons holding EVT Common Stock as part of an integrated investment
(including a "straddle") comprised of shares of EVT Common Stock and one or
more other positions. This discussion assumes that holders of EVT Common Stock
hold their respective shares as capital assets within the meaning of section
1221 of the Code.
No ruling from the Internal Revenue Service (the "IRS") concerning the
federal income tax consequences of the Merger has been or will be requested.
It is a condition to the Merger that EVT receive an opinion from Gunderson
Dettmer Stough Villeneuve Franklin & Hachigian, LLP, and that Guidant receive
an opinion from Dewey Ballantine LLP, that the Merger will qualify, for
federal income tax purposes, as a reorganization within the meaning of section
368(a) of the Code, and that Guidant and EVT will each be a party to that
reorganization within the meaning of section 368(b) of the Code. Each of these
opinions will be based upon (i) certain assumptions set forth therein and (ii)
representations by the managements of EVT and Guidant and certain stockholders
of EVT. The opinions referred to above neither bind nor preclude the IRS from
adopting a contrary position and no assurance can be given that contrary
positions will not be successfully asserted by the IRS or adopted by a court
if the issues are litigated.
THE FOLLOWING IS A SUMMARY OF CERTAIN MATERIAL FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER, WITHOUT REFERENCE TO THE PARTICULAR FACTS AND
CIRCUMSTANCES OF ANY PARTICULAR HOLDER OF EVT COMMON STOCK. IN ADDITION,
EXCEPT FOR THE DISCUSSION OF TRANSFER TAXES BELOW, THIS DISCUSSION DOES NOT
ADDRESS ANY NON-INCOME TAX OR ANY FOREIGN, STATE OR LOCAL TAX CONSEQUENCES OF
THE MERGER. THIS DISCUSSION DOES NOT ADDRESS THE TAX
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CONSEQUENCES OF ANY TRANSACTION OTHER THAN THE MERGER. ACCORDINGLY, EACH
HOLDER OF EVT COMMON STOCK IS STRONGLY URGED TO CONSULT WITH SUCH HOLDER'S TAX
ADVISOR TO DETERMINE THE PARTICULAR UNITED STATES FEDERAL, STATE, LOCAL OR
FOREIGN INCOME OR OTHER TAX CONSEQUENCES OF THE MERGER TO SUCH HOLDER.
Exchange of EVT Common Stock Solely for Guidant Common Stock. Except as
discussed below under "Cash Received in Lieu of Fractional Shares of Guidant
Common Stock," no gain or loss will be recognized for federal income tax
purposes by holders of EVT Common Stock who exchange their EVT Common Stock
for Guidant Common Stock pursuant to the Merger. The aggregate tax basis of
Guidant Common Stock received as a result of the Merger will be the same as
the holder's aggregate tax basis in the EVT Common Stock surrendered in the
exchange (reduced by any tax basis allocable to fractional shares exchanged
for cash) and the holding period of the Guidant Common Stock received will
include the holding period of the EVT Common Stock surrendered therefor.
Cash Received in Lieu of Fractional Shares of Guidant Common Stock. No
fractional shares of Guidant Common Stock will be issued upon the surrender
for exchange of certificates representing shares of EVT Common Stock. The
payment of cash to a holder of EVT Common Stock in lieu of a fractional share
interest in Guidant Common Stock will be treated as if the fractional share
had been distributed as part of the exchange and then redeemed by Guidant. The
cash payment will be treated as having been received as a distribution in
payment for the Guidant Common Stock hypothetically redeemed as provided in
section 302 of the Code and generally should result in the recognition of
capital gain or loss measured by the difference between the amount of cash
received and the portion of the tax basis of the share of EVT Common Stock
allocable to such fractional share interest. Such capital gain or loss will be
long-term capital gain or loss if such share of EVT Common Stock has been held
for more than one year at the Effective Time. Long-term capital gain
recognized by certain non-corporate stockholders is subject to federal income
tax at preferential capital gains rates, and such gain recognized with respect
to an asset with a holding period of more than 18 months is subject to federal
income tax at further reduced capital gains rates.
Transfer Taxes. Certain state and local taxing authorities (e.g., New York
State) may impose certain taxes on the direct or indirect transfer of an
interest in real property (including leases) located within such jurisdiction
("Transfer Taxes"). Transfer Taxes may also be imposed in connection with
certain direct or indirect ownership changes of an entity owning a real
property interest located within such jurisdiction. Guidant and EVT do not
anticipate that Transfer Taxes will be incurred by holders of EVT Common Stock
as a result of the Merger. If any such Transfer Taxes are imposed, however, in
accordance with the Merger Agreement, EVT will declare a special dividend (the
"Special Dividend") to the holders of EVT Common Stock in an amount equal to
the amount of any Transfer Taxes that may be incurred by the holders of EVT
Common Stock, and, in satisfaction of the Special Dividend, EVT will pay such
Transfer Taxes on behalf of the holders of EVT Common Stock. No money will be
distributed with respect to the Special Dividend. PURSUANT TO THE MERGER
AGREEMENT, THE HOLDERS OF EVT COMMON STOCK WILL BE DEEMED TO HAVE: (I)
AUTHORIZED EVT TO FILE ANY TAX RETURNS RELATING TO TRANSFER TAXES AND PAY ANY
TRANSFER TAXES ARISING IN CONNECTION WITH THE MERGER AND (II) AGREED TO BE
BOUND BY THE VALUES AND ALLOCATIONS ESTABLISHED BY EVT ON ANY SUCH TAX
RETURNS.
For federal income tax purposes, the payment of Transfer Taxes by EVT, if
any, generally should be treated as a distribution by EVT to each holder of
EVT Common Stock taxable to such holder as a dividend if EVT has sufficient
earnings and profits. Any income taxes owing on account of such deemed
distribution will be the responsibility of the holders of EVT Common Stock.
Each holder of EVT Common Stock is urged to consult with such holder's tax
advisor to determine the particular United States federal, state, local or
foreign income or other tax consequences to such holder resulting from EVT's
payment of any Transfer Taxes.
Reporting Requirements. Each holder of EVT Common Stock that receives
Guidant Common Stock in the Merger will be required to retain records and file
with such holder's federal income tax return a statement setting forth certain
facts relating to the Merger.
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Backup Withholding. Unless an exemption applies under the applicable law and
regulations, the Exchange Agent (as hereinafter defined) may be required to
withhold, and, if required, will withhold, 31% of any cash payments to a
holder of EVT Common Stock in the Merger unless such holder provides the
appropriate form. A U.S. Holder should complete and sign the Substitute Form
W-9 enclosed with the letter of transmittal sent by the Exchange Agent, so as
to provide the information (including the U.S. Holder's taxpayer
identification number) and certification necessary to avoid backup
withholding, unless an applicable exemption exists and is proved in a manner
satisfactory to Guidant and the Exchange Agent. Non-U.S. Holders should
forward a completed and signed Form W-8 to the Exchange Agent to avoid backup
withholding.
As used herein, the term "U.S. Holder" means a holder of EVT Common Stock
that is (i) a citizen or resident of the United States, (ii) a corporation,
partnership or other entity created or organized in or under the laws of the
United States or of any political subdivision thereof, (iii) an estate, and,
for taxable years beginning on or before December 31, 1996, in general any
trust, the income of which is subject to United States federal income taxation
regardless of its source, or (iv) for taxable years beginning after December
31, 1996, any trust if a court within the United States is able to exercise
primary supervision over the administration of such trust and one or more
United States fiduciaries have the authority to control all substantial
decisions of such trust. A "Non-U.S. Holder" means a holder of EVT Common
Stock that is not a U.S. Holder.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED HEREIN FOR
GENERAL INFORMATION ONLY AND DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OF THE
POTENTIAL TAX EFFECTS OF THE MERGER. EVT STOCKHOLDERS ARE ADVISED TO CONSULT
THEIR OWN TAX ADVISORS REGARDING THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE
MERGER.
REGULATORY APPROVALS
Under the HSR Act, and the rules promulgated thereunder by the Federal Trade
Commission (the "FTC"), the Merger cannot be consummated until notifications
have been given and certain information has been furnished to the FTC and the
Antitrust Division of the Department of Justice (the "Antitrust Division") and
specified waiting period requirements have been satisfied. Guidant and EVT
each filed notification and report forms under the HSR Act with the FTC and
the Antitrust Division on , 1997. If a request from the FTC or Antitrust
Division for additional information and documentary material is timely
received by both Guidant and EVT, the waiting period will not terminate until
20 days after Guidant and EVT have each "substantially complied" (as such term
is defined under the HSR Act) with such request unless the FTC or the
Antitrust Division voluntarily terminates the waiting period prior to
substantial compliance.
In addition, at any time before or after consummation of the Merger, the
Antitrust Division or the FTC could take such action under the antitrust laws
as it deems necessary or desirable in the public interest, including seeking
to enjoin the consummation of the Merger or seeking divestiture of substantial
assets of Guidant or EVT. At any time before or after the Effective Time, and
notwithstanding that the HSR Act waiting period has expired, any state could
take action under the antitrust laws as it deems necessary or desirable. Such
action could include seeking to enjoin the consummation of the Merger or
seeking divestiture of EVT or businesses of Guidant or EVT by Guidant. Private
parties may also seek to take legal action under the antitrust laws under
certain circumstances.
RESALE RESTRICTIONS
All shares of Guidant Common Stock received by EVT stockholders in the
Merger will be freely transferable, except that shares of Guidant Common Stock
received by persons who are deemed to be "affiliates" (as such term is defined
under the Securities Act) of EVT at the time of the Special Meeting may be
resold by them only in transactions permitted by the resale provisions of Rule
145 promulgated under the Securities Act (or Rule 144 in the case of such
persons who become affiliates of Guidant) or as otherwise permitted under the
Securities Act. Persons who may be deemed to be affiliates of EVT or Guidant
generally
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include individuals or entities that control, are controlled by, or are under
common control with, such party and may include certain officers and directors
of such party as well as principal stockholders of such party. The Merger
Agreement requires EVT to cause each of its affiliates to execute a written
agreement to the effect that such person will not offer to sell, transfer, or
otherwise dispose of any of the shares of Guidant Common Stock issued to such
person in or pursuant to the Merger unless (a) such sale, transfer or other
disposition has been registered under the Securities Act, (b) such sale,
transfer or other disposition is made in conformity with Rule 145 under the
Securities Act or (c) in the opinion of counsel or pursuant to a "no-action"
letter obtained from the Commission by such person, such sale, transfer or
other disposition is exempt from registration under the Securities Act. In
order to qualify for pooling of interests treatment, an affiliate of either
Guidant or EVT may not sell (subject to certain de minimus exceptions), or in
any other way reduce said affiliate's relative risk to, the shares of Guidant
Common Stock until after such time as Guidant publishes results covering at
least 30 days of combined operations of Guidant and EVT.
NO APPRAISAL RIGHTS
Section 262 of the DGCL provides appraisal rights (sometimes referred to as
"dissenters' rights") to stockholders of Delaware corporations in certain
situations. However, Section 262 appraisal rights are not available to
stockholders of a corporation, such as EVT, (a) whose securities are listed on
a national securities exchange or are designated as a national market system
security on an interdealer quotation system by the National Association of
Securities Dealers, Inc. ("NASD") and (b) whose stockholders are not required
to accept in exchange for their stock anything other than stock of another
corporation listed on a national securities exchange or on an interdealer
quotation system by the NASD and cash in lieu of fractional shares. Because
EVT Common Stock is traded on such a system, the Nasdaq National Market, and
because the EVT stockholders are being offered Guidant Common Stock, which is
traded on the NYSE, and cash in lieu of fraction shares, stockholders of EVT
will not have appraisal rights with respect to the Merger.
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THE MERGER AGREEMENT
The following is a brief summary of certain provisions of the Merger
Agreement, a copy of which is attached as Appendix A to this Proxy
Statement/Prospectus and is incorporated herein by reference. This summary is
qualified in its entirety by reference to the full text of the Merger
Agreement. You are urged to read the Merger Agreement in its entirety.
Capitalized terms used in this section which are not otherwise defined shall
have the meanings set forth elsewhere in this Proxy Statement/Prospectus or in
the Merger Agreement.
THE MERGER
Subject to the terms and conditions of the Merger Agreement, at the
Effective Time, Merger Sub will be merged with and into EVT, and the separate
corporate existence of Merger Sub will thereupon cease. EVT will be the
surviving corporation in the Merger and will be a wholly-owned subsidiary of
Guidant. The effects of the Merger will be governed by the DGCL.
After the satisfaction or waiver of all conditions to the Merger, and
provided that the Merger Agreement has not been terminated or abandoned,
Guidant and EVT will cause a Certificate of Merger to be executed,
acknowledged and filed with the Secretary of State of the State of Delaware as
provided in Section 251 of the DGCL (the "Certificate of Merger"). The date of
filing of the Certificate of Merger with the Secretary of State of Delaware or
at such later time which Guidant and EVT have agreed upon and designated in
such filing as the effective time shall be the effective time of the Merger
(the "Effective Time").
As a result of the Merger and without any action on the part of the holders
of EVT Common Stock, each share of EVT Common Stock issued and outstanding
immediately prior to the Effective Time shall be converted into the right to
receive such number or fraction of a number, rounded to four decimal places,
of shares of Guidant Common Stock that equals the result obtained by dividing
$20.00 by the Closing Price; provided, however, that if the Closing Price
shall be greater than or equal to $46.63 but less than or equal to $51.75,
then the Exchange Ratio shall be fixed at 0.3865; provided, further, that if
the Closing Price shall be less than $46.63, then the Exchange Ratio shall be
the result obtained by dividing $18.00 by the Closing Price.
As a result of the Merger and without any action on the part of the holders
of EVT Common Stock at the Effective Time, all shares of EVT Common Stock
outstanding immediately prior to the Effective Time shall cease to be
outstanding and shall cease to exist, and each holder of shares of EVT Common
Stock shall thereafter cease to have any rights with respect to such shares of
EVT Common Stock, except the right to receive, without interest, the Exchange
Consideration and cash for fractional shares of Guidant Common Stock (as
described below in "--Exchange Procedures") upon the surrender of a
certificate (a "Stock Certificate") representing such shares of EVT Common
Stock. Each share of EVT Common Stock issued and held in EVT's treasury at the
Effective Time shall, by virtue of the Merger, cease to be outstanding and
shall be cancelled and retired and shall cease to exist without payment of any
consideration therefor.
At the Effective Time, all options to purchase capital stock of EVT (the
"EVT Options") outstanding, whether or not exercisable, whether or not vested,
and whether or not performance-based, under EVT's 1989 Stock Option Plan and
1995 Stock Option Plan (collectively, the "EVT Stock Option Plans") shall, by
virtue of the Merger and without any further action on the part of EVT or the
holder thereof, be converted into an option to purchase Guidant Common Stock
pursuant to the terms of the Guidant Corporation 1994 Stock Plan ("Guidant
1994 Stock Plan") in such manner that Guidant (i) is "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 EVT Options, would be a transaction within Section
424 of the Code. Each EVT Option converted by Guidant shall be exercisable
upon the same terms and conditions as under the applicable EVT Stock Option
Plan and the applicable option agreement issued thereunder, except that (A)
each such EVT Option shall be exercisable for that whole number of shares of
Guidant Common Stock (rounded down to the nearest whole share) into which the
number of shares of EVT Common Stock subject to such EVT Option immediately
prior to the Effective Time would be converted into under the Merger
Agreement, and (B) the option price per share of Guidant Common Stock shall be
an amount equal to the option price per share of
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EVT Common Stock subject to such EVT Option in effect immediately prior to the
Effective Time divided by the Exchange Ratio (the option price per share, as so
determined, being rounded downward to the nearest full cent). Guidant shall (i)
on or prior to the Effective Time, reserve for issuance the number of shares of
Guidant Common Stock that will become subject to options to purchase shares of
Guidant Common Stock ("Guidant Options"), (ii) from and after the Effective
Time, upon exercise of the Guidant Options in accordance with the terms
thereof, make available for issuance all shares of Guidant Common Stock covered
thereby, and (iii) as promptly as practicable after the Effective Time, issue
to each holder of an outstanding EVT Option a document evidencing the foregoing
substitution of options by Guidant. It is intended that the EVT Options
converted by Guidant qualify following the Effective Time as incentive stock
options as defined in Section 422 of the Code to the extent permitted under
Section 422 of the Code and to the extent the EVT Options qualified as
incentive stock options prior to the Effective Time. If necessary to register
Guidant Common Stock issuable upon the exercise of Guidant Options, Guidant
shall as promptly as practicable following the Effective Time file a
registration statement on Form S-8 or an amendment to an existing registration
statement on Form S-8 under the Securities Act, covering the shares of Guidant
Common Stock issuable upon the exercise of Guidant Options created upon the
substitution of Guidant Options by Guidant for EVT Options, except to the
extent the shares issuable pursuant to the substitution of EVT Options by
Guidant have already been registered, and will use its reasonable best efforts
to cause such registration statement to become effective and to maintain such
registration in effect until the exercise or expiration of such Guidant
Options. No payment shall be made for fractional interests, rather, the
aggregate number of shares to be issued under any substituted EVT Option
following the substitution shall be rounded down to the nearest whole number.
No payment shall be made for fractional interests; rather, the aggregate number
of shares to be issued under any assumed EVT Option shall be rounded down to
the nearest whole number.
EXCHANGE PROCEDURES
At the Effective Time Guidant shall deposit, or shall cause to be deposited,
with First Chicago Trust Company of New York (the "Exchange Agent"), for the
benefit of the holders of shares of EVT Common Stock, for exchange in
accordance with the Merger Agreement, certificates representing the shares of
Guidant Common Stock to be issued in connection with the Merger and cash in an
amount equal to Guidant's good faith estimate of the cash required to be paid
to holders of shares of EVT Common Stock in lieu of fractional shares expected
to be payable in connection with the Merger to be issued and paid pursuant to
the Merger Agreement in exchange for outstanding shares of EVT Common Stock.
Guidant may, in lieu of issuing certificates for Guidant Common Stock, make
book-entry notations pursuant to established book-entry procedures of the
Exchange Agent.
Promptly after the Effective Time, the Exchange Agent will mail to each
holder of record of shares of EVT Common Stock, a letter of transmittal to be
used by such holders in forwarding their Stock Certificates and instructions
for effecting the surrender of Stock Certificates in exchange for certificates
representing shares of Guidant Common Stock. Upon surrender to the Exchange
Agent of a Stock Certificate for cancellation, together with such letter of
transmittal, the holder of such Stock Certificate will be entitled to receive a
certificate representing that number of whole shares of Guidant Common Stock,
cash in lieu of any fractional shares (as described below) and unpaid dividends
and distributions, if any, which such holder has the right to receive in
respect of the Stock Certificate surrendered, and the Stock Certificate so
surrendered will be cancelled. EVT STOCKHOLDERS SHOULD NOT SEND IN THEIR STOCK
CERTIFICATES UNTIL THEY RECEIVE A LETTER OF TRANSMITTAL.
No fractional shares of Guidant Common Stock will be issued and any holder of
shares of EVT Common Stock entitled under the Merger Agreement to receive a
fractional share will be entitled to receive only a cash payment in lieu
thereof, which payment will be in an amount equal to the product of the Closing
Price of a share of Guidant Common Stock multiplied by the fractional share of
Guidant Common Stock that would otherwise be payable.
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No dividends on shares of Guidant Common Stock will be paid with respect to
any shares of EVT Common Stock represented by a Stock Certificate until such
Stock Certificate is surrendered for exchange as provided in the Merger
Agreement. Subject to the effect of applicable laws, following surrender of any
such Stock Certificate, there will be paid to the holder of certificates
representing whole shares of Guidant Common Stock issued in exchange therefor,
(i) at the time of such surrender, the amount of any dividends or other
distributions with a record date after the Effective Time theretofore payable
with respect to such whole shares of Guidant Common Stock and not paid, less
the amount of any withholding taxes which may be required thereon, and (ii) at
the appropriate payment date, the amount of dividends or other distributions
with a record date after the Effective Time but prior to surrender and a
payment date subsequent to surrender payable with respect to such whole shares
of Guidant Common Stock less the amount of any withholding taxes which may be
required thereon.
At or after the Effective Time, there will be no transfers on the transfer
books of EVT of shares of EVT Common Stock which were outstanding immediately
prior to the Effective Time.
Any portion of the monies from which cash payments in lieu of fractional
interests in shares of Guidant Common Stock will be made (including the
proceeds of any investments thereof) and any shares of Guidant Common Stock
that are unclaimed by the former stockholders of EVT six months after the
Effective Time will be delivered to Guidant. Any former stockholders of EVT who
have not theretofore complied with the exchange procedures in the Merger
Agreement may thereafter look to Guidant for payment of their shares of Guidant
Common Stock, cash in lieu of fractional shares, and any unpaid dividends and
distributions on shares of Guidant Common Stock, deliverable in respect of each
share of EVT Common Stock such stockholder holds. Notwithstanding the
foregoing, neither EVT, Guidant, the Exchange Agent nor any other person will
be liable to any former holder of shares of EVT Common Stock for any amount
properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
No interest will be paid or accrued on cash in lieu of fractional shares and
unpaid dividends and distributions, if any, which will be paid upon surrender
of Stock Certificates.
In the event that any Stock Certificate has been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such Stock
Certificate to be lost, stolen or destroyed and, the posting by such person of
a bond in such amount as the surviving corporation (EVT) in the Merger may
direct as indemnity against any claim that may be made against it with respect
to such Stock Certificate, the Exchange Agent will issue in exchange for such
lost, stolen or destroyed Stock Certificate the shares of Guidant Common Stock
and cash deliverable in respect thereof pursuant to the Merger Agreement.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of
Guidant and EVT relating to, among other things: (a) the due organization,
power and standing of EVT and Guidant and similar corporate matters; (b) the
authorization, execution, delivery and enforceability of the Merger Agreement
and all agreements contemplated thereby; (c) the capital structure of EVT and
Guidant; (d) the absence of conflicts under charters or bylaws and violations
of any instruments or law, and the obtainment of required consents or
approvals; (e) certain documents filed by each of EVT and Guidant with the
Commission and the accuracy of information contained therein; (f)
investigations and litigations; (g) conduct of business in the ordinary course
and the absence of certain changes or material adverse changes; (h) taxes; (i)
material contracts; (j) retirement and other employee benefit plans of EVT; (k)
qualification for pooling of interests accounting treatment; (l) brokers' and
finders' fees with respect to the Merger; (m) EVT's receipt of a fairness
opinion from its financial advisor; (n) EVT's lack of ownership of the capital
stock of Guidant; (o) environmental matters; (p) EVT's ownership interests in
its subsidiary; (q) EVT's lack of interests or investment in non-subsidiary
business entities; (r) EVT's and Guidant's legally enforceable rights to their
respective intellectual property; (s) products manufactured by EVT which would
be subject to regulation by United States or foreign governmental entities; (t)
EVT's labor
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matters; (u) the inapplicability of state takeover laws and the EVT Shareholder
Rights Plan to the Merger; (v) information concerning persons who are or could
be deemed to be affiliates of EVT within the meaning of Rule 145 of the rules
and regulations promulgated under the Securities Act; and (vi) the absence of
dissenter's rights.
CONDUCT OF BUSINESS PENDING THE MERGER
EVT has agreed (and has agreed to cause its subsidiaries), among other
things, prior to the consummation of the Merger, unless Guidant agrees in
writing or as otherwise required or permitted by the Merger Agreement: (i) to
conduct its operations according to its usual, regular and ordinary course in
substantially the same manner as theretofore conducted, (ii) to use its
reasonable efforts to preserve intact its business organizations and goodwill,
keep available the services of its officers and employees and maintain
satisfactory business relationships, (iii) promptly to notify Guidant of any
material adverse change in its condition (financial or otherwise), business,
properties, assets, liabilities or the normal course of its business or of its
properties, any litigation or governmental complaints, investigations or
hearings (or communications indicating that the same may be contemplated), or
the breach of any of its representations or warranties contained in the Merger
Agreement, (iv) to promptly notify Guidant upon receiving any written notice of
any proposed adjustment to any tax relating to EVT and (v) promptly to deliver
to Guidant true and correct copies of any report, statement or schedule filed
with the Commission subsequent to October 5, 1997. In addition, EVT has agreed
that, among other things, prior to the consummation of the Merger, unless
Guidant agrees in writing or as otherwise required or permitted by the Merger
Agreement, EVT (and its subsidiaries) will not: (i) amend their respective
Certificates of Incorporation or Bylaws; (ii) issue any shares of capital stock
or securities, except upon exercise of options outstanding as of October 5,
1997, to purchase shares of EVT Common Stock under EVT Stock Option Plans, or
effect any stock split or otherwise change its capitalization, except for up to
35,000 shares of Common Stock to be issued pursuant to the Stock Purchase Plan;
(iii) grant, confer or award any options, warrants, conversion rights or other
rights, not existing on October 5, 1997, to acquire any shares of its capital
stock or other securities of EVT or its Subsidiaries, except for up to 100,000
shares of EVT Common Stock granted to newly hired officers, employees and
consultants in the ordinary course of business consistent with past practice;
(iv) amend the terms of any EVT Plans (as defined in the Merger Agreement),
including, without limitation, any employment, severance or similar agreements
or arrangements in existence on October 5, 1997, or adopt any new employee
benefit plans, programs or arrangements or any employment, severance or similar
agreements or arrangements, except that EVT may hire employees in the ordinary
course of business consistent with past practice and may make payments under
EVT Plans; (v) declare, set aside or pay any dividend or make any other
distribution or payment with respect to any shares of its capital stock or
other ownership interest, or directly or indirectly redeem, purchase or
otherwise acquire any shares of its capital stock or capital stock of any of
its Subsidiaries, or make any commitment for any such action, except for the
repurchase of unvested shares from employees, consultants or directors in
accordance with the EVT Plans and the agreements entered into pursuant thereto;
(vi) authorize, propose or announce an intention to authorize or propose, or
enter into an agreement with respect to, any merger, consolidation or business
combination (other than the Merger), any acquisition of a material amount of
assets or securities, any disposition of a material amount of assets or
securities or any release or relinquishment of any material contract rights;
(vii) take any actions which would, or would be reasonably likely to, prevent
the Merger from qualifying as a reorganization within the meaning of Section
368(a) of the Code; (viii) incur, create, assume or otherwise become liable for
borrowed money or assume, guarantee, endorse or otherwise become responsible or
liable for the obligations of any other individual, corporation or other
entity, except pursuant to the Credit Agreement and for borrowings under
existing credit facilities in the ordinary course of business, or make any
loans or advances to any other person; (ix) change any practice with respect to
taxes, make, revoke or change any election with respect to taxes or settle or
compromise any tax liability; (x) take any action which would, or would be
reasonably likely to prevent the accounting for the Merger as a pooling of
interests in accordance with APB No. 16, the interpretive release issued
thereto, and the pronouncements of the Commission; or (xi) agree, in writing or
otherwise, to take any of the foregoing actions or take any action which would
make any of its representations or warranties untrue or incorrect.
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NO SOLICITATION OF TRANSACTIONS
EVT has agreed to immediately cease any existing discussions or negotiations,
if any, with any parties conducted prior to the date of the Merger Agreement
with respect to any acquisition of all or any material portion of the assets
of, or any material equity interest in, EVT or any of its Subsidiaries or any
business combination with EVT or any of its Subsidiaries. EVT may, directly or
indirectly, furnish information and access, in each case only in response to
unsolicited requests therefor, to any corporation, partnership, person or other
entity or group pursuant to confidentiality agreements, and may participate in
discussions and negotiate with such entity or group concerning: (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 EVT in a single transaction
or series of transactions; (iii) any tender offer or exchange offer for 15% or
more of the outstanding shares of EVT Common Stock or the filing of a
registration statement under the Securities Act in connection therewith; (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 outstanding shares of EVT Common
Stock; (v) any public announcement of a proposal, plan or intention to do any
of the foregoing or any agreement to engage in any of the foregoing, if such
entity or group has submitted a written proposal or an indication of interest
likely to lead to a written proposal to the EVT Board of Directors relating to
any such transaction (an "Alternative Proposal") and the EVT Board by a
majority vote determines in its good faith judgment, based as to legal matters
on the advice of outside legal counsel and as to financial matters upon the
advice of an investment banking firm of national reputation, that the
Alternative Proposal is a Superior Proposal (as hereinafter defined) and that
failing to take such action would constitute a breach of the EVT Board's
fiduciary duty. EVT has agreed to provide a copy of any such written proposal
to Guidant or Merger Sub immediately after receipt thereof. Except as set forth
above, EVT has agreed that neither it nor any of its affiliates, nor any of its
or their respective officers, directors, employees, representatives or agents,
will, directly or indirectly, encourage, solicit, participate in or initiate
discussions or negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group (other than Guidant
and Merger Sub, any affiliate or associate of Guidant and Merger Sub or any
designees of Guidant and Merger Sub) concerning: (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 EVT in a single transaction or series of transactions;
(iii) any tender offer or exchange offer for 15% or more of the outstanding
shares of EVT Common Stock or the filing of a registration statement under the
Securities Act in connection therewith; (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 outstanding shares of EVT Common Stock; or (v) any public
announcement of a proposal, plan or intention to do any of the foregoing or any
agreement to engage in any of the foregoing, or similar transaction involving
EVT or any subsidiary or division of EVT (each a "Transaction"); provided,
however, that nothing in the Merger Agreement will prevent the EVT Board from
taking, and disclosing to EVT's stockholders, a position contemplated by Rules
14d-9 and 14e-2 promulgated under the Exchange Act with regard to any tender
offers; provided, further, that the EVT Board will not recommend that the
stockholders of EVT tender their outstanding shares of EVT Common Stock in
connection with any such tender offer unless the EVT Board by a majority vote
determines in its good faith judgment, based as to legal matters on the advice
of outside counsel and as to financial matters upon the advice of an investment
banking firm of national reputation, that failing to take such action would
constitute a breach of the Board's fiduciary duty. Nothing in the Merger
Agreement will permit EVT to terminate the Merger (except as specifically
provided in the Merger Agreement), or permit EVT to enter into any agreement
with respect to an Alternative Proposal during the term of the Merger Agreement
(it being agreed that during the term of the Merger Agreement, EVT will not
enter into any agreement with any person that provides for, or in any way
facilitates, an Alternative Proposal (other than a confidentiality agreement in
customary form)), or affect any other obligation of EVT under the Merger
Agreement.
"Superior Proposal" means any Alternative Proposal with respect to a
Transaction which is superior to the Merger from a financial point of view to
the stockholders of EVT.
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CERTAIN COVENANTS
The Merger Agreement also contains certain other covenants including, among
other things, covenants relating to the Special Meeting, public announcements,
access to personnel and data, cooperation regarding certain filings with
governmental and other agencies and organizations and obtaining affiliate
agreements.
STOCK PURCHASE PLAN; BENEFIT MATTERS
Guidant has agreed that outstanding purchase rights under EVT's Stock
Purchase Plan shall be exercised upon the earlier of January 30, 1998, or
immediately prior to the Effective Time, provided that if the Effective Time is
later than January 31, 1998, then a new purchase period will commence on
February 2, 1998, and will end upon the earlier of July 31, 1998, or
immediately prior to the Effective Time, and each participant in the Stock
Purchase Plan shall accordingly be issued shares of EVT Common Stock at that
time pursuant to the terms of the Stock Purchase Plan and each share of EVT
Common Stock so issued shall by virtue of the Merger, and without any action on
the part of the holder thereof, be converted into the right to receive the
Exchange Consideration.
Guidant and EVT have agreed that Guidant will provide benefits to EVT
employees and officers following the Effective Time that are substantially
identical to the benefits currently provided to similarly situated employees
and officers of Guidant. From and after the Effective Time, Guidant shall grant
all employees credit for all service (to the same extent as service with
Guidant is taken into account with respect to similarly situated employees of
Guidant) with EVT prior to the Effective Time for: (i) vesting purposes and
(ii) for purposes of vacation accrual after the Effective Time as if such
service with EVT was service with Guidant. Guidant and EVT agree that where
applicable with respect to any medical or dental benefit plan of Guidant,
Guidant shall waive any pre-existing condition exclusion and actively-at-work
requirements (provided, however, that no such waiver shall apply to a pre-
existing condition of any employee of EVT who was, as of the Effective Time,
excluded from participation in a 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 dependents shall be taken into
account for purposes of satisfying applicable deductible, coinsurance and
maximum out-of-pocket provisions after the Effective Time to the same extent as
such expenses are taken into account for the benefit of similarly situated
employees of Guidant.
Any EVT employee who is terminated without cause after the Effective Time
will receive severance benefits which would result from the Merger in
accordance with the existing terms of the EVT Officers Severance Plan or EVT
Key Employees Severance Plan, to the extent such individual is eligible under
each such plan. This provision of the Merger Agreement is intended to benefit
each beneficiary of such plans and shall be enforceable by the beneficiaries of
such plans.
The Merger Agreement also provides that, to the extent any matching
contribution is paid or payable to the EVT 401(k) Savings Plan, it shall be
paid in cash.
INDEMNIFICATION AND INSURANCE
Guidant has agreed that: (a) the Certificate of Incorporation and the Bylaws
of the surviving corporation (EVT) shall contain the indemnification provisions
that are set forth, as of October 5, 1997, in the EVT Certificate and the
bylaws of EVT (the "EVT Bylaws") which provisions shall not be amended,
repealed or otherwise modified for a period of six years from the Effective
Time in any manner that would affect adversely the rights thereunder of
individuals who at or at any time prior to the Effective Time were entitled to
indemnification thereunder; (b) to assume, as of the Effective Time, all
obligations of EVT under such provisions and to pay all amounts that become due
and payable under such provisions; (c) that the Surviving Corporation (EVT) and
Guidant shall honor and fulfill in all respects the obligations of EVT pursuant
to indemnification agreements with EVT's directors and officers existing at or
before the Effective Time; and (d) that the Surviving Corporation (EVT) shall
use commercially reasonable efforts to maintain in effect for six years from
the
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Effective Time, if available, directors' and officers' liability insurance
covering those persons who are currently covered by EVT's directors' and
officers' liability insurance policy on terms comparable to such existing
insurance coverage; provided, however, that in no event shall the Surviving
Corporation (EVT) be required to expend more than an amount per year equal to
150% of current annual premiums paid by EVT for such insurance (which premiums
EVT has represented and warranted to be not more than $250,000 in the
aggregate); and provided, further, that if the annual premiums exceed such
amount, Guidant shall be obligated to use commercially reasonable efforts to
obtain a policy with the greatest coverage available for a cost not exceeding
such amount.
CONDITIONS
The respective obligations of EVT and Guidant to consummate the Merger are
subject to the fulfillment of each of the following conditions, among others:
(a) the Merger Agreement and the transactions contemplated thereby shall have
been approved by the holders of the issued and outstanding shares of capital
stock of EVT; (b) the waiting period applicable to the consummation of the
Merger under the HSR Act will have expired or been terminated; (c) none of the
parties to the Merger Agreement will be subject to any order or injunction
which prohibits the consummation of the transactions contemplated by the Merger
Agreement; (d) the Registration Statement will have become effective under the
Securities Act and no stop order with respect thereto shall be in effect, and
all material approvals under state securities laws relating to the issuance or
trading of the Guidant Common Stock to be issued to EVT stockholders in
connection with the Merger will have been received; (e) all material consents,
authorizations, orders and approvals of (or filings or registrations with) any
governmental commission, board or other regulatory body required in connection
with the execution, delivery and performance of the Merger Agreement will have
been obtained or made, except for filings in connection with the Merger and any
other documents which may be required to be filed after the Effective Time; and
(f) the Guidant Common Stock to be issued to EVT stockholders in connection
with the Merger will have been approved for listing on the NYSE and the Pacific
Exchange, Inc., subject only to official notice of issuance.
The obligations of each of EVT and Guidant to effect the Merger are also
subject to the satisfaction of the following conditions, among others: (a) the
other party will have performed all obligations required to be performed by it
under the Merger Agreement; the representations and warranties of the other
party set forth in the Merger Agreement will be true in all material respects
as of the Effective Time, except that those representations and warranties
which address matters only as of a particular date will have been true and
correct as of such date; and the other party will provide a certificate of the
President or a Vice President, dated the Closing Date, certifying the above to
such effect; and (b) each party will have received the opinion of its tax
counsel that the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code. In addition,
Guidant's obligation to effect the Merger is also subject to satisfaction of
the following conditions: (i) Guidant will have received a letter from its
independent public accountants, dated the Effective Time, in form and substance
reasonably satisfactory to it, stating that such accountants concur with
management's conclusion that the Merger will qualify as a transaction to be
accounted for in accordance with the pooling of interests method of accounting
under the requirements of APB No. 16; and (ii) from October 5, 1997 through the
Effective Time, there has not occurred an EVT Material Adverse Effect (as
defined in the Merger Agreement).
TERMINATION
The Merger Agreement may be terminated and the Merger may be abandoned at any
time prior to the Effective Time, before or after the approval of the Merger
Agreement by the stockholders of EVT: (a) by the mutual consent of EVT and
Guidant; (b) by action of the Board of Directors of either EVT or Guidant if
(i) the Merger shall not have been consummated by March 31, 1998; provided,
that the terminating party shall not have breached in any material respect its
obligations under the Merger Agreement in any manner that shall have
proximately contributed to the failure to consummate the Merger; or (ii) the
adoption of the Merger Agreement and the approval of the transactions
contemplated thereby by EVT's stockholders shall not have been obtained at a
meeting duly convened therefor or at any adjournment thereof; or (iii) if a
United States federal or state
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court of competent jurisdiction or United States federal or state governmental,
regulatory or administrative agency or commission shall have issued an order,
decree or ruling or taken any other action permanently restraining, enjoining
or otherwise prohibiting the transactions contemplated by the Merger Agreement
and such order, decree, ruling or other action shall have become final and non-
appealable; provided, that the party seeking to terminate the Merger Agreement
pursuant to this clause (iii) shall have used all reasonable efforts to remove
such injunction, order or decree; (c) by action of the Board of Directors of
EVT, if (i) in the exercise of its good faith judgment as to its fiduciary
duties to its stockholders imposed by law based on the advise of outside
counsel, the Board of Directors of EVT determines that such termination is
required by reason of a Superior Proposal; or (ii) there has been a breach by
Guidant or Merger Sub of any representation or warranty contained in the Merger
Agreement which would have or would be reasonably likely to have a material
adverse effect on Guidant and is not curable or, if curable, is not cured
within thirty (30) days after written notice of such breach is given by EVT to
Guidant; (iii) there has been a material breach by Guidant of any of the
covenants or agreements contained in the Merger Agreement which is not curable
or, if curable, is not cured within thirty (30) days after written notice of
such breach is given by EVT to Guidant; or (iv) the Closing Price is less than
$40.00; or (d) by action by the Board of Directors of Guidant, if (i) the Board
of Directors of EVT shall have withdrawn or modified in a manner materially
adverse to Guidant its approval or recommendation of the Merger Agreement or
the Merger or shall have recommended an Alternative Proposal to EVT
stockholders; (ii) there has been a breach by EVT of any representation or
warranty contained in the Merger Agreement which would have or would be
reasonably likely to have a material adverse effect on EVT which breach is not
curable or, if curable, is not cured within thirty (30) days after written
notice of such breach is given by Guidant to EVT; (iii) there has been a
material breach by EVT of any of the covenants or agreements contained in the
Merger Agreement which is not curable or, if curable, is not cured within
thirty (30) days after written notice of such breach is given by Guidant to
EVT; or (iv) the Closing Price is less than $40.00. In the event of the
termination of the Merger Agreement by EVT pursuant to (c)(i) above, EVT's
ability to terminate the Merger Agreement is conditioned upon its prior payment
of any amounts owed by it in termination fees. See "Termination Fees."
The Merger Agreement provides that if EVT proposes to terminate the Merger
Agreement because the Closing Price is less than $40.00, EVT shall first notify
Guidant in writing of its intent to so terminate the Merger Agreement and
Guidant shall then have not less than five days from the date of receipt of
written notice by EVT to submit a final and best written offer (a "Final
Offer") for a change in the Exchange Consideration. If such Final Offer is
accepted by EVT, the parties thereto shall amend the Merger Agreement to
reflect such Final Offer and shall make any appropriate amendments to the
Registration Statement and the Proxy Statement/Prospectus. Any decision by EVT
to accept or reject a Final Offer shall be at EVT's sole discretion.
TERMINATION FEES
If the Merger Agreement is (a) terminated by either EVT or Guidant as a
result of the failure of EVT's stockholders to approve the Merger Agreement and
the transactions contemplated thereby at a meeting duly convened therefor or at
any adjournment thereof, and prior to such termination (x) a proposal with
respect to a Transaction shall have been made, and (y) within one year after
such termination, (A) any third party shall acquire beneficial ownership of
more than 50% of EVT's outstanding shares of voting stock, or (B) EVT shall
enter into any agreement with respect to any Transaction, and within such one
year period or thereafter, such Transaction is consummated, or (b) terminated
by Guidant if the Board of Directors of EVT withdraws or modifies in a manner
materially adverse to Guidant its approval or recommendation in favor of the
Merger Agreement or the Merger or recommends an Alternative Proposal to EVT's
stockholders, or (c) terminated by EVT, if in the exercise of its good faith
judgment as to fiduciary duties to its stockholders imposed by law based on the
advice of outside counsel, the Board of Directors of EVT determines that
termination is required by reason of a Superior Proposal, then within two
business days after such termination EVT will pay Guidant, by wire transfer of
immediately available funds, a fee (the "Termination Fee") of $7 million.
EVT has agreed that if it fails promptly to pay the Termination Fee and, in
order to obtain such payment, Guidant or Merger Sub commences a suit which
results in a judgment against EVT for the Termination Fee,
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EVT must pay to Guidant its costs and expenses (including attorneys' fees) in
connection with such suit, together with interest on the amount of the fee at
the rate of 12% per annum from the date such fee was required to be paid.
EXPENSES
Whether or not the Merger is consummated, all costs and expenses incurred in
connection with the Merger Agreement and the transactions contemplated thereby
will be paid by the party incurring such expenses, except as otherwise provided
in the Merger Agreement. The Merger Agreement provides that Guidant shall pay
the filing fee in connection with filing the Registration Statement with the
Commission and the expenses incurred in connection with printing and mailing
the Proxy Statement/Prospectus.
AMENDMENT
The Merger Agreement may be amended by the parties thereto, by action taken
by their respective Boards of Directors, at any time before or after approval
of matters presented in connection with the Merger by the stockholders of EVT
and Guidant, but after any such stockholder approval, no amendment will be made
which by law requires the further approval of stockholders without obtaining
such further approval. The Merger Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties to the Merger
Agreement.
SUPPORT AGREEMENT
The following is a brief summary of the terms of the Support Agreement, a
copy of which is filed as an exhibit to the Registration Statement, and is
hereby incorporated herein by reference. This summary is qualified in its
entirety by reference to the Support Agreement.
As an inducement and condition to the willingness of Guidant to enter into
the Merger Agreement, Menlo Evergreen V, L.P., Menlo Ventures IV, L.P., H.
DuBose Montgomery, W. James Fitzsimmons, Vaughn D. Bryson and Tony R. Brown
(collectively, the "Specified Stockholders") have entered into the Support
Agreement. The individuals who are Specified Stockholders comprise all of the
members of the EVT Board. Collectively, the Specified Stockholders held, at the
Record Date, over % of the combined voting power of the outstanding EVT Common
Stock, and therefore, together, are able to significantly influence the vote on
the approval and adoption of the Merger Agreement and the transactions
contemplated thereby by the EVT stockholders.
In the Support Agreement, each Specified Stockholder has agreed to vote all
of such Specified Stockholder's shares of EVT Common Stock in favor of the
Merger, the approval and adoption of the Merger Agreement and the approval of
the other transactions contemplated by the Merger Agreement, at any meeting of
stockholders of EVT called to vote upon the Merger and the Merger Agreement or
at any adjournment thereof or in any other circumstances upon which a vote,
consent or other approval (including by written consent) with respect to the
Merger and the Merger Agreement is sought. Each Specified Stockholder has
granted Guidant (and certain officers of Guidant) an irrevocable proxy, for and
in the name, place and stead of each Specified Stockholder, to vote all of such
Specified Stockholder's shares of EVT Common Stock in favor of adoption of the
Merger Agreement.
Pursuant to the terms of the Support Agreement, each Specified Stockholder
has agreed that, until the close of business on the date of the Special
Meeting, such Specified Stockholder will not: (a) sell, assign, transfer,
pledge or otherwise dispose of any of its EVT Common Stock, (b) deposit its EVT
Common Stock into a voting trust or enter into a voting agreement or
arrangement with respect to such EVT Common Stock or grant any proxy with
respect thereto, or (c) enter into any contract, option or other arrangement or
undertaking with respect to the direct or indirect acquisition or sale,
assignment, transfer or other disposition of any EVT Common Stock.
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Pursuant to the terms of the Support Agreement, each Specified Stockholder
has agreed: (a) to not permit any agents and representatives (including,
without limitation, any investment banker, attorney or accountant retained by
it) to, initiate, solicit or encourage, directly or indirectly, any inquiries
or the making or implementation of any proposal or offer (including, without
limitation, any proposal or offer to EVT's shareholders) with respect to an
Alternative Proposal or engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any person
relating to an Alternative Proposal and (b) to notify Guidant immediately in
writing if any such inquiries or proposals are received in writing by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, it.
The Support Agreement will terminate upon the earliest to occur of the
Effective Time or any termination of the Merger Agreement in accordance with
the terms thereof.
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BUSINESS OF GUIDANT
Guidant was incorporated in Indiana on September 9, 1994, to be the parent
of five of the nine businesses in the Medical Devices and Diagnostics Division
of Eli Lilly and Company, an Indiana corporation ("Lilly"). Prior to the
consummation of the initial public offering of Guidant's common stock on
December 20, 1994 (the "Offering"), Guidant was a wholly-owned subsidiary of
Lilly. Pursuant to the Offering, approximately 19.8 percent of Guidant's
common stock was issued to the public. Lilly continued to own approximately
80.2 percent of Guidant's common stock after the Offering. On September 25,
1995, Lilly disposed of its remaining ownership interest in Guidant by means
of a split-off, an exchange offer pursuant to which Lilly shareholders were
given the opportunity to exchange some, all or none of their Lilly common
stock for Guidant's common stock owned by Lilly (the "Exchange Offer") on a
tax-free basis. The consummation of the Exchange Offer resulted in Lilly
distributing all of its Guidant Common Stock to Lilly shareholders. As a
result, Lilly no longer owns any Guidant Common Stock.
Guidant is a multinational company that designs, develops, manufactures and
markets a broad range of products for use in cardiac rhythm management
("CRM"), vascular intervention ("VI"), and other forms of minimally invasive
systems ("MIS"). In CRM, Guidant is a worldwide leader in automatic
implantable cardioverter defibrillator ("AICD") systems. Guidant also designs,
manufactures and markets a full line of implantable pacemaker systems used in
the treatment of slow or irregular arrhythmias. In VI, Guidant is a worldwide
leader in minimally invasive procedures used for opening blocked coronary
arteries. In addition, Guidant develops, manufactures and markets products for
use in MIS procedures, focusing on laparoscopic market opportunities in
general and cardiovascular surgeries.
Guidant's business strategy is to design, develop, manufacture and market
innovative, high quality therapeutic products principally for use in treating
cardiovascular disease and performing minimal invasive surgical procedures,
resulting in improved quality of patient care and reduced treatment costs.
Cardiovascular disease is the leading cause of death in the United States. In
implementing this strategy, Guidant focuses on the following three areas,
which Guidant believes are critical to its future success: (l) global product
innovation, (2) economic partnership with customers worldwide and (3)
organizational excellence.
Guidant's strategy includes the potential acquisition of one or more
businesses in the medical device industry. Guidant plans to acquire
technologies that are complementary to its existing technology base, products
that serve Guidant's existing customer base and businesses that expand its
geographical presence. However, there can be no assurance that any acquisition
will be consummated or, if consummated, as to the timing and terms of any
transaction. Guidant is not currently engaged in any negotiations concerning
any material acquisition.
CARDIAC RHYTHM MANAGEMENT
In the CRM market, implantable device systems are used to detect and treat
abnormally fast and abnormally slow or irregular heart rhythms or arrhythmias.
Guidant's CRM product line is organized into two major product categories. The
tachycardia ("Tachy") product category includes AICDs, endocardial
defibrillation leads, programmers and accessories used primarily in the
treatment of fast arrhythmias. The bradycardia ("Brady") product category
includes pacemaker pulse generators, endocardial pacing leads, programmers and
accessories used primarily in the treatment of slow or irregular arrhythmias.
Customers for Brady products include electrophysiologists, implanting
cardiologists and cardiovascular surgeons. Customers for Tachy products are
primarily electrophysiologists. Sales of Guidant's CRM products, as a
percentage of Guidant's total consolidated net sales for the years ended
December 31, 1996, 1995 and 1994, and the six months ended June 30, 1997, were
55%, 49%, 44% and 57%, respectively.
VASCULAR INTERVENTION
Guidant offers its customers a wide range of VI products, including coronary
dilatation catheters, stent systems, atherectomy catheters, guide wires,
guiding catheters and related accessories. Customers for VI products
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are primarily interventional cardiologists. Sales of VI products, as a
percentage of Guidant's total consolidated net sales for the years ended
December 31, 1996, 1995 and 1994, and the six months ended June 30, 1997, were
41%, 48%, 54% and 37%, respectively.
More than six million Americans have been diagnosed with coronary artery
disease ("CAD"), which is the formation of blood flow restrictions
(atherosclerotic lesions) within the coronary arteries. If untreated, CAD can
lead to a heart attack, or cause chest pain that may interfere with normal
activities. Worldwide, over one million patients annually undergo a minimally
invasive CAD intervention (angioplasty, stenting, atherectomy or mechanical or
laser ablation), which are less invasive and less expensive alternatives to
coronary artery bypass graft surgery.
On October 2, 1997, Guidant announced that its ACS MULTI-LINK Coronary Stent
System had been approved by the FDA for marketing in the United States.
Coronary stenting is an alternative procedure to angioplasty and has been
shown to more effectively keep the artery open.
MINIMALLY INVASIVE SYSTEMS
Guidant is involved in the development and marketing of innovative surgical
devices and systems which alter the surgeon's approach to surgical procedures
and may provide improved clinical benefit, reduced operative time and better
patient outcomes. The primary customers for Guidant's MIS products are
surgeons who specialize in general, gynecological, urologic, vascular, and
cardiovascular surgery. Sales of Guidant's MIS products, as a percentage of
Guidant's total consolidated net sales for the years ended December 31, 1996,
1995 and 1994, and the six months ended June 30, 1997, were 4%, 3%, 2% and 6%,
respectively. Certain of these devices were developed for and manufactured
under original equipment manufacturer distribution arrangements.
MIS uses small incisions to gain access to the surgical site. Minimally
invasive procedures significantly decrease the patient's postoperative pain,
hospital stay and recovery period by limiting the size of incisions required
to gain access to the primary surgical site as well as reducing the resulting
trauma caused by more invasive techniques. In May 1996, Guidant announced that
the strategic focus for its MIS business would be on cardiovascular
applications.
Additional information concerning Guidant is included in the Guidant Reports
incorporated by reference in this Proxy Statement/Prospectus. See
"Incorporation of Certain Documents by Reference" and "Available Information."
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BUSINESS OF EVT
EVT designs, develops and manufactures minimally invasive, endovascular
systems to repair diseased or damaged vascular structures. EVT's first
product, the Ancure system, provides catheter-based delivery and implantation
of a specialized prosthesis to repair AAAs. The Ancure system represents a
less invasive alternative to the open surgical procedure performed today. The
Ancure system is approved for marketing in Europe and Australia and is
currently in Phase II clinical trials in the United States.
An AAA is a balloon-like enlargement of the aorta, resulting from weakened
arterial walls. Once present, AAAs continue to enlarge and, if left untreated,
become increasingly susceptible to rupture, usually resulting in death.
According to industry analysts, in the United States, an estimated 1.5 million
people have AAAs and each year approximately 190,000 new cases are diagnosed
and 45,000 AAA patients undergo surgical repair. AAA surgery is extremely
invasive and has serious drawbacks including high mortality and complication
rates, high costs, long hospital stays and extended home convalescence.
EVT's Ancure system is comprised of the EndoGraft endovascular prosthesis
and its delivery catheter. The EndoGraft is composed of a vascular graft,
similar to the surgical graft, with proprietary attachment systems that
consist of self expanding cylindrical wire frames and a series of hooks. The
attachment systems are designed to create a circumferential seal and anchor
the prosthesis to the vessel wall by means of the hooks, much like a line of
sutures. The EndoGraft is carried in a collapsed state by a delivery catheter
that is introduced through a small incision in the groin to access the femoral
artery and navigated into the aorta. Once properly positioned across the AAA,
the EndoGraft is released and its attachment systems are implanted by means of
balloon inflations. EVT has developed three distinct EndoGraft designs and,
therefore, offers three products, the Ancure Tube, Ancure Bifurcated and
Ancure Aortoiliac systems.
To its knowledge, EVT was the first company to receive Investigational
Device Exemption approval from the U.S. Food and Drug Administration to
conduct human clinical trials in the United States with an endovascular system
to treat AAA disease. Based on the results of clinical trials to date, EVT
believes that its Ancure products are safe and effective, and offer distinct
advantages over conventional AAA surgery. As a result, EVT believes that
patients treated surgically today, patients who elect not to undergo open
surgery and patients who are deemed not to be surgical candidates, will be
considered for its endovascular procedure.
Additional information concerning EVT is included in the EVT Reports
incorporated by reference in this Proxy Statement/Prospectus. See
"Incorporation of Certain Documents By Reference" and "Available Information."
RECENT DEVELOPMENTS
During the third quarter of 1997, EVT increased spending and expedited
accelerated PMA preparation activities in an effort to capitalize on the
earliest possible filing and approval dates for its Ancure products. EVT is
using outside services to collect and monitor patient data, as well as
regulatory consultants to advise EVT on strategy and assist with data analysis
and PMA drafting.
On August 15, 1997, Jeffrey Jarvela, Vice President of Manufacturing,
resigned to pursue other interests. Subsequently, G. Bradley Cole, Vice
President of Finance and Chief Financial Officer was named Senior Vice
President of Operations and Chief Financial Officer. In his new position, Mr.
Cole will have responsibility for manufacturing, finance and administrative
functions at EVT.
On September 16, 1997, EVT borrowed $7 million pursuant to its Credit
Agreement with Guidant. See "Certain Transactions."
On September 23, 1997, EVT announced that the U.S. Patent Office issued U.S.
Patent Number 5,669,936 to EVT. The patent is directed to a system and method
for placing a prosthesis within a corporeal lumen, such as the aorta,
utilizing an inflatable device. This patent is based on a continuation
application having a priority date going back to 1983. EVT also announced that
the U.S. Patent Office has issued four other significant patents to EVT over
the last thirteen months. Patent number 5,562,728 relates generally to grafts
with one or more attachment systems. Patent numbers 5,609,625 and 5,628,783
generally relate to the system and method of delivering a graft. Patent number
5,662,700 is directed to general methods of implanting intraluminal grafts.
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COMPARISON OF SHAREHOLDERS' RIGHTS
The rights of Guidant shareholders are governed by the Guidant Articles, the
Guidant Bylaws and the Indiana Business Corporation Law (the "IBCL"). The
rights of EVT shareholders are governed by the EVT Certificate, its Amended
and Restated Bylaws (the "EVT Bylaws") and the DGCL. After the Effective Time,
the rights of EVT shareholders who become Guidant shareholders will be
governed by the Guidant Articles, the Guidant Bylaws and the IBCL.
Certain provisions of the IBCL, the Guidant Articles and the Guidant Bylaws
alter the current rights of EVT shareholders who become Guidant shareholders.
The following is a summary of certain material differences between the rights
of Guidant shareholders and EVT shareholders, between the Guidant Articles and
Bylaws and the EVT Certificate and Bylaws, and between certain provisions of
the DGCL and the IBCL affecting shareholders' rights. The following summary
does not purport to be a complete statement of the rights of shareholders of
EVT under the DGCL, the EVT Certificate and the EVT Bylaws or a comprehensive
comparison with the rights of shareholders of Guidant under the IBCL, the
Guidant Articles and the Guidant Bylaws, or a complete description of the
specific provisions referred to herein. The identification of specific
differences is not meant to indicate that other equally or more significant
differences do not exist. This summary is qualified in its entirety by
reference to the Guidant Articles, the Guidant Bylaws, the IBCL, the EVT
Certificate, the EVT Bylaws, and the DGCL, as appropriate. Copies of the
Guidant Articles of Incorporation, the Guidant Bylaws, the EVT Certificate,
and the EVT Bylaws will be sent to Guidant and EVT shareholders, respectively,
upon request.
Authorized Capital. Under the Guidant Articles, the total number of
authorized shares of Guidant is three hundred million (300,000,000). The
Guidant Articles designate two different classes of shares (common stock
("Common Stock") and preferred stock ("Preferred Stock")) and the number of
shares in each class. The number of shares of Common Stock authorized to be
issued is two hundred and fifty million (250,000,000) shares. The number of
shares of Preferred Stock authorized to be issued is fifty million
(50,000,000) shares. A total of one million five hundred thousand (1,500,000)
shares of the fifty million (50,000,000) shares of authorized Preferred Stock
are designated as Series A Participating Preferred Stock (the "Series A
Preferred Stock").
Under the EVT Certificate, the total number of authorized shares of EVT is
thirty five million (35,000,000). The EVT Certificate designates two classes
of stock (common stock ("Common Stock") and preferred stock ("Preferred
Stock")) and the number of shares in each class. The number of shares of
Common Stock authorized to be issued is thirty million (30,000,000). The
number of shares of Preferred Stock authorized to be issued is five million
(5,000,000). Under the EVT Certificate, the par value for Common Stock is
$0.00001 per share.
Directors. Under Section 23-1-33-3 of the IBCL, a board of directors must
consist of one (1) or more individuals, with the number specified in or fixed
in accordance with the articles of incorporation or the bylaws. The articles
of incorporation or the bylaws may establish a variable range for the size of
the board of directors by fixing a minimum and maximum number of directors. If
a variable range is established, the number of directors may be fixed or
changed from time to time, within the minimum and maximum, by the board of
directors. The Guidant Articles provide that the initial number of directors
of Guidant shall be eight. The number of directors may be specified by or
fixed in accordance with the bylaws at any number, provided, however, that
such number shall not be less than seven (7) nor more than nineteen (19). The
Guidant Bylaws provide that the number of directors which shall constitute the
whole Board of Directors shall be ten (10), which number may either be
increased or diminished by resolution adopted by not less than a majority of
the directors then in office; provided, that the number may not be less than
seven (7) or more than nineteen (19). The Guidant Board of Directors currently
consists of ten (10) members.
Under the Guidant Articles, the members of the Guidant Board are divided
into three classes with approximately one-third of the directors standing for
election each year for three-year terms.
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Under the DGCL, Section 141, a board of directors shall consist of one (1)
or more members. The number of directors shall be fixed by, or in the manner
provided in, the bylaws, unless the articles of incorporation fixes the number
of directors, in which case a change in the number of directors shall be made
only by amendment of the certificate. The EVT Certificate provides that the
number of directors of EVT shall be fixed from time to time by a bylaw or
amendment thereof duly adopted by the Board of Directors or by the
shareholders. The EVT Bylaws provide that the number of directors that shall
constitute the whole board shall be determined by resolution of the Board of
Directors or by the shareholders at the annual meeting of the shareholders,
with certain exceptions. The EVT Board of Directors currently consists of four
(4) members.
The EVT Certificate provides for a classified EVT Board consisting of three
classes of directors, each serving staggered three-year terms.
Special Meetings of the Board of Directors. Under the Guidant Bylaws,
special meetings of the Board of Directors may be called by the Chairman of
the Board or the President and shall be called by the Secretary at the request
of any three (3) directors.
Under the EVT Bylaws, special meetings of the Board of Directors may be
called by the President on two (2) days' notice to each director by mail or
forty-eight (48) hour notice to each director either personally or by
telephone, telegram or facsimile. The EVT Bylaws also provide that upon the
written request of two (2) directors, the President or Secretary shall call
special meetings in like manner and on like notice, unless the Board of
Directors consists of only one (1) director, in which case special meetings
shall be called by the President or Secretary in like manner and on notice on
the written request of the sole director.
Removal of Directors. Both the Guidant Articles and the Guidant Bylaws
provide that any director may be removed from office at any time, with or
without cause, but only upon the affirmative vote of at least 80% of the votes
entitled to be cast by holders of all of the outstanding shares of Voting
Stock (as defined in the Guidant Articles of Incorporation) voting together as
a single class.
The EVT Bylaws provide that any director or the entire Board of Directors
may be removed, for cause only, by the holders of a majority of shares
entitled to vote at an election of directors.
Vacancies in the Board of Directors. The IBCL, Section 23-1-33-9, provides
that unless the articles of incorporation provide otherwise, if a vacancy
occurs on a board of directors, including a vacancy resulting from an increase
in the number of directors, (a) the board of directors may fill the vacancy;
or (b) if the directors remaining in office constitute fewer than a quorum of
the board, they may fill the vacancy by affirmative vote of a majority of all
the directors remaining in office. If the vacant office was held by a director
elected by a voting group of shareholders, only the holders of shares of that
voting group are entitled to vote to fill the vacancy if it is filled by the
shareholders. The Guidant Bylaws provide that any vacancy on the Board of
Directors shall be filled by the affirmative vote of a majority of the
remaining directors.
The DGCL, Section 142, provides that any vacancy occurring in any office of
the corporation by death, resignation, removal or otherwise, shall be filed as
the bylaws provide. In the absence of such provision, the vacancy shall be
filed by the board of directors or other governing body. The EVT Bylaws
provide that vacancies and newly created directorships resulting from any
increase in the authorized number of directors may be filled by a majority of
directors then in office, though less than a quorum, or by a sole remaining
director. If there are no directors in office, then an election of directors
may be held in the manner provided by statute.
Exculpation of Directors. Section 23-1-35-1(e) of the IBCL provides that a
director is not liable for any action taken as a director, or any failure to
take any action, unless: (1) the director has breached or failed to perform
the duties of the director's office in compliance with Section 23-1-35-1
(which generally requires a director to act in good faith, with the care of an
ordinarily prudent person in a like position would exercise under similar
circumstances and in a manner the director reasonable believes to be in the
best interests of Guidant); and (2) the breach or failure to perform
constitutes willful misconduct or recklessness.
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Section 102(b)(7) of the DGCL provides that the EVT Certificate may include
a provision eliminating or limiting the personal liability of a director of
EVT or its shareholders for monetary damages for breach of fiduciary duty as a
director, provided, that such provision shall not eliminate or limit the
liability of a director: (i) for any breach of the director's duty of loyalty
to EVT or its shareholders; (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of the law; (iii)
under Section 174 of the DGCL (which generally includes liability of directors
for unlawful payment of dividend or unlawful stock purchase or redemption); or
(iv) for any transaction from which the director derived an improper personal
benefit.
Removal of Officers. Under the Guidant Bylaws the Board of Directors, a
superior officer upon whom the power of removal has been conferred by the
Board of Directors, or any officer to whom the power to appoint the officer
being removed has been conferred by the Board of Directors may remove an
officer.
Under the EVT Bylaws, only the Board of Directors may remove an officer.
Director and Officer Discretion. Under Sections 23-1-35-1(d), (f), and (g)
of the IBCL, in discharging his or her duties to the corporation and in
determining what he or she believes to be in the best interests of the
corporation, a director or officer may, in addition to considering the effects
of any action on shareholders, consider the effects of the action on
employees, suppliers, customers, the communities in which the corporation
operates and any other factors that the director or officer considers
pertinent.
The DGCL does not contain a provision regarding director and officer
discretion.
Indemnification. Under both Chapter 23-1-37 of the IBCL and the Guidant
Articles of Incorporation, Guidant may indemnify officers, directors, agents
and employees made a party to a proceeding against all liability and
reasonable expenses.
Although Section 145 of the DGCL allows indemnification for directors,
officers, agents or employees of the corporation, the EVT Certificate only
provide a provision indemnifying directors.
Special Shareholder Meetings. The Guidant Bylaws provide that special
meetings of the shareholders may be called at any time by the Board of
Directors, the Chairman of the Board of Directors, or the President. The
Guidant Bylaws specifically state that shareholders shall not have the right
to call special meetings.
The EVT Bylaws provide that a special meeting of the shareholders, for any
purpose or purposes, may only be called by the Board of Directors and shall be
called by the president or secretary at the request in writing of a majority
of the Board of Directors.
Notice of Shareholder Meetings. Under the Guidant Bylaws, the Secretary
shall cause a written or printed notice of the place, day and hour and the
purpose or purposes of each meeting of the shareholders to be delivered or
mailed at least ten (10) but not more than sixty (60) days prior to the
meeting, to each shareholder of record entitled to vote at the meeting. Under
the IBCL, Section 23-1-29-7 and Guidant Bylaws, a record date for notice of a
shareholder meeting may not be more than seventy (70) days before the meeting
or action requiring a determination of shareholders.
The EVT Bylaws provide that written notice of the annual meeting stating the
place, day and hour of the meeting shall be given to each shareholder entitled
to vote at such meeting not fewer than ten (10) nor more than sixty (60) days
before the date of the meeting. The EVT Bylaws provide that written notice of
a special meeting stating the place, day and hour of the meeting and the
purpose or purposes for which the meeting is called, shall be sent not fewer
than twenty (20) nor more than sixty (60) days before the date of the meeting,
to each shareholder entitled to vote at such meeting. Under the DGCL, Section
213 and EVT Bylaws, a record date for notice of a shareholder meeting may not
be more than sixty (60) nor less than ten (10) days before the date of such
meeting.
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Notice of Shareholder Business. Under the Guidant Bylaws, for business to be
properly brought before an annual meeting by a shareholder, the shareholder
must have the legal right and authority to make the proposal for consideration
at the meeting and the shareholder must have given timely notice thereof in
writing to the Secretary of the Corporation. To be timely a shareholder's
notice shall be delivered to or mailed and received at the principal executive
offices of the Corporation not less than sixty (60) days prior to the meeting;
provided, however, that in the event that less than seventy (70) days notice
or prior public disclosure of the date of the meeting is given or made to
shareholders, notice by the shareholder to be timely must be received not
later than the close of business on the tenth (10th) day following the day on
which such notice of the date of the annual meeting was mailed or such public
disclosure was made.
Under the EVT Bylaws, for business to be properly brought before any meeting
by a shareholder, the shareholder must have given timely notice thereof in
writing to the Secretary of the Corporation. To be timely, a shareholder's
notice must be delivered to or mailed and received at the principal executive
offices of EVT not less than thirty (30) days nor more than sixty (60) days
prior to the date of the meeting.
Quorum at Shareholders' Meeting. The Guidant Bylaws provide that at any
meeting of the shareholders a majority of the outstanding shares entitled to
vote on a matter at such a meeting, represented in person or by proxy, shall
constitute a quorum for action on that matter. In the absence of a quorum, the
holders of a majority of the shares entitled to vote present in person or by
proxy, or, if no shareholders entitled to vote is present in person or by
proxy, any officer entitled to preside at or act as Secretary of such meeting,
may adjourn such meeting from time to time, until a quorum shall be present.
At any such adjourned meeting at which a quorum may be present any business
may be transacted which might have been transacted at the meeting as
originally called.
The EVT Bylaws provide that when a quorum is present at any meeting, the
vote of the holders of a majority of the stock having voting power present in
person or represented by proxy shall decide any question brought before such
meeting, unless the question is one upon which by express provision of the
statutes or of the certificate of incorporation, a different vote is required,
in which case such express provision shall govern and control the decision of
such question.
Interested Shareholder Transactions. Section 23-1-43-18 of the IBCL provides
that a corporation may not engage in any "business combination" (as defined
therein) with any "interested shareholder" for a period of five (5) years
following the interested shareholder's share acquisition date unless the
business combination or the purchase of shares made by the interested
shareholder is approved by the board of directors of the corporation before
the interested shareholder's share acquisition date. An "interested
shareholder" under the IBCL, Section 23-1-43-10, is generally defined as any
person owning ten percent (10%) or more of the voting power of the outstanding
voting shares of the corporation. The Guidant Articles provide that in
addition to all other requirements imposed by law, and except where expressly
provided for in the Articles of Incorporation, the Corporation shall not give
effect to or approve, as a shareholder of any majority-owned subsidiary of
Guidant certain specified transactions (including specified business
combination transactions) if, as of the record date for the determination of
the shareholders entitled to vote thereon, any Related Person (as defined in
the Guidant Articles and which generally includes: any other corporation,
person, or entity which beneficially owns or controls, directly or indirectly,
five percent (5%) or more of the outstanding shares of Voting Stock) exists.
However, Guidant may give effect or approve, as a shareholder of any majority-
owned subsidiary of Guidant, the above actions or transactions involving a
Related Person if: (a) the actions and transactions involving a Related Person
shall have been authorized by the affirmative vote of at least eighty percent
(80%) of all of the votes entitled to be cast by holders of the outstanding
shares of Voting Stock, voting together as a single class; (b) notwithstanding
(a), the eighty percent (80%) voting requirement shall not be applicable if
any action or transaction involving a Related Person is approved by Guidant's
Board and by a majority of the Continuing Directors (as defined in the Guidant
Articles); (c) unless approved by a majority of the Continuing Directors,
after becoming a Related Person and prior to consummation of such action or
transaction: (i) the Related Person shall not have acquired from Guidant or
any of its subsidiaries any newly issued or treasury shares of capital
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stock or any newly issued securities convertible into capital stock of Guidant
or any of its majority-owned subsidiaries, directly or indirectly (except upon
conversion of convertible securities acquired by it prior to becoming a
Related Person or as a result of a pro rata stock dividend or stock split or
other distribution of stock to all shareholders pro rata); (ii) the Related
Person shall not have received the benefit directly or indirectly (except
proportionately as a shareholder) of any loans, advances, guarantees, pledges,
or other financial assistance or tax credits provided by Guidant or any of its
majority-owned subsidiaries, or made any major changes in Guidant's or any of
its majority-owned subsidiaries' businesses or capital structures or reduced
the current rate of dividends payable on Guidant's capital stock below the
rate in effect immediately prior to the time such Related Person became a
Related Person; and (iii) the Related Person shall have taken all required
actions within its power to ensure that Guidant's Board included
representation by Continuing Directors at least proportionately to the voting
power of the shareholders of Voting Stock of Guidant's Remaining Public
Shareholders (as defined in the Guidant Articles), with a Continuing Director
to occupy an additional Board of Director's position if a fractional right to
a director results and, in any event, with at least one Continuing Director to
serve on the board so long as there are any Remaining Public Shareholders; (d)
a proxy statement responsive to the requirements of the Exchange Act, whether
or not Guidant is then subject to such requirements, shall be mailed to the
shareholders of Guidant for the purpose of soliciting shareholder approval of
such action or transaction and shall contain at the front thereof, in a
prominent place, any recommendations as to the advisability or inadvisability
of the action or transaction which the Continuing Directors may choose to
state and, if deemed advisable by a majority of the Continuing Directors, the
opinion of an investment banking firm selected by a majority of the Continuing
Directors as to the fairness (or not) of the terms of the action or
transaction from a financial point of view to the Remaining Public
Shareholders, such investment banking firm to be paid a reasonable fee for its
services by Guidant. The requirements of Section (d) shall not apply to any
such action or transaction which is approved by a majority of the Continuing
Directors. The Guidant Articles also provide that a majority of the Continuing
Directors of Guidant shall have the power and duty to determine for the
purposes of the above provision, on the basis of information then known to the
Continuing Directors, whether (i) any Related Person exists or is an Affiliate
or an Associate (each as defined therein) of another and (ii) any proposed
sale, lease, exchange, or other disposition of part of the assets of Guidant
or any majority-owned subsidiary involves a substantial part of the assets of
Guidant or any of its subsidiaries. Any such determination by the Continuing
Directors shall be conclusive and binding for all purposes.
Section 203 of the DGCL provides that except as otherwise provided, a
corporation shall not engage in any "business combination" (as defined
therein) with any "interested stockholder" for a period of three (3) years
following the time that such stockholder became an interested stockholder,
unless (i) prior to such time, the board of directors of the corporation
approved either the business combination or the transaction which resulted in
the stockholder becoming an interested stockholder, (ii) upon consummation of
the transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least eighty-five percent
(85%) of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding for purposes of determining the number of
shares outstanding those shares owned (a) by persons who are directors and
also officers and (b) employee stock plans in which employee participants do
not have the right to determine confidentially whether shares held subject to
the plan will be tendered in a tender or exchange offer, or (iii) at or
subsequent to such time, the business combination is approved by the board of
directors and authorized at an annual or special meeting of stockholders, and
not by written consent, by the affirmative vote of at least two-thirds (2/3)
of the outstanding voting stock which is not owned by the interested
stockholder. An "interested stockholder" under DGCL, Section 203, is generally
defined as any person owning fifteen percent (15%) or more of the
corporation's outstanding voting stock. Neither the EVT Certificate nor the
EVT Bylaws contain a provision regarding transactions with interested
shareholders.
Shareholder Rights Plan. Guidant maintains a shareholder rights plan which
would entitle all shareholders to a preferred stock purchase right allowing
them to purchase from Guidant one one-hundredth (1/100) of a share of Series A
Preferred Stock at an exercise price of forty three dollars and fifty cents
($43.50). Guidant may redeem the rights for one cent ($0.01) per right up to
and including the tenth business day after the date of a public announcement
that a person or group of affiliated or associated persons ("Acquiring
Person") has
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acquired ownership of common stock having ten percent (10%) or more of
Guidant's general voting power ("Stock Acquisition Date"). The plan provides
that if Guidant is acquired in a business combination at any time after a
Stock Acquisition Date, generally each holder of a right will be entitled to
purchase at the exercise price a number of the acquiring company's shares
having a market value of twice the exercise price. The plan also provides that
in the event of certain other business combinations, certain self-dealing
transactions, or the acquisition by a person or group of stock having fifteen
percent (15%) or more of Guidant's general voting power, generally each holder
of a right will be entitled to purchase at the exercise price a number of
shares of Guidant Common Stock having a market value of twice the exercise
price. Any rights beneficially owned by an Acquiring Person shall not be
entitled to the benefit of the adjustments with respect to the number of
shares described above. The rights will expire on October 17, 2004, unless
redeemed earlier by Guidant.
EVT maintains a shareholder rights plan which would entitle all shareholders
to a preferred stock purchase right (a "Right") entitling them to purchase
from EVT one one-thousandth (1/1000) of a share of Series A Junior
Participating Preferred Stock, par value one one-thousandth of a cent
($0.00001) per share, at an exercise price of sixty dollars ($60.00) per share
(the "Purchase Price"), subject to adjustment. At any time prior to the time
any Person becomes an Acquiring Person, the EVT Board may redeem the Rights in
whole, but not in part, at a price of one cent ($0.01) per Right. Until the
earlier to occur of (i) ten (10) days following a public announcement that a
person or group of affiliated or associated persons (an "Acquiring Person")
has acquired beneficial ownership of fifteen percent (15%) or more of the
outstanding EVT Common Stock; or (ii) ten (10) business days (or such later
date as may be determined by action of the EVT Board prior to such time as any
Person becomes an Acquiring Person) following the commencement of, or
announcement of an intention to make, a tender offer or exchange offer the
consummation of which would result in the beneficial ownership by a person or
group of fifteen percent (15%) or more of such outstanding EVT Common Stock
(the earlier of such dates being called the "Distribution Date"), the Rights
will be evidenced, with respect to any of the EVT Common Stock certificates
outstanding as of the Record Date, by such EVT Common Stock certificate with a
copy of the Summary of Rights attached thereto. In the event that, at any time
after a Person becomes an Acquiring Person, EVT is acquired in a merger or
other business combination transaction or fifty percent (50%) or more of its
consolidated assets or earning power are sold, proper provision will be made
so that each holder of a Right will thereafter have the right to receive, upon
the exercise thereof at the then current exercise price of the Right, that
number of shares of common stock of the acquiring company which at the time of
such transaction will have a market value of two (2) times the exercise price
of the Right. In the event that any person becomes an Acquiring Person, proper
provision shall be made so that each holder of a Right, other than Rights
beneficially owned by the Acquiring Person and its Affiliates and Associates
(which will thereafter be void), will thereafter have the right to receive
upon exercise that number of EVT Common Stock having a market value of two (2)
times the exercise price of the Right. The rights are not exercisable until
the Distribution Date and the Rights will expire on March 3, 2007, unless such
date is extended or unless the Rights are earlier redeemed by EVT.
Control Share Acquisitions. Chapter 23-1-42 of the IBCL requires that,
unless the articles or by-laws of a corporation exempt the corporation
therefrom (which the Guidant Articles and Bylaws do not), any person who
proposes to acquire or has acquired (a "control share acquisition") ownership
of (or the power to direct the voting of) shares representing one-fifth, one-
third, or a majority of the voting power of an issuing public corporation in
the election of directors must provide the corporation with a statement
describing such acquisition (an "acquiring person statement"). If the
acquiring person so requests at the time of delivery of such statement (and
undertakes to pay the expenses relating thereto), the corporation shall cause
a special meeting of its shareholders to be called for the purpose of
considering the voting rights to be accorded the shares acquired in the
control share acquisition. The shares so acquired shall be accorded the same
voting rights as were accorded such shares before the control share
acquisition only to the extent granted by resolution of the shareholders of
such corporation. Shares acquired in a control share acquisition as to which
no acquiring person statement has been filed may be redeemed by the
corporation at the fair value thereof under certain circumstances. In the
event that shares acquired in a control share acquisition are accorded full
voting rights and the acquiring person has acquired shares representing a
majority or more of all voting power, the other shareholders will be entitled
to appraisal rights.
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The DGCL does not contain a provision regarding control share acquisitions.
Neither the EVT Certificate nor the EVT Bylaws contain a similar provision.
Takeover Offers. Chapter 23-2-3.1 of the IBCL provides that a person shall
not make a takeover offer unless the following conditions are satisfied: (1) a
statement which consists of each document required to be filed with the
Commission is filed with the Indiana securities commissioner and delivered to
the president of the target company before making the takeover offer; (2) a
consent to service of process and the requisite filing fee accompanies the
statement filed with the Indiana securities commissioner; (3) the takeover
offer is made to all offerees holding the same class of equity securities on
substantially equivalent terms; (4) a hearing is held within twenty (20)
business days after the statement described in clause (1) above is filed; and
(5) the Indiana securities commissioner shall have approved the takeover
offer. In addition, such section provides that no offeror may acquire any
equity security of any class of a target company within two years following
the conclusion of a takeover offer with respect to that class, unless the
holder of such equity security is afforded, at the time of that acquisition, a
reasonable opportunity to dispose of such securities to the offeror upon
substantially equivalent terms. A "takeover offer" means an offer to acquire
or an acquisition of any equity security of a target company pursuant to a
tender offer or request or invitation for tenders if, after the acquisition,
the offeror is directly or indirectly a record or beneficial owner of more
than ten percent of any class of the outstanding equity securities of the
target company.
The DGCL does not contain a provision regarding control share acquisitions.
Neither the EVT Certificate nor the EVT Bylaws contain a similar provision.
Dissenters' Rights. Chapter 23-1-44 of the IBCL provides that a shareholder
is entitled, under certain circumstances, to receive payment of the fair value
of the shareholder's common stock if the shareholder dissents from a merger,
share exchange, sale or exchange of all or substantially all of the
corporation's property and certain control share acquisitions. The IBCL also
permits a corporation to grant (by inclusion of a provision in its articles of
incorporation, bylaws or resolution of the board of directors) appraisal
rights in connection with other corporate actions. Under the IBCL, dissenters'
rights are not available if the shares of the Indiana corporation are (i)
registered on a United States securities exchange registered under the
Exchange Act (such as the NYSE) (as is the Guidant Common Stock) or (ii)
traded on the National Association of Securities Dealers, Inc. Automated
Quotations System Over-the-Counter Markets--National Market Issues (such as
the Nasdaq National Market) or a similar market.
The DGCL, Section 262, provides that a stockholder is entitled, under
certain circumstances, to receive payment of the fair value of the
stockholder's common stock if the stockholder dissents from a merger or
consolidation. The DGCL also permits a corporation to grant (by inclusion of a
provision in its certificate of incorporation) appraisal rights in connection
with certain other corporate transactions. Under the DGCL, dissenters' rights
are not available if the shares of the Delaware corporation are (i) listed on
a national securities exchange (such as the NYSE) or designated as a national
market system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. (e.g., quoted on the Nasdaq National
Market) (as is the EVT Common Stock) or (ii) held of record by more than two
thousand (2,000) holders. Notwithstanding the foregoing, dissenters' rights
under the DGCL are available if the stockholders of the Delaware corporation
are to receive in the merger or consolidation anything other than (i) shares
of stock of the surviving or resulting corporation, (ii) shares of stock of
any other corporation which are listed on a national securities exchange or
are designated as a national market system security on an interdealer
quotation system or held of record by more than two thousand (2,000) holders,
and/or (iii) cash in lieu of fractional shares.
Dividend and Repurchases. Under Chapter 23-1-28 of the IBCL, a board of
directors may authorize and a corporation may make distributions to its
shareholders as long as the corporation's debts may be paid as they come due,
the corporation's total assets exceed the sum of its liabilities plus the
amount that would be needed if the corporation were to be dissolved and the
payment of these distributions is consistent with the corporation's articles
of incorporation.
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Under the DGCL, Section 170, a corporation may pay dividends and repurchase
stock out of surplus or, if there is no surplus, out of any net profits for
the fiscal year in which the dividend was declared and/or for the preceding
fiscal year as long as no payment reduces capital below the amount of capital
represented by all classes of shares having a preference upon the distribution
of assets. Under the EVT Bylaws, dividends may be paid in cash, in property,
or in shares of the capital stock, subject to the provisions of the
certificate of incorporation.
Amendment of Articles of Incorporation. Under Chapter 23-1-38 of the IBCL, a
corporation has the power to amend its articles of incorporation at any time
to add or change a provision that is required or permitted to be in the
articles of incorporation or to delete a provision not required to be in the
articles of incorporation. Unless otherwise required by Chapter 23-1-38 of the
IBCL, the articles of incorporation or the board of directors, an amendment to
the articles of incorporation must be approved by a majority of the
shareholders entitled to vote. The Guidant Articles provide that the
affirmative vote of at least eighty percent (80%) of the votes entitled to be
cast by holders of all of the outstanding shares of Voting Stock, voting
together as a single class, shall be required to alter, amend or repeal
Article 5 of the Guidant Articles. Article 5 of the Guidant Articles includes
provisions related to the management of the business and the conduct of the
affairs of Guidant, including (i) the number of directors, (ii) board classes,
(iii) removal of directors, (iv) amendment of the Guidant By-Laws, (v)
conflict of interest transactions, (vi) approval or ratification by
shareholders of contracts, transactions or acts of Guidant or its Board, and
(viii) indemnification.
The EVT Certificate provide that EVT reserves the right to amend, alter,
change or repeal any provision contained in the Articles of Incorporation, in
the manner then or thereafter prescribed by statute, and all rights conferred
upon shareholders in the Articles of Incorporation are granted subject to such
reservation. Section 242 of the DGCL generally provides that after a
corporation has received payment for any of its capital stock, it may amend
its certificate of incorporation, from time to time, in any and as many
respects as may be desired, so long as its certificate of incorporation as
amended would contain only such provisions as it would be lawful and proper to
insert in an original certificate of incorporation filed at the time of the
filing of the amendment; and, if a change in stock or the rights of
stockholders, or an exchange, reclassification or cancellation of stock or
rights of stockholders is to be made, such provisions as may be necessary to
effect such change, exchange, reclassification or cancellation. The EVT
Certificate also provide that any repeal or modification of the
indemnification provision in the Articles of Incorporation by the shareholders
shall not adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification.
Amendment of Bylaws. The Guidant Articles provide that the Board of
Directors, by a majority vote of the actual number of directors elected and
qualified from time to time shall have the exclusive power to make, alter,
amend or repeal the Guidant Bylaws. The shareholders of Guidant shall have no
power to make, alter, or repeal the Guidant Bylaws.
Both the DGCL, Section 109, and the EVT Bylaws provide that the power to
adopt, amend or repeal bylaws shall be in the shareholders entitled to vote;
provided, however, the EVT Certificate may confer the power to adopt, amend or
repeal bylaws upon the directors. The EVT Certificate do not contain such a
provision.
CERTAIN TRANSACTIONS
There are existing business relationships between EVT and Guidant. These
relationships are the product of arms-length negotiations between the
corporations.
In February 1997, EVT and Guidant entered into the Credit Agreement, which
is a $30 million credit facility. Borrowings under the Credit Agreement bear
interest at 16.5% to 19%. Interest accruing during the first thirty months in
which loans are outstanding is payable in full thirty months after the date
the first loan is made. Interest accruing thereafter is due quarterly.
Principal payments are due in full on March 31, 2002. Balances
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owed under the Credit Agreement may be prepaid subject to a prepayment fee,
which is initially set at 5% of the prepayment amount and is reduced on each
anniversary date of the Credit Agreement by 1%. Further, all principal
outstanding will be due upon the occurrence of certain asset sales and
issuances of equity securities, and will be due at Guidant's discretion upon a
change in control of EVT. Consummation of the Merger would constitute such a
change of control. Among other requirements, the Credit Agreement prohibits
EVT from paying dividends and incurring additional indebtedness. On September
16, 1997, EVT borrowed $7 million pursuant to the Credit Agreement, which
amount is outstanding as of the date hereof. EVT expects to make an additional
drawdown under the Credit Agreement prior to December 31, 1997. See "The
Merger--Background of the Merger."
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for Guidant by Mr. J.B. King, Vice President and General Counsel for
Guidant. As of October 15, 1997, Mr. King owned directly and indirectly 28,724
shares of Guidant Common Stock and held options to acquire an additional
129,736 shares of Guidant Common Stock. Certain legal matters with respect to
federal income tax consequences in connection with the Merger will be passed
upon for Guidant by Dewey Ballantine LLP, New York, New York. Certain legal
matters with respect to federal income tax consequences in connection with the
Merger will be passed upon for EVT by Gunderson Dettmer Stough Villeneuve
Franklin & Hachigian, LLP, Menlo Park, California.
EXPERTS
The consolidated financial statements and schedule of Guidant at December
31, 1996 and 1995, and for each of the three years in the period ended
December 31, 1996, incorporated by reference in this Proxy
Statement/Prospectus, which are referred to herein and made part of the
Registration Statement of which this Proxy Statement/Prospectus is a part,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon also incorporated herein by reference. Such consolidated
financial statements of Guidant are incorporated herein by reference in
reliance upon such report of Ernst & Young LLP given upon the authority of
such firm as experts in accounting and auditing.
The financial statements and related financial statement schedule of EVT
incorporated in this Proxy Statement/Prospectus by reference have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
It is expected that representatives of Arthur Andersen LLP will be present
at the Special Meeting, to respond to appropriate questions and to make a
statement if they desire.
FUTURE STOCKHOLDER PROPOSALS
In the event the Merger is not consummated, the only stockholder proposals
eligible to be considered for inclusion in the proxy materials for the 1998
annual meeting of EVT will be those which were submitted to EVT no later than
January 30, 1998, as provided in the 1997 Annual Meeting Proxy Statement of
EVT. The inclusion of any proposal will be subject to applicable rules of the
Commission. In addition, the Bylaws of EVT establish an advance notice
requirement for any proposal of business to be considered at an annual meeting
of stockholders.
62
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
GUIDANT CORPORATION
SKI ACQUISITION CORP.
AND
ENDOVASCULAR TECHNOLOGIES, INC.
DATED AS OF OCTOBER 5, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<C> <S> <C>
ARTICLE 1 THE MERGER........................................... A-1
1.1 The Merger................................................ A-1
1.2 The Closing............................................... A-1
1.3 Effective Time............................................ A-1
1.4 Certificate of Incorporation and Bylaws................... A-2
1.5 Directors of the Surviving Corporation.................... A-2
1.6 Officers of the Surviving Corporation..................... A-2
ARTICLE 2 CONVERSION AND EXCHANGE OF SECURITIES................ A-2
2.1 Merger Sub Stock.......................................... A-2
2.2 EVT Stock................................................. A-2
2.3 Exchange of Certificates Representing EVT Common Stock.... A-3
2.4 Adjustment of Exchange Ratio.............................. A-5
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF EVT................ A-5
Existence; Good Standing; Corporate Authority; Compliance
3.1 With Law.................................................. A-5
3.2 Authorization, Validity and Effect of Agreements.......... A-6
3.3 Capitalization............................................ A-6
3.4 Subsidiaries.............................................. A-6
3.5 Other Interests........................................... A-7
3.6 No Violation.............................................. A-7
3.7 SEC Documents............................................. A-7
3.8 Patents, Trademarks, Copyrights and Trade Secrets......... A-8
3.9 Investigations; Litigation................................ A-8
3.10 Governmental Approvals.................................... A-8
3.11 Absence of Certain Changes................................ A-8
3.12 Taxes and Tax Returns..................................... A-9
3.13 Material Contracts........................................ A-10
3.14 Employee Benefit Plans.................................... A-10
3.15 Labor Matters............................................. A-12
3.16 Guidant Stock Ownership................................... A-12
3.17 Pooling of Interests; Tax Reorganization.................. A-12
3.18 Environmental Matters..................................... A-12
3.19 State Takeover Statutes and Shareholder Rights Plan....... A-12
3.20 No Brokers................................................ A-12
3.21 Opinion of Financial Advisor.............................. A-12
3.22 Affiliates................................................ A-13
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF GUIDANT AND MERGER
SUB........................................................... A-13
Existence; Good Standing; Corporate Authority; Compliance
4.1 With Law.................................................. A-13
4.2 Authorization, Validity and Effect of Agreements.......... A-13
4.3 Capitalization............................................ A-13
4.4 Merger Sub................................................ A-14
4.5 No Violation.............................................. A-14
4.6 SEC Documents............................................. A-14
4.7 Investigations; Litigation................................ A-15
4.8 Absence of Certain Changes................................ A-15
4.9 No Brokers................................................ A-15
4.10 Patents, Trademarks, Copyrights and Trade Secrets......... A-15
4.11 Pooling of Interests; Tax Reorganization.................. A-15
</TABLE>
i
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<TABLE>
<CAPTION>
PAGE NO.
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<C> <S> <C>
ARTICLE 5 COVENANTS................................................. A-15
5.1 Alternative Proposals......................................... A-15
5.2 Interim Operations............................................ A-16
5.3 Meeting of Stockholders....................................... A-18
5.4 Filings; Other Actions........................................ A-18
5.5 Inspection of Records......................................... A-18
5.6 Publicity..................................................... A-18
5.7 Registration Statement........................................ A-19
5.8 Listing Application........................................... A-19
5.9 Affiliate Letters............................................. A-19
5.10 Expenses...................................................... A-19
5.11 Certain Transaction Related Fees.............................. A-20
5.12 Directors' and Officers' Indemnification and Insurance........ A-20
5.13 Reorganization................................................ A-20
5.14 Shareholder Rights Plan and Takeover Statutes................. A-20
5.15 Support Agreement Legend...................................... A-21
5.16 Conveyance Taxes.............................................. A-21
5.17 Transfer Taxes................................................ A-21
5.18 Company Employee Stock Purchase Plan.......................... A-21
5.19 Benefit Arrangements.......................................... A-21
ARTICLE 6 CONDITIONS................................................ A-22
6.1 Conditions to Each Party's Obligation to Effect the Merger.... A-22
6.2 Conditions to Obligation of EVT to Effect the Merger.......... A-22
Conditions to Obligation of Guidant and Merger Sub to Effect
6.3 the Merger.................................................... A-23
ARTICLE 7 TERMINATION............................................... A-23
7.1 Termination by Mutual Consent................................. A-23
7.2 Termination by Either Guidant or EVT.......................... A-23
7.3 Termination by EVT............................................ A-24
7.4 Termination by Guidant........................................ A-24
7.5 Effect of Termination and Abandonment......................... A-24
7.6 Extension; Waiver............................................. A-25
7.7 Certain Rights of Guidant..................................... A-25
ARTICLE 8 GENERAL PROVISIONS........................................ A-25
8.1 Nonsurvival of Representations, Warranties and Agreements..... A-25
8.2 Notices....................................................... A-25
8.3 Assignment; Binding Effect.................................... A-26
8.4 Entire Agreement.............................................. A-26
8.5 Amendment..................................................... A-26
8.6 Governing Law................................................. A-26
8.7 Counterparts.................................................. A-26
8.8 Headings...................................................... A-26
8.9 Interpretation................................................ A-26
8.10 Waivers....................................................... A-27
8.11 Incorporation of Exhibits..................................... A-27
8.12 Severability.................................................. A-27
8.13 Enforcement of Agreement...................................... A-27
8.14 Subsidiaries.................................................. A-27
8.15 Other......................................................... A-27
</TABLE>
ii
<PAGE>
EXHIBIT A Form of Affiliate Letter
SCHEDULES
EVT Disclosures Schedules
3.4. Subsidiaries
3.8. Patents, Trademarks, Copyrights and Trade Secrets
3.9. Investigations; Litigation
3.10 Governmental Approvals
3.13 Material Contracts
3.14 Employee Benefit Plans
3.22 Affiliates Guidant Disclosure Schedules
4.7 Investigations; Litigation
GUIDANT WILL FURNISH SUPPLEMENTALLY A COPY OF THE SCHEDULES TO THE SECURITIES
AND EXCHANGE COMMISSION UPON REQUEST.
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of October 5,
1997, between Guidant Corporation, an Indiana corporation ("Guidant"), Ski
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Guidant ("Merger Sub"), and EndoVascular Technologies, Inc., a Delaware
corporation ("EVT").
RECITALS
A. Guidant and EVT each have determined that a business combination between
Guidant and EVT is in the best interests of their respective companies and
stockholders and presents an opportunity for their respective companies to
achieve long-term strategic and financial benefits, and accordingly have
agreed to effect the merger provided for herein upon the terms and subject to
the conditions set forth herein.
B. Concurrently with the execution of this Agreement, in order to induce
Guidant and Merger Sub to enter into the Agreement, certain stockholders of
EVT are entering into support agreements (each a "Support Agreement") with
Guidant, providing for certain voting and other restrictions with respect to
the shares of EVT Common Stock (as defined herein) beneficially owned by them
upon the terms and conditions specified therein.
C. It is intended that for federal income tax purposes, the merger provided
for herein shall qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code") and for
accounting purposes as a pooling of interests.
D. Merger Sub is a wholly owned subsidiary of Guidant and has been formed
solely to facilitate the Merger (as defined herein) and has conducted and will
conduct no business or activity other than in connection with the Merger.
E. The parties intend to cause the Merger to be accounted for as a pooling
of interests pursuant to APB Opinion No. 16, Staff Accounting Series Releases
130, 135 and 146 and Staff Accounting Bulletin Topic Two.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
The Merger
1.1 THE MERGER. Subject to the terms and conditions of this Agreement, at
the Effective Time (as defined in Section 1.3), Merger Sub shall be merged
with and into EVT in accordance with this Agreement, and the separate
corporate existence of Merger Sub shall thereupon cease (the "Merger"). EVT
shall be the surviving corporation in the Merger (sometimes hereinafter
referred to as the "Surviving Corporation") and will be a wholly owned
subsidiary of Guidant. The Merger shall have the effects specified in the
Delaware General Corporation Law (the "DGCL").
1.2 THE CLOSING. Subject to the terms and conditions of this Agreement, the
closing of the Merger (the "Closing") shall take place (a) at the offices of
Dewey Ballantine LLP, 1301 Avenue of the Americas, New York, New York, at
10:00 a.m., local time, on the first business day immediately following the
day on which the last to be fulfilled or waived of the conditions set forth in
Article 6 shall be fulfilled or waived in accordance herewith or (b) at such
other time, date or place as Guidant and EVT may agree in writing. The date on
which the Closing occurs is hereinafter referred to as the "Closing Date."
1.3 EFFECTIVE TIME. If all the conditions set forth in Article 6 shall have
been fulfilled or waived in accordance herewith and this Agreement shall not
have been terminated as provided in Article 7, the parties
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hereto shall cause a Certificate of Merger meeting the requirements of Section
251 of the DGCL to be properly executed and filed in accordance with such
Section on the Closing Date. The Merger shall become effective at the time of
filing of the Certificate of Merger with the Secretary of State of the State
of Delaware in accordance with the DGCL or at such later time which the
parties hereto shall have agreed upon and designated in such filing as the
effective time of the Merger (the "Effective Time").
1.4 CERTIFICATE OF INCORPORATION AND BYLAWS. After the Effective Time, (i)
the Certificate of Incorporation of the Surviving Corporation shall be amended
and restated in its entirety to read as the Certificate of Incorporation of
Merger Sub in effect immediately prior to the Effective Time, except that the
Certificate of Incorporation of the Surviving Corporation shall provide that
the name of the corporation be "EndoVascular Technologies, Inc." and (ii) the
Bylaws of the Merger Sub, as in effect immediately prior to the Effective
Time, shall be the Bylaws of the Surviving Corporation until duly amended in
accordance with applicable law.
1.5 DIRECTORS OF THE SURVIVING CORPORATION. The directors of Merger Sub
immediately prior to the Effective Time shall be the directors of the
Surviving Corporation as of the Effective Time and until their successors are
duly appointed or elected in accordance with applicable law.
1.6 OFFICERS OF THE SURVIVING CORPORATION. The officers of EVT immediately
prior to the Effective Time shall be the officers of the Surviving Corporation
as of the Effective Time and until their successors are duly appointed or
elected in accordance with applicable law.
ARTICLE 2
Conversion and Exchange of Securities
2.1 MERGER SUB STOCK. At the Effective Time, each share of common stock, par
value $.01 per share, of Merger Sub outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one validly issued,
fully paid and non-assessable share of common stock, par value $.01 per share,
of the Surviving Corporation.
2.2 EVT STOCK. (a) At the Effective Time, each share of common stock, par
value $.00001 per share, of EVT (the "EVT Common Stock") issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into the right to receive such number or fraction of a number, rounded to four
decimal places (the "Exchange Ratio"), of shares of common stock, without par
value, of Guidant (the "Guidant Common Stock") that equals the result obtained
by dividing $20.00 by the "Closing Price" (the "Exchange Consideration");
provided, however, that if the Closing Price shall be greater than or equal to
$46.63 but less than or equal to $51.75, then the Exchange Ratio shall be
fixed at 0.3865; provided, further, that if the Closing Price shall be less
than $46.63, then the Exchange Ratio shall be the result obtained by dividing
$18.00 by the Closing Price.
"Closing Price" means the average closing price of Guidant Common Stock,
rounded to four decimal places, as reported in The Wall Street Journal's New
York Stock Exchange Composite Transaction Reports, for each of the 10
consecutive Trading Days immediately preceding the third Trading Day prior to
the EVT Stockholders Meeting (as defined in Section 5.3). "Trading Day" means
a day on which the New York Stock Exchange, Inc. (the "NYSE") is open for
trading.
(b) As a result of the Merger and without any action on the part of the
holder thereof, at the Effective Time, all shares of EVT Common Stock
outstanding immediately prior to the Effective Time shall cease to be
outstanding and shall cease to exist, and each holder of shares of EVT Common
Stock shall thereafter cease to have any rights with respect to such shares of
EVT Common Stock, except the right to receive, without interest, the Exchange
Consideration and cash for fractional shares of Guidant Common Stock in
accordance with Sections 2.3(b) and 2.3(e) upon the surrender of a certificate
(a "Certificate") representing such shares of EVT Common Stock.
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<PAGE>
(c) Each share of EVT Common Stock issued and held in EVT's treasury at the
Effective Time shall, by virtue of the Merger, cease to be outstanding and
shall be canceled and retired and shall cease to exist without payment of any
consideration therefor.
(d) All options to purchase capital stock of EVT (the "EVT Options")
outstanding, whether or not exercisable, whether or not vested, and whether or
not performance-based, at the Effective Time under EVT's 1989 Stock Option
Plan and 1995 Stock Option Plan, (collectively, the "EVT Stock Option Plans"),
shall by virtue of the Merger and without any further action on the part of
EVT or the holder thereof, be converted into an option to purchase Guidant
Common Stock pursuant to the terms of the Guidant Corporation 1994 Stock Plan
("Guidant 1994 Stock Plan") in such manner that Guidant (i) is "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 EVT Options, would be a transaction within
Section 424 of the Code. Each EVT Option converted by Guidant shall be
exercisable upon the same terms and conditions as under the applicable EVT
Stock Option Plan and the applicable option agreement issued thereunder,
except that (A) each such EVT Option shall be exercisable for that whole
number of shares of Guidant Common Stock (rounded down to the nearest whole
share) into which the number of shares of EVT Common Stock subject to such EVT
Option immediately prior to the Effective Time would be converted under
Section 2.2(a), and (B) the option price per share of Guidant Common Stock
shall be an amount equal to the option price per share of EVT Common stock
subject to such EVT Option in effect immediately prior to the Effective Time
divided by the Exchange Ratio (the option price per share, as so determined,
being rounded downward to the nearest full cent). Guidant shall (i) on or
prior to the Effective Time, reserve for issuance the number of shares of
Guidant Common Stock that will become subject to options to purchase shares of
Guidant Common Stock ("Guidant Options") pursuant to this Section 2.2(d), (ii)
from and after the Effective Time, upon exercise of the Guidant Options in
accordance with the terms thereof, make available for issuance all shares of
Guidant Common Stock covered thereby and (iii) as promptly as practicable
after the Effective Time, issue to each holder of an outstanding EVT Option a
document evidencing the foregoing assumption by Guidant.
(e) It is the intention of the parties that the EVT Options converted by
Guidant qualify following the Effective Time as incentive stock options as
defined in Section 422 of the Code to the extent permitted under Section 422
of the Code and to the extent the EVT Options qualified as incentive stock
options prior to the Effective Time.
(f) If necessary to register Guidant Common Stock issuable upon the exercise
of Guidant Options, Guidant shall as promptly as practicable following the
Effective Time file a registration statement on Form S-8 or an amendment to an
existing registration statement on Form S-8 under the Securities Act of 1933,
as amended (the "Securities Act"), covering the shares of Guidant Common Stock
issuable upon the exercise of Guidant Options created upon the assumption by
Guidant of EVT Options under Section 2.2(d), except to the extent the shares
issuable pursuant to the assumption of EVT Options by Guidant have already
been registered, and will use its reasonable best efforts to cause such
registration statement to become effective and to maintain such registration
in effect until the exercise or expiration of such Guidant Options. No payment
shall be made for fractional interests, rather, the aggregate number of shares
to be issued under any assumed EVT Option shall be rounded down to the nearest
whole number.
2.3 EXCHANGE OF CERTIFICATES REPRESENTING EVT COMMON STOCK.
(a) As of the Effective Time, Guidant shall deposit, or shall cause to be
deposited, with First Chicago Trust Company of New York (the "Exchange
Agent"), for the benefit of the holders of shares of EVT Common Stock, for
exchange in accordance with this Article 2, certificates representing the
shares of Guidant Common Stock to be issued in connection with the Merger and
cash in an amount equal to Guidant's good faith estimate of the cash required
to be paid to holders of shares of EVT Common Stock in lieu of fractional
shares expected to be payable in connection with the Merger (such cash and
certificates for shares of Guidant Common Stock, together with any dividends
or distributions with respect thereto (relating to record dates for such
dividends or distributions after the Effective Time), being hereinafter
referred to as the "Exchange Fund") to be issued
A-3
<PAGE>
pursuant to Section 2.2 and paid pursuant to this Section 2.3 in exchange for
outstanding shares of EVT Common Stock. Notwithstanding anything in this
Agreement to the contrary, Guidant may, in lieu of issuing certificates for
Guidant Common Stock, make book-entry notations pursuant to established book-
entry procedures of the Exchange Agent, and all references in this Agreement
to certificates for Guidant Common Stock will be deemed to be references to
book-entry notations.
(b) Promptly after the Effective Time, Guidant shall cause the Exchange
Agent to mail to each holder of record of shares of EVT Common Stock (i) a
letter of transmittal specifying that delivery shall be effected, and risk of
loss and title to such shares of EVT Common Stock shall pass, only upon
delivery of the Certificates representing such shares to the Exchange Agent
and which letter shall be in such form and have such other provisions as
Guidant may reasonably specify and (ii) instructions for use in effecting the
surrender of EVT Common Stock Certificates in exchange for the Exchange
Consideration, including cash in lieu of fractional shares. Upon surrender of
a Certificate for cancellation to the Exchange Agent together with such letter
of transmittal, duly executed and completed in accordance with the
instructions thereto, the holder of the shares represented by such Certificate
shall be entitled to receive in exchange therefor (x) a certificate
representing that number of whole shares of Guidant Common Stock and (y) a
check representing the amount of cash in lieu of fractional shares, if any,
and unpaid dividends and distributions, if any, that such holder has the right
to receive in respect of the Certificate surrendered pursuant to the
provisions of this Article 2, after giving effect to any required withholding
tax, and the shares represented by the Certificate so surrendered shall
forthwith be canceled. No interest will be paid or accrued on the cash payable
to holders of shares of EVT Common Stock. In the event of a transfer of
ownership of EVT Common Stock that is not registered in the transfer records
of EVT, a certificate representing the proper number of shares of Guidant
Common Stock, together with a check for the cash to be paid may be issued to
such a transferee if the Certificate representing such EVT Common Stock is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and to evidence that any applicable stock
transfer taxes have been paid.
(c) Notwithstanding any other provisions of this Agreement, no dividends or
other distributions declared after the Effective Time on Guidant Common Stock
shall be paid with respect to any shares of EVT Common Stock represented by a
Certificate until such Certificate is surrendered for exchange as provided
herein. Subject to the effect of applicable laws, following surrender of any
such Certificate, there shall be paid to the holder of the certificates
representing whole shares of Guidant Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of dividends
or other distributions with a record date after the Effective Time theretofore
payable with respect to such whole shares of Guidant Common Stock and not
paid, less the amount of any withholding taxes which may be required thereon,
and (ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole shares of Guidant Common Stock, less the amount of any withholding
taxes which may be required thereon.
(d) At or after the Effective Time, there shall be no transfers on the stock
transfer books of EVT of the shares of EVT Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall be
canceled and exchanged for certificates for shares of Guidant Common Stock and
cash deliverable in respect thereof pursuant to this Agreement in accordance
with the procedures set forth in this Article 2. Certificates surrendered for
exchange by any person constituting an "affiliate" of EVT for purposes of Rule
145(c) under the Securities Act of 1933, as amended (the "Securities Act"),
shall not be exchanged until Guidant has received a written agreement from
such person as provided in Section 5.9.
(e) No fractional shares of Guidant Common Stock shall be issued pursuant
hereto. In lieu of the issuance of any fractional share of Guidant Common
Stock, cash adjustments will be paid to holders in respect of any fractional
share of Guidant Common Stock that would otherwise be issuable, and the amount
of such cash adjustment shall be equal to the product obtained by multiplying
such stockholder's fractional share of Guidant Common Stock that would
otherwise be payable by the Closing Price.
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<PAGE>
(f) Any portion of the Exchange Fund (including the proceeds of any
investments thereof and any shares of Guidant Common Stock) that remains
unclaimed by the former stockholders of EVT six months after the Effective
Time shall be delivered to Guidant. Any former stockholders of EVT who have
not theretofore complied with this Article 2 shall thereafter look only to
Guidant, and Guidant shall comply with such requests, made in accordance with
the terms of this Agreement, for payment of their shares of Guidant Common
Stock, cash and unpaid dividends and distributions on Guidant Common Stock
deliverable in respect of each share of EVT Common Stock such stockholder
holds as determined pursuant to this Agreement, in each case, without any
interest thereon.
(g) None of Guidant, EVT, the Surviving Corporation, the Exchange Agent or
any other person shall be liable (except to the extent provided by applicable
law) to any former holder of shares of EVT Common Stock for any amount
properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(h) In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and the posting by such person of
a bond in such 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 Guidant Common Stock and cash
deliverable in respect thereof pursuant to this Agreement.
2.4 ADJUSTMENT OF EXCHANGE RATIO. In the event that, subsequent to the date
of this Agreement but prior to the Effective Time, the outstanding shares of
Guidant Common Stock or EVT Common Stock, respectively, shall have been
changed into a different number of shares or a different class as a result of
a stock split, reverse stock split, stock dividend, subdivision,
reclassification, combination, exchange, recapitalization or other similar
transaction, the Exchange Ratio shall be appropriately adjusted.
ARTICLE 3
Representations and Warranties of EVT
Except as set forth in the disclosure schedule delivered at or prior to the
execution hereof to Guidant (the "EVT Disclosure Schedule") or in the EVT
Reports (as defined below), EVT represents and warrants to Guidant as of the
date of this Agreement as follows:
3.1 EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY; COMPLIANCE WITH LAW. EVT
is a corporation duly incorporated, validly existing and in good standing
under the laws of its jurisdiction of incorporation. EVT is duly licensed or
qualified to do business as a foreign corporation and is in good standing
under the laws of any other state of the United States in which the character
of the properties owned or leased by it or in which the transaction of its
business makes such qualification necessary, except where the failure to be so
qualified or to be in good standing would not have a material adverse effect
on the business, results of operation, financial condition or prospects of EVT
and its Subsidiaries (as defined in Section 8.14) taken as a whole (as
modified by the following proviso, an "EVT Material Adverse Effect");
provided, however, that any such effect resulting from (i) any change in
economic or business conditions generally affecting the medical devices
industry, (ii) any change in generally accepted accounting principles or
interpretations thereof generally affecting the medical devices industry (as
opposed to EVT specifically), (iii) any effect on EVT resulting from actions
taken or not taken by EVT at Guidant's direction pursuant to Section 5.2 of
this Agreement or (iv) operating losses not in excess of $2 million per month,
shall not be considered when determining if an EVT Material Adverse Effect has
occurred. EVT has all requisite corporate power and authority to own, operate
and lease its properties and carry on its business as now conducted or as
reasonably contemplated in the future. Each of EVT's Subsidiaries is a
corporation or partnership duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization,
has the corporate or partnership power and authority to own its
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properties and to carry on its business as it is now being conducted, and is
duly qualified to do business and is in good standing in each jurisdiction in
which the ownership of its property or the conduct of its business requires
such qualification, except for jurisdictions in which such failure to be so
qualified or to be in good standing would not have an EVT Material Adverse
Effect. Neither EVT nor any of its Subsidiaries is in violation of any order
of any court, governmental authority or arbitration board or tribunal, or any
law, ordinance, governmental rule or regulation to which EVT or any of its
Subsidiaries or any of their respective properties or assets is subject, other
than any violations that would not have an EVT Material Adverse Effect. EVT
and its Subsidiaries have obtained all licenses, permits and other
authorizations and have taken all actions required by applicable law or
governmental regulations in connection with their business as now conducted,
except where the failure to obtain any such item or to take any such action
would not have an EVT Material Adverse Effect.
3.2 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS. EVT has the requisite
corporate power and authority to execute and deliver this Agreement and all
agreements and documents contemplated hereby. Subject only to the approval of
this Agreement and the transactions contemplated hereby by the holders of a
majority of the outstanding shares of EVT Common Stock, the consummation by
EVT of the transactions contemplated hereby has been unanimously approved by
the Board of Directors of EVT and duly authorized by all requisite corporate
action. This Agreement constitutes, and all agreements and documents
contemplated hereby to which EVT is a party (when executed and delivered
pursuant hereto for value received) will constitute, the valid and legally
binding obligations of EVT, enforceable in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, moratorium or other
similar laws relating to creditors' rights and general principles of equity.
3.3 CAPITALIZATION. The authorized capital stock of EVT consists of
30,000,000 shares of EVT Common Stock and 5,000,000 shares of preferred stock,
par value $.00001 per share (the "EVT Preferred Stock"). As of October 5,
1997, there were 8,545,609 shares of EVT Common Stock issued and outstanding
and no shares of EVT Preferred Stock issued and outstanding. As of October 5,
1997, options to acquire 1,280,414 shares of EVT Common Stock were outstanding
pursuant to the terms of the 1989 Stock Option Plan and the 1995 Stock Option
Plan (the "EVT Stock Option Plans"). Since such date, no additional options
have been granted. EVT has no outstanding bonds, debentures, notes or other
obligations the holders of which have the right to vote (or which are
convertible into or exercisable for securities having the right to vote) on
any matter with respect to such securities. All issued and outstanding shares
of EVT Common Stock are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights. The current "Purchase Period" (as
defined in EVT's Employee Stock Purchase Plan (the "Stock Purchase Plan"))
commenced on August 1, 1997 and will end upon the earlier of January 30, 1998
or immediately prior to the Effective Time, provided that if the Effective
Time is later than January 31, 1998, then a new Purchase Period will commence
on February 2, 1998 and will end upon the earlier of July 31, 1998 or
immediately prior to the Effective Time. Except for the outstanding purchase
rights held by participants in the current Purchase Period, there are no other
purchase rights or options outstanding under the Stock Purchase Plan. There
are not at the date of this Agreement any existing options, warrants, calls,
subscriptions, convertible securities, or other rights, agreements or
commitments, other than under the EVT Stock Option Plans, the Rights
Agreement, dated February 5, 1997, between EVT and Chase Mellon Shareholder
Services (the "EVT Shareholder Rights Plan"), the Stock Purchase Plan, and as
contemplated herein, that obligate EVT or any of its Subsidiaries to issue,
transfer or sell any shares of capital stock of EVT or any of its
Subsidiaries. After the Effective Time, the Surviving Corporation will have no
obligation to issue, transfer or sell any shares of capital stock or other
securities of EVT or the Surviving Corporation pursuant to any EVT Plan (as
defined in Section 3.14).
3.4 SUBSIDIARIES. EVT owns directly or indirectly each of the outstanding
shares of capital stock (or other ownership interests having by their terms
ordinary voting power to elect a majority of directors or others performing
similar functions with respect to such Subsidiary) of each of EVT's
Subsidiaries. Each of the outstanding shares of capital stock of each of EVT's
Subsidiaries is duly authorized, validly issued, fully paid and nonassessable,
and is owned, directly or indirectly, by EVT free and clear of all liens,
pledges, security interests, claims or other encumbrances. Set forth in
Section 3.4 of the EVT Disclosure Schedule is the name and jurisdiction of
incorporation of each Subsidiary of EVT.
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3.5 OTHER INTERESTS. Except for interests in its Subsidiaries, neither EVT
nor any of its Subsidiaries owns directly or indirectly any interest or
investment (whether equity or debt) in any corporation, partnership, joint
venture, business, trust or entity other than marketable securities available
for sale.
3.6 NO VIOLATION. Neither the execution and delivery by EVT of this
Agreement nor the consummation by EVT of the transactions contemplated hereby
in accordance with the terms hereof, will: (i) conflict with or result in a
breach of any provisions of the Certificate of Incorporation or Bylaws of EVT;
(ii) result in a breach or violation of, a default under, or the triggering of
any payment or other material obligations pursuant to, or accelerate vesting
under, any existing EVT Plan, or any grant or award made under any of the
foregoing; (iii) violate, conflict with, result in a breach of any provision
of, constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, result in the termination or in a
right of termination or cancellation of, accelerate the performance required
by, result in the triggering of any payment or other material obligations
pursuant to, result in the creation of any lien, security interest, charge or
encumbrance upon any of the material properties of EVT or its Subsidiaries
under, or result in being declared void, voidable, or without further binding
effect, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust or any material license, franchise, permit,
lease, contract, agreement or other instrument, commitment or obligation to
which EVT or any of its Subsidiaries is a party, or by which EVT or any of its
Subsidiaries or any of their respective properties is bound or affected,
except for any of the foregoing matters which would not have an EVT Material
Adverse Effect; or (iv) other than the filings provided for in Article 1,
filings required under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 (the "HSR Act"), the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Securities Act, or applicable state securities and "Blue
Sky" laws, as required under the DGCL and the rules of the Nasdaq National
Market or filings in connection with the maintenance of qualification to do
business in other jurisdictions or foreign filings of which EVT notifies
Guidant in writing within five business days of the date hereof (collectively,
the "Regulatory Filings"), require any consent, approval or authorization of,
or declaration, filing or registration with, any domestic governmental or
regulatory authority, other than consents, approvals, authorizations,
declarations or filings or registration which, if not obtained or made would
not have an EVT Material Adverse Effect. The stockholders of EVT have no
appraisal, dissenters or other similar rights with respect to the Merger.
3.7 SEC DOCUMENTS. As of their respective dates, each registration
statement, report, proxy statement or information statement (as defined in
Regulation 14C under the Exchange Act) of EVT prepared by it since its initial
public offering of EVT Common Stock (including, without limitation, the
Registration Statement on Form S-1 with respect to its initial offering), in
the form (including exhibits and any amendments thereto) filed with the
Securities and Exchange Commission (the "SEC"), (collectively, the "EVT
Reports") (i) complied as to form in all material respects with the applicable
requirements of the Securities Act, the Exchange Act, and the rules and
regulations thereunder and (ii) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. Each of the balance
sheets included in or incorporated by reference into the EVT Reports
(including the related notes and schedules) fairly presents the consolidated
financial position of EVT and its Subsidiaries as of its date, and each of the
statements of operations, retained earnings and cash flows included in or
incorporated by reference into the EVT Reports (including any related notes
and schedules) fairly presents the results of operations, retained earnings or
cash flows, as the case may be, of EVT and its Subsidiaries for the periods
set forth therein (subject, in the case of unaudited statements, to normal
year-end audit adjustments which would not be material in amount or effect),
in each case in accordance with generally accepted accounting principles
consistently applied during the periods involved, except as may be noted
therein. Neither EVT nor any of its Subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or
otherwise), except (a) as set forth in the EVT Reports, (b) liabilities or
obligations reflected on, or reserved against in, a balance sheet of EVT or in
the notes thereto, prepared in accordance with generally accepted accounting
principles consistently applied and included in the EVT Reports, (c)
liabilities or obligations incurred in the ordinary course of business which
do not have an EVT Material Adverse Effect and (d) arising under executory
contracts not currently in default.
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3.8 PATENTS, TRADEMARKS, COPYRIGHTS AND TRADE SECRETS. (a) Section 3.8 of
the EVT Disclosure Schedule contains a complete list of all United States and
foreign patents and patent applications, trademarks (whether registered or as
to which registration has been applied for), trade names and service marks
owned by or licensed to EVT or any of its Subsidiaries as of the date hereof.
(b) Except as set forth in Section 3.8 of the Ski Disclosure Schedule or the
EVT Reports, (i) to the knowledge of EVT, there is no existing or, threatened
infringement, misuse or misappropriation by others, of any United States or
foreign patents, patent applications, trademarks, whether registered or as to
which registration has been applied for, tradenames, service marks,
copyrights, processes, designs, formulae, inventions, know-how, trade secrets
or concepts (the "Intellectual Property") of EVT or any of its Subsidiaries
that is reasonably likely to be material to EVT's operation, (ii) there are no
pending or threatened claims by EVT or any of its Subsidiaries against others
for infringement, misuse or misappropriation, of any Intellectual Property of
EVT or its Subsidiaries that are reasonably likely to be material to EVT's
operation and (iii) to the knowledge of EVT, neither EVT nor any of its
Subsidiaries is infringing, misusing or misappropriating any Intellectual
Property of any third party and, to EVT's knowledge, no claim of such
infringement, misuse or misappropriation is pending or threatened.
(c) Except as set forth in Section 3.8 of the EVT Disclosure Schedule or the
EVT Reports, EVT and its Subsidiary own or possess adequate licenses or other
valid rights to use all of the Intellectual Property of EVT. EVT has no
knowledge of any facts or claims which may bring the validity of its issued
patents into question.
3.9 INVESTIGATIONS; LITIGATION. Except as set forth in Section 3.9 of the
EVT Disclosure Schedule or in the EVT Reports and except in the ordinary
course of its business, (a) no material investigation or review by any
governmental entity with respect to EVT or any of its Subsidiaries is pending
(or, to EVT's knowledge, threatened) nor has any governmental entity indicated
to EVT an intention to conduct the same; and (b) there are no actions, suits
or proceedings pending against EVT or its Subsidiaries or, to the knowledge of
EVT, threatened against EVT or its Subsidiaries, at law or in equity, or
before or by any federal, state, local or foreign commission, board, bureau,
agency or instrumentality.
3.10 GOVERNMENTAL APPROVALS. Except as set forth in Section 3.10 of the EVT
Disclosure Schedule, there are no products now being manufactured, sold or
distributed by EVT or any Subsidiary which at the date hereof would require
any approval of the United States Food and Drug Administration (the "FDA") or
any other governmental body that regulates the safety, effectiveness, market
clearances, market or post-market surveillance of the products, whether
Federal, state, local or foreign for the purpose for which they are being
manufactured, sold or distributed, for which such approval has not been
obtained. All products now being commercially distributed by EVT or any
Subsidiary in any jurisdiction meet, in all material respects, the applicable
legal requirements of such jurisdiction with respect to their safety,
effectiveness, market clearance, marketing and post-market surveillance and
all requisite governmental approvals have been duly obtained and are in full
force and effect, and except as set forth in the EVT Reports, there is no
basis known to EVT for the FDA or any other governmental body to rescind any
approval for any of their commercially distributed products for the purpose
for which they are being manufactured, sold or distributed. There is no action
or proceeding by the FDA or any other governmental body claiming that any
product now being commercially distributed or used in any clinical trials by
EVT or any Subsidiary is defective or fails to meet any applicable regulatory
standards or that EVT has violated any applicable rules or regulations
governing the marketing or post-market surveillance requirements for any
product, including, but not limited to, recall procedures, pending or, to the
knowledge of EVT, threatened against EVT or any Subsidiary, and no such
proceeding was brought at any time in the past, relating to the safety or
efficacy of any of its products, and, to the knowledge of EVT, there is no
basis for any such action or proceeding. No Institutional Review Board or
Institutional Review Committee or other similar group has terminated or
recommended termination of a clinical study of any product of EVT or any
Subsidiary.
3.11 ABSENCE OF CERTAIN CHANGES. Since December 31, 1996, EVT has conducted
its business only in the ordinary course of such business, and there has not
been (i) any EVT Material Adverse Effect or any event which is reasonably
likely to result in an EVT Material Adverse Effect; (ii) any declaration,
setting aside or
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payment of any dividend or other distribution with respect to its capital
stock; or (iii) any material change in its accounting principles, practices or
methods.
3.12 TAXES AND TAX RETURNS. (a) Definitions:
"Code" means the Internal Revenue Code of 1986, as amended. All citations to
provisions of the Code, or to the Treasury Regulations promulgated thereunder,
shall include any amendments thereto and any substitute or successor
provisions thereto.
"Taxes" means all taxes, charges, fees, levies or other assessments,
including, without limitation, income, gross receipts, employment, excise,
withholding, property, sales, use, transfer, license, payroll and franchise
taxes, together with any interest and any penalties, additions to tax or
additional amounts with respect thereto, imposed by the United States, or any
state, local or foreign government or subdivision or agency thereof.
"Taxable Period" means any taxable year or any other period that is treated
as a taxable year (or other period, or portion thereof, in the case of a Tax
imposed with respect to such period or portion thereof, e.g., a quarter) with
respect to which any Tax may be imposed under any applicable statute, rule, or
regulation.
"Tax Reserve" shall have the meaning set forth in Section 3.12(d).
"Tax Return" shall mean any report, return, election, notice or other
information required to be supplied to a taxing authority in connection with
Taxes.
(b) All Tax Returns required to be filed by or with respect to EVT and each
of its Subsidiaries for all Taxable Periods ending on or before the date
hereof or the Effective Time have been or will be timely filed. Except to the
extent that a proper reserve for Taxes has been reflected on the EVT Financial
Statements included in the EVT Reports for the period ended June 30, 1997, in
accordance with GAAP, all such Tax Returns (i) were prepared in the manner
required by applicable law, (ii) are true, correct, and complete in all
material respects, and (iii) reflect the liability for Taxes of EVT and each
of its Subsidiaries. All Taxes shown to be payable on such Tax Returns, and
all assessments of Tax made against EVT and each of its Subsidiaries with
respect to such Tax Returns, have been paid when due except to the extent that
a proper reserve for Taxes has been reflected on the EVT Financial Statements
included in the EVT Reports for the period ended June 30, 1997, in accordance
with GAAP. No adjustment relating to any such Tax Return has been proposed or
threatened formally or informally by any Taxing authority and, except to the
extent that a proper reserve for Taxes has been reflected on the EVT Financial
Statements included in the EVT Reports for the period ended June 30, 1997, in
accordance with GAAP, no basis exists for any such adjustment.
(c) EVT and each of its Subsidiaries have made (or there has been made on
its behalf) all required current estimated Tax payments sufficient to avoid
any material underpayment penalties.
(d) EVT and each of its Subsidiaries have (i) timely paid or caused to be
paid or will cause to be paid all Taxes that are or were due on or prior to
the date hereof or the Effective Time, except to the extent that a proper
reserve for Taxes has been reflected on the EVT Financial Statements included
in the EVT Reports for the period ended June 30, 1997, in accordance with
GAAP, whether or not shown (or required to be shown) on a Tax Return and (ii)
provided a sufficient reserve for the payment of all Taxes not yet due and
payable (the "Tax Reserve") on the financial statements included in EVT's
Annual Report on Form 10-K for the year ended December 31, 1996. There are no
Taxes that would be due if asserted by a Taxing authority, except with respect
to which EVT and each of its Subsidiaries are maintaining adequate reserves on
such EVT Financial Statements.
(e) EVT and each of its Subsidiaries have complied (and until the Closing
Date will comply) in all material respects with the provisions of the Code
relating to the withholding and payment of Taxes, including, without
limitation, the withholding and reporting requirements under Code sections
1441 through 1464, 3401 through 3406, and 6041 through 6049, as well as
similar provisions under any other laws, and have, within the time and in the
manner prescribed by law, withheld from employee wages and paid over to the
proper governmental authorities all amounts required.
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(f) Except as set forth in Schedule 3.12(f) of the EVT Disclosure Schedule,
none of the Tax Returns have been examined by the IRS or relevant state, local
or foreign Taxing authorities. There are no threatened actions, suits,
proceedings, investigations or claims relating to or asserted for Taxes of EVT
and/or any of its Subsidiaries to EVT's knowledge and there is no basis for
any such claim.
(g) No material claim has ever been made in writing by any Taxing authority
with respect to EVT or any of its Subsidiaries in a jurisdiction where EVT
and/or any of its Subsidiaries do not file reports and returns that EVT or any
such Subsidiary is or may be subject to Taxation by that jurisdiction. Except
for liens for real and personal property Taxes that are not yet due and
payable, there are no liens for any Tax upon any asset of EVT or any of its
Subsidiaries.
(h) Neither EVT nor any of its Subsidiaries has agreed or is required to
include in income or make any material adjustment under either Section 481(a)
or Section 482 of the Code (or an analogous provision of state, local, or
foreign law) by reason of a change in accounting or otherwise. Neither EVT nor
any of its Subsidiaries has disposed of any material property in a transaction
being accounted for under the installment method pursuant to Section 453 of
the Code.
(i) Neither EVT nor any of its Subsidiaries is a party to any agreement
(other than this Agreement) to share Taxes with respect to any Taxable Period.
(j) There is no contract, agreement, plan or arrangement covering any person
that, individually or collectively, could give rise to the payment of any
amount that would not be deductible by EVT or any Subsidiary thereof by reason
of Section 280G of the Code.
(k) Neither EVT nor any of its Subsidiaries has distributed the stock of any
corporation in a transaction satisfying the requirements of Section 355 of the
Code since April 16, 1997.
3.13 MATERIAL CONTRACTS. Section 3.13 of the EVT Disclosure Schedule sets
forth a complete list as of the date of this Agreement of (i) contracts,
commitments and agreements (for purposes of this Agreement, contracts,
commitments and agreements shall include, without limitation, all
collaborative arrangements or relationships of EVT and its Subsidiaries) to
which EVT or any Subsidiary is a party or under which any of them is obligated
or bound or to which any of their properties or assets may be subject, which
(a) involve a payment or receipt after the date hereof of more than $200,000,
(b) are supply agreements, (c) involve the licensing of or by EVT of any
Intellectual Property, (d) are joint development agreements or (e) are
contracts, commitments and agreements that individually or in the aggregate
with other contracts, commitments and agreements are material to the business
of EVT and its Subsidiaries taken as a whole. To EVT's knowledge, all material
terms of each of such contracts are in full force and effect and are
enforceable against all parties thereto in accordance with their terms.
Neither EVT nor any of its Subsidiaries is in default under any such contract,
commitment or agreement and, to the knowledge of EVT, no party having any
commitment to, or contract or agreement with, EVT or any Subsidiary is in
default thereunder and EVT has no knowledge of any fact, circumstance or event
which might reasonably be expected in the future to cause any such party to be
in default under any such material contract, commitment or agreement except
for such instances that would not result in an EVT Material Adverse Effect.
3.14 EMPLOYEE BENEFIT PLANS. (a) Section 3.14 of the EVT Disclosure Schedule
sets forth each plan, agreement, arrangement or commitment which is an
employment or consulting agreement, executive or incentive compensation plan,
bonus plan, deferred compensation agreement, employee pension, profit sharing,
savings or retirement plan, employee stock option or stock purchase plan,
group life, health, or accident insurance or other employee benefit plan,
agreement, arrangement or commitment, including, without limitation, any
commitment arising under the laws of any jurisdiction, severance, holiday,
vacation, Christmas or other bonus plans (including, but not limited to,
"employee benefit plans", as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), maintained by
EVT or any Subsidiary for any of their
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present or former employees, officers or directors ("EVT Personnel") or with
respect to which EVT or any Subsidiary has liability, makes or has an
obligation to make contributions ("EVT Plans").
(b) EVT has provided Guidant with (i) copies of all EVT Plans or in the case
of an unwritten plan, a written description thereof, (ii) copies of any
annual, financial or actuarial reports and Internal Revenue Service
determination letters relating to such EVT Plans and (iii) copies of all
summary plan descriptions (whether or not required to be furnished under
ERISA) and employee communications relating to such EVT Plans and distributed
to EVT Personnel, in each case under this subsection (b), existing or in
effect during or within the past five years.
(c) There are no EVT Personnel who are entitled to (i) any pension benefit
that is unfunded or (ii) any pension or other benefit to be paid after
termination of employment other than required by Section 601 of ERISA or
pursuant to plans intended to be qualified under Section 401(a) of the Code
and listed on Section 3.14 of the EVT Disclosure Schedule, and no other
benefits whatsoever are payable to any EVT Personnel after termination of
employment (including retiree medical and death benefits).
(d) Each EVT Plan that is an employee welfare benefit plan under Section
3(1) of ERISA is either (i) funded through an insurance company contract and
is not a "welfare benefit fund" within the meaning of Section 419 of the Code
or (ii) is unfunded.
(e) All contributions or payments owed with respect to any periods prior to
the Closing under any EVT Plan have been made or accrued. Each EVT Plan by its
terms and operation is in material compliance with all applicable laws
(including, but not limited to, ERISA, the Code and the Age Discrimination in
Employment Act of 1967, as amended).
(f) There are no actions, suits or claims pending or threatened (other than
routine noncontested claims for benefits) or, to EVT's knowledge, no set of
circumstances exist which may reasonably give rise to such a claim against any
EVT Plan or administrator or fiduciary of any such EVT Plan. As to each EVT
Plan for which an annual report is required to be filed under ERISA or the
Code, all such filings, including schedules, have been made on a timely basis
and with respect to the most recent report regarding each such EVT Plan
liabilities do not exceed assets, and no material adverse change has occurred
with respect to the financial matters covered thereby.
(g) Neither EVT nor any entity required to be aggregated with EVT pursuant
to Sections 414(b), (c), (m) or (o) of the Code contributes to, maintains or
has any liability with respect to a plan subject to Title IV of ERISA, Section
412 of the Internal Revenue Code or Section 302 of ERISA.
(h) Each EVT Plan that is intended to be qualified under Section 401(a) of
the Code has received a favorable determination letter from the Internal
Revenue Service stating that such plan is so qualified and nothing has
occurred since the date of such letter to cause the letter to be no longer
valid or effective.
(i) Neither EVT, any Subsidiary nor any other person, including any
fiduciary, has engaged in any "prohibited transaction" (as defined in Section
4975 of the Code or Section 406 of ERISA), which could subject any of the EVT
Plans (or their trusts), EVT, or any person who EVT has an obligation to
indemnify, to any tax or penalty imposed under Section 4975 of the Code or
Section 502 of ERISA.
(j) The events contemplated by this Agreement (either alone or together with
any other event) will not (i) entitle any EVT Personnel to severance pay,
unemployment compensation, or other similar payments under any EVT Plan or
law, (ii) accelerate the time of payment or vesting or increase the amount of
benefits due under any EVT Plan or compensation to any EVT Personnel, (iii)
result in any payments (including parachute payments) under any EVT Plan or
law becoming due to any EVT Personnel, or (iv) terminate or modify or give a
third party a right to terminate or modify the provisions or terms of any EVT
Plan.
(k) EVT, its Subsidiaries and each member of their respective business
enterprises have complied with the Worker Adjustment and Retraining
Notification Act.
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3.15 LABOR MATTERS. Neither EVT nor any of its Subsidiaries is a party to,
or bound by, any collective bargaining agreement, contract or other agreement
or understanding with a labor union or labor organization. There is no unfair
labor practice or labor arbitration proceeding pending or, to the knowledge of
EVT, threatened against EVT or its Subsidiaries relating to their business,
except for any such proceeding which would not have an EVT Material Adverse
Effect. To the knowledge of EVT, there are no organizational efforts with
respect to the formation of a collective bargaining unit currently being made
or threatened involving employees of EVT or any of its Subsidiaries. EVT and
its Subsidiaries are in compliance in all material respects with all
applicable laws regarding employment consulting, employment practices, wages,
hours and terms and conditions of employment.
3.16 GUIDANT STOCK OWNERSHIP. Neither EVT nor any of its Subsidiaries owns
any shares of Guidant Common Stock or other securities convertible into
Guidant Common Stock.
3.17 POOLING OF INTERESTS; TAX REORGANIZATION. There has been no action or
omission by EVT or its Subsidiaries which would prevent the accounting for the
Merger as a pooling of interests in accordance with Accounting Principles
Board Opinion No. 16 ("APB No. 16"), the interpretative releases issued
pursuant thereto, and the pronouncements of the SEC. There has been no action
or omission by EVT or its Subsidiaries which would prevent the Merger from
constituting a reorganization within the meaning of Section 368(a) of the
Code.
3.18 ENVIRONMENTAL MATTERS. Except as described in the EVT Reports, EVT and
each of its Subsidiaries are in material compliance with all applicable
federal, state, local and foreign laws, rules and regulations relating to
pollution or protection of human health, worker safety or the environment
(including, without limitation, ambient air, surface water, ground water, land
surface or subsurface strata) (collectively, "Environmental Laws"). Such
compliance includes, but is not limited to, the possession by EVT and its
Subsidiaries of all material permits and other governmental authorizations
required under applicable Environmental Laws, and compliance with the terms
and conditions thereof. Neither EVT nor any of its Subsidiaries has received
written notice of, or to the knowledge of EVT, is the subject of, any actions,
causes of action, claims, investigations, demands or notices by any person or
entity alleging liability under or noncompliance with any Environmental Law.
To the knowledge of EVT, there are no circumstances that are reasonably likely
to prevent or interfere with such material compliance in the future.
3.19 STATE TAKEOVER STATUTES AND SHAREHOLDER RIGHTS PLAN. The Board of
Directors of EVT has approved the Merger, this Agreement, the Support
Agreements and the other transactions contemplated by this Agreement and the
Support Agreements, and such approval is sufficient to render inapplicable to
the Merger, this Agreement, the Support Agreements and the transactions
contemplated by this Agreement and the Support Agreements, the EVT Shareholder
Rights Plan and the provisions of Section 203 of the DGCL to the extent, if
any, such EVT Shareholder Rights Plan or Section would otherwise be applicable
to the Merger, this Agreement, the Support Agreements and the transactions
contemplated by this Agreement and the Support Agreements.
3.20 NO BROKERS. EVT has not entered into any contract, arrangement or
understanding with any person or firm which may result in the obligation of
EVT or Guidant to pay any finder's fees, brokerage or agent's commissions or
other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby, except
that EVT has retained Montgomery Securities, Inc. as its financial advisor,
the arrangements of which have been disclosed by EVT to Guidant. Other than
the foregoing arrangements, EVT is not aware of any claim for payment of any
finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby.
3.21 OPINION OF FINANCIAL ADVISOR. EVT has received the opinion of
Montgomery Securities, Inc. to the effect that, as of the date hereof, the
Exchange Consideration is fair to the holders of EVT Common Stock from a
financial point of view.
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3.22 AFFILIATES. Section 3.22 of the EVT Disclosure Schedule contains an
accurate and complete list of the names and addresses of those persons who are
"affiliates" of EVT within the meaning of Rule 145 of the rule and regulations
promulgated under the Securities Act.
ARTICLE 4
Representations and Warranties of Guidant and Merger Sub
Except as set forth in the disclosure schedule delivered at or prior to the
execution hereof to EVT (the "Guidant Disclosure Schedule") or in the Guidant
Reports (as defined below), Guidant and Merger Sub represent and warrant to
EVT as of the date of this Agreement as follows:
4.1 EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY; COMPLIANCE WITH LAW. Each
of Guidant and Merger Sub is a corporation duly incorporated, validly existing
and in good standing under the laws of its jurisdiction of incorporation.
Guidant is duly licensed or qualified to do business as a foreign corporation
and is in good standing under the laws of any other state of the United States
in which the character of the properties owned or leased by it or in which the
transaction of its business makes such qualification necessary, except where
the failure to be so qualified or to be in good standing would not have a
material adverse effect on the business, results of operations or financial
condition of Guidant and its Subsidiaries taken as a whole (as modified by the
following proviso, a "Guidant Material Adverse Effect"); provided, however,
that any such effect resulting from (i) any change in economic or business
conditions generally affecting the medical devices industry or (ii) any change
in generally accepted accounting principles or interpretation thereof
generally affecting the medical devices industry (as opposed to Guidant
specifically) shall not be considered when determining if a Guidant Material
Adverse Effect has occurred. Guidant has all requisite corporate power and
authority to own, operate and lease its properties and carry on its business
as now conducted. Neither Guidant nor Merger Sub is in violation of any order
of any court, governmental authority or arbitration board or tribunal, or any
law, ordinance, governmental rule or regulation to which Guidant or Merger Sub
or any of their respective properties or assets is subject, other than any
violations which would not have a Guidant Material Adverse Effect. Guidant and
Merger Sub have obtained all licenses, permits and other authorizations and
have taken all actions required by applicable law or governmental regulations
in connection with their business as now conducted, except where the failure
to obtain any such item or to take any such action would not have a Guidant
Material Adverse Effect.
4.2 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS. Each of Guidant and
Merger Sub has the requisite corporate power and authority to execute and
deliver this Agreement and all agreements and documents contemplated hereby.
The consummation by Guidant and Merger Sub of the transactions contemplated
hereby has been unanimously approved by the Board of Directors of Guidant and
duly authorized by all requisite corporate action. This Agreement constitutes,
and all agreements and documents contemplated hereby (when executed and
delivered pursuant hereto for value received) will constitute, the valid and
legally binding obligations of Guidant and Merger Sub, enforceable in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights and
general principles of equity.
4.3 CAPITALIZATION. The authorized capital stock of Guidant consists of
250,000,000 shares of Guidant Common Stock and 50,000,000 shares of Preferred
Stock, without par value, ("Guidant Preferred Stock"). As of September 30,
1997, there were 148,139,439 shares of Guidant Common Stock and no shares of
Guidant Preferred Stock issued and outstanding. Since such date, no additional
shares of capital stock of Guidant have been issued, except shares issued
pursuant to the exercise of options outstanding under Guidant's stock option
plans (the "Guidant Stock Option Plans"). As of September 30, 1997, options to
acquire 6,675,161 shares of Guidant Common Stock were outstanding. Since such
date, no additional options have been granted. Prior to the Closing Date,
Guidant anticipates that options to acquire additional shares of Guidant
Common Stock will be granted to certain employees pursuant to the Guidant 1994
Stock Plan. Guidant has no outstanding bonds, debentures, notes or other
obligations the holders of which have the right to vote (or which are
convertible into
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or exercisable for securities having the right to vote) with the stockholders
of Guidant on any matter. All such issued and outstanding shares of Guidant
Common Stock are duly authorized, validly issued, fully paid, nonassessable
and free of preemptive rights. Except as contemplated by this Agreement, there
are not at the date of this Agreement any existing options, warrants, calls,
subscriptions, convertible securities, or other rights, agreements or
commitments, other than pursuant to the Guidant Stock Option Plans and the
Rights Agreement between Guidant and Bank One, Indianapolis, NA dated October
17, 1994 (the "Guidant Rights Agreement"), which obligate Guidant or any of
its Subsidiaries to issue, transfer or sell any shares of capital stock of
Guidant or any of its Subsidiaries.
4.4 MERGER SUB. The authorized capital stock of Merger Sub consists of 100
shares of common stock, par value $.01 per share, all of which shares are
issued and outstanding and owned by Guidant. Notwithstanding any provisions to
the contrary, Guidant may, in its sole discretion, increase or decrease the
number of shares of authorized common stock of Merger Sub and the number of
shares of common stock of Merger Sub issued and outstanding owned by Guidant.
Merger Sub has not engaged in any activities other than in connection with the
transactions contemplated by this Agreement.
4.5 NO VIOLATION. Neither the execution and delivery by Guidant and Merger
Sub of this Agreement, nor the consummation by Guidant and Merger Sub of the
transactions contemplated hereby in accordance with the terms hereof, will:
(i) conflict with or result in a breach of any provisions of the Certificate
of Incorporation or Bylaws of Guidant or Merger Sub; (ii) result in a breach
or violation of, a default under, or the triggering of any payment or other
material obligations pursuant to, or accelerate vesting under, any of the
Guidant Stock Option Plans, or any grant or award under any of the foregoing;
(iii) violate, conflict with, result in a breach of any provision of,
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, result in the termination or in a right of
termination or cancellation of, accelerate the performance required by, result
in the triggering of any payment or other material obligations pursuant to,
result in the creation of any lien, security interest, charge or encumbrance
upon any of the material properties of Guidant or Merger Sub under, or result
in being declared void, voidable, or without further binding effect, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
deed of trust or any material license, franchise, permit, lease, contract,
agreement or other instrument, commitment or obligation to which Guidant or
Merger Sub is a party, or by which Guidant or Merger Sub or any of their
respective properties is bound or affected, except for any of the foregoing
matters which would not have a Guidant Material Adverse Effect; or (iv) other
than the Regulatory Filings, require any consent, approval or authorization
of, or declaration, filing or registration with, any domestic governmental or
regulatory authority, other than consents, approvals, authorizations,
declarations or filings or registrations which, if not obtained or made would
not have a Guidant Material Adverse Effect.
4.6 SEC DOCUMENTS. As of their respective dates, each registration
statement, report, proxy statement or information statement (as defined in
Regulation 14C under the Exchange Act) of Guidant prepared by it since its
initial public offering (including, without limitation, the Registration
Statement on Form S-1 with respect to its initial offering), in the form
(including exhibits and any amendments thereto) filed with the SEC,
(collectively, the "Guidant Reports") (i) complied as to form in all material
respects with the applicable requirements of the Securities Act, the Exchange
Act, and the rules and regulations thereunder and (ii) did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. Each of
the consolidated balance sheets included in or incorporated by reference into
the Guidant Reports (including the related notes and schedules) fairly
presents the consolidated financial position of Guidant as of its date, and
each of the consolidated statements of income, retained earnings and cash
flows included in or incorporated by reference into the Guidant Reports
(including any related notes and schedules) fairly presents the results of
operations, retained earnings or cash flows, as the case may be, of Guidant
for the periods set forth therein (subject, in the case of unaudited
statements, to normal year-end audit adjustments which would not be material
in amount or effect), in each case in accordance with generally accepted
accounting principles consistently applied during the periods involved, except
as may be noted therein. Guidant has no liabilities or obligations of
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any nature (whether accrued, absolute, contingent or otherwise) except (a)
liabilities or obligations reflected on, or reserved against in, a balance
sheet of Guidant or in the notes thereto, prepared in accordance with
generally accepted accounting principles consistently applied and included in
the Guidant Reports and (b) liabilities or obligations incurred in the
ordinary course of business which do not have a Guidant Material Adverse
Effect.
4.7 INVESTIGATIONS; LITIGATION. Except as set forth in Section 4.7 of the
Guidant Disclosure Schedule or in the Guidant Reports (a) no material
investigation or review, except in the ordinary course of its business, by any
governmental entity with respect to Guidant is pending (or, to Guidant's
knowledge, threatened) nor has any governmental entity indicated to Guidant an
intention to conduct the same; and (b) there are no actions, suits or
proceedings pending against Guidant or, to the knowledge of Guidant,
threatened against Guidant, at law or in equity, or before or by any federal
or state commission, board, bureau, agency or instrumentality, that are
reasonably likely to have a Guidant Material Adverse Effect.
4.8 ABSENCE OF CERTAIN CHANGES. Since December 31, 1996, Guidant has
conducted its business only in the ordinary course of such business, and there
has not been (i) any Guidant Material Adverse Effect or any event which is
reasonably likely to result in a Guidant Material Adverse Effect; (ii) any
declaration, setting aside or payment of any dividend or other distribution
with respect to its capital stock (other than the regular quarterly cash
dividends payable on Guidant Common Stock); or (iii) any material change in
its accounting principles, practices or methods.
4.9 NO BROKERS. Guidant has not entered into any contract, arrangement or
understanding with any person or firm which may result in the obligation of
EVT or Guidant to pay any finder's fee, brokerage or agent's commissions or
other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby, except
that Guidant has retained BT Alex. Brown, Incorporated as its financial
advisor. Other than the foregoing arrangements, Guidant is not aware of any
claim for payment of any finder's fees, brokerage or agent's commissions or
other like payments in connection with the negotiations leading to this
Agreement or the consummation of the transactions contemplated hereby.
4.10 PATENTS, TRADEMARKS, COPYRIGHTS AND TRADE SECRETS. Guidant and its
Subsidiaries own, or are licensed or otherwise possess legally enforceable
rights to use all patents, trademarks, trade names, service marks, copyrights,
and any applications therefor, and tangible or intangible proprietary
information or material ("Guidant Intellectual Property") that are used or
proposed to be used in the business of Guidant and its Subsidiaries as
currently conducted or as proposed to be conducted, except where the failure
to have such rights would not have a Guidant Material Adverse Effect.
4.11 POOLING OF INTERESTS; TAX REORGANIZATION. There has been no action or
omission by Guidant or its Subsidiaries which would prevent the accounting for
the Merger as a pooling of interests in accordance with APB No. 16, the
interpretive releases issued pursuant thereto, and the pronouncements of the
SEC. There has been no action or omission by Guidant or its Subsidiaries which
would prevent the Merger from constituting a reorganization with the meaning
of Section 368(a) of the Code.
ARTICLE 5
Covenants
5.1 ALTERNATIVE PROPOSALS. EVT, its affiliates and their respective
officers, directors, employees, representatives and agents shall immediately
cease any existing discussions or negotiations, if any, with any parties
conducted heretofore with respect to any acquisition of all or any material
portion of the assets of, or any material equity interest in, EVT or any of
its Subsidiaries or any business combination with EVT or any of its
Subsidiaries. EVT may, directly or indirectly, furnish information and access,
in each case only in response to unsolicited requests therefor, to any
corporation, partnership, person or other entity or group pursuant to
confidentiality agreements, and may participate in discussions and negotiate
with such entity or group concerning
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(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 EVT in a single
transaction or series of transactions; (iii) any tender offer or exchange
offer for 15% or more of the outstanding shares of EVT Common Stock or the
filing of a registration statement under the Securities Act in connection
therewith; (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 outstanding
shares of EVT Common Stock; or (v) any public announcement of a proposal, plan
or intention to do any of the foregoing or any agreement to engage in any of
the foregoing, if such entity or group has submitted a written proposal or an
indication of interest reasonably likely to lead to a written proposal to the
Board relating to any such transaction (an "Alternative Proposal") and the
Board by a majority vote determines in its good faith judgment, based as to
legal matters on the advice of outside legal counsel and as to financial
matters upon the advice of an investment banking firm of national reputation,
that the Alternative Proposal is a Superior Proposal (as hereinafter defined)
and that failing to take such action would constitute a breach of the Board's
fiduciary duty. The Board shall provide a copy of any such written proposal or
indication of interest to Guidant or Merger Sub immediately after receipt
thereof and thereafter keep Guidant and Merger Sub promptly advised of any
development with respect thereto. Except as set forth above, neither EVT or
any of its affiliates, nor any of its or their respective officers, directors,
employees, representatives or agents, shall, directly or indirectly,
encourage, solicit, participate in or initiate discussions or negotiations
with, or provide any information to, any corporation, partnership, person or
other entity or group (other than Guidant and Merger Sub, any affiliate or
associate of Guidant and Merger Sub or any designees of Guidant and Merger
Sub) concerning (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 EVT in a single transaction or series of transactions; (iii) any tender
offer or exchange offer for 15% or more of the outstanding shares of EVT
Common Stock or the filing of a registration statement under the Securities
Act in connection therewith; (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
outstanding shares of EVT Common Stock; or (v) any public announcement of a
proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing, or similar transaction involving EVT or any
subsidiary or division of EVT (each a "Transaction"); provided, however, that
nothing herein shall prevent the Board from taking, and disclosing to EVT's
shareholders, a position contemplated by Rules 14d-9 and 14e-2 promulgated
under the Exchange Act with regard to any tender offers, provided, further,
that the Board shall not recommend that the shareholders of EVT tender their
outstanding shares of EVT Common Stock in connection with any such tender
offer or exchange offer unless the Board by a majority vote determines in its
good faith judgment, based as to legal matters on the advice of outside legal
counsel and as to financial matters upon the advice of an investment banking
firm of national reputation, that the tender offer is a Superior Proposal and
that failing to take such action would constitute a breach of the Board's
fiduciary duty. Nothing in this Section 5.1 shall (x) permit EVT to terminate
this Agreement (except as specifically provided in Article 7 hereof), (y)
permit EVT to enter into any agreement with respect to an Alternative Proposal
during the term of this Agreement (it being agreed that during the term of
this Agreement, EVT shall not enter into any agreement with any person that
provides for, or in any way facilitates, an Alternative Proposal (other than a
confidentiality agreement in customary form)), or (z) affect any other
obligation of EVT under this Agreement.
For purposes of this Agreement "Superior Proposal" means any Alternative
Proposal with respect to a Transaction which is superior to the Merger from a
financial point of view to the stockholders of EVT.
5.2 INTERIM OPERATIONS. Prior to the Effective Time, except as set forth in
the EVT Disclosure Schedule or as contemplated by any other provision of this
Agreement, unless Guidant has consented in writing thereto, which consent
shall not be unreasonably withheld, EVT:
(i) shall, and shall cause each of its Subsidiaries to, conduct its
operations according to their usual, regular and ordinary course in
substantially the same manner as heretofore conducted;
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(ii) shall use its reasonable efforts, and shall cause each of its
Subsidiaries to use its reasonable efforts, to preserve intact their
business organizations and goodwill, keep available the services of their
respective officers and employees and maintain satisfactory relationships
with those persons having business relationships with them;
(iii) shall not, and shall cause its Subsidiaries not to, amend their
respective Certificates of Incorporation or Bylaws or comparable governing
instruments;
(iv) shall promptly notify Guidant of (x) any material adverse change in
its condition (financial or otherwise), business, properties, assets,
prospects, liabilities or the normal course of its business or of its
properties, (y) any litigation or governmental complaints, investigations
or hearings (or communications indicating that the same may be
contemplated), or (z) any material breach of any representation or warranty
contained herein;
(v) shall, upon receiving any written notice from any Taxing authority
proposing any adjustment to any Tax relating to EVT or any of its
Subsidiaries, give prompt written notice thereof to Guidant, which notice
shall describe in detail each proposed adjustment;
(vi) shall promptly deliver to Guidant true and correct copies of any
report, statement or schedule filed with the SEC subsequent to the date of
this Agreement;
(vii) subject to the provisions of Section 5.1, shall not, and shall not
permit any of its Subsidiaries to, authorize, propose or announce an
intention to authorize or propose, or enter into an agreement with respect
to, any merger, consolidation or business combination (other than the
Merger), any acquisition of a material amount of assets or securities, any
disposition of a material amount of assets or securities or any release or
relinquishment of any material contract rights;
(viii) shall not, and shall not permit any of its Subsidiaries to, issue
any shares of their capital stock or securities, except upon exercise of
options outstanding on the date of this Agreement to purchase shares of EVT
Common Stock outstanding under EVT Stock Option Plans, or effect any stock
split or otherwise change its capitalization and except for up to 35,000
shares of EVT Common Stock to be issued pursuant to the Stock Purchase
Plan;
(ix) shall not, and shall not permit any of its Subsidiaries to, grant,
confer or award any options, warrants, conversion rights or other rights,
not existing on the date hereof, to acquire any shares of its capital stock
or other securities of EVT or its Subsidiaries except for options to
purchase up to 100,000 shares of EVT Common Stock granted to newly hired
officers, employees and consultants in the ordinary course of business
consistent with past practice;
(x) shall not, and shall not permit any of its Subsidiaries to, take any
action which would, or would be reasonably likely to, prevent the
accounting for the Merger as a pooling of interests in accordance with APB
No. 16, the interpretive releases issued thereto, and the pronouncements of
the SEC.
(xi) shall not and shall not permit any of its Subsidiaries to, take any
actions which would, or would be reasonably likely to, prevent the Merger
from qualifying as a reorganization with the meaning of Section 368(a) of
the Code;
(xii) shall not, and shall not permit any of its Subsidiaries to, amend
the terms of any EVT Benefit Plan, including, without limitation, any
employment, severance or similar agreements or arrangements in existence on
the date hereof, or adopt any new employee benefit plans, programs or
arrangements or any employment, severance or similar agreements or
arrangements except that EVT may hire employees in the ordinary course of
business consistent with past practice and this subsection (xii) shall not
preclude EVT from making payments under EVT Plans;
(xiii) shall not, and shall not permit any of its Subsidiaries to, (x)
incur, create, assume or otherwise become liable for borrowed money or
assume, guarantee, endorse or otherwise become responsible or liable for
the obligations of any other individual, corporation or other entity except
pursuant to the loan agreement existing on the date hereof between Guidant
and EVT (the "Loan Agreement") or (y) make any loans or advances to any
other person, except in the case of clause (x) for borrowings under
existing credit facilities in the ordinary course of business;
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(xiv) shall not, and shall not permit any of its Subsidiaries to, (x)
change any practice with respect to Taxes, (y) make, revoke or change any
election with respect to Taxes or (z) settle or compromise any tax
liability;
(xv) shall not, and shall not permit any of its Subsidiaries to, (y)
declare, set aside or pay any dividend or make any other distribution or
payment with respect to any shares of its capital stock or other ownership
interests or (z) directly or indirectly redeem, purchase or otherwise
acquire any shares of its capital stock or capital stock of any of its
Subsidiaries, or make any commitment for any such action, except for the
repurchase of unvested shares from employees, consultants or directors in
accordance with the EVT Plans and the agreements entered into pursuant
thereto; and
(xvi) shall not, and shall not permit any of its Subsidiaries to, agree,
in writing or otherwise, to take any of the foregoing actions or take any
action which would make any representation or warranty in Article 3 hereof
untrue or incorrect.
5.3 MEETING OF STOCKHOLDERS. EVT will take all action necessary in
accordance with applicable law and its Certificate of Incorporation and Bylaws
to convene a meeting of its stockholders (the "EVT Stockholders Meeting") as
promptly as practicable to consider and vote upon the approval of this
Agreement and the transactions contemplated hereby. The Board of Directors of
EVT shall recommend such approval and shall take all lawful action to solicit
such approval, including, without limitation, timely mailing the Proxy
Statement/Prospectus (as defined in Section 5.7); provided, however, that such
recommendation or solicitation shall not be required if and to the extent that
the Board of Directors of EVT determines after the date hereof, in its good
faith judgment, based as to legal matters on the advice of outside legal
counsel and as to financial matters upon the advice of an investment banking
firm of national reputation, that the making of such recommendation or
solicitation would involve a breach of its fiduciary duties to its
stockholders imposed by law.
5.4 FILINGS; OTHER ACTIONS. Subject to the terms and conditions herein
provided, EVT and Guidant shall: (a) promptly make their respective filings
and thereafter make any other required submissions under the HSR Act with
respect to the Merger; (b) use all reasonable efforts to cooperate with one
another (i) in determining which filings are required to be made prior to the
Effective Time with, and which consents, approvals, permits or authorizations
are required to be obtained prior to the Effective Time from, governmental or
regulatory authorities of the United States, the several states and foreign
jurisdictions in connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby and (ii) timely
making all such filings and timely seeking all such consents, approvals,
permits or authorizations; and (c) use all reasonable efforts to take, or
cause to be taken, all other action and do, or cause to be done, all other
things necessary, proper or appropriate to consummate and make effective the
transactions contemplated by this Agreement as promptly as practicable.
5.5 INSPECTION OF RECORDS. From the date hereof to the Effective Time, EVT
and Guidant shall (i) allow all designated officers, attorneys, accountants
and other representatives of their respective companies reasonable access at
all reasonable times to the offices, records and files, correspondence, audits
and properties, as well as to all information relating to commitments,
contracts, titles and financial position, or otherwise pertaining to the
business and affairs, of the other party and their Subsidiaries, (ii) furnish
to such other party and such other party's counsel, financial advisors,
auditors and other authorized representatives such financial and operating
data and other information as such persons may reasonably request and (iii)
instruct employees, counsel and financial advisors to cooperate with such
party in such party's investigation of the business of the other party and its
Subsidiaries.
5.6 PUBLICITY. The initial press release relating to this Agreement shall be
a joint press release and thereafter EVT and Guidant shall, subject to their
respective legal obligations (including requirements of stock exchanges and
other similar regulatory bodies), consult with each other, and use reasonable
efforts to agree upon the text of any press release, before issuing any such
press release or otherwise making public statements with respect to the
transactions contemplated hereby and in making any filings with any federal or
state governmental or regulatory agency or with any national securities
exchange with respect thereto.
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5.7 REGISTRATION STATEMENT. Guidant and EVT shall cooperate and promptly
prepare and Guidant shall file with the SEC as soon as practicable a
Registration Statement on Form S-4 (the "Form S-4") under the Securities Act,
with respect to the Guidant Common Stock issuable in the Merger, which
Registration Statement shall contain the proxy statement with respect to the
meeting of the stockholders of EVT in connection with the Merger (the "Proxy
Statement/Prospectus"). Notwithstanding the foregoing, Guidant may file the
Proxy Statement/Prospectus with the SEC, and receive SEC clearance of the
Proxy Statement/Prospectus, prior to filing the Form S-4. The respective
parties will cause the Proxy Statement/Prospectus and the Form S-4 to comply
as to form in all material respects with the applicable provisions of the
Securities Act, the Exchange Act and the rules and regulations thereunder.
Guidant shall use reasonable efforts, and EVT will cooperate with Guidant, to
have the Form S-4 declared effective by the SEC as promptly as practicable.
Guidant shall use reasonable efforts to obtain, prior to the effective date of
the Form S-4, all necessary state securities law or "Blue Sky" permits or
approvals required to carry out the transactions contemplated by this
Agreement. The information supplied by EVT for inclusion or incorporation by
reference in the Proxy Statement/Prospectus and the Form S-4 shall not (i) at
the time the Form S-4 is declared effective, (ii) at the time the Proxy
Statement/Prospectus (or any amendment thereof or supplement thereto) is first
mailed to holders of EVT Common Stock, (iii) at the time of the EVT
Stockholders' Meeting and (iv) at the Effective Time, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of
the circumstances under which they are made, not misleading. The information
supplied by Guidant for inclusion or incorporation by reference in the Proxy
Statement/Prospectus and the Form S-4 shall not (i) at the time the Form S-4
is declared effective, (ii) at the time the Proxy Statement/Prospectus (or any
amendment thereof or supplement thereto) is first mailed to holders of EVT
Common Stock, (iii) at the time of the EVT Stockholders' Meeting and (iv) at
the Effective Time, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they are
made, not misleading. No amendment or supplement to the Proxy
Statement/Prospectus will be made by EVT without the approval of Guidant.
Guidant will advise EVT, promptly after it receives notice thereof, of the
time when the Form S-4 has become effective or any supplement or amendment has
been filed, the issuance of any stop order, the suspension of the
qualification of the Guidant Common Stock issuable in connection with the
Merger for offering or sale in any jurisdiction, or any request by the SEC for
amendment of the Proxy Statement/Prospectus or the Form S-4 or comments
thereon and responses thereto or requests by the SEC for additional
information.
5.8 LISTING APPLICATION. Guidant shall promptly prepare and submit to the
NYSE and the Pacific Exchange, Inc. (the "Pacific Exchange") a listing
application covering the shares of Guidant Common Stock issuable in the
Merger, and shall use all reasonable efforts to obtain, prior to the Effective
Time, approval for the listing of such Guidant Common Stock, subject to
official notice of issuance.
5.9 AFFILIATE LETTERS. At least 30 days prior to the Closing Date, EVT shall
deliver to Guidant a list of names and addresses of those persons who were, at
the record date for its stockholders' meeting to approve the Merger,
"affiliates" (each such person, an "Affiliate") of EVT within the meaning of
Rule 145 of the rules and regulations promulgated under the Securities Act.
EVT shall provide Guidant such information and documents as Guidant shall
reasonably request for purposes of reviewing such list. EVT shall deliver or
cause to be delivered to Guidant, prior to the Closing Date, from each of the
Affiliates of EVT identified in the foregoing list, an Affiliate Letter in the
form attached hereto as Exhibit A. Guidant shall be entitled to place legends
as specified in such Affiliate Letters on the certificates evidencing any
Guidant Common Stock to be received by such Affiliates pursuant to the terms
of this Agreement, and to issue appropriate stop transfer instructions to the
transfer agent for the Guidant Common Stock, consistent with the terms of such
Affiliate Letters.
5.10 EXPENSES. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses except
as expressly provided herein and except that the filing fee in connection with
the filing of the Form S-4 or Proxy Statement/Prospectus with the SEC and the
expenses incurred in connection with printing and mailing the Form S-4 and the
Proxy Statement/Prospectus shall be paid by Guidant.
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5.11 CERTAIN TRANSACTION RELATED FEES. EVT shall not, and shall not permit
any Subsidiary to, incur, spend or otherwise become liable or obligated for
any fees, costs or other expenses arising out of or related to the
transactions contemplated hereby, including without limitation fees of
counsel, investment banking, and other financial and other advisors, in excess
of $2.5 million. The foregoing sentence shall not apply to any fees, costs or
other expenses arising out of or relating to any dispute or litigation that
relates to the transactions contemplated hereby. EVT shall not, without the
prior written consent of Guidant, amend the arrangements with Montgomery
Securities, Inc., which have been disclosed by EVT to Guidant.
5.12 DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE.
(a) The Certificate of Incorporation and the Bylaws of the Surviving
Corporation shall contain the respective provisions that are set forth, as of
the date of this Agreement, in Article IX of the Eighth Amended and Restated
Certificate of Incorporation of EVT ("Restated Certification") and Article
VII, Section 6 of the Bylaws of EVT, which provisions shall not be amended,
repealed or otherwise modified for a period of six years from the Effective
Time in any manner that would affect adversely the rights thereunder of
individuals who at or at any time prior to the Effective Time were entitled to
indemnification thereunder.
(b) Guidant hereby agrees (i) to assume, as of the Effective Time, all
obligations of EVT under Article IX of the Restated Certificate and Article
VII, Section 6 of the Bylaws of EVT, and (ii) to pay all amounts that become
due and payable under such provisions.
(c) The Surviving Corporation and Guidant shall honor and fulfill in all
respects the obligations of EVT pursuant to indemnification agreements with
EVT's directors and officers existing at or before the Effective Time.
(d) The Surviving Corporation shall use commercially reasonable efforts to
maintain in effect for six years from the Effective Time, if available,
directors' and officers' liability insurance covering those persons who are
currently covered by EVT's directors' and officers' liability insurance policy
on terms comparable to such existing insurance coverage; provided, however,
that in no event shall the Surviving Corporation be required to expend
pursuant to this Section 5.12 more than an amount per year equal to 150% of
current annual premiums paid by EVT for such insurance (which premiums EVT
represents and warrants to be not more than $250,000 in the aggregate) and;
provided further that if the annual premiums exceed such amount, Guidant shall
be obligated to use commercially reasonable efforts to obtain a policy with
the greatest coverage available for a cost not exceeding such amount.
(e) This Section shall survive the consummation of the Merger, is intended
to benefit EVT, the Surviving Corporation and each indemnified party, shall be
binding, jointly and severally, on all successors and assigns of the Surviving
Corporation and Guidant, and shall be enforceable by the indemnified parties.
5.13 REORGANIZATION. From and after the date hereof and until the Effective
Time, neither Guidant nor EVT nor any of their respective subsidiaries or
other affiliates shall (i) knowingly take any action, or knowingly fail to
take any action, that would jeopardize qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code; or (ii) enter
into any contract, agreement, commitment or arrangement with respect to the
foregoing.
5.14 SHAREHOLDER RIGHTS PLAN AND TAKEOVER STATUTES. EVT shall take all
action necessary to render the EVT Shareholder Rights Plan and the rights
issued pursuant thereto inapplicable to the transactions contemplated hereby
or by the Support Agreements. If any "fair price," "moratorium," "control
share acquisition" or other form of antitakeover statute or regulation,
including without limitation Section 203 of the DGCL, is or shall become
applicable to the transactions contemplated hereby or the Support Agreements,
EVT and the members of the Board of Directors of EVT shall grant such
approvals and take such actions as are necessary so that the transactions
contemplated hereby and by the Support Agreements may be consummated as
promptly as practicable on the terms contemplated hereby and by the Support
Agreements and otherwise act to
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eliminate or minimize the effects of such statute or regulation on the
transactions contemplated hereby and by the Support Agreements.
5.15 SUPPORT AGREEMENT LEGEND. EVT will inscribe upon any Certificate
representing the Shares tendered by a Stockholder (as such terms are defined
in the various Support Agreements dated the same date as this Agreement, a
list of which are included in Section 5.14 of the EVT Disclosure Schedule) for
such purpose the following legend: "THE SHARES OF COMMON STOCK, PAR VALUE
$.00001 PER SHARE, OF EVT REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
SUPPORT AGREEMENT DATED AS OF OCTOBER 5, 1997, AND ARE SUBJECT TO TERMS
THEREOF. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT THE PRINCIPAL EXECUTIVE
OFFICES OF EVT.
5.16 CONVEYANCE TAXES. EVT and Guidant shall cooperate in the preparation,
execution and filing of all returns, questionnaires, applications or other
documents regarding any real property transfer or gains, sales, use, transfer,
value added, stock transfer and stamp Taxes, any transfer, recording,
registration and other fees or any similar Taxes which become payable in
connection with the transactions contemplated by this Agreement that are
required or permitted to be filed on or before the Effective Time.
5.17 TRANSFER TAXES. On or before the Closing Date, the Board of Directors
of EVT shall declare a special dividend (the "Special Dividend") to the
holders of EVT Common Stock in an amount equal to the amount of any real
property transfer or gains Taxes and/or stock transfer Taxes imposed on the
holders of EVT Common Stock by any state or other jurisdiction (and any
penalties and interest with respect to such taxes) (the "Transfer Taxes"),
which become payable in connection with the Merger. In satisfaction of the
Special Dividend, EVT shall pay the Transfer Taxes on behalf of the holders of
EVT Common Stock. EVT and Guidant shall cooperate in the preparation,
execution and filing of any required returns with respect to such Transfer
Taxes (including returns on behalf of the holders of EVT Common Stock) and in
the determination of the portion of the consideration allocable to individual
real properties of EVT and the EVT Subsidiaries. The Proxy
Statement/Prospectus shall provide that the holders of EVT Common Stock shall
be deemed to have (i) authorized EVT to prepare, execute and file any Tax
Returns relating to Transfer Taxes and pay any Transfer Taxes arising in
connection with the Merger, in each case, on behalf of such holders, and (ii)
agreed to be bound by the values and allocations established by EVT and
Guidant in the preparation of any return with respect to the Transfer Taxes,
if applicable.
5.18 COMPANY EMPLOYEE STOCK PURCHASE PLAN. Outstanding purchase rights under
EVT's Stock Purchase Plan shall be exercised upon the earlier of January 30,
1998 or immediately prior to the Effective Time, provided that if the
Effective Time is later than January 31, 1998, then a new Purchase Period will
commence on February 2, 1998 and will end upon the earlier of July 31, 1998 or
immediately prior to the Effective Time, and each participant in the Stock
Purchase Plan shall accordingly be issued shares of EVT Common Stock at that
time pursuant to the terms of the Stock Purchase Plan and each share of EVT
Common Stock so issued shall by virtue of the Merger, and without any action
on the part of the holder thereof, be converted into the right to receive the
Exchange Consideration.
5.19 BENEFIT ARRANGEMENTS. (a) Guidant and EVT agree that Guidant will
provide benefits to EVT employees and officers following the Effective Time
that are substantially identical to the benefits currently provided to
similarly situated employees and officers of Guidant. From and after the
Effective Time, Guidant shall grant all employees credit for all service (to
the same extent as service with Guidant is taken into account with respect to
similarly situated employees of Guidant) with EVT prior to the Effective Time
for (i) vesting purposes and (ii) for purposes of vacation accrual after the
Effective Time as if such service with EVT was service with Guidant. Guidant
and EVT agree that where applicable with respect to any medical or dental
benefit plan of Guidant, Guidant shall waive any pre-existing condition
exclusion and actively-at-work requirements (provided, however, that no such
waiver shall apply to a pre-existing condition of any employee of EVT who was,
as of the Effective Time, excluded from participation in a 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
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covered dependents shall be taken into account for purposes of satisfying
applicable deductible, coinsurance and maximum out-of-pocket provisions after
the Effective Time to the same extent as such expenses are taken into account
for the benefit of similarly situated employees of Guidant.
(b) Any EVT employee who is terminated without cause after the Effective
Time will receive severance benefits which would result from the Merger in
accordance with the existing terms of the EVT Officers Severance Plan or EVT
Key Employees Severance Plan, to the extent such individual is eligible under
each such plan. This Section 5.19(b) is intended to benefit each beneficiary
of such plans and shall be enforceable by the beneficiaries of such plans.
(c) To the extent any matching contribution is paid or payable to the EVT
401(k) Savings Plan, it shall be paid in cash.
ARTICLE 6
Conditions
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Closing Date of the following conditions:
(a) This Agreement and the transactions contemplated hereby shall have
been approved by the holders of the issued and outstanding shares of
capital stock of EVT in accordance with the DGCL and EVT's Restated
Certificate of Incorporation.
(b) The waiting period applicable to the consummation of the Merger under
the HSR Act shall have expired or been terminated.
(c) None of the parties hereto shall be subject to any order or
injunction of a court of competent jurisdiction in the United States which
prohibits the consummation of the transactions contemplated by this
Agreement. In the event any such order or injunction shall have been
issued, each party agrees to use all reasonable efforts to have any such
injunction lifted.
(d) The Form S-4 shall have become effective and shall be effective at
the Effective Time, and no stop order suspending effectiveness of the Form
S-4 shall have been issued, no action, suit, proceeding or investigation by
the SEC to suspend the effectiveness thereof shall have been initiated and
be continuing, and all material approvals under state securities laws
relating to the issuance or trading of the Guidant Common Stock to be
issued to EVT stockholders in connection with the Merger shall have been
received.
(e) The Guidant Common Stock to be issued to EVT stockholders in
connection with the Merger shall have been approved for listing on the NYSE
and the Pacific Exchange, subject only to official notice of issuance.
(f) All material consents, authorizations, orders and approvals of (or
filings or registrations with) any governmental commission or other
regulatory body required in connection with the execution, delivery and
performance of this Agreement shall have been obtained or made, except for
filings in connection with the Merger and any other documents which may be
required to be filed after the Effective Time.
6.2 CONDITIONS TO OBLIGATION OF EVT TO EFFECT THE MERGER. The obligation of
EVT to effect the Merger shall be subject to the fulfillment at or prior to
the Closing Date of the following conditions:
(a) Guidant shall have performed in all material respects their
agreements contained in this Agreement required to be performed on or prior
to the Closing Date, the representations and warranties of Guidant and
Merger Sub contained in this Agreement, the Guidant Disclosure Schedule and
documents delivered at closing, other than the representations and
warranties contained in Section 4.8(i) of this Agreement, shall be true and
correct in all material respects as of the Closing Date, except that those
representations and warranties which address matters only as of a
particular date shall have been true and correct as of such
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date, and EVT shall have received a certificate of the President or a Vice
President of Guidant, dated the Closing Date, certifying to such effect.
(b) EVT shall have received the opinion of Gunderson Dettmer Stough
Villeneuve Franklin & Hachigian, LLP, counsel to EVT, dated the Closing
Date and based upon reasonably requested representation letters, to the
effect that the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code and that
EVT and Guidant will each be a party to that reorganization within the
meaning of Section 368(b) of the Code.
6.3 CONDITIONS TO OBLIGATION OF GUIDANT AND MERGER SUB TO EFFECT THE
MERGER. The obligations of Guidant and Merger Sub to effect the Merger shall
be subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) EVT shall have performed in all material respects its agreements
contained in this Agreement required to be performed on or prior to the
Closing Date, the representations and warranties of EVT contained in this
Agreement, the EVT Disclosure Schedule and documents delivered at closing
shall be true and correct in all material respects as of the Closing Date,
except that those representations and warranties which address matters only
as of a particular date shall have been true and correct as of such date,
and Guidant shall have received a certificate of the President or a Vice
President of EVT, dated the Closing Date, certifying to such effect.
(b) Guidant shall have received the opinion of Dewey Ballantine LLP,
counsel to Guidant, dated the Closing Date and based upon reasonably
requested representation letters, to the effect that the Merger will be
treated for Federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code, and that EVT and Guidant will each
be a party to that reorganization within the meaning of Section 368(b) of
the Code.
(c) Guidant shall have received a letter of its independent public
accountants, dated the Effective Time, in form and substance reasonably
satisfactory to it, stating that such accountants concur with management's
conclusion that the Merger will qualify as a transaction to be accounted
for in accordance with the pooling of interests method of accounting under
the requirements of APB No. 16.
(d) From the date of this Agreement through the Effective Time, there
shall not have occurred an EVT Material Adverse Effect.
ARTICLE 7
Termination
7.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or
after the approval of this Agreement by the stockholders of EVT, by the mutual
consent of Guidant and EVT.
7.2 TERMINATION BY EITHER GUIDANT OR EVT. This Agreement may be terminated
and the Merger may be abandoned by action of the Board of Directors of either
Guidant or EVT if (a) the Merger shall not have been consummated by March 31,
1998, or (b) the approval of EVT's stockholders required by Section 6.1(a)
shall not have been obtained at a meeting duly convened therefor or at any
adjournment thereof, or (c) a United States federal, state, local or foreign
court of competent jurisdiction or United States federal or state, local or
foreign governmental, regulatory or administrative agency or commission shall
have issued an order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated
by this Agreement and such order, decree, ruling or other action shall have
become final and nonappealable; provided, that the party seeking to terminate
this Agreement pursuant to this clause (c) shall have used all reasonable
efforts to remove such injunction, order or decree; and provided, in the case
of a termination pursuant to clause (a) above, that the terminating party
shall not have breached in any material respect its obligations under
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this Agreement in any manner that shall have proximately contributed to the
failure to consummate the Merger by March 31, 1998. Notwithstanding the
foregoing, EVT's ability to terminate this Agreement pursuant to this
subsection (b) and (c) of Section 7.2 is conditioned upon the prior payment by
EVT of any amounts owed by it pursuant to Section 7.5(a).
7.3 TERMINATION BY EVT. This Agreement may be terminated and the Merger may
be abandoned at any time prior to the Effective Time, before or after the
adoption and approval by the stockholders of EVT referred to in Section
6.1(a), by action of the Board of Directors of EVT, if (a) in the exercise of
its good faith judgment as to fiduciary duties to its stockholders imposed by
law based on the advice of outside counsel, the Board of Directors of EVT
determines that such termination is required by reason of a Superior Proposal
being made, or (b) there has been a breach by Guidant or Merger Sub of any
representation or warranty contained in this Agreement that has had or will
have a Guidant Material Adverse Effect, which breach is not curable or, if
curable, is not cured within 30 days after written notice of such breach is
given by EVT to Guidant, (c) there has been a material breach of any of the
covenants or agreements set forth in this Agreement on the part of Guidant,
which breach is not curable or, if curable, is not cured within 30 days after
written notice of such breach is given by EVT to Guidant, or (d) the Closing
Price is less than $40.00. Notwithstanding the foregoing, EVT's ability to
terminate this Agreement pursuant to this Section 7.3 is conditioned upon the
prior payment by EVT of any amounts owed by it pursuant to Section 7.5(a).
7.4 TERMINATION BY GUIDANT. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, before or after the
approval by the stockholders of EVT referred to in Section 6.1(a), by action
of the Board of Directors of Guidant, if (a) the Board of Directors of EVT
shall have withdrawn or modified in a manner materially adverse to Guidant its
approval or recommendation of this Agreement or the Merger or shall have
recommended an Alternative Proposal to EVT stockholders, (b) there has been a
breach by EVT of any representation or warranty contained in this Agreement
that has had or will have an EVT Material Adverse Effect, which breach is not
curable or, if curable, is not cured within 30 days after written notice of
such breach is given by Guidant to EVT, (c) there has been a material breach
of any of the covenants or agreements set forth in this Agreement on the part
of EVT, which breach is not curable or, if curable, is not cured within 30
days after written notice of such breach is given by Guidant to EVT, or (d)
the Closing Price is less than $40.00.
7.5 EFFECT OF TERMINATION AND ABANDONMENT. (a) EVT shall pay Guidant a fee
of $7 million, which amount shall be payable by wire transfer of same day
funds, within two business days after such amount becomes due, upon the
occurrence of any of the following events:
(i) EVT or Guidant terminates this Agreement pursuant to clause (b) of
Section 7.2 and prior to such termination, (x) a proposal with respect to a
Transaction shall have been made, and (y) within one year after such
termination, (A) any third party shall acquire beneficial ownership of more
than 50% of EVT's outstanding shares of voting stock, or (B) EVT shall
enter into any agreement with respect to any Transaction, and within such
one year period or thereafter, such Transaction is consummated;
(ii) Guidant terminates this Agreement pursuant to clause (a) of Section
7.4;
(iii) EVT terminates this Agreement pursuant to clause (a) of Section
7.3.
EVT acknowledges that the agreements contained in this Section 7.5(a) are an
integral part of the transactions contemplated in this Agreement, and that,
without these agreements, Guidant and Merger Sub would not enter into this
Agreement; accordingly, if EVT fails to promptly pay the amount due pursuant
to this Section 7.5(a), and, in order to obtain such payment, Guidant or
Merger Sub commences a suit which results in a judgment against EVT for the
full amount of the fee set forth in this Section 7.5(a), EVT shall pay to
Guidant its costs and expenses (including attorneys' fees) in connection with
such suit, together with interest on the amount of the fee at the rate of 12%
per annum from the date such fee was required to be paid.
(b) In the event of termination of this Agreement and the abandonment of the
Merger pursuant to this Article 7, all obligations of the parties hereto shall
terminate, except the obligations of the parties set forth in
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this Section 7.5 and Section 5.10 and except for the Confidentiality
Agreement, dated October 1, 1996. Moreover, in the event of termination of
this Agreement pursuant to Section 7.3 or 7.4, nothing herein shall prejudice
the ability of the nonbreaching party from seeking damages from any other
party for any breach of this Agreement, including without limitation,
attorneys' fees and the right to pursue any remedy at law or in equity.
Notwithstanding any other provision contained herein, Guidant shall not have
the right to seek damages from any officer, director or employee of EVT.
7.6 EXTENSION; WAIVER. At any time prior to the Effective Time, any party
hereto, by action taken by its Board of Directors, may, to the extent legally
allowed, (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall
be valid only if set forth in an instrument in writing signed on behalf of
such party.
7.7 CERTAIN RIGHTS OF GUIDANT. If EVT proposes to terminate this Agreement
pursuant to subsection (d) of Section 7.3, EVT shall first notify Guidant in
writing of its intent to so terminate this Agreement and Guidant shall then
have not less than five days from the date of receipt of written notice by EVT
to submit a final and best written offer (a "Final Offer") for a change in the
Exchange Consideration. If such Final Offer is accepted by EVT, the parties
thereto shall amend this Agreement to reflect such Final Offer and shall make
any appropriate amendments to the Registration Statement and the Proxy
Statement/Prospectus. Any decision by EVT to accept or reject a Final Offer
shall be at EVT's sole discretion.
ARTICLE 8
General Provisions
8.1 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall not survive the Merger,
provided, however, that the agreements contained in Article 1, Article 2,
Section 5.11, Section 5.12, Section 5.19 and this Article 8 shall survive the
Merger to the extent contemplated by such sections.
8.2 NOTICES. Any notice required to be given hereunder shall be sufficient
if in writing, and sent by facsimile transmission, by courier or other
national overnight express mail service (with proof of service), hand delivery
or certified or registered mail (return receipt requested and first-class
postage prepaid), addressed as follows:
If to Guidant or Merger Sub:
Guidant Corporation
111 Monument Circle, 29th Floor
Indianapolis, IN 46204-5129
Attention: General Counsel
with copies to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019-6092
Attention: Bernard E. Kury, Esq.
Jonathan L. Freedman, Esq.
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If to EVT:
EndoVascular Technologies, Inc.
1360 O'Brien Drive
Menlo Park, CA 94025
Attention: W. James Fitzsimmons.
with copies to:
Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP
155 Constitution Drive
Menlo Park, CA 94025
Attention: Robert V. Gunderson, Esq.
or to such other address as any party shall specify by written notice so
given, and such notice shall be deemed to have been delivered as of the date
so telecommunicated, personally delivered or mailed.
8.3 ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Notwithstanding anything
contained in this Agreement to the contrary, except for the provisions of
Section 5.11, nothing in this Agreement, expressed or implied, is intended to
confer on any person other than the parties hereto or their respective heirs,
successors, executors, administrators and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
8.4 ENTIRE AGREEMENT. This Agreement, the Exhibits, the EVT Disclosure
Schedule, the Guidant Disclosure Schedule, the Confidentiality Agreement dated
October 1, 1996, between EVT and Guidant and any documents delivered by the
parties in connection herewith constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings among the parties with respect thereto. No
addition to or modification of any provision of this Agreement shall be
binding upon any party hereto unless made in writing and signed by all parties
hereto.
8.5 AMENDMENT. This Agreement may be amended by the parties hereto, by
action taken by their respective Boards of Directors, at any time before or
after approval of matters presented in connection with the Merger by the
stockholders of EVT and Guidant, but after any such stockholder approval, no
amendment shall be made which by law requires the further approval of
stockholders without obtaining such further approval. This Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto.
8.6 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to its rules
of conflict of laws.
8.7 COUNTERPARTS. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof
each signed by less than all, but together signed by all of the parties
hereto.
8.8 HEADINGS. Headings of the Articles and Sections of this Agreement are
for the convenience of the parties only, and shall be given no substantive or
interpretive effect whatsoever.
8.9 INTERPRETATION. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and
vice versa, and words denoting each gender shall include the other gender and
words denoting natural persons shall include corporations and partnerships and
vice versa.
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8.10 WAIVERS. Except as provided in this Agreement, no action taken pursuant
to this Agreement, including, without limitation, any investigation by or on
behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties,
covenants or agreements contained in this Agreement. The waiver by any party
hereto of a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or any
other provision hereunder.
8.11 INCORPORATION OF EXHIBITS. The EVT Disclosure Schedule, the Guidant
Disclosure Schedule and all Exhibits attached hereto and referred to herein
are hereby incorporated herein and made a part hereof for all purposes as if
fully set forth herein.
8.12 SEVERABILITY. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
8.13 ENFORCEMENT OF AGREEMENT. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
was not performed in accordance with its specific terms or was otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof, this being in addition to any
other remedy to which they are entitled at law or in equity.
8.14 SUBSIDIARIES. As used in this Agreement, the word "Subsidiary" when
used with respect to any party means any corporation or other organization,
whether incorporated or unincorporated, of which such party directly or
indirectly owns or controls at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of
the board of directors or others performing similar functions with respect to
such corporation or other organization, or any organization of which such
party is a general partner.
8.15 OTHER. Guidant agrees that any adverse effect on EVT resulting from any
of the matters set forth in clauses (i) through (iv) of the proviso to the
definition of EVT Material Adverse Effect in Section 3.1 shall not be
considered in determining whether there has been a material adverse change to
or effect on EVT for purposes of the Loan Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf on the day and year first written
above.
GUIDANT CORPORATION
By: /s/ Jay Watkins
----------------------------------
Name:F. Thomas (Jay) Watkins, III
Title: Vice President
SKI ACQUISITION CORP.
By: /s/ Jay Watkins
----------------------------------
Name:F. Thomas (Jay) Watkins, III
Title:Vice President
ENDOVASCULAR TECHNOLOGIES, INC.
By: /s/ W. James Fitzsimmons
----------------------------------
Name:W. James Fitzsimmons
Title:President and Chief
Executive Officer
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EXHIBIT A
TO MERGER
AGREEMENT
FORM OF AFFILIATE LETTER
[GUIDANT]
[ADDRESS]
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to be
an "affiliate" of EndoVascular Technologies, Inc., a Delaware corporation
("EVT"), 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 "SEC") under the Securities Act
of 1933, as amended (the "Act"), or (ii) used in and for purposes of
Accounting Series, Releases 130 and 135, as amended, of the SEC (the "Pooling
Rules"). Pursuant to the terms of the Agreement and Plan of Merger, dated as
of October 5, 1997 (the "Agreement"), between Guidant Corporation, an Indiana
corporation ("Guidant"), Ski Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of Guidant ("Merger Sub"), and EVT, Merger Sub will be
merged with and into EVT (the "Merger").
As a result of the Merger, I will receive shares of Common Stock, without
par value, of Guidant (the "Guidant Common Stock") in exchange for shares
owned by me of Common Stock, par value $.00001 per share, of EVT.
Compliance with the Act. In compliance with the Act and the Rules and
Regulations thereunder, I represent, warrant and covenant to Guidant that in
the event I receive any Guidant Common Stock as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of the
Guidant Common Stock in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Agreement and discussed the
requirements of such documents and other applicable limitations upon my
ability to sell, transfer or otherwise dispose of the Guidant Common Stock,
to the extent I felt necessary, with my counsel or counsel for EVT.
C. I have been advised that the issuance of Guidant Common Stock to me
pursuant to the Merger has been registered with the SEC under the Act on a
Registration Statement on Form S-4. However, I have also been advised that,
since at the time the Merger was submitted for a vote of the stockholders
of EVT, I may be deemed to have been an affiliate of EVT and the
distribution by me of the Guidant Common Stock has not been registered
under the Act, I may not sell, transfer or otherwise dispose of the Guidant
Common Stock issued to me in the Merger unless such sale, transfer or other
disposition (i) has been registered under the Act and all applicable state
securities or "blue sky" laws, (ii) is made in conformity with Rule 145
promulgated by the SEC under the Act and all applicable state securities or
"blue sky" laws, or (iii) in the opinion of counsel reasonably acceptable
to Guidant, or pursuant to a "no action" letter obtained by the undersigned
from the staff of the SEC, is otherwise exempt from registration under the
Act and all applicable state securities or "blue sky" laws.
D. I understand that Guidant is under no obligation to register the sale,
transfer or other disposition of the Guidant Common Stock received by me or
on my behalf as a result of the Merger under the Act or to take any other
action necessary in order to make compliance with an exemption from such
registration available.
E. I also understand that stop transfer instructions will be given to
Guidant's transfer agents with respect to the Guidant Common Stock and that
there will be placed on the certificates for the Guidant Common Stock
issued to me, or any substitutions therefor, a legend stating in substance:
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"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED PURSUANT TO A
BUSINESS COMBINATION WHICH IS BEING ACCOUNTED FOR AS A POOLING OF
INTERESTS, 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 BETWEEN THE REGISTERED HOLDER HEREOF AND GUIDANT
CORPORATION, A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL
OFFICES OF GUIDANT CORPORATION."
F. I also understand that unless the transfer by me of my Guidant Common
Stock has been registered under the Act or is a sale made in conformity
with the provisions of Rule 145 and all applicable state securities or
"blue sky" laws, Guidant 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 OR ANY APPLICABLE STATE SECURITIES OR
"BLUE SKY" LAWS 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 AND ALL APPLICABLE STATE SECURITIES OR "BLUE
SKY" LAWS.
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 such legend is not required for purposes of the Act, any applicable
state securities or "blue sky" laws or this Agreement. It is understood and
agreed that such legends and the stop orders referred to above will be removed
if (i) one year shall have elapsed from the date the undersigned acquired the
Guidant Common Stock received in the Merger and the provisions of Rule
145(d)(2) are then available to the undersigned, (ii) two years shall have
elapsed from the date the undersigned acquired the Guidant Common Stock
received in the Merger and the provisions of Rule 145(d)(3) are then available
to the undersigned, (iii) Guidant has received either an opinion of counsel,
which opinion and counsel shall be reasonably satisfactory to Guidant, or a
"no action" letter obtained by the undersigned from the staff of the SEC, to
the effect that the restrictions imposed by Rule 145 under the Act and all
applicable state securities or "blue sky" laws no longer apply to the
undersigned or (iv) the shares of stock beneficially owned by me, any of my
affiliates and any person with whom I am acting in concert represent less than
1% of the outstanding Guidant Common Stock and may be sold pursuant to Rule
144 during a single 90-day period.
2. Pooling Requirements. I further represent to and covenant with Guidant
that (A) I have not sold any shares of common stock of EVT within 30 days of
the Effective Time (as defined in the Merger Agreement and (B) I will not
sell, transfer or otherwise dispose of (i) any shares of common stock of EVT
within 30 days of the Effective Time or (ii) any Guidant Common Stock received
by me in the Merger or any other shares of the capital stock of Guidant until
after such time as results covering at least 30 days of post-merger combined
operations of EVT and Guidant have been published by Guidant, in the form of a
quarterly earnings report, an effective registration statement filed with the
SEC, a report to the SEC on Form 10-K, 10-Q or 8-K, or any other public filing
or announcement which includes such combined results of operations and would
satisfy the Pooling Rules.
3. Certain Tax Matters. In connection with the qualification of the receipt
of Guidant Common Stock in the Merger as tax-free under Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), I hereby represent and
warrant to Guidant as follows:
A-A-2
<PAGE>
A. I am currently the owner of shares of EVT Common Stock and have
not acquired, or made any Sale (as defined below) of EVT Common Stock since
, 1997, or otherwise in contemplation of the Merger. These shares
constitute my entire interest in EVT.
B. Except with respect to (i) the exchange of EVT Common Stock for
Guidant Common Stock pursuant to the Merger, I have no current plan or
intent to engage in any Sale (as defined below) of any EVT Common Stock on,
or prior to, the Merger.
C. I have no current plan or intent to engage in a sale, exchange,
transfer, pledge, distribution, redemption, or any transaction that reduces
my risk of loss or potential for gain (by short sale or otherwise) with
respect to, or other disposition of, directly or indirectly (collectively,
a "Sale"), any Guidant Common Stock that I receive in the Merger. I am not
aware of, or participating in, any plan or intent on the part of EVT's
stockholders (a "Plan") to engage in any Sale of Guidant Common Stock to be
issued in the Merger such that the aggregate fair market value, as of the
Effective Time of the shares subject to such Sale would exceed ten percent
(10%) of the aggregate fair market value of all shares of EVT Common Stock
outstanding immediately prior to the Merger (the "Outstanding EVT Common
Stock"). A Sale of Guidant Common Stock shall be considered to have
occurred pursuant to a Plan if, among other things, such sale, transfer or
other disposition occurs in a transaction that is in contemplation of, or
related to, the Merger (a "Related Transaction"). Additionally, for
purposes of the foregoing, shares of EVT Common Stock with respect to which
a pre-Merger Sale occurs in a Related Transaction shall be considered to be
shares of Outstanding EVT Common Stock that are exchanged for shares of
Guidant Common Stock which are disposed of pursuant to a Plan.
D. Notwithstanding the foregoing provisions, I acknowledge that I will
hold the Guidant Common Stock with an investment intent and, therefore, in
the event of a change of circumstances (including a change in financial
circumstances or a change in value of Guidant Common Stock), I may at some
time in the future engage in a Sale of some or all of my shares of Guidant
Common Stock. I do not intend to take a position on any federal or state
income tax return that is inconsistent with the treatment of the receipt of
Guidant Common Stock in the Merger as occurring pursuant to a
reorganization qualifying as tax-free under Section 368(a) of the Code.
E. I shall immediately notify Guidant in writing via facsimile if, at any
time prior to the Effective Time, any of the following representations are
untrue.
The representation, covenants and agreements contained herein shall be true
and correct at all times from the date hereof. I understand that my
obligations hereunder shall attach to and be binding upon any person or entity
to whom legal or beneficial ownership of my shares of EVT Common Stock (and
shares of Guidant Common Stock following the Merger) shall pass by operation
of law or otherwise.
Very truly yours,
Name:
Accepted this
day of ,
1997 by Guidant
Corporation
By: _________________________________
Name:
Title:
A-A-3
<PAGE>
APPENDIX B
Board of Directors
EndoVascular Technologies, Inc.
October 5, 1997
Board of Directors
EndoVascular Technologies, Inc.
1360 O'Brien Drive
Menlo Park, CA 94025
Gentlemen:
We understand that EndoVascular Technologies, Inc., a Deleware corporation
("EVT"), and Guidant Corporation, an Indiana corporation ("Guidant"), have
entered into an Agreement and Plan of Merger dated as of October 5, 1997 (the
"Merger Agreement"), pursuant to which a subsidiary of Guidant will be merged
with and into EVT, which will be the surviving entity and become a wholly
owned subsidiary of Guidant (the "Merger"). Pursuant to the Merger, as more
fully described in the Merger Agreement, we understand that each share of
common stock, par value $0.0001 per share, of EVT (the "EVT Common Stock")
issued and outstanding immediately prior to the closing shall, by virtue of
the Merger and without any action on part of the holder thereof, be converted
into the right to receive consideration (the "Consideration") comprised of
such number of shares of common stock, without par value, of Guidant (the
"Guidant Common Stock") equal to $20.00 divided by the Closing Price (the
"Exchange Ratio"); provided, however, that if the Closing Price shall be
greater than or equal to $46.63 but less than or equal to $51.75, then the
Exchange Ratio shall be fixed at 0.3865; provided, further, that if the
Closing Price shall be less than $46.63, then the Exchange Ratio shall be
$18.00 divided by the Closing Price. The Merger Agreement may be terminated
and the Merger may be abandoned by either party at any time prior to the
closing, before or after the approval by the stockholders of EVT, if the
Closing Price is less than $40.00.
"Closing Price" means the average closing price of Guidant Common Stock,
rounded to four decimal places, as reported in the Wall Street Journal's New
York Stock Exchange Composite Transaction Reports, for the 10 consecutive
trading days preceding the third trading day prior to the EVT stockholders
meeting to approve the Merger.
You have asked for our opinion as investment bankers as to whether the
Consideration to be received by the stockholders of EVT pursuant to the Merger
is fair to such stockholders from a financial point of view, as of the date
hereof. As you are aware, we were not requested to nor did we solicit or
assist EVT in soliciting indications of interest from third parties for all or
any part of EVT. Further, we were not retained to nor did we advise EVT with
respect to EVTs underlying decision to proceed with or effect the Merger.
In connection with our opinion, we have, among other things: (i) reviewed
certain publicly available financial and other data with respect to EVT and
Guidant, including the consolidated financial statements for recent years and
interim periods to June 30, 1997 and certain other relevant financial and
operating data relating to EVT and Guidant made available to us from published
sources and, with respect to EVT, from internal records; (ii) reviewed the
Merger Agreement; (iii) reviewed certain publicly available information
concerning the trading of, and the trading market for, EVT Common Stock and
Guidant Common Stock; (iv) compared EVT and Guidant from a financial point of
view with certain other companies in the medical technology industry which we
deemed to be relevant; (v) considered the financial terms, to the extent
publicly available, of selected recent business combinations of companies in
the medical technology industry which we deemed to be comparable, in whole or
in part, to the Merger; (vi) reviewed and discussed with representatives of
the management of EVT certain information of a business and financial nature
regarding EVT, furnished to us by them, including financial forecasts and
related assumptions of EVT; (vii) reviewed certain third-party analysts'
reports, including financial forecasts, regarding Guidant; (viii) made
inquiries regarding and discussed the Merger and the Merger Agreement and
other matters related thereto with EVT's and Guidants counsel; and (ix)
performed such other analyses and examinations as we have deemed appropriate.
B-1
<PAGE>
In connection with our review, we have not assumed any obligation
independently to verify the foregoing information and have relied on its being
accurate and complete in all material respects. With respect to the financial
forecasts for EVT provided to us by its management, upon their advice and with
your consent we have assumed for purposes of our opinion that the forecasts
(including without limitation the assumptions regarding regulatory approval
timelines, revenue growth rates and operating margins) have been reasonably
prepared on bases reflecting the best available estimates and judgments of
EVT's management at the time of preparation as to the future financial
performance of EVT. We have also assumed that there have been no material
changes in EVT's or Guidant's assets, financial condition, results of
operations, business or prospects since the respective dates of their last
financial statements made available to us. We have relied on advice of counsel
and independent accountants to EVT and Guidant as to all legal and financial
reporting matters with respect to EVT and Guidant, the Merger and the Merger
Agreement, including the legal status and financial reporting of litigation
involving EVT and Guidant. We have assumed that the Merger will be consummated
in a manner that complies in all respects with the applicable provisions of
the Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934 and all other applicable federal and state statutes,
rules and regulations. In addition, we have not assumed responsibility for
making an independent evaluation, appraisal or physical inspection of any of
the assets or liabilities (contingent or otherwise) of EVT or Guidant, nor
have we been furnished with any such appraisals. You have informed us, and we
have assumed, that the Merger will be recorded as a pooling of interests under
generally accepted accounting principles. Finally, our opinion is based on
economic, monetary and market and other conditions as in effect on, and the
information made available to us as of, the date hereof. Accordingly, although
subsequent developments may affect this opinion, we have not assumed any
obligation to update, revise or reaffirm this opinion.
We have further assumed with your consent that the Merger will be
consummated in accordance with the terms described in the Merger Agreement,
without any further amendments thereto, and without waiver by EVT of any of
the conditions to its obligations thereunder.
We have acted as financial advisor to EVT in connection with the Merger and
will receive a fee for our services, including rendering this opinion, a
significant portion of which is contingent upon the consummation of the
Merger. In the ordinary course of our business, we actively trade the equity
securities of EVT and Guidant for our own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities. We have also acted as an underwriter in connection with a
public offering of securities of EVT and performed various investment banking
services for EVT.
Based upon the foregoing and in reliance thereon, it is our opinion as
investment bankers that the Consideration to be received by the stockholders
of EVT pursuant to the Merger is fair to such stockholders from a financial
point of view, as of the date hereof.
This opinion is directed to the Board of Directors of EVT in its
consideration of the Merger and is not a recommendation to any stockholder as
to how such stockholder should vote with respect to the Merger. Further, this
opinion addresses only the financial fairness of the Consideration to the
stockholders and does not address the relative merits of the Merger and any
alternatives to the Merger, EVT's underlying decision to proceed with or
effect the Merger, or any other aspect of the Merger. This opinion may not be
used or referred to by EVT, or quoted or disclosed to any person in any
manner, without our prior written consent, which consent is hereby given to
the inclusion of this opinion in any proxy statement filed with the Securities
and Exchange Commission in connection with the Merger. In furnishing this
opinion, we do not admit that we are experts within the meaning of the term
"experts" as used in the Securities Act and the rules and regulations
promulgated thereunder, nor do we admit that this opinion constitutes a report
or valuation within the meaning of Section 11 of the Securities Act.
Very truly yours,
/s/ NationsBanc Montgomery Securities, Inc.
B-2
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Indiana Business Corporation Law provides that a corporation, unless
limited by its Articles of Incorporation, is required to indemnify its
directors and officers against reasonable expenses incurred in the successful
defense of any proceeding arising out of their serving as a director or
officer of the corporation.
As permitted by the Indiana Business Corporation Law, the Registrant's
Articles of Incorporation provide for indemnification of directors, officers
and employees of the Registrant against any and all liability and reasonable
expense that may be incurred by them, arising out of any claim or action,
civil or criminal, in which they may become involved by reason of being or
having been a director, officer, or employee. To be entitled to
indemnification, those persons must have been wholly successful in the claim
or action or the Board of Directors or independent legal counsel must have
determined that such persons acted in good faith in what they reasonably
believed to be in the best interests of the Registrant and, in addition, in
any criminal action, had no reasonable cause to believe that their conduct was
unlawful.
Officers and directors of the Registrant are insured, subject to certain
exclusions and deductibles and maximum amounts, against loss from claims
arising in connection with their acting in their respective capacities, which
include claims under the Securities Act of 1933.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<C> <S>
2.1 Agreement and Plan of Merger, dated as of October 5, 1997, among the
Registrant, Ski Acquisition Corp. and EndoVascular Technologies, Inc.
(attached as Appendix A to the Proxy Statement/Prospectus included in
this Registration Statement).
2.2* Support Agreement.
5.1** Opinion of J.B. King, Esq., as to the legality of the securities.
8.1** Tax Opinion of Gunderson Dettmer Stough Villeneuve Franklin &
Hachigian, LLP.
23.1* Consent of Ernst & Young LLP.
23.2* Consent of Arthur Andersen LLP.
23.3** Consent of J.B. King, Esq. (included in opinion filed as Exhibit 5.1).
23.4** Consent of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian,
LLP (included in opinion filed as Exhibit 8.1).
23.6* Consent of NationsBanc Montgomery Securities, Inc.
24.1 Powers of Attorney (included on signature page).
99.1* Form of Proxy for holders of EndoVascular Technologies, Inc. Common
Stock.
</TABLE>
- --------
*Filed herewith
**To be filed by amendment
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
II-1
<PAGE>
Statement; provided, however, that paragraphs (i) and (ii) do not apply if
the Registration Statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs
is contained in periodic reports filed by the Registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose 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.
(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.
The undersigned Registrant hereby undertakes 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
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to section 15(d) of the Exchange Act) 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.
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 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 will, 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 will be
governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes as follows: 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 will 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.
The Registrant undertakes that every prospectus (i) that is filed pursuant
to the immediately preceding paragraph, 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, will be filed
as a part of an amendment to the registration statement and will 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.
The undersigned Registrant hereby undertakes 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.
The undersigned Registrant hereby undertakes 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-2
<PAGE>
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 CITY OF INDIANAPOLIS, STATE OF
INDIANA, ON THE 23RD DAY OF OCTOBER, 1997.
Guidant Corporation
Registrant
By: /s/ James M. Cornelius
----------------------------------
James M. Cornelius
Chairman of the Board
Know All Men By These Presents, that each person whose signature appears
below constitutes and appoints Keith E. Brauer and J.B. King, and each of
them, his or her true and lawful attorneys-in-fact and agents, with full power
of substitution and re-substitution, for him and in his name, place and stead,
in any and all capacities, to sign any and all Amendments (including Post-
Effective Amendments) to this Registration Statement, 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 such
and every act and thing requisite and necessary to be done, 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 their
or his substitute or 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 AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE
/s/ James M. Cornelius Chairman of the October 23,
- ------------------------------------- Board and Director 1997
JAMES M. CORNELIUS (Principal
Executive Officer)
/s/ Ronald W. Dollens President, Chief October 23,
- ------------------------------------- Executive Officer 1997
RONALD W. DOLLENS and Director
(Principal
Executive Officer)
/s/ Keith E. Brauer Vice President, October 23,
- ------------------------------------- Finance and Chief 1997
KEITH E. BRAUER Financial Officer
(Principal
Financial Officer)
/s/ Roger Marchetti Corporate Controller October 23,
- ------------------------------------- and Chief 1997
ROGER MARCHETTI Accounting Officer
(Principal
Accounting Officer)
/s/ Maurice A. Cox, Jr. Director October 23,
- ------------------------------------- 1997
MAURICE A. COX, JR.
/s/ Enrique C. Falla Director October 23,
- ------------------------------------- 1997
ENRIQUE C. FALLA
II-3
<PAGE>
SIGNATURE TITLE DATE
/s/ J.B. King Director October 23,
- ------------------------------------- 1997
J.B. KING
/s/ Susan B. King Director October 23,
- ------------------------------------- 1997
SUSAN B. KING
/s/ J. Kevin Moore Director October 23,
- ------------------------------------- 1997
J. KEVIN MOORE
/s/ Mark Novitch, M.D. Director October 23,
- ------------------------------------- 1997
MARK NOVITCH, M.D.
/s/ Eugene L. Step Director October 23,
- ------------------------------------- 1997
EUGENE L. STEP
/s/ Ruedi E. Wager, Ph.D. Director October 23,
- ------------------------------------- 1997
RUEDI E. WAGER, PH.D.
II-4
<PAGE>
EXHIBIT 2.2
SUPPORT AGREEMENT
SUPPORT AGREEMENT, dated as of October 5, 1997, between Guidant Corporation,
an Indiana corporation ("Guidant"), and the undersigned stockholders of
EndoVascular Technologies, Inc., a Delaware corporation ("EVT") (the
"Stockholders," each a "Stockholder").
WHEREAS, as of the date hereof, each of the Stockholders own (either
beneficially or of record) that amount of shares of common stock, par value
$0.00001 per share ("EVT Common Stock"), of EVT as set forth opposite such
Stockholder's name on Schedule A attached hereto (all such shares and any
shares hereafter acquired by the Stockholder prior to the termination of this
Agreement being referred to herein as the "Shares");
WHEREAS, concurrently herewith, Guidant, Ski Acquisition Corp. ("Merger
Sub") and EVT are entering into an Agreement and Plan of Merger (as such
Agreement may hereafter be amended from time to time, the "Merger Agreement"),
pursuant to which, upon the terms and subject to the conditions thereof,
Merger Sub will be merged with and into EVT (the "Merger"), and the Surviving
Corporation (as defined in the Merger Agreement) will be a wholly owned
subsidiary of Guidant; and
WHEREAS, as a condition to the willingness of Guidant to enter into the
Merger Agreement, Guidant has requested that the Stockholders agree, and, in
order to induce Guidant to enter into the Merger Agreement, the Stockholders
have agreed, to grant Guidant proxies to vote such Stockholder's Shares;
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants and agreements set forth herein and in
the Merger Agreement, the parties hereto, intending to be legally bound,
hereby agree as follows:
ARTICLE 1
1.1 Voting of Shares. Until the termination of this Agreement in accordance
with Section 4.13 hereof, each Stockholder hereby agrees as follows:
(a) The Stockholder shall, including by initiating a written consent
solicitation if requested by Guidant, vote (or cause to be voted) the
Shares in favor of the Merger, the approval and adoption of the Merger
Agreement and the approval of the other transactions contemplated by the
Merger Agreement, at any meeting of stockholders of EVT called to vote upon
the Merger and the Merger Agreement or at any adjournment thereof or in any
other circumstances upon which a vote, consent or other approval (including
by written consent) with respect to the Merger and the Merger Agreement is
sought (the "Special Meeting").
(b) The Stockholder, and any beneficiary of a revocable trust for which
the Stockholder serves as trustee, shall not take any action to revoke or
terminate such trust or take any other action which would restrict, limit
or frustrate the Stockholder's right to vote the Shares on behalf of such
trust in accordance with this Agreement. Each such beneficiary hereby
acknowledges and agrees to be bound by the terms of this Agreement
applicable to it.
1.2 Grant of Irrevocable Proxy; Appointment of Proxy. (a) The Stockholder
hereby irrevocably grants to, and appoints, Guidant and James M. Cornelius,
Ronald W. Dollens and J.B. King, in their respective capacities as officers of
Guidant, and any individual who shall hereafter succeed to any such office of
Guidant, and each of them individually, the Stockholder's proxy and attorney-
in-fact (with full power of substitution), for and in the name, place and
stead of the Stockholder, to vote the Shares, or grant a consent or approval
in respect of the Shares, in favor of adoption of the Merger Agreement.
<PAGE>
(b) The Stockholder represents that any proxies heretofore given in
respect of the Shares are not irrevocable, and that all such proxies are
hereby revoked. The Stockholder hereby affirms that the irrevocable proxy
set forth in this Section 1.2 is given in connection with the execution of
the Merger Agreement, and that such irrevocable proxy is given to secure
the performance of the duties of the Stockholder under this Agreement. The
Stockholder hereby further affirms that the irrevocable proxy is coupled
with an interest and may under no circumstances be revoked. The Stockholder
hereby ratifies and confirms all that such irrevocable proxy may lawfully
do or cause to be done by virtue hereof. Such irrevocable proxy is executed
and intended to be irrevocable in accordance with the provisions of Section
212(e) of the Delaware General Corporation Law (the "DGCL").
1.3 Restrictions on Transfer and Conversion. (a) Until the close of business
on the date of the Special Meeting, the Stockholder will not (i) sell, assign,
transfer, pledge or otherwise dispose of any of its Shares, (ii) deposit its
Shares into a voting trust or enter into a voting agreement or arrangement
with respect to such Shares or grant any proxy with respect thereto, or (iii)
enter into any contract, option or other arrangement or undertaking with
respect to the direct or indirect acquisition or sale, assignment, transfer or
other disposition of any EVT Common Stock.
(b) If, at the time the Merger Agreement is submitted for approval to the
stockholders of EVT, the Stockholder is an "affiliate" of EVT for purposes
of Rule 145 under the Securities Act of 1933, as amended, or for purposes
of qualifying the Merger for pooling of interests accounting treatment
under Accounting Principles Board Opinion No. 16 and applicable Securities
and Exchange Commission ("SEC") rules and regulations, the Stockholder
shall deliver to Guidant on or prior to the Closing Date (as defined in the
Merger Agreement) a written agreement substantially in the form attached as
Exhibit A to the Merger Agreement.
(c) The Stockholder agrees to tender to Ski, within 10 business days
after the date hereof (or, in the event the Shares are acquired subsequent
to the date hereof within 10 business days after the date of such
acquisition), any and all certificates representing the Shares in order
that Ski may inscribe upon such certificates the legend in accordance with
Section 5.14 of the Merger Agreement, if such legend is required by law to
be placed upon such certificates.
ARTICLE 2
2.1 Authority. The Stockholder has all requisite power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly authorized, executed and delivered by the
Stockholder and constitutes a valid and binding obligation of the Stockholder
enforceable against the Stockholder in accordance with its terms. If the
Stockholder is a natural person and is married, and the Shares constitute
community property or otherwise require spousal or other approval for this
Agreement to be legal, valid and binding, this Agreement has been duly
authorized, executed and delivered by, and constitutes a valid and binding
agreement of, the Stockholder's spouse, enforceable against such spouse in
accordance with its terms. No trust of which the Stockholder is a trustee
requires the consent of any beneficiary to the execution and delivery of this
Agreement or to the consummation of the transactions contemplated hereby.
2.2 The Shares. The Stockholder is the record and beneficial owner of or is
trustee of a trust that is the record holder of, and whose beneficiaries are
the beneficial owners of, and has good and marketable title to, the Shares,
free and clear of any Liens whatsoever. The Stockholder does not own, of
record or beneficially, any shares of capital stock of EVT other than as set
forth on Schedule A. The Stockholder has the sole right to vote the Shares,
and none of such Shares is subject to any voting trust or other agreement,
arrangement or restriction with respect to the voting of such Shares, except
as contemplated by this Agreement.
2.3 No Violation. Neither the execution and delivery by the Stockholder of
this Agreement nor the consummation by the Stockholder of the transactions
contemplated hereby in accordance with the terms hereof, will: (i) conflict
with, or result in a breach of any provision of the Certificate of
Incorporation or Bylaws (or
<PAGE>
other comparable organizational documents, if any) of the Stockholder; (ii)
violate, conflict with, result in a breach of any provision of, constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, any trust agreement, loan or credit agreement,
bond, note, mortgage, indenture, lease or other contract, agreement,
obligation, commitment, arrangement, understanding, instrument, permit,
concession, franchise, license, statute, law, ordinance, rule, regulation,
judgment, order, notice or decree, applicable to the Stockholder or to the
Stockholder's property or assets, including the Shares; (iii) other than the
expiration or termination of the waiting periods under the HSR Act (as defined
in the Merger Agreement) and informational filings with the SEC, require any
filing with, or permit, authorization, consent or approval of, any Federal,
state or local government or any court, tribunal, administrative agency or
commission or other governmental and regulatory authority or agency, domestic
or foreign, or (iv) violate any order, writ, injunction, decree, statute, rule
or regulation applicable to the Stockholder or any of the Stockholder's
properties or assets, including the Shares.
ARTICLE 3
3.1 No Solicitation. Prior to the Effective Time (as defined in the Merger
Agreement), (a) the Stockholder shall not, and shall not permit any agents and
representatives (including, without limitation, any investment banker,
attorney or accountant retained by it) to, initiate, solicit or encourage,
directly or indirectly, any inquiries or the making or implementation of any
proposal or offer (including, without limitation, any proposal or offer to
EVT's shareholders) with respect to an Alternative Proposal (as defined in the
Merger Agreement) or engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any person
relating to an Alternative Proposal, or otherwise facilitate any effort or
attempt to make or implement an Alternative Proposal and (b) the Stockholder
will notify Guidant immediately in writing if any such inquiries or proposals
are received in writing by, any such information is requested from, or any
such negotiations or discussions are sought to be initiated or continued with,
it. Nothing in this section 3.1 shall preclude any Stockholder who is also a
director of EVT from taking any action solely in his capacity as a director of
EVT which is permitted by Section 5.1 of the Merger Agreement.
ARTICLE 4
4.1 Notices. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
as of the date delivered, mailed or transmitted, and shall be effective upon
receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
changes of address) or sent by electronic transmission to the telecopier
number specified below:
If to Guidant:
Guidant Corporation
111 Monument Circle, 29th Floor
Indianapolis, Indiana 46204-5129
Attention: General Counsel
with a copy to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019-6092
Attention: Bernard E. Kury, Esq.
Jonathan L. Freedman, Esq.
<PAGE>
If to the Stockholder, to the address indicated on Schedule A attached
hereto for each respective Stockholder.
with a copy to:
Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP
155 Constitution Drive
Menlo Park, CA 94025
Attention: Robert V. Gunderson, Jr., Esq.
Brooks Stough, Esq.
4.2 Certain Events. The Stockholder agrees that this Agreement and the
obligations hereunder shall attach to the Shares and shall be binding upon any
person or entity to which legal or beneficial ownership of such Shares shall
pass, whether by operation of law or otherwise, including the Stockholder's
heirs, guardians, administrators or successors. In the event of any stock
split, stock dividend, merger, reorganization, recapitalization or other
change in the capital structure of EVT affecting the EVT Common Stock, or the
acquisition of additional shares of EVT Common Stock or other voting
securities of EVT by the Stockholder, the number of Shares listed herein shall
be adjusted appropriately and this Agreement and the obligations hereunder
shall attach to any additional shares of EVT Common Stock or other voting
securities of EVT issued to or acquired by the Stockholder.
4.3 Assignment; Binding Effect. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the
parties hereto or their respective heirs, successors, executors,
administrators and assigns any rights, remedies, obligations or liabilities
under or by reason of this Agreement.
4.4 Entire Agreement. This Agreement constitutes the entire agreement of the
parties and supersedes all prior agreements and undertakings, both written and
oral, between the parties, or any of them, with respect to the subject matter
hereof.
4.5 Amendments. This Agreement may not be amended except by an instrument in
writing signed by each of the parties hereto.
4.6 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, without giving effect to
principles of conflicts of laws.
4.7 Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity. In addition, each of the parties hereto
waives any right to trial by jury with respect to any claim or proceeding
related to or arising out of this Agreement or any of the transactions
contemplated hereby.
4.8 Voidability. If prior to the execution hereof, the Board of Directors of
EVT shall not have duly and validly authorized and approved by all necessary
corporate action, this Agreement, the Merger Agreement and the transactions
contemplated hereby and thereby, so that by the execution and delivery hereof
Guidant would become, or could reasonably be expected to become an "interested
stockholder" with whom EVT would be prevented for any period pursuant to
Section 203 of the DGCL from engaging in any "business combination" (as such
terms are defined in Section 203 of the DGCL), then this Agreement shall be
void and unenforceable until such time as such authorization and approval
shall have been duly and validly obtained.
<PAGE>
4.9 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 transactions contemplated hereby 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 to the
fullest extent permitted by applicable law in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent
possible.
4.10 Public Announcements. Except as required by law, the Stockholder shall
not issue any press release or other public statement with respect to the
transactions contemplated by this Agreement and the Merger Agreement without
the prior written consent of Guidant.
4.11 Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
4.12 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of
which, taken together, shall constitute one and the same agreement.
4.13 Termination. This Agreement shall terminate automatically immediately
following the earlier of (i) termination of the Merger Agreement and (ii) the
closing of the Merger.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
Guidant Corporation
By: /s/ Jay Watkins
----------------------------------
Name: F. Thomas (Jay) Watkins, III
Title: Vice President
Menlo Evergreen V, L.P.
Menlo Ventures IV, L.P.
By MV Management IV, L.P. General
Partner
By: /s/ H. DuBose Montgomery
----------------------------------
H. DuBose Montgomery,
General Partner
H. DuBose Montgomery
/s/ H. DuBose Montgomery
-------------------------------------
H. DuBose Montgomery
<PAGE>
W. James Fitzsimmons
/s/ W. James Fitsimmons
-------------------------------------
W. James Fitzsimmons
Vaughn Bryson
/s/ Vaughn Bryson
-------------------------------------
Vaughn Bryson
Tony R. Brown
/s/ Tony R. Brown
-------------------------------------
Tony R. Brown
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
SHAREHOLDER SHARES OWNED
----------- ------------
<S> <C>
DuBose Montgomery........................................... 33,325
c/o Menlo Ventures
3000 Sand Hill Road
Building 4, Suite 100
Menlo Park, CA 94025
Menlo Ventures and its affiliated entities.................. 2,107,921
3000 Sand Hill Road
Building 4, Suite 100
Menlo Park, CA 94025
Vaughn Bryson............................................... 23,809
800 Pembroke Court
Vero Beach, FL 32963
Tony R. Brown............................................... 26,190
6605 Canyon Hill Road
Anaheim Hills, CA 92807
James Fitzsimmons*.......................................... 49,613
</TABLE>
* c/o EndoVascular Technologies, Inc.
1360 O'Brien Drive
Menlo Park, California 94025
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Experts" and
"Selected Consolidated Financial Data and Comparative Per Share Data" included
in the Proxy Statement of EndoVascular Technologies, Inc. that is made part of
the Registration Statement (Amendment No. 2 on Form S-4 to Form S-3 No. 333-
06363) and Prospectus of Guidant Corporation for the registration of xxxx
shares of its common stock and to the incorporation by reference therein of
our reports dated February 4, 1997, with respect to the consolidated financial
statements of Guidant Corporation incorporated by reference in its Annual
Report (Form 10-K) for the year ended December 31, 1996 and the related
financial statement schedule included therein, filed with the Securities and
Exchange Commission.
/s/ Ernst & Young LLP
Indianapolis, Indiana
October 27, 1997
<PAGE>
EXHIBIT 23.2
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 March 27, 1997
included in EndoVascular Technologies Corporation's Form 10-K for the year
ended December 31, 1996 and to all references to our firm included in this
Registration Statement.
/s/ Arthur Andersen LLP
San Jose, California
October 24, 1997
<PAGE>
EXHIBIT 23.6
[LETTERHEAD OF NATIONSBANC MONTGOMERY SECURITIES, INC.]
October 27, 1997
Members of the Board of Directors
EndoVascular Technologies, Inc.
1360 O'Brien Drive
Menlo Park, CA 94025
Gentlemen:
We hereby consent to the inclusion of our opinion letter dated October 5,
1997 to the Board of Directors of EndoVascular Technologies, Inc. (the
"Company" or "EVT") regarding the acquisition of the Company by Guidant
Corporation, attached as Appendix B to the Proxy Statement/Prospectus which
forms part of Guidant Corporation's registration statement on From S-4 (the
"Registration Statement") and to the reference therein to our firm and to our
opinion under the headings: "SUMMARY--The Merger--Opinion of Financial
Advisor," "THE MERGER--Background of the Merger" and "--Opinion of Financial
Advisor." In giving the foregoing consent, we do not admit and we hereby
disclaim (i) that we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended (the
"Securities Act"), or the rules and regulations of the Securities and Exchange
Commission promulgated thereunder, and (ii) that we are experts with respect
to any part of the Registration Statement within the meaning of the term
"experts" as used in the Securities Act and the rules and regulations of the
Securities and Exchange Commission promulgated thereunder.
Very truly yours,
NATIONSBANC MONTGOMERY SECURITIES, INC.
By /s/ Michael G. Dovey
-----------------------------------
Michael G. Dovey
Managing Director
<PAGE>
EXHIBIT 99.1
PRELIMINARY COPY
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 1997
P
R
O
X
Y
ENDOVASCULAR TECHNOLOGIES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, having received the Notice of Special
Meeting of Stockholders and the Proxy Statement, hereby
appoint(s) Guidant Corporation ("Guidant"), James M. Cornelius,
Ronald W. Dollens and J.B. King, and each of them, Proxies of
the undersigned (with full power of substitution) to attend the
Special Meeting of Stockholders of Endovascular Technologies,
Inc. ("EVT") to be held on , 1997, and all
postponements and adjournments thereof (the "Meeting"), and
there to vote all shares of Common Stock of EVT that the
undersigned would be entitled to vote, if personally present,
in regard to all matters which may come before the Meeting.
The undersigned hereby confer(s) the Proxies, and each of
them, discretionary authority to consider and act upon such
business, matters or proposals other than the business set
forth below as may properly come before the Meeting. The Proxy
when properly executed will be voted in the manner specified
herein. If no specification is made, the Proxies intend to vote
FOR the proposal.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
-----------
SEE
REVERSE
SIDE
-----------
<PAGE>
[X] PLEASE
MARK
VOTES
AS IN
THIS
EXAMPLE
The Board of Directors recommends a vote FOR the proposal.
1. Adoption and approval of the Agreement and Plan of Merger dated as of
October 5, 1997, as amended, among Guidant, EVT, and Ski Acquisition Corp.
[_] FOR [_] AGAINST [_] ABSTAIN
2. Approval to adjourn the meeting in the event that the Board of Directors
wishes to continue to solicit votes to approve the transaction.
[_] FOR [_] AGAINST [_] ABSTAIN
MARK HERE FOR ADDRESS
CHANGE AND NOTE AT
LEFT [_]
In signing, please write name(s) exactly
as appearing in the imprint on this card.
For shares held jointly, each joint owner
should sign. If signing as executor, or in
any other representative capacity, or as
an officer of a corporation, please
indicate your full title as such.
Signature: ________ Dated: ________________
Signature: ________ Dated: ________________
