<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
PERCLOSE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
(i) common shares, no par value per share, of Abbott Laboratories
("Abbott Common Stock") and (ii) common stock, par value $0.001 per
share ("Perclose Common Stock"), of Perclose, Inc. ("Perclose") to be
acquired by Abbott Laboratories in the transaction.
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(2) Aggregate number of securities to which transaction applies:
13,235,837 being the number of shares of Perclose Common Stock expected
to be acquired in the transaction.
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(3) Per unit price or other underlying value of transaction computed pur-
suant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
The filing fee was calculated in accordance with Rule 0-11(c)(1) under
the Securities Exchange Act of 1934 (the "Exchange Act") as follows:
one-fiftieth of one percent of the value of the Abbott Common Stock to
be issued to holders of Perclose Common Stock in the transaction. The
value of the Abbott Common Stock was determined in accordance with Rule
0-11(a)(4) under the Exchange Act based on the value of the Perclose
Common Stock to be acquired by Abbott Laboratories in the transaction.
The value of the Perclose Common Stock to be acquired was determined by
multiplying the number of shares of Perclose Common Stock expected to
be acquired in the transaction (13,235,837) by $51,094, the average of
the high and low sale prices for Perclose Common Stock on the Nasdaq
National Market on August 4, 1999.
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(4) Proposed maximum aggregate value of transaction:
$676,271,855.68
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(5) Total fee paid:
$135,254.37 (Fee paid by wire transfer on August 6, 1999.)
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/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
PERCLOSE, INC.
PROXY STATEMENT
------------------------
ABBOTT LABORATORIES
PROSPECTUS
UP TO 17,889,168 SHARES OF COMMON STOCK
Dear Perclose Stockholder:
You are cordially invited to attend our special meeting of stockholders on
October 8, 1999. At the special meeting, we will ask you to vote on the merger
of a wholly-owned subsidiary of Abbott Laboratories, with and into Perclose. As
a result of the merger, Perclose will become a wholly-owned subsidiary of
Abbott.
In the merger, for each share of Perclose common stock you own, you will be
entitled to receive a number of shares of Abbott common stock determined by
dividing (1) $54.00 by (2) the average closing price per share of Abbott common
stock for the twenty full trading days preceding the date of the last full
trading day before the special meeting of stockholders; provided that in no
event will Abbott issue less than 1.10 shares or more than 1.35 shares of Abbott
common stock for each share of Perclose common stock. Abbott common stock is
listed on the New York Stock Exchange under the trading symbol "ABT," and on
August 24, 1999, Abbott common stock closed at $44 3/16 per share. You will
receive cash for any fractional shares of Abbott common stock which you would
otherwise receive in the merger.
We cannot complete the merger unless the holders of a majority of the
outstanding shares of Perclose common stock vote to adopt the merger agreement.
Only stockholders who hold shares of Perclose common stock at the close of
business on August 16, 1999 will be entitled to vote at the special meeting.
YOU SHOULD CONSIDER THE MATTERS DISCUSSED UNDER "RISK FACTORS RELATING TO
THE MERGER" COMMENCING ON PAGE 13 OF THE ENCLOSED PROXY STATEMENT/PROSPECTUS
BEFORE VOTING. PLEASE REVIEW CAREFULLY THE ENTIRE PROXY STATEMENT/PROSPECTUS.
AFTER CAREFUL CONSIDERATION, PERCLOSE'S BOARD OF DIRECTORS HAS UNANIMOUSLY
APPROVED THE MERGER AGREEMENT AND DETERMINED THAT THE MERGER IS FAIR TO YOU AND
IN YOUR BEST INTERESTS AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE ADOPTION
OF THE MERGER AGREEMENT.
Thank you for your support.
<TABLE>
<S> <C>
Sincerely,
[SIG] [SIG]
John B. Simpson, M.D. Henry A. Plain, Jr.
CHAIRMAN OF THE BOARD PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
YOUR VOTE IS IMPORTANT.
PLEASE PROMPTLY COMPLETE, SIGN, DATE AND RETURN YOUR PROXY.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATOR HAS APPROVED OR DISAPPROVED OF THE MERGER DESCRIBED IN THE PROXY
STATEMENT/PROSPECTUS OR THE ABBOTT COMMON STOCK TO BE ISSUED IN CONNECTION WITH
THE MERGER OR DETERMINED IF THE PROXY STATEMENT/PROSPECTUS IS ACCURATE OR
ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The proxy statement/prospectus is dated August 26, 1999
and is first being mailed to stockholders on or about August 30, 1999.
<PAGE>
REFERENCES TO ADDITIONAL INFORMATION
This proxy statement/prospectus incorporates important business and
financial information about Abbott and Perclose from documents that are not
included in or delivered with this proxy statement/ prospectus. This information
is available to you without charge upon your written or oral request. You can
obtain documents incorporated by reference in this proxy statement/prospectus by
requesting them in writing or by telephone from the appropriate company at the
following addresses and telephone numbers:
<TABLE>
<S> <C>
Abbott Laboratories Perclose, Inc.
100 Abbott Park Road 400 Saginaw Drive
Abbott Park, Illinois 60064-6400 Redwood City, California 94063
Attention: Shareholder Services Attention: Investor Relations
Telephone: (847) 937-6100 Telephone: (650) 473-3100
</TABLE>
IF YOU WOULD LIKE TO REQUEST DOCUMENTS, PLEASE DO SO BY AUGUST 30, 1999 IN
ORDER TO RECEIVE THEM BEFORE THE SPECIAL MEETING OF THE PERCLOSE STOCKHOLDERS.
See "Where You Can Find More Information" (page 54).
<PAGE>
PERCLOSE, INC.
400 SAGINAW DRIVE
REDWOOD CITY, CALIFORNIA 94063
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 8, 1999
---------------------
To the Stockholders of Perclose, Inc.:
We will hold a special meeting of the stockholders of Perclose, Inc. on
Friday, October 8, 1999, at 8:00 a.m., local time, at our executive offices, 400
Saginaw Drive, Redwood City, California 94063, for the following purpose:
To consider and vote upon a proposal to adopt the merger agreement
among Abbott Laboratories, AL Acquisition Corp., a wholly-owned
subsidiary of Abbott, and Perclose. Under the merger agreement, Perclose
will become a wholly-owned subsidiary of Abbott, and each outstanding
share of Perclose common stock will be converted into the right to
receive shares of Abbott common stock on the terms more fully described
in this proxy statement/prospectus.
We will transact no other business at the special meeting, except such
business as may properly be brought before the special meeting or any
adjournment of it.
Only holders of record of shares of Perclose common stock at the close of
business on August 16, 1999, the record date for the special meeting, are
entitled to notice of, and to vote at, the special meeting and any adjournments
or postponements of it.
We cannot complete the merger unless the holders of a majority of the
outstanding shares of Perclose common stock vote to adopt the merger agreement.
Holders of Perclose common stock have no appraisal rights under Delaware law in
connection with the merger.
FOR MORE INFORMATION ABOUT THE MERGER, PLEASE REVIEW THE ACCOMPANYING PROXY
STATEMENT/PROSPECTUS AND THE MERGER AGREEMENT ATTACHED AS ANNEX 1.
Whether or not you plan to attend the special meeting, please complete, sign
and date the enclosed proxy and return it promptly in the enclosed postage-paid
envelope. If you do not vote by proxy or in person at the special meeting, it
will have the same effect as a vote against the merger agreement.
PLEASE DO NOT SEND ANY STOCK CERTIFICATES AT THIS TIME.
By Order of the Board of Directors,
[SIG]
J. Casey McGlynn
SECRETARY
Redwood City, California
August 26, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER..................................................................... iii
SUMMARY.................................................................................................... 1
General.................................................................................................. 1
The Special Meeting...................................................................................... 2
The Merger............................................................................................... 3
The Companies............................................................................................ 6
Selected Historical Financial Information of Abbott...................................................... 9
Selected Historical Financial Information of Perclose.................................................... 10
Pro Forma Financial Information of Abbott................................................................ 11
RISK FACTORS RELATING TO THE MERGER........................................................................ 13
You May Receive Shares of Abbott Common Stock Having a Value of Less than $54.00 Per Share............... 13
Conflicts of Interest of Perclose's Directors and Officers............................................... 13
The Price of Abbott Common Stock May Be Affected by Factors Different From Those Affecting the Price of
Perclose Common Stock.................................................................................. 14
Failure to Qualify for Pooling of Interests Accounting Treatment May Impact Reported Operating Results... 14
THE SPECIAL MEETING........................................................................................ 14
Date; Time and Place..................................................................................... 14
Purpose of Special Meeting............................................................................... 14
Record Date; Stock Entitled to Vote; Quorum.............................................................. 14
Vote Required............................................................................................ 15
Voting by Perclose Directors and Executive Officers...................................................... 15
Voting of Proxies........................................................................................ 15
Revocability of Proxies.................................................................................. 15
Solicitation of Proxies.................................................................................. 16
THE MERGER................................................................................................. 17
Background to the Merger................................................................................. 17
Reasons for the Merger and Board of Directors' Recommendation............................................ 19
Opinion of U.S. Bancorp Piper Jaffray Inc................................................................ 20
Interests of Perclose Directors and Management in the Merger............................................. 26
Expected Accounting Treatment............................................................................ 27
Form of the Merger....................................................................................... 27
Merger Consideration..................................................................................... 28
Conversion of Shares; Procedures for Exchange of Certificates; Fractional Shares......................... 28
Effective Time of the Merger............................................................................. 29
Stock Exchange Listing of Abbott Common Stock............................................................ 29
Delisting and Deregistration of Perclose Common Stock.................................................... 29
Material United States Federal Income Tax Consequences of the Merger..................................... 29
Regulatory Matters....................................................................................... 31
Resale of Abbott Common Stock............................................................................ 31
Appraisal Rights......................................................................................... 32
Effect on Awards Outstanding under Perclose Stock Plans.................................................. 32
THE COMPANIES.............................................................................................. 33
Perclose, Inc............................................................................................ 33
Abbott Laboratories...................................................................................... 33
THE MERGER AGREEMENT, THE STOCK OPTION AGREEMENT AND THE STOCKHOLDERS AGREEMENT............................ 34
The Merger Agreement..................................................................................... 34
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
The Stock Option Agreement............................................................................... 40
The Stockholders Agreement............................................................................... 40
COMPARATIVE STOCK PRICES AND DIVIDENDS..................................................................... 41
COMPARISON OF RIGHTS OF COMMON SHAREHOLDERS OF ABBOTT AND COMMON STOCKHOLDERS OF PERCLOSE.................. 41
Capitalization........................................................................................... 42
Voting Rights............................................................................................ 42
Board of Directors....................................................................................... 42
Number, Election, Vacancy and Removal of Directors....................................................... 42
Amendments to Certificates of Incorporation.............................................................. 43
Amendments to Bylaws..................................................................................... 44
Stockholder Action....................................................................................... 44
Special Stockholder Meetings............................................................................. 44
Advance Notice Provisions for Stockholder Proposals Other Than Election of Directors..................... 45
Advance Notice Provisions for Stockholder Nominations of Directors....................................... 45
Limitation of Personal Liability of Directors............................................................ 47
Indemnification of Directors and Officers................................................................ 47
Dividends................................................................................................ 48
Business Combinations.................................................................................... 48
Merger or Sale of Assets................................................................................. 49
Dissenters or Appraisal Rights........................................................................... 49
Rights Plan.............................................................................................. 50
OWNERSHIP OF PERCLOSE COMMON STOCK......................................................................... 52
LEGAL MATTERS.............................................................................................. 54
EXPERTS.................................................................................................... 54
STOCKHOLDER PROPOSALS...................................................................................... 54
WHERE YOU CAN FIND MORE INFORMATION........................................................................ 54
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS.......................................................... 56
Annexes
Annex 1 Agreement and Plan of Merger
Annex 2 Stock Option Agreement
Annex 3 Stockholders Agreement
Annex 4 Opinion of U.S. Bancorp Piper Jaffray Inc.
</TABLE>
ii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHY ARE ABBOTT AND PERCLOSE PROPOSING TO MERGE?
A: This is a unique opportunity for Perclose to join Abbott, one of the world's
leading health care companies, and for Perclose stockholders to become Abbott
shareholders. We anticipate that the merger will create significant growth and
business expansion opportunities for Perclose which are greater than those that
would be available to Perclose as an independent company.
Q: WHAT DO I NEED TO DO NOW?
A: After carefully reading and considering the information contained in this
proxy statement/prospectus, please complete and sign your proxy and return it in
the enclosed return envelope as soon as possible, so that your shares may be
represented at the special meeting. If you sign and send in your proxy and do
not indicate how you want to vote, we will count your proxy as a vote in favor
of adoption of the merger agreement. If you abstain from voting or do not vote,
it will have the same effect as a vote against adoption of the merger agreement.
The special meeting will take place on October 8, 1999. You may attend the
special meeting and vote your shares in person. Even if you plan to attend the
special meeting, we recommend that you complete, sign and date the enclosed
proxy and return it promptly in the enclosed postage-paid envelope.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY?
A: Yes. You can change your vote at any time before your proxy is voted at the
special meeting. You can do this in one of three ways. First, you can send a
written notice stating that you would like to revoke your proxy. Second, you can
complete and submit a new proxy. If you choose either of these two methods, you
must submit your notice of revocation or your new proxy to the Vice President of
Finance and Administration and Chief Financial Officer of Perclose at the
address set forth below. Third, you can attend the special meeting and vote in
person. If you hold your shares through a broker or bank, you should follow the
instructions provided by that firm to revoke your proxy.
Q: IF MY PERCLOSE SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER
VOTE MY SHARES FOR ME?
A: Your broker will not be able to vote your Perclose shares on your behalf
unless you provide instructions on how to vote. You should follow the directions
provided by your broker regarding how to instruct your broker to vote your
shares. Without instructions, your shares will not be voted, which will have the
same effect as a vote against adoption of the merger agreement.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed, you will receive written instructions for
exchanging your stock certificates. Please do not send in your stock
certificates with your proxy.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you have any questions about the merger or if you want to revoke your
proxy or you need additional copies of this proxy statement/prospectus or the
enclosed proxy, you should contact:
Investor Relations
Perclose, Inc.
400 Saginaw Drive
Redwood City, California 94063
Telephone: (650) 473-3100
iii
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROXY
STATEMENT/PROSPECTUS AND DOES NOT CONTAIN ALL OF THE INFORMATION THAT IS
IMPORTANT TO YOU. TO UNDERSTAND THE MERGER FULLY AND FOR A MORE COMPLETE
DESCRIPTION OF THE LEGAL TERMS OF THE MERGER, YOU SHOULD CAREFULLY READ THIS
ENTIRE PROXY STATEMENT/PROSPECTUS AND THE OTHER DOCUMENTS TO WHICH WE HAVE
REFERRED YOU. SEE "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 54. WE HAVE
INCLUDED PAGE REFERENCES PARENTHETICALLY TO DIRECT YOU TO A MORE COMPLETE
DESCRIPTION OF THE TOPICS PRESENTED IN THIS SUMMARY.
GENERAL
WHAT PERCLOSE STOCKHOLDERS WILL RECEIVE IN THE MERGER (page 28)
In the merger, holders of Perclose common stock will receive between 1.10
and 1.35 shares of Abbott common stock for each share of Perclose common stock.
The exact number will be determined by dividing (1) $54.00 by (2) the average
closing price per share of Abbott common stock on the New York Stock Exchange
for the twenty full trading days preceding the date of the last full trading day
before the special meeting. If, however, the average closing price per share of
Abbott common stock is greater than $49.00, then the exchange ratio remains
fixed at 1.10 and the value of the shares of Abbott common stock you receive may
exceed $54.00 per share of Perclose common stock. If the average closing price
per share of Abbott common stock is less than $40.00, then the exchange ratio
remains fixed at 1.35 and the value of the shares of Abbott common stock you
receive may be less than $54.00 per share of Perclose common stock. Stockholders
will receive cash for any fractional shares which they would otherwise receive
in the merger.
The exchange ratio will be determined before the date of the special meeting
to approve the merger.
BOARD OF DIRECTORS RECOMMENDATION TO STOCKHOLDERS (page 20)
The Perclose board of directors believes that the terms of the merger
agreement and the merger are fair to and in the best interests of Perclose and
its stockholders and unanimously recommends that the stockholders vote "FOR" the
adoption of the merger agreement.
To review the background and reasons for the merger in greater detail, as
well as certain risks related to the merger, see pages 13 and 17.
OPINION OF FINANCIAL ADVISOR (page 20)
Perclose's financial advisor, U.S. Bancorp Piper Jaffray Inc., has given a
written opinion, dated July 8, 1999, to the Perclose board as to the fairness,
from a financial point of view, of the consideration to be received by the
holders of Perclose common stock, other than Abbott and its affiliates, in the
merger. The full text of this opinion is attached to this document as Annex 4.
You should read the opinion carefully in its entirety to understand the
procedures followed, assumptions made, matters considered and limitations on the
review undertaken by U.S. Bancorp Piper Jaffray in providing its opinion. THE
OPINION OF U.S. BANCORP PIPER JAFFRAY IS DIRECTED TO THE PERCLOSE BOARD AND DOES
NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS TO ANY MATTER RELATING TO
THE MERGER.
INTERESTS OF PERCLOSE DIRECTORS AND MANAGEMENT IN THE MERGER (page 26)
In considering the recommendation of the board of directors of Perclose with
respect to the merger, Perclose stockholders should be aware of, and should
carefully consider that, the Perclose board of directors and certain members of
Perclose's management may have interests in the merger that are in addition to
their interests as stockholders of Perclose generally and which may create
potential conflicts of interest. The following summarizes potential conflicts of
interest with respect to the merger:
- Kenneth Ludlum, Perclose's Vice President of Finance and Administration
and Chief Financial Officer, has an employment agreement with Perclose
that provides that all of Mr. Ludlum's unvested options will become fully
vested
<PAGE>
upon the closing of the merger. In addition, if Mr. Ludlum's employment is
terminated within 12 months of the closing of the merger, he will be
entitled to receive 12 months severance pay if his termination is
involuntary and six months severance pay if his termination is voluntary;
- As of August 16, 1999, directors and executive officers of Perclose owned
(1) 2,161,013 shares of Perclose common stock and (2) unexercised options
to purchase 787,830 shares of Perclose common stock. For a description of
how stock options will be treated in the merger, see "The Merger--Effect
on Awards Outstanding under Perclose Stock Plans;" and
- Abbott has agreed to fulfill and honor in all respects the obligations of
Perclose pursuant to indemnification agreements currently in effect
between Perclose and its directors and executive officers.
The board of directors of Perclose was aware of these interests and
considered them, among other matters, in approving the merger.
APPRAISAL RIGHTS (page 32)
Perclose stockholders have no appraisal rights in connection with the
merger.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER (page 29)
The merger is intended to qualify as a tax-free reorganization within the
meaning of the Internal Revenue Code of 1986. It is a condition to the
completion of the merger that Perclose receive an opinion from Wilson Sonsini
Goodrich & Rosati and that Abbott receive an opinion from Skadden, Arps, Slate,
Meagher & Flom (Illinois), in each case stating that the merger will qualify for
United States federal income tax purposes as a tax-free reorganization within
the meaning of Section 368(a) of the Internal Revenue Code. Assuming the merger
qualifies as a tax-free reorganization within the meaning of the Internal
Revenue Code, holders of Perclose common stock will not recognize gain or loss
for United States federal income tax purposes as a result of the exchange of
their Perclose common stock for Abbott common stock in the merger, except for
cash received instead of fractional shares of Abbott common stock. The tax basis
of the shares of Abbott common stock you receive generally will be equal to the
tax basis of the Perclose common stock you surrender, and the holding period of
your shares of Abbott common stock generally will include the holding period of
the Perclose common stock.
TAX MATTERS ARE COMPLICATED AND THE TAX CONSEQUENCES OF THE MERGER TO YOU
WILL DEPEND ON THE FACTS OF YOUR OWN SITUATION. YOU SHOULD CONSULT YOUR OWN TAX
ADVISORS FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES OF THE MERGER TO YOU.
THE SPECIAL MEETING (page 14)
The special meeting of Perclose stockholders will be held at our executive
offices, 400 Saginaw Drive, Redwood City, California 94063, at 8:00 a.m., local
time, on October 8, 1999. At the special meeting, stockholders will be asked to
consider and vote upon: (1) the adoption of the merger agreement; and (2) such
other business as may properly come before the special meeting or the
adjournment or postponement thereof.
RECORD DATE; VOTING POWER
Perclose stockholders are entitled to vote at the special meeting if they
owned shares of Perclose common stock as of the close of business on August 16,
1999, the record date.
On the record date, there were 11,197,814 shares of Perclose common stock
entitled to vote at the special meeting. Stockholders will have one vote at the
special meeting for each share of Perclose common stock that they owned on the
record date.
2
<PAGE>
VOTE REQUIRED
The affirmative vote of the holders of a majority of the shares of Perclose
common stock outstanding on the record date is required to adopt the merger
agreement. If a Perclose stockholder abstains from voting or does not vote,
either in person or by proxy, it will have the same effect as a vote against
adoption of the merger agreement.
VOTING BY PERCLOSE DIRECTORS AND EXECUTIVE OFFICERS
On the record date, directors and executive officers of Perclose and their
affiliates owned and were entitled to vote 2,161,013 shares of Perclose common
stock, or approximately 19.3% of the shares of Perclose common stock outstanding
on the record date. Pursuant to the stockholders agreement, the directors and
executive officers of Perclose have agreed to vote the Perclose common stock
owned by them "FOR" adoption of the merger agreement.
THE MERGER (page 17)
THE MERGER AGREEMENT IS ATTACHED AS ANNEX 1 TO THIS PROXY
STATEMENT/PROSPECTUS. WE ENCOURAGE YOU TO READ THE MERGER AGREEMENT. IT IS THE
PRINCIPAL DOCUMENT GOVERNING THE MERGER. THE FOLLOWING SUMMARIZES SOME OF THE
MATERIAL TERMS OF THE MERGER AGREEMENT.
CONDITIONS TO THE MERGER (page 34)
Abbott and Perclose will complete the merger only if they satisfy or, in
some cases, waive several conditions, including the following:
- the adoption of the merger agreement by the holders of a majority of all
outstanding shares of Perclose common stock;
- approval of the shares of Abbott common stock issuable to Perclose
stockholders for listing on the New York Stock Exchange;
- the representations and warranties of each of Abbott and Perclose must be
true and correct in all material respects and each must satisfy its
respective covenants contained in the merger agreement in all material
respects;
- the expiration or termination of the waiting period required under the
Hart-Scott-Rodino Act;
- the expiration of any applicable period for action under the German
antitrust laws;
- the absence of any legal restraints or prohibitions which prevent the
completion of the merger;
- the absence of any governmental litigation;
- Abbott must receive a signed letter from each director and executive
officer of Perclose agreeing to certain transfer restrictions on the
transfer or sale of the shares of Abbott common stock he or she will
receive as a result of the merger;
- the absence of any material adverse change in the other party from July 8,
1999, until the date on which the merger is to be completed or, if one has
occurred, it has been cured;
- Abbott and Perclose each must receive letters, respectively, from Arthur
Andersen LLP and Ernst & Young LLP regarding those firms' concurrence with
Abbott management's and Perclose management's conclusions, respectively,
that pooling of interests accounting is appropriate for the merger under
Accounting Principles Board Opinion No. 16 if completed in accordance with
the merger agreement; and
3
<PAGE>
- Skadden, Arps, Slate, Meagher & Flom (Illinois) must deliver an opinion to
Abbott, and Wilson Sonsini Goodrich & Rosati must deliver an opinion to
Perclose, in each case stating that the merger will qualify as a
reorganization within the meaning of Section 368(a) of the Internal
Revenue Code.
TERMINATION OF THE MERGER AGREEMENT (page 37)
Abbott and Perclose may jointly agree to terminate the merger agreement at
any time without completing the merger.
Either Abbott or Perclose may terminate the merger agreement if:
- Abbott and Perclose do not complete the merger by December 31, 1999;
- the Perclose stockholders do not approve the merger;
- a governmental authority or other legal action permanently prohibits the
completion of the merger;
- the Perclose board of directors receives an unsolicited proposal by a
third party to acquire Perclose on terms determined by the Perclose board
of directors to be more favorable to its stockholders than the terms of
the merger with Abbott, and the board in good faith determines, after
consultation with its legal advisors, that failure to accept that superior
proposal would create a substantial risk of liability for breach of its
fiduciary duties to its stockholders, and Perclose (1) notifies Abbott of
such proposal and (2) pays the termination fee described below; or
- the other party breached in any material respect any of its
representations, warranties or obligations under the merger agreement and
has not cured the breach within 45 days of receipt of written notice.
Abbott can terminate the merger agreement if:
- the Perclose board of directors withdraws or adversely modifies its
approval or recommendation of the merger agreement or fails to reconfirm
its recommendation upon request by Abbott; or
- Perclose breaches the stock option agreement in any material respect.
TERMINATION FEES (page 37)
Perclose must pay Abbott a termination fee of $20 million in connection with
the merger if:
- (1) Perclose receives a takeover proposal or a takeover proposal otherwise
is publicly announced and the Perclose stockholders fail to approve the
merger agreement or (2) the Perclose board of directors withdraws or
adversely modifies its recommendation;
- Perclose terminates the merger agreement because a superior proposal has
been received and entered into, and (1) Perclose has provided notice of
that proposal to Abbott and (2) the Perclose board of directors has
determined that failure to accept that superior proposal would create a
substantial risk of liability for breach of its fiduciary duty to its
stockholders;
- Perclose intentionally or in bad faith materially breaches any of its
covenants or agreements;
- Perclose refuses to permit Abbott to exercise the option provided for in
the stock option agreement; or
- Perclose is acquired by another entity or enters into an acquisition
agreement with another entity within twelve months of a termination of the
merger agreement for any other reason, except a willful and material
breach by Abbott of the merger agreement.
4
<PAGE>
STOCK OPTION AGREEMENT (page 40)
Perclose entered into a stock option agreement with Abbott which grants
Abbott the option to buy up to 2,223,818 shares of Perclose common stock,
representing approximately 19.9% of the shares of Perclose common stock
outstanding on July 8, 1999, or approximately 16.6% after issuance of the shares
of Perclose common stock subject to the option. The exercise price of the option
is $54.00 per share. The option may discourage third parties who are interested
in acquiring a significant stake in Perclose and is intended by Abbott to
increase the likelihood that the merger will be completed.
The option is not currently exercisable, and Abbott may only exercise the
option if the merger agreement is terminated in circumstances similar to those
upon which the termination fee is payable. If the merger agreement is terminated
under circumstances upon which the termination fee is not payable, the option
will terminate and may not be exercised by Abbott.
The stock option agreement is attached as Annex 2 to this proxy
statement/prospectus. We encourage you to read the stock option agreement in its
entirety.
STOCKHOLDERS AGREEMENT (page 40)
As a condition to entering into the merger agreement, Abbott required all of
the executive officers and directors of Perclose to enter into a stockholders
agreement pursuant to which they agreed to vote all of their Perclose shares
"FOR" adoption of the merger agreement. The Perclose stockholders who entered
into the stockholders agreement collectively held approximately 19.3% of the
outstanding Perclose common stock as of the record date.
The stockholders agreement is attached as Annex 3 to this proxy
statement/prospectus. We encourage you to read the stockholders agreement in its
entirety.
REGULATORY MATTERS (page 31)
United States antitrust laws prohibit Abbott and Perclose from completing
the merger until after they have furnished certain information and materials to
the Antitrust Division of the Department of Justice and the Federal Trade
Commission and a required waiting period has ended. Abbott and Perclose each
filed the required notification and report forms with the Antitrust Division and
the Federal Trade Commission on July 26, 1999. The Federal Trade Commission
granted Abbott and Perclose early termination of the waiting period on August
16, 1999.
The German Act Against Restraints of Competition prohibits Abbott and
Perclose from completing the merger until the Federal Cartel Office has been
notified of the transaction and the Cartel Office has cleared the transaction.
Abbott and Perclose jointly filed the notification with the Cartel Office on
August 6, 1999.
EXPECTED ACCOUNTING TREATMENT (page 27)
Abbott and Perclose expect the merger to qualify as a pooling of interests,
which means that Abbott and Perclose will be treated as if they had always been
combined for accounting and financial reporting purposes.
EXPENSES (page 38)
Abbott and Perclose will share equally
the costs of printing and mailing this proxy statement/prospectus and the
registration statement of which this proxy statement/prospectus is a part.
Except for those printing and mailing costs, Abbott and Perclose will each pay
its own expenses in connection with the merger.
5
<PAGE>
THE COMPANIES (page 33)
PERCLOSE, INC.
400 Saginaw Drive
Redwood City, California 94063
(650) 473-3100
Perclose, founded in 1992, designs, manufactures and markets less invasive
medical devices that automate the surgical closure or connection of blood
vessels. The Company's first product family, the Prostar-Registered Trademark-
and Techstar-Registered Trademark- products, which are marketed in major
countries worldwide, surgically close the arterial access site in the femoral
artery after catheterizaton procedures such as angioplasty, stenting,
atherectomy and diagnostic angiography. A second group of products, The
Heartflo-TM- System, is under development and is designed to automate the
surgical connection of blood vessels in conventional and minimally invasive
coronary artery bypass surgery.
ABBOTT LABORATORIES
100 Abbott Park Road
Abbott Park, Illinois 60064-6400
(847) 937-6100
Abbott's principal business is the discovery, development, manufacture and
sale of a broad and diversified line of health care products and services.
On June 21, 1999, Abbott announced that it had signed a definitive agreement
to acquire ALZA Corporation.
AL Acquisition Corp. is a newly incorporated Delaware corporation organized
in connection with the merger and has not carried on any activities other than
in connection with the merger. All of the outstanding capital stock of AL
Acquisition Corp. is owned directly by Abbott.
MARKET PRICE AND DIVIDEND INFORMATION (page 41)
Shares of Abbott common stock are listed on the New York Stock Exchange.
Shares of Perclose common stock are listed on The Nasdaq National Market. The
following table presents:
- the last reported sale price of one share of Abbott common stock; and
- the last reported sale price of one share of Perclose common stock;
and, in each case, as if the merger had been completed on July 7, 1999, the last
full trading day before the public announcement of the merger, and on August 24,
1999, the last day for which that information could be calculated prior to the
date of this proxy statement/prospectus.
<TABLE>
<CAPTION>
ABBOTT PERCLOSE
DATE COMMON STOCK COMMON STOCK
- ------------------------- ------------- -------------
<S> <C> <C>
July 7, 1999............. $43 9/16 $48
August 24, 1999.......... $44 3/16 $51 5/16
</TABLE>
If the merger had closed on July 7, 1999, you would have received shares of
Abbott common stock having a value of $54.00 for each share of Perclose common
stock you own.
6
<PAGE>
COMPARATIVE PER SHARE INFORMATION
We have summarized below the following per share information:
- for Abbott on an historical consolidated basis;
- for Abbott and Perclose on a pro forma basis (excluding Abbott's proposed
merger with ALZA Corporation);
- for Abbott, Perclose and ALZA on a pro forma basis; and
- for Perclose on an historical and pro forma equivalent basis.
If consummated, the ALZA merger is expected to be accounted for as a pooling of
interests. Abbott's fiscal year ends on December 31, and Perclose's fiscal year
ends on the last Friday in March. For ease of presentation, Perclose's fiscal
year end information is shown as ending on March 31 of each year. The historical
and unaudited pro forma financial information for the periods presented include
Perclose's financial information conformed to Abbott's fiscal years.
The unaudited "pro forma," the unaudited "pro forma equivalent--Perclose"
and the unaudited "pro forma equivalent--Perclose and ALZA" information assumes
that the merger of Perclose and Abbott and the merger of Abbott and ALZA were
each accounted for as pooling of interests and had each occurred at the
beginning of the earliest period presented.
The unaudited "pro forma equivalent--Perclose" and the unaudited "pro
forma--Perclose and ALZA" information was calculated by multiplying the
corresponding pro forma combined information by the exchange ratio of 1.2857.
The actual exchange ratio will range between 1.10 and 1.35. For more information
regarding the determination of the actual exchange ratio, see "The
Merger--Merger Consideration" on page 28. This information shows how each share
of Perclose common stock would have participated in net earnings, cash dividends
and book value of Abbott if the merger had been completed at the beginning of
the earliest period presented. These amounts do not, however, necessarily
reflect future per share levels of net earnings, cash dividends or book value of
Abbott. The following unaudited comparative and unaudited pro forma per share
data is derived from the consolidated financial statements of Abbott, the
consolidated historical financial statements of Perclose and the unaudited pro
forma financial statements of Abbott, Perclose and ALZA.
STOCKHOLDERS SHOULD READ THE INFORMATION IN THIS SECTION ALONG WITH ABBOTT'S
HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS AND PERCLOSE'S HISTORICAL
CONSOLIDATED FINANCIAL STATEMENTS AND ACCOMPANYING NOTES INCLUDED IN THE
DOCUMENTS DESCRIBED UNDER "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 54.
7
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED -------------------------------
JUNE 30, 1999 1998 1997 1996
-------------- ----- ---------- ---------
<S> <C> <C> <C> <C>
ABBOTT:
Income per share from continuing operations:
Basic:
Historical................................................. $0.86 $1.53 $ 1.36 $ 1.20
Pro forma for Perclose..................................... 0.86 1.52 1.34 1.19
Pro forma for Perclose and ALZA............................ 0.82(1) 1.47 1.08(2) 1.16
Diluted:
Historical................................................. 0.85 1.51 1.34 1.19
Pro forma for Perclose..................................... 0.84 1.50 1.32 1.18
Pro forma for Perclose and ALZA............................ 0.80(1) 1.44 1.06(2) 1.14
Book value per share:
Historical................................................. 4.23 3.77 3.27 3.11
Pro forma for Perclose..................................... 4.23 3.76 3.27 3.11
Pro forma for Perclose and ALZA............................ 4.28 3.81 3.26 3.29
Cash dividends declared per share:
Historical................................................. 0.34 0.60 0.54 0.48
Pro forma for Perclose..................................... 0.34 0.60 0.54 0.48
Pro forma for Perclose and ALZA............................ 0.34 0.60 0.54 0.48
PERCLOSE:
Income (loss) per share from continuing operations:
Basic:
Historical................................................. $0.52 $0.10 $ (1.59) $ (0.86)
Pro forma equivalent....................................... 1.10 1.95 1.72 1.53
Pro forma equivalent and ALZA.............................. 1.05(1) 1.90 1.39(2) 1.49
Diluted:
Historical................................................. 0.47 0.10 (1.59) (0.86)
Pro forma equivalent....................................... 1.09 1.92 1.70 1.51
Pro forma equivalent and ALZA.............................. 1.03(1) 1.86 1.36(2) 1.46
Book value per share:
Historical................................................. 4.42 3.69 3.53 3.38
Pro forma equivalent....................................... 5.43 4.84 4.20 4.00
Pro forma equivalent and ALZA.............................. 5.50 4.90 4.19 4.23
Cash dividends declared per share:
Historical................................................. -- -- -- --
Pro forma equivalent....................................... 0.44 0.77 0.69 0.62
Pro forma equivalent and ALZA.............................. 0.44 0.77 0.69 0.62
</TABLE>
- ------------------------
(1) Includes a charge of $32.6 million related to ALZA's acquisition of SEQUUS
Pharmaceuticals, Inc., less a tax benefit of $7.8 million. Before such
charge, basic and diluted pro forma income per Abbott share from continuing
operations would have been $0.83 and $0.81.
(2) Reflects a total of $368.7 million (or $0.22 per pro forma Abbott share,
diluted) of charges, including a $247.0 million charge and $8.0 million of
interest expense related to ALZA's distribution of shares of Crescendo
Pharmaceuticals Corporation Class A common stock, $108.5 million for
acquired in-process research and development, an asset write-down of $11.5
million and costs of $1.8 million related to a work force reduction, less a
tax benefit of $8.1 million. Before such charges, pro forma diluted income
per Abbott share from continuing operations would have been $1.28.
8
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION OF ABBOTT
Abbott is providing the following information to aid you in your analysis of
the financial aspects of the merger. Abbott derived this information from
audited financial statements for 1994 through 1998 and unaudited financial
statements for the six months ended June 30, 1998 and 1999. In the opinion of
Abbott, the unaudited financial statements for the six months ended June 30,
1998 and 1999 reflect all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results of operations and
financial condition for the six months ended June 30, 1998 and 1999. Results for
interim periods should not be considered indicative of results for any other
periods or for the year.
THIS INFORMATION IS ONLY A SUMMARY, AND YOU SHOULD READ IT IN CONJUNCTION
WITH ABBOTT'S HISTORICAL FINANCIAL STATEMENTS AND RELATED NOTES AND THE SECTION
TITLED "FINANCIAL REVIEW" CONTAINED IN ABBOTT'S ANNUAL REPORTS, QUARTERLY
REPORTS AND OTHER INFORMATION ON FILE WITH THE SECURITIES AND EXCHANGE
COMMISSION AND INCORPORATED BY REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS. SEE
"WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 54.
<TABLE>
<CAPTION>
ABBOTT
-------------------------------------------------------------------------------
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
-------------------- ---------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
--------- --------- ---------- ---------- ---------- ---------- ---------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL CONSOLIDATED
STATEMENT OF OPERATIONS DATA:
Net sales....................... $ 6,542.2 $ 6,111.7 $ 12,477.8 $ 11,883.5 $ 11,013.5 $ 10,012.2 $ 9,156.0
Net earnings.................... 1,309.2 1,175.2 2,333.2 2,094.5 1,882.0 1,688.7 1,516.7
Earnings per share--diluted..... 0.85 0.76 1.51 1.34 1.19 1.05 0.92
Weighted average shares and
assumed conversions--
diluted....................... 1,541.8 1,547.6 1,545.7 1,561.5 1,580.6 1,607.3 1,639.8
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, --------------------------------------------------------
1999 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
HISTORICAL CONSOLIDATED BALANCE SHEET DATA:
Working capital............................ $ 1,376.8 $ 591.0 $ 3.7 $ 137.2 $ 436.4 $ 400.5
Total assets............................... 13,145.1 13,216.2 12,061.1 11,125.6 9,412.6 8,523.7
Total long-term debt....................... 1,337.6 1,339.7 938.0 932.9 435.2 287.1
Total shareholders' investment............. 6,439.3 5,713.7 4,998.7 4,820.2 4,396.8 4,049.4
</TABLE>
9
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION OF PERCLOSE
Perclose is providing the following information to aid you in your analysis
of the financial aspects of the merger. Perclose derived this information from
audited financial statements for each of the five fiscal years in the period
ended March 31, 1999 and from unaudited financial statements for the three
months ended June 30, 1998 and 1999. In the opinion of Perclose, the unaudited
financial statements for the three months ended June 30, 1998 and 1999 reflect
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the results of operations and financial condition for the
three months ended June 30, 1998 and 1999. Results for interim periods should
not be considered indicative of results for any other periods or for the year.
THIS INFORMATION IS ONLY A SUMMARY, AND YOU SHOULD READ IT IN CONJUNCTION
WITH PERCLOSE'S HISTORICAL FINANCIAL STATEMENTS (AND RELATED NOTES) AND
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" CONTAINED IN PERCLOSE'S ANNUAL REPORTS, QUARTERLY REPORTS AND OTHER
INFORMATION ON FILE WITH THE SECURITIES AND EXCHANGE COMMISSION AND INCORPORATED
BY REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS. SEE "WHERE YOU CAN FIND MORE
INFORMATION" ON PAGE 54.
<TABLE>
<CAPTION>
PERCLOSE
---------------------------------------------------------------------------------
THREE MONTHS ENDED
JUNE 30, YEAR ENDED MARCH 31,
------------------- -----------------------------------------------------------
1999 1998 1999 1998 1997 1996 1995
-------- -------- -------- --------- --------- --------- ------------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Net sales.................................... $ 16.0 $ 8.4 $ 43.3 $ 10.6 $ 4.5 $ 2.5 $ 0.2
Net earnings (loss).......................... 2.9 0.3 5.5 (13.8) (9.7) (8.1) (7.0)
Earnings (loss) per share--diluted........... 0.24 0.02 0.47 (1.38) (1.02) (1.76) (1.56)(1)
Weighted average shares and assumed
conversions--diluted....................... 12.3 11.4 11.7 10.0 9.5 4.6 4.5(1)
</TABLE>
<TABLE>
<CAPTION>
MARCH 31,
JUNE 30, -----------------------------------------------------
1999 1999 1998 1997 1996 1995
----------- --------- --------- --------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
HISTORICAL CONSOLIDATED BALANCE SHEET DATA:
Working capital.............................................. $ 40.6 $ 36.5 $ 33.8 $ 27.3 $ 37.7 $ 8.0
Total assets................................................. 54.4 49.6 40.5 32.5 40.9 10.9
Total long-term debt......................................... -- -- -- 0.2 0.5 0.6
Total shareholders' investment............................... 49.4 44.9 36.9 29.4 38.5 9.0
</TABLE>
- ------------------------
(1) Pro forma loss per share is presented for 1995, reflecting the assumed
conversion of convertible preferred stock that automatically converted into
common stock in Perclose's initial public offering.
10
<PAGE>
PRO FORMA FINANCIAL INFORMATION OF ABBOTT
The following describes the pro forma effect of the Perclose merger and the
combined effect of the Perclose merger and ALZA merger on (1) Abbott's unaudited
income statements for the six months ended June 30, 1998 and 1999 and the
audited income statements for the years ended December 31, 1996, 1997 and 1998
and (2) its unaudited balance sheet as of June 30, 1999 and the audited balance
sheets as of December 31, 1996, 1997 and 1998, based on the historical
consolidated financial statements of Abbott and the unaudited pro forma
financial information for the periods presented, including Perclose's financial
information conformed to Abbott's fiscal year end.
The pro forma financial information and the accompanying notes should be
read in conjunction with the historical financial information and related notes
of Abbott and Perclose, incorporated by reference in this proxy
statement/prospectus.
The pro forma consolidated financial information is provided for
informational purposes only and does not purport to represent what Abbott's
financial position and results of operations would actually have been had the
transactions and other pro forma adjustments in fact occurred at the dates
indicated.
The unaudited pro forma consolidated statement of operations data and
consolidated balance sheet information of Abbott illustrate the estimated
effects of the Perclose merger and the ALZA merger as if each transaction had
occurred at the beginning of the periods presented and end of the periods
presented, respectively.
The managements of Abbott and Perclose have concluded that this merger
qualifies as a pooling of interests business combination for accounting
purposes. Management of Abbott has determined that the ALZA merger will also
qualify as a pooling of interests business combination for accounting purposes.
Under this method of accounting, the recorded historical cost basis of the
assets and liabilities of Abbott, Perclose and ALZA will be carried forward to
the operations of the combined company at their historical recorded amounts.
Results of operations of the combined company will include income of each
company for the entire fiscal period in which the combination occurs, and the
historical results of operations of the separate companies for fiscal years
before the merger will be combined and reported as the results of operations of
the combined company. No adjustments have been made to the unaudited pro forma
financial statement information of Abbott, Perclose and ALZA to conform the
accounting policies of the combined company as the nature and amounts of those
adjustments are not expected to be significant.
Some of the conditions to be met for pooling of interests accounting cannot
be fully assessed until the passage of specified periods of time after the
effective time of the merger, as certain of the conditions for pooling of
interests accounting address transactions occurring within these specified
periods of time. Certain events, including certain transactions in Abbott common
stock, Perclose common stock or ALZA common stock by affiliates, could prevent
either merger from ultimately qualifying as a pooling of interests for
accounting purposes.
11
<PAGE>
<TABLE>
<CAPTION>
ABBOTT LABORATORIES
-----------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
--------------------------- -----------------------------------------
1999 1998 1998 1997 1996
------------ ---------- ----------- ------------- ---------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
DATA:(1)
Net sales......................................... $ 6,572.5 $ 6,125.9 $ 12,512.7 $ 11,889.3 $11,018.0
Net earnings...................................... 1,314.9 1,173.9 2,334.3 2,079.1 1,873.8
Earnings per share--diluted....................... 0.84 0.75 1.50 1.32 1.18
Weighted average shares and assumed
conversions--diluted............................ 1,557.3 1,562.0 1,560.2 1,574.4 1,593.4
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, -------------------------------------
1999 1998 1997 1996
----------- ----------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
PRO FORMA CONSOLIDATED BALANCE SHEET DATA:(1)
Working capital............................................. $ 1,417.4 $ 623.8 $ 38.3 $ 167.8
Total assets................................................ 13,199.5 13,259.9 12,101.9 11,161.1
Total long-term debt........................................ 1,337.6 1,339.7 938.0 933.1
Total shareholders' investment.............................. 6,488.7 5,753.6 5,036.4 4,852.4
</TABLE>
<TABLE>
<CAPTION>
ABBOTT LABORATORIES
-----------------------------------------------------------------------
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
--------------------------- -----------------------------------------
1999 1998 1998 1997 1996
------------ ---------- ----------- ------------- ---------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
DATA:(2)
Net sales......................................... $ 6,953.2 $ 6,427.7 $ 13,159.6 $ 12,393.7 $11,464.1
Net earnings...................................... 1,352.8(3) 1,229.8 2,442.6 1,803.9(4) 1,955.9
Earnings per share--diluted....................... 0.80(3) 0.72 1.44 1.06(4) 1.14
Weighted average shares and assumed
conversions--diluted............................ 1,710.8 1,715.8 1,712.2 1,724.1 1,740.8
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, -------------------------------------
1999 1998 1997 1996
----------- ----------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
PRO FORMA CONSOLIDATED BALANCE SHEET DATA:(2)
Working capital............................................. $ 1,745.4 $ 920.9 $ 315.2 $ 701.2
Total assets................................................ 14,929.4 14,926.5 13,552.6 12,859.7
Total long-term debt........................................ 2,311.0 2,305.8 1,870.2 1,826.3
Total shareholders' investment.............................. 7,085.8 6,285.5 5,402.7 5,523.3
</TABLE>
- --------------------------
(1) Pro forma for Abbott and Perclose.
(2) Pro forma for Abbott, Perclose and ALZA.
(3) Includes a charge of $32.6 related to ALZA's acquisition of SEQUUS
Pharmaceuticals, Inc., less a tax benefit of $7.8. Before such charge, pro
forma net earnings and pro forma diluted income per Abbott share from
continuing operations would have been $1,377.6 and $0.81.
(4) Reflects a total of $368.7 (or $0.22 per pro forma Abbott share, diluted) of
charges, including a $247.0 charge and $8.0 of interest expense related to
ALZA's distribution of shares of Crescendo Pharmaceuticals Corporation Class
A common stock, $108.5 for acquired in-process research and development, an
asset write-down of $11.5 and costs of $1.8 related to a work force
reduction, less a tax benefit of $8.1. Before such charges, pro forma net
earnings and pro forma diluted income per Abbott share from continuing
operations would have been $2,172.6 and $1.28.
12
<PAGE>
RISK FACTORS RELATING TO THE MERGER
IN ADDITION TO THE OTHER INFORMATION INCLUDED AND INCORPORATED BY REFERENCE
IN THIS PROXY STATEMENT/PROSPECTUS, YOU SHOULD CONSIDER CAREFULLY THE MATTERS
DESCRIBED BELOW IN DETERMINING WHETHER TO ADOPT THE MERGER AGREEMENT.
YOU MAY RECEIVE SHARES OF ABBOTT COMMON STOCK HAVING A VALUE OF LESS THAN $54.00
PER SHARE.
Under the merger agreement, each share of Perclose common stock will be
converted into the right to receive that number of shares of Abbott common stock
equal to $54.00 divided by the average closing price of one share of Abbott
common stock for the twenty full trading days preceding the date of the last
full trading day prior to the special meeting. This exchange ratio will not,
however, exceed 1.35 shares of Abbott common stock. If the average closing price
of Abbott common stock is below $40.00 per share, stockholders of Perclose may
receive consideration having a value of less than $54.00 per share.
The prices of Abbott common stock and Perclose common stock at the closing
of the merger may vary from their respective prices on the date of this proxy
statement/prospectus and on the date of the special meeting as well as from the
average closing price of Abbott common stock. These prices may vary because of
changes in the business, operations or prospects of Abbott or Perclose, market
assessments of the likelihood that the merger will be completed, the timing of
the completion of the merger, the prospects of post-merger operations,
regulatory considerations, general market and economic conditions and other
factors. We urge Perclose stockholders to obtain current market quotations for
Abbott common stock and Perclose common stock.
CONFLICTS OF INTEREST OF PERCLOSE'S DIRECTORS AND OFFICERS.
In considering the Perclose board of directors' recommendation to adopt and
approve the merger, you should be aware that some officers and directors of
Perclose may have conflicts of interest. Perclose's board believes that it has
appropriately considered these potential conflicts of interest, together with
other relevant factors, when recommending the merger to you. Such conflicts of
interest include:
- Kenneth Ludlum, Perclose's Vice President of Finance and Administration
and Chief Financial Officer, has an employment agreement with Perclose
that provides that all of Mr. Ludlum's unvested options will become fully
vested upon the closing of the merger. In addition, if Mr. Ludlum's
employment is terminated within 12 months of the closing of the merger, he
will be entitled to receive 12 months severance pay if his termination is
involuntary and six months severance pay if his termination is voluntary;
- As of August 16, 1999, directors and executive officers of Perclose owned
(1) 2,161,013 shares of Perclose common stock and (2) unexercised options
to purchase 787,830 shares of Perclose common stock. For a description of
how stock options will be treated in the merger, see "The Merger--Effect
on Awards Outstanding under Perclose Stock Plans;" and
- Abbott has agreed to fulfill and honor in all respects the obligations of
Perclose pursuant to indemnification agreements currently in effect
between Perclose and its directors and executive officers.
Finally, under the terms of the merger agreement, Abbott has agreed to cause
the surviving corporation to indemnify the directors and officers of Perclose
after the effective time. Abbott will also maintain for six years after the
effective date of the merger directors' and officers' liability insurance for
those persons who are currently covered by Perclose's directors' and officers'
liability insurance policy.
13
<PAGE>
THE PRICE OF ABBOTT COMMON STOCK MAY BE AFFECTED BY FACTORS DIFFERENT FROM THOSE
AFFECTING THE PRICE OF PERCLOSE COMMON STOCK.
Upon completion of the merger, holders of Perclose common stock will become
holders of Abbott common stock. Abbott's business differs from that of Perclose
since Abbott operates significant businesses outside of the medical devices
industry and has a much larger international presence. Abbott's results of
operations, as well as the price of Abbott common stock, may be affected by
factors different from those affecting Perclose's results of operations and the
price of Perclose common stock. See "Comparative Stock Prices and Dividends."
For a discussion of Abbott's and Perclose's businesses and certain factors to
consider in connection with their businesses, see Abbott's Annual Report on Form
10-K for the fiscal year ended December 31, 1998, and Perclose's Annual Report
on Form 10-K for the fiscal year ended March 31, 1999, each of which is
incorporated by reference in this proxy statement/prospectus.
FAILURE TO QUALIFY FOR POOLING OF INTERESTS ACCOUNTING TREATMENT MAY IMPACT
REPORTED OPERATING RESULTS.
If the Perclose merger or the ALZA merger fails to qualify for pooling of
interests accounting treatment, the purchase method of accounting will apply to
that merger. Under the purchase method, the estimated fair value of the Abbott
common stock issued in the merger would be recorded as the cost of acquiring the
business of Perclose or ALZA, as the case may be. Abbott would allocate that
cost to the individual assets it acquired and the liabilities it assumed
according to their respective fair values, with the excess of the estimated fair
value of the Abbott common stock over the fair value of net assets acquired
recorded as goodwill, to be amortized over a period ranging from 10 to 20 years.
Purchase accounting treatment could have a material adverse effect on the
reported operating results of Abbott as compared to pooling of interests
accounting treatment because of required charges to Abbott's earnings for
in-process research and development and amortization of goodwill required by the
purchase accounting treatment.
THE SPECIAL MEETING
WE ARE FURNISHING THIS PROXY STATEMENT/PROSPECTUS TO STOCKHOLDERS OF
PERCLOSE AS PART OF THE SOLICITATION OF PROXIES BY THE PERCLOSE BOARD OF
DIRECTORS FOR USE AT THE SPECIAL MEETING.
DATE; TIME AND PLACE
We will hold the special meeting at our executive offices, 400 Saginaw
Drive, Redwood City, California 94063, at 8:00 a.m., local time, on Friday,
October 8, 1999.
PURPOSE OF SPECIAL MEETING
At the special meeting, we are asking holders of Perclose common stock to
adopt the merger agreement. The Perclose board of directors has determined that
the merger is fair to, and in the best interests of, Perclose stockholders, has
unanimously approved the merger agreement and the merger and unanimously
recommends that Perclose stockholders vote "FOR" adoption of the merger
agreement.
RECORD DATE; STOCK ENTITLED TO VOTE; QUORUM
Perclose stockholders are entitled to vote at the special meeting if they
owned shares as of the close of business on August 16, 1999, the record date. On
the record date, there were 11,197,814 shares of Perclose common stock entitled
to vote at the special meeting. Stockholders will have one vote at the special
meeting for each share of Perclose common stock that they owned on the record
date. A quorum is present at the special meeting if a majority of the shares of
Perclose common stock issued and outstanding and entitled to vote on the record
date is represented in person or by proxy. In the
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<PAGE>
event that a quorum is not present at the special meeting, it is expected that
the meeting will be adjourned or postponed to solicit additional proxies.
VOTE REQUIRED
The affirmative vote of a majority of the shares of Perclose common stock
outstanding on the record date is required to adopt the merger agreement. IF A
PERCLOSE STOCKHOLDER ABSTAINS FROM VOTING OR DOES NOT VOTE, EITHER IN PERSON OR
BY PROXY, IT WILL HAVE THE SAME EFFECT AS A VOTE AGAINST ADOPTION OF THE MERGER
AGREEMENT.
VOTING BY PERCLOSE DIRECTORS AND EXECUTIVE OFFICERS
On the record date, directors and executive officers of Perclose and their
affiliates owned and were entitled to vote 2,161,013 shares of Perclose common
stock, or approximately 19.3% of the shares of Perclose common stock outstanding
on the record date. Pursuant to the stockholders agreement, the directors and
executive officers of Perclose have agreed to vote the Perclose common stock
owned by them "FOR" adoption of the merger agreement.
VOTING OF PROXIES
All shares represented by properly executed proxies received in time for the
special meeting will be voted at the special meeting in the manner specified by
the holders. Properly executed proxies that do not contain voting instructions
will be voted "FOR" adoption of the merger agreement.
Shares of Perclose common stock represented at the special meeting but not
voting, including shares of Perclose common stock for which proxies have been
received but for which holders of shares have abstained, will be treated as
present at the special meeting for purposes of determining the presence or
absence of a quorum for the transaction of all business.
Only shares affirmatively voted for adoption of the merger agreement,
including properly executed proxies that do not contain voting instructions,
will be counted as favorable votes for that proposal. If a Perclose stockholder
abstains from voting or does not vote, either in person or by proxy, it will
have the same effect as if that Perclose stockholder had voted against adoption
of the merger agreement. Brokers who hold shares of Perclose common stock in
street name for customers who are the beneficial owners of these shares may not
give a proxy to vote those customers' shares in the absence of specific
instructions from those customers. These non-voted shares are referred to as
broker non-votes and have the effect of votes against adoption of the merger
agreement.
The persons named as proxies by a stockholder may propose and vote for one
or more adjournments of the special meeting, including adjournments to permit
further solicitations of proxies. No proxy voted against the proposal to adopt
the merger agreement will be voted in favor of any such adjournment or
postponement.
Perclose does not expect that any matter other than the proposal to adopt
the merger agreement will be brought before the special meeting. If, however,
the Perclose board of directors properly presents other matters, the persons
named as proxies will vote in accordance with their judgment on such other
matters.
REVOCABILITY OF PROXIES
The grant of a proxy on the enclosed form of proxy does not preclude a
stockholder from voting in person at the special meeting. If you are not the
owner of record but hold your shares through a broker or bank, you should take
appropriate steps to obtain a legal proxy from the owner of record if you wish
to vote at the special meeting. A stockholder may revoke a proxy at any time
before its exercise by filing with the Vice President and Chief Financial
Officer of Perclose a duly executed
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<PAGE>
revocation of proxy, by submitting a duly executed proxy to the Vice President
and Chief Financial Officer of Perclose bearing a later date or by appearing at
the special meeting and voting in person. Attendance at the special meeting will
not itself constitute revocation of a proxy. If you hold your shares through a
broker or bank, you should follow the instructions provided by that firm to
revoke your proxy.
SOLICITATION OF PROXIES
Perclose will bear the cost of the solicitation of proxies from its
stockholders. In addition to solicitation by mail, the directors, officers and
employees of Perclose may solicit proxies from stockholders by telephone or
other electronic means or in person. Perclose will cause brokerage houses and
other custodians, nominees and fiduciaries to forward solicitation materials to
the beneficial owners of stock held of record by these persons. Perclose will
reimburse these custodians, nominees and fiduciaries for their reasonable
out-of-pocket expenses in doing so.
Perclose may retain a proxy solicitation firm to assist in the solicitation
of proxies. Perclose anticipates that if it retains a proxy solicitation firm,
the fees payable to that firm will be approximately $50,000, plus reimbursement
of certain out-of-pocket expenses. Perclose would indemnify that firm against
any losses arising out of proxy soliciting services on behalf of Perclose.
STOCKHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXIES. A
transmittal form with instructions for the surrender of Perclose common stock
certificates will be mailed to Perclose stockholders as soon as practicable
after completion of the merger.
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<PAGE>
THE MERGER
THE FOLLOWING DISCUSSION SUMMARIZES THE BACKGROUND OF THE MERGER AND THE
MATERIAL TERMS OF THE MERGER. STOCKHOLDERS SHOULD READ CAREFULLY THE REMAINDER
OF THIS PROXY STATEMENT/PROSPECTUS AND THE MERGER AGREEMENT, WHICH IS ATTACHED
AS ANNEX 1 TO THIS PROXY STATEMENT/PROSPECTUS.
BACKGROUND TO THE MERGER
In October 1998, Tyco International, Ltd. announced that it was considering
selling the marketing rights to a product that competes with Perclose's surgical
closure products, the Angioseal device manufactured by Kensey-Nash Corporation.
Perclose management viewed the availability of these marketing rights as an
opportunity to inform major medical device and health care companies regarding
Perclose's products and technology. As a result, Perclose requested that U.S.
Bancorp Piper Jaffray, its financial advisor, contact various major medical
device and health care companies, including Abbott, that represented potential
purchasers of the Angioseal marketing rights. The purpose of these contacts was
to provide these companies with current information regarding Perclose. Abbott's
discussions with U.S. Bancorp Piper Jaffray were limited in nature.
In mid-February 1999, Abbott contacted U.S. Bancorp Piper Jaffray to
indicate its interest in the possibility of a strategic transaction with
Perclose. In late March 1999, representatives of Abbott advised U.S. Bancorp
Piper Jaffray that Abbott would be interested in having a preliminary management
meeting with Perclose in order to consider the possibility of a strategic
transaction with, or acquisition of, Perclose. Accordingly, on April 13, 1999,
Abbott and Perclose executed a confidentiality agreement. On April 15, 1999, Dr.
John Simpson, Chairman of the Perclose board of directors, Mr. Henry Plain,
Perclose's President and Chief Executive Officer, and Mr. Kenneth Ludlum,
Perclose's Vice President of Finance and Administration and Chief Financial
Officer, met with Mr. Richard Gonzalez, Abbott's Senior Vice President, Hospital
Products, and other representatives of Abbott, together with representatives of
U.S. Bancorp Piper Jaffray. Perclose management presented information regarding
Perclose and its business.
On May 24, 1999, Dr. Simpson, Mr. Plain and other representatives of
Perclose, together with representatives of U.S. Bancorp Piper Jaffray, met with
Mr. Gonzalez and other representatives of Abbott's Hospital Products Division
and representatives of Goldman Sachs, Abbott's financial advisor, and presented
information regarding Perclose's current products, products under development,
financial projections and business plans. At the conclusion of this meeting, Mr.
Gonzalez advised Perclose management and U.S. Bancorp Piper Jaffray that Abbott
would review and evaluate the information presented and would contact Perclose
and U.S. Bancorp Piper Jaffray if it was interested in pursuing a transaction.
On May 27, 1999, representatives of Abbott, through Goldman Sachs, advised
U.S. Bancorp Piper Jaffray and Perclose that Abbott was interested in conducting
a complete due diligence review in connection with a possible acquisition of
Perclose by Abbott. At that time, representatives of Goldman Sachs advised
representatives of U.S. Bancorp Piper Jaffray that Abbott would be willing to
consider a price range greater than $50.00 for each outstanding share of
Perclose common stock. Goldman Sachs also advised U.S. Bancorp Piper Jaffray
that Abbott would require a period of approximately thirty days for due
diligence and negotiation, during which Perclose would negotiate exclusively
with Abbott regarding an acquisition of Perclose and would not consider
proposals from other parties.
On May 28, 1999, the Perclose board of directors met to consider the
preliminary terms summarized by Goldman Sachs as well as Abbott's request for an
exclusivity period. During this meeting, legal counsel to Perclose advised the
Perclose board of the board's fiduciary obligations with respect to an agreement
for a period of exclusive negotiation and the evaluation of a possible merger
transaction. The Perclose board approved entering into an agreement with Abbott
for an exclusive negotiation period. On May 29, 1999, representatives of
Perclose, through U.S. Bancorp Piper Jaffray,
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advised Goldman Sachs and Abbott that the price range Perclose would require in
a possible transaction was more than $50.00 for each Perclose share. On June 4,
1999, the agreement granting Abbott an exclusive 30-day negotiation period was
executed, and Abbott's due diligence review began on June 7, 1999.
On June 22, 1999, legal counsel to Perclose provided legal counsel to Abbott
with an initial draft of a merger agreement that legal counsel to Abbott revised
and returned on June 23rd. On June 24th and June 25th, representatives of
Perclose, Abbott, U.S. Bancorp Piper Jaffray and Goldman Sachs met at the
offices of Abbott's legal counsel to review various matters relating to the
proposed transaction. During these meetings, legal counsel to Perclose and
Abbott reviewed the revised draft merger agreement. Representatives of Goldman
Sachs and U.S. Bancorp Piper Jaffray reviewed the financial terms of the
transaction. During these meetings, Goldman Sachs advised U.S. Bancorp Piper
Jaffray that two elements of any proposal Abbott might choose to make would be
an agreement granting Abbott an option to purchase a number of shares equal to
19.9% of Perclose's outstanding common stock in the event certain triggering
events occurred and a stockholders agreement pursuant to which the Perclose
directors and executive officers would agree to vote all shares of Perclose
common stock beneficially owned by them in favor of the merger agreement.
On June 24, 1999, Mr. Plain and representatives of U.S. Bancorp Piper
Jaffray met with Mr. Gary Coughlan, Abbott's Senior Vice President of Finance
and Chief Financial Officer, Mr. Gonzalez, other representatives of Abbott and
representatives of Goldman Sachs to conduct a financial due diligence of Abbott.
On June 28, 1999, the Perclose board met by telephone conference.
Representatives of U.S. Bancorp Piper Jaffray and legal counsel advised the
Perclose board of the outcome of the meetings held at the end of the preceding
week, the issues that remained open for negotiation and the likely structure of
a possible transaction. During the week of June 28, 1999, legal counsel to
Perclose and Abbott continued their negotiation of the merger agreement, the
stockholders agreement and the stock option agreement, and representatives of
Goldman Sachs and U.S. Bancorp Piper Jaffray continued their discussion of the
possible financial terms of a potential transaction.
Late on July 1, 1999, Mr. Gonzalez and Mr. Plain held a telephone discussion
regarding the financial terms and other arrangements of the merger. During that
conversation, Mr. Gonzalez advised Mr. Plain of Abbott's offer of $54.00 for
each outstanding share of Perclose common stock.
In the afternoon of July 2, 1999, Mr. Plain and Mr. Gonzalez held another
telephone discussion during which Mr. Plain advised Mr. Gonzalez that Perclose
management was prepared to accept Abbott's $54.00 offer, subject to the approval
of Perclose's board of directors.
Later on July 2, 1999, Perclose management advised Abbott management that it
would likely be necessary to recall certain units of the
Techstar-Registered Trademark- 6FXL device from the field as a result of an
assessment of reported product problems. Perclose management reported its
initial assessment of the likely scope of the recall, but indicated that
additional review to be performed over the weekend of July 3-5 would provide
more detailed information.
On July 6, 1999, the Perclose board met to review the status of the merger
discussions and the planned recall. Perclose management advised the Perclose
board that Abbott intended to evaluate the possible recall and, subject to
completion of this due diligence and satisfactory resolution of the situation,
would then be in a position to consider the terms of a merger agreement.
Perclose's legal counsel then gave a presentation regarding the fiduciary duties
of the Perclose board in evaluating a possible merger. Legal counsel also
reviewed the provisions of the draft merger agreement, stockholders agreement
and stock option agreement. Finally, representatives of U.S. Bancorp Piper
Jaffray delivered a presentation regarding the financial terms of a possible
transaction.
On July 6, 1999, the Abbott board of directors held a telephonic meeting at
which the Abbott board considered the terms of a proposed merger. At this
meeting, Abbott's legal counsel reviewed the
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provisions of the draft merger agreement, stockholders agreement and stock
option agreement, and Mr. Coughlan reviewed the financial terms of the merger.
Abbott's board of directors then authorized the execution and delivery of the
merger agreement, the stockholders agreement and the stock option agreement,
subject to completion of a due diligence investigation by Abbott relating to the
recall of the Techstar-Registered Trademark- 6FXL device and satisfactory
resolution of the issue as determined by Abbott management.
On July 7, 1999, Abbott conducted a due diligence investigation relating to
the recall of the Techstar-Registered Trademark- 6FXL device.
On July 8, 1999, Abbott concluded its review of the recall situation and
determined that Perclose could attain a satisfactory resolution of that
situation and that it was prepared to execute the merger agreement.
Representatives of Abbott then so informed Perclose management.
Later on July 8, 1999, the Perclose board met by telephone conference with
its legal and financial advisors. Mr. Plain advised the Perclose board that the
recall due diligence review with representatives of Abbott had been
satisfactorily completed and that Abbott was prepared to proceed with the
transaction. Mr. Plain also advised the board of directors that, although the
recall had not been formally initiated, rumors of a possible recall had reached
the market resulting in an approximately $9.00 per share decline in the price of
Perclose common stock during the first several hours of trading. Accordingly,
management had requested of The Nasdaq National Market that trading in the stock
be halted pending the anticipated execution of the merger agreement and related
agreements and an announcement of the planned merger. Legal counsel to Perclose
then reviewed the proposed definitive merger agreement, stockholders agreement
and stock option agreement. The representatives of U.S. Bancorp Piper Jaffray
provided an update to their presentation regarding the financial terms of the
proposed merger and related financial analyses. U.S. Bancorp Piper Jaffray then
rendered its opinion that, as of July 8, 1999, the consideration to be received
in the proposed merger was fair, from a financial point of view, to the
stockholders of Perclose.
After additional discussion, the Perclose board unanimously approved the
merger agreement and the related agreements with Abbott and unanimously resolved
to recommend to the Perclose stockholders to approve and adopt the merger.
The merger agreement, the stockholders agreement and the stock option
agreement were executed by all parties during the afternoon of July 8, 1999, and
a joint public announcement of the transaction was made.
REASONS FOR THE MERGER AND BOARD OF DIRECTORS' RECOMMENDATION
REASONS FOR THE MERGER. The Perclose board of directors has unanimously
determined that the terms of the merger agreement and the transactions provided
for in the merger agreement are fair to, and in the best interests of, Perclose
stockholders. Accordingly, the Perclose board has unanimously approved the
merger agreement and unanimously recommends that the stockholders of Perclose
vote "FOR" approval and adoption of the merger agreement. In reaching its
determination, the Perclose board consulted with Perclose's management, its
legal counsel and financial advisor, and gave significant consideration to a
number of factors bearing on its decision. The Perclose board did not consider
it practical to, nor did it attempt to, quantify or otherwise assign relative
weights to the factors it considered in reaching its decision.
The factors considered by the Perclose board of directors included:
- Analyses of the financial performance and condition and the businesses and
prospects of Abbott and Perclose. These analyses included a review of the
recent and historic earnings and stock price performance of Perclose and
Abbott. The Perclose board also considered the detailed financial
analyses, pro forma and other information with respect to Abbott and
Perclose presented by U.S. Bancorp Piper Jaffray as well as the Perclose
board's own knowledge of
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Abbott, Perclose and their respective businesses. The Perclose board also
considered the current economic, financial and business climate.
- The effect on Perclose stockholders of Perclose continuing as a
stand-alone entity compared to the effect of combining with Abbott, with
respect to the financial condition and prospects of the two companies on a
stand-alone basis and as a combined company. In particular, the Perclose
board considered that Perclose competes in a single segment of the medical
device market, arterial access site closure devices, and that the market
price of Perclose common stock had experienced significant volatility.
- The view of Perclose management that the medical device industry has
experienced significant consolidation as participants have sought to
broaden product lines, gain market share and increase international market
penetration to enable combined product offerings and capitation
arrangements with managed care organizations and health care provider
organizations, which are increasingly taking actions that favor health
care and medical device companies offering large and cost-effective
product portfolios.
- The relatively greater financial, manufacturing, personnel, sales and
distribution resources of Abbott and the likelihood that these resources
would allow Perclose to accelerate its long-term growth strategy, to
facilitate the introduction of new products with a larger sales force, and
to compete more effectively in its targeted markets.
- The written opinion of U.S. Bancorp Piper Jaffray that, as of July 8,
1999, and based upon and subject to the various qualifications and
assumptions described in their opinion, the consideration to be received
in the merger was fair, from a financial point of view, to the
stockholders of Perclose. See "--Opinion of U.S. Bancorp Piper Jaffray
Inc."
- The exchange ratio and the other terms of the merger agreement. See
"--Background to the Merger" and "--Merger Consideration."
- The expectation that the merger will be a tax-free transaction to Perclose
and its stockholders and will be accounted for as a pooling of interests
transaction. See "--Material United States Federal Income Tax Consequences
of the Merger" and "--Expected Accounting Treatment."
RECOMMENDATION OF THE PERCLOSE BOARD OF DIRECTORS. After careful
consideration, the Perclose board of directors has unanimously determined that
the merger and the terms of the merger agreement are fair to, and in the best
interests of, Perclose and its stockholders and has approved the merger
agreement and the merger. The Perclose board of directors unanimously recommends
that the stockholders of Perclose vote "FOR" the adoption of the merger
agreement.
OPINION OF U.S. BANCORP PIPER JAFFRAY INC.
Pursuant to an engagement letter dated March 17, 1999, Perclose retained
U.S. Bancorp Piper Jaffray to act as its exclusive financial advisor and, if
requested, to render to the board of directors an opinion as to the fairness,
from a financial point of view, of the consideration to be received by Perclose
stockholders in the merger.
On July 8, 1999, U.S. Bancorp Piper Jaffray delivered to the Perclose board
of directors its opinion, as of that date and based upon and subject to the
assumptions, factors and limitations set forth in the written opinion and
described below, that the consideration proposed to be received by Perclose
stockholders in the proposed merger with Abbott was fair, from a financial point
of view, to those stockholders. A copy of U.S. Bancorp Piper Jaffray's written
opinion is attached to this proxy statement/prospectus as Annex 4 and is
incorporated into this proxy statement/prospectus by reference. Stockholders
should read the opinion carefully in its entirety in conjunction with this proxy
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statement/prospectus and should carefully consider the assumptions made, matters
considered and the limits of the review undertaken by U.S. Bancorp Piper
Jaffray.
While U.S. Bancorp Piper Jaffray rendered its opinion and provided certain
analyses to the board of directors, U.S. Bancorp Piper Jaffray was not requested
to and did not make any recommendation to the board of directors as to the
specific form or amount of the consideration to be received by Perclose
stockholders in the proposed merger with Abbott, which was determined through
negotiations between Perclose and Abbott. U.S. Bancorp Piper Jaffray's written
opinion, which was delivered for use and considered by the board of directors,
is directed only to the fairness, from a financial point of view, of the
proposed consideration to be received by Perclose stockholders in the proposed
transaction, does not address the value of a share of Perclose common stock or
Abbott common stock, does not address Perclose's underlying business decision to
participate in the merger and does not constitute a recommendation to any
Perclose stockholder as to how a stockholder should vote with respect to the
merger.
In arriving at its opinion, U.S. Bancorp Piper Jaffray reviewed, analyzed
and relied upon material relating to the financial and operating condition and
prospects of Perclose and Abbott and material prepared in connection with the
proposed merger. These materials were:
- a draft of the merger agreement dated July 7, 1999;
- publicly available financial, operating and business information related
to Abbott and to Perclose;
- publicly available market and securities data of Abbott and of selected
public companies deemed comparable to Abbott;
- publicly available market and securities data of Perclose and of selected
public companies deemed comparable to Perclose;
- analyst reports relating to each of Abbott and Perclose;
- to the extent publicly available, financial information relating to
selected merger transactions deemed comparable to the proposed merger; and
- internal financial information of Perclose prepared for financial planning
purposes and furnished by Perclose management.
In addition, U.S. Bancorp Piper Jaffray had discussions with management of
Perclose concerning the financial condition, current operating results and
business outlook for Perclose on a stand-alone basis and as a combined company
with Abbott. U.S. Bancorp Piper Jaffray also had discussions with management of
Abbott concerning the financial condition, current operating results and
business outlook for Abbott on a stand-alone basis and as a combined company
with Perclose.
In delivering its opinion to the Perclose board of directors on July 8,
1999, U.S. Bancorp Piper Jaffray presented to the board of directors various
analyses and other information material to the opinion. The following is a
summary of these analyses.
IMPLIED CONSIDERATION. U.S. Bancorp Piper Jaffray calculated the implied
value of the stock consideration to be received by the Perclose stockholders for
the range of exchange ratios and share prices of Abbott common stock payable in
the merger under the merger agreement, as shown in the
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following table. The exchange ratio will be based on the 20-day average closing
stock price of Abbott common stock two days prior to consummation of the merger.
<TABLE>
<CAPTION>
PER SHARE
AVERAGE ABBOTT STOCK PRICE EXCHANGE RATIO CONSIDERATION
- ----------------------------------------------------- ----------------- --------------------
<S> <C> <C>
less than $40.00..................................... 1.3500 less than $54.00
$40.00 to $49.00..................................... 1.3500-1.1020 $54.00
more than $49.00..................................... 1.1020 more than $54.00
</TABLE>
Following the merger, current Perclose stockholders will own approximately
1% of the outstanding Abbott common stock, without giving effect to the proposed
ALZA Corporation merger. At an implied merger consideration of $54.00 per share,
the aggregate equity value of Perclose is approximately $680 million, based on
12.6 million outstanding shares of common stock on a fully diluted basis.
PERCLOSE MARKET ANALYSIS. U.S. Bancorp Piper Jaffray reviewed the stock
trading history and published analyst estimates of Perclose common stock, as
well as recent trading information.
U.S. Bancorp Piper Jaffray performed stock price comparisons for Perclose
common stock and Abbott common stock for the one-year period preceding July 7,
1999. The average stock price ratios for certain periods during that year were
as follows:
<TABLE>
<CAPTION>
TIME PERIOD RATIO
- ------------------------------------------------------------------------------------- ---------
<S> <C>
One year............................................................................. .6881
Six months........................................................................... .8708
Three months......................................................................... .8623
One month............................................................................ 1.0474
</TABLE>
These historical stock price ratios can be compared to the implied exchange
ratio in the merger of 1.2396 based on the price of Abbott common stock as of
July 7, 1999.
PERCLOSE COMPARABLE COMPANY ANALYSIS. U.S. Bancorp Piper Jaffray compared
financial information and valuation data relating to Perclose to corresponding
data and ratios from nine publicly traded companies deemed comparable to
Perclose (Biomatrix, Boston Scientific, Guidant Corp., Medtronic, MiniMed,
Osteotech, ResMed, Visx and Xomed Surgical).
This analysis produced multiples of selected valuation data as follows:
<TABLE>
<CAPTION>
PERCLOSE(1) COMPARABLE COMPANIES
----------- --------------------------------------------
LOW MEAN MEDIAN HIGH
--------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Company value to latest twelve months revenue............. 15.0x 5.1x 11.5x 8.6x 32.9x
Company value to estimated calendar year 1999
revenue(2).............................................. 10.4x 4.0x 8.7x 6.8x 23.2x
Company value to estimated calendar year 2000
revenue(2).............................................. 7.7x 3.1x 7.0x 6.1x 18.8x
Company value to latest twelve months operating income.... 152.7x 18.3x 41.3x 33.3x 98.9x
Common stock value per share to latest twelve months net
income per share........................................ 180.0x 31.3x 65.2x 50.3x 155.8x
Common stock value per share to estimated calendar 1999
net income per share(2)................................. 68.4x 25.8x 49.5x 41.0x 111.3x
Common stock value per share to estimated calendar 2000
net income per share(2)................................. 43.5x 14.4x 37.1x 33.1x 74.9x
</TABLE>
- --------------------------
(1) Based on an implied merger consideration of $54.00.
(2) Estimated revenue and net income for Perclose and the comparable companies
are based on analysts' estimates.
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<PAGE>
COMPARABLE TRANSACTION ANALYSIS. U.S. Bancorp Piper Jaffray reviewed merger
and acquisition transactions that it deemed comparable to the merger. Of the
transactions meeting its criteria, two separate comparison groups were
evaluated:
- 25 transactions related to the cardiovascular market; and
- 8 transactions involving high growth, high margin products with leading
market positions, known as franchise medical technology transactions.
U.S. Bancorp Piper Jaffray analyzed the cardiovascular group transactions
and compared the resulting multiples of selected valuation data to multiples for
Perclose derived from the implied consideration payable in the merger.
<TABLE>
<CAPTION>
PERCLOSE(1) COMPARABLE TRANSACTIONS
----------- --------------------------------------------
LOW MEAN MEDIAN HIGH
--------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Company value to latest twelve months revenue............. 15.0x 1.5x 4.6x 3.5x 11.0x
Company value to latest twelve months operating income.... 152.7x 16.2x 32.2x 32.2x 74.9x
Equity value to latest twelve months net income........... 194.0x 22.8x 56.4x 49.5x 131.1x
</TABLE>
- --------------------------
(1) Based on an implied merger consideration of $54.00.
U.S. Bancorp Piper Jaffray analyzed the franchise medical technology group
transactions and compared the resulting multiples of selected valuation data to
multiples for Perclose derived from the implied consideration payable in the
merger.
<TABLE>
<CAPTION>
PERCLOSE(1) COMPARABLE TRANSACTIONS
----------- --------------------------------------------
LOW MEAN MEDIAN HIGH
--------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Company value to latest twelve months revenue............. 15.0x 6.4x 9.5x 8.8x 13.1x
Company value to latest twelve months operating income.... 152.7x 16.6x 40.2x 39.3x 64.0x
Equity value to latest twelve months net income........... 194.0x 22.8x 65.1x 60.2x 126.1x
</TABLE>
- --------------------------
(1) Based on a Perclose stock price of $54.00.
PREMIUMS PAID ANALYSIS. U.S. Bancorp Piper Jaffray reviewed publicly
available information for selected completed and pending transactions since
January 1, 1995 where a change of control of the target occurred and that
fulfill the criteria used for the Comparable Transaction Analysis. U.S. Bancorp
Piper Jaffray again evaluated two separate groups:
- 58 transactions in the medical technology market in general; and
- 7 of the franchise medical technology group transactions analyzed in the
Comparable Transaction Analysis.
U.S. Bancorp Piper Jaffray performed the analysis of the medical technology
transactions, and the table below shows a comparison of those premiums
(discounts) to the premium that would be paid to Perclose stockholders based on
the implied merger consideration of $54.00. The premium calculations for
Perclose common stock are based upon an assumed announcement date of July 7,
1999.
<TABLE>
<CAPTION>
IMPLIED PREMIUM (DISCOUNT)
----------------------------------------------------------------
PERCLOSE COMPARABLE TRANSACTIONS
------------ --------------------------------------------------
LOW MEAN MEDIAN HIGH
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
One week before announcement(1)......................... 12.5% (11.8%) 34.3% 30.0% 150.9%
Four weeks before announcement(2)....................... 23.6% (9.3%) 44.8% 39.2% 130.0%
</TABLE>
- --------------------------
(1) Based on a Perclose stock price of $48.00 per share on June 29, 1999.
(2) Based on a Perclose stock price of $43.6875 on June 8, 1999.
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U.S. Bancorp Piper Jaffray performed the analysis of the franchise medical
technology transactions, and the table below shows a comparison of those
premiums to the premium that would be paid to Perclose stockholders based on the
implied merger consideration of $54.00.
<TABLE>
<CAPTION>
IMPLIED PREMIUM (DISCOUNT)
----------------------------------------------------------------
PERCLOSE COMPARABLE TRANSACTIONS
------------ --------------------------------------------------
LOW MEAN MEDIAN HIGH
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
One week before announcement(1)........................... 12.5% 4.3% 35.7% 26.7% 71.1%
Four weeks before announcement(2)......................... 23.6% 26.8% 46.9% 36.6% 75.6%
</TABLE>
- --------------------------
(1) Based on a Perclose stock price of $48.00 per share on June 29, 1999.
(2) Based on a Perclose stock price of $43.6875 on June 8, 1999.
PERCLOSE DISCOUNTED CASH FLOW ANALYSIS. U.S. Bancorp Piper Jaffray
performed a discounted cash flow analysis for Perclose in which it calculated
the present value of the projected future cash flows of Perclose using internal
financial planning data prepared by Perclose management. U.S. Bancorp Piper
Jaffray estimated a range of theoretical values for Perclose based on the net
present value of its implied annual cash flows and a terminal value for Perclose
in 2004 calculated based upon a multiple of operating income. U.S. Bancorp Piper
Jaffray applied a range of discount rates of 20% to 25% and a range of terminal
value multiples of 11.0x to 13.0x of forecasted 2004 operating income, which
correspond to implied latest twelve month revenue multiples of 3.6x to 4.3x in
2004. This analysis yielded the following results:
- A per share equity value of Perclose ranging from $42.36--$56.96.
- An aggregate equity value of Perclose ranging from approximately $525
million to $718 million.
CONTRIBUTION ANALYSIS. U.S. Bancorp Piper Jaffray analyzed the hypothetical
pro forma contribution of Perclose to the combined company, without giving
effect to the proposed ALZA Corporation merger, for the years ending December
31, 1999, 2000 and 2001. For these periods, U.S. Bancorp Piper Jaffray analyzed
Perclose's expected contribution to revenue, operating income and pre-tax income
of the combined company and compared it to the estimated 1.0% of the combined
company that would be owned by current Perclose stockholders after the merger
based on the implied exchange ratio of 1.2396.
<TABLE>
<CAPTION>
ESTIMATED PRO FORMA CONTRIBUTION OF
PERCLOSE TO THE COMBINED COMPANY
-------------------------------------------------------------
1999 ESTIMATE(1) 2000 ESTIMATE(1) 2001 ESTIMATE(1)
------------------- ------------------- -------------------
<S> <C> <C> <C>
Revenue.................................... 0.50% 0.76% 1.01%
Operating Income........................... 0.41% 0.85% 1.15%
Pre-Tax Income............................. 0.44% 0.84% 1.11%
</TABLE>
- --------------------------
(1) Estimated financial data for Perclose is based on internal Perclose
management estimates. Estimated financial data for Abbott is based on
analyst estimates.
TRADING MARKET ANALYSIS OF ABBOTT. U.S. Bancorp Piper Jaffray reviewed
general background information concerning Abbott, including publicly available
analyst estimates and ratings of Abbott common stock, the price performance of
Abbott common stock over the previous twelve months relative to the S&P 500 and
to a group of companies deemed comparable to Abbott, and the stock price and
volume over the previous twelve months. U.S. Bancorp Piper Jaffray reviewed the
recent operating performance of Abbott and projected operating financial data
based upon analyst estimates. The comparable company group consisted of American
Home Products, Bristol Myers Squibb, Johnson & Johnson, Eli Lilly, Merck,
Pfizer, Pharmacia Upjohn, Schering Plough and Warner-Lambert.
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<PAGE>
U.S. Bancorp Piper Jaffray also reviewed the recent stock trading history of
Abbott common stock. In addition, U.S. Bancorp Piper Jaffray compared selected
financial data and ratios for Abbott to the corresponding data and ratios for
the same comparable company group described above.
In reaching its conclusion as to the fairness of the merger consideration
and in its presentation to the board of directors, U.S. Bancorp Piper Jaffray
did not rely on any single analysis or factor described above, assign relative
weights to the analyses or factors considered by it, or make any conclusion as
to how the results of any given analysis, taken alone, supported its opinion.
The preparation of a fairness opinion is a complex process and not necessarily
susceptible to partial analysis or summary description. U.S. Bancorp Piper
Jaffray believes that its analyses must be considered as a whole and that
selection of portions of its analyses and of the factors considered by it,
without considering all of the factors and analyses, would create a misleading
view of the processes underlying the opinion.
The analyses of U.S. Bancorp Piper Jaffray are not necessarily indicative of
actual values or future results, which may be significantly more or less
favorable than suggested by the analyses. Analyses relating to the value of
companies do not purport to be appraisals or valuations or necessarily reflect
the price at which companies may actually be sold. No company or transaction
used in any analysis for purposes of comparison is identical to Perclose, Abbott
or the merger. Accordingly, an analysis of the results of the comparisons is not
mathematical; rather, it involves complex considerations and judgments about
differences in the companies to which Perclose and Abbott were compared and
other factors that could affect the public trading value of the companies.
For purposes of its opinion, U.S. Bancorp Piper Jaffray relied upon and
assumed the accuracy, completeness and fairness of the financial statements and
other information provided to it by Perclose and Abbott and otherwise made
available to it and did not assume responsibility for the independent
verification of that information. Information prepared for financial planning
purposes was not prepared with the expectation of public disclosure. U.S.
Bancorp Piper Jaffray relied upon the assurances of the managements of Perclose
and Abbott that the information provided to it by Perclose and Abbott was
prepared on a reasonable basis, the financial planning data and other business
outlook information reflect the best currently available estimates of
management, and management was not aware of any information or facts that would
make the information provided to U.S. Bancorp Piper Jaffray incomplete or
misleading.
For purposes of its opinion, U.S. Bancorp Piper Jaffray assumed that the
final form of the merger agreement would be substantially similar to the last
draft it reviewed, without modification or waiver of material terms or
conditions by Perclose or Abbott. In addition, U.S. Bancorp Piper Jaffray
assumed that the merger will constitute a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code and that it would be accounted for
as a pooling of interests under generally accepted accounting principles. U.S.
Bancorp Piper Jaffray also assumed that, in the course of obtaining the
necessary regulatory approvals for the merger transaction, no restrictions,
including any divestiture requirements, will be imposed that would have a
material adverse effect on the contemplated benefits of the merger.
In arriving at its opinion, U.S. Bancorp Piper Jaffray did not perform any
appraisals or valuations of any specific assets or liabilities of Perclose or
Abbott, and was not furnished with any such appraisals or valuations. U.S.
Bancorp Piper Jaffray analyzed Perclose as a going concern and accordingly
expressed no opinion as to the liquidation value of any entity. U.S. Bancorp
Piper Jaffray expressed no opinion as to the price at which shares of Perclose
or Abbott common stock have traded or at which the shares of Perclose, Abbott or
the combined company may trade at any future time, or the effect that changes in
the Abbott stock price may have on the merger consideration. U.S. Bancorp Piper
Jaffray was not authorized to solicit, and did not solicit, other persons
regarding a business combination with Perclose. The opinion is based on
information available to U.S. Bancorp Piper Jaffray and the
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<PAGE>
facts and circumstances as they existed and were subject to evaluation on the
date of the opinion. Events occurring after that date could materially affect
the assumptions used in preparing the opinion. U.S. Bancorp Piper Jaffray has
not undertaken to and is not obligated to affirm or revise its opinion or
otherwise comment on any events occurring after the date it was given.
U.S. Bancorp Piper Jaffray, as a customary part of its investment banking
business, evaluates businesses and their securities in connection with mergers
and acquisitions, underwritings and secondary distributions of securities,
private placements and valuations for estate, corporate and other purposes. The
Perclose board of directors selected U.S. Bancorp Piper Jaffray because of its
expertise, reputation and familiarity with the medical technology industry in
general and with Perclose in particular. U.S. Bancorp Piper Jaffray acted as
manager for the initial public offering of Perclose common stock on November 6,
1995 and for a secondary public offering of Perclose common stock on November
20, 1997. U.S. Bancorp Piper Jaffray writes research on and maintains a market
in the Perclose common stock. In the ordinary course of its business, U.S.
Bancorp Piper Jaffray and its affiliates may actively trade securities of
Perclose or Abbott for their own accounts or the accounts of their customers
and, accordingly, may at any time hold a long or short position in those
securities.
Under the terms of the engagement letter dated March 17, 1999, Perclose has
agreed to pay U.S. Bancorp Piper Jaffray a fee equal to 1% of the aggregate
consideration paid to Perclose or its stockholders in connection with the merger
for its financial advisory services rendered in connection with the merger, and
the minimum fee payable is $500,000. Perclose has agreed to pay U.S. Bancorp
Piper Jaffray $500,000 for rendering its opinion, which will be credited against
payment of the fee for financial advisory services. The contingent nature of the
financial advisory fee may have created a potential conflict of interest in that
Perclose would be unlikely to consummate the transaction unless it had received
the opinion of U.S. Bancorp Piper Jaffray. Whether or not the transaction is
consummated, Perclose has agreed to pay the reasonable out-of-pocket expenses of
U.S. Bancorp Piper Jaffray and to indemnify U.S. Bancorp Piper Jaffray against
liabilities incurred. These liabilities include liabilities under the federal
securities laws in connection with the engagement of U.S. Bancorp Piper Jaffray
by the Perclose board of directors.
INTERESTS OF PERCLOSE DIRECTORS AND MANAGEMENT IN THE MERGER
In considering the recommendation of the board of directors of Perclose with
respect to the merger, Perclose's stockholders should be aware of, and should
carefully consider that, the Perclose board of directors and some members of
Perclose's management may have interests in the merger that are in addition to
their interests as stockholders of Perclose generally and that may create
potential conflicts of interest. The following summarizes potential conflicts of
interest with respect to the merger:
- Kenneth Ludlum, Perclose's Vice President of Finance and Administration
and Chief Financial Officer, has an employment agreement with Perclose
that provides that all of Mr. Ludlum's unvested options will become fully
vested upon the closing of the merger. As of August 16, 1999, Mr. Ludlum
held options to purchase 130,500 shares of Perclose common stock, 81,715
of which were vested. In addition, if Mr. Ludlum's employment is
terminated within 12 months of the closing of the merger, he will be
entitled to receive 12 months severance pay if his termination is
involuntary and six months severance pay if his termination is voluntary;
- As of August 16, 1999, directors and executive officers of Perclose owned
(1) 2,161,013 shares of Perclose common stock for which they will receive
the same consideration as other Perclose stockholders and (2) unexercised
options to purchase 787,830 shares of Perclose common stock. For a
description of how stock options will be treated in the merger, see "The
Merger--Effect on Awards Outstanding under Perclose Stock Plans;" and
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<PAGE>
- Abbott has agreed to fulfill and honor in all respects the obligations of
Perclose pursuant to indemnification agreements currently in effect
between Perclose and its directors and executive officers.
Finally, under the terms of the merger agreement, Abbott has agreed to cause
the surviving corporation to indemnify the directors and officers of Perclose
after the effective time. Abbott will also maintain for six years after the
effective date of the merger directors' and officers' liability insurance for
those persons who are currently covered by Perclose's directors' and officers'
liability insurance policy.
EXPECTED ACCOUNTING TREATMENT
The merger is intended to qualify as a pooling of interests for accounting
purposes. Under this method of accounting, the recorded historical cost basis of
the assets and liabilities of Abbott and Perclose will be carried forward to the
operations of the combined company at their historical recorded amounts. Results
of operations of the combined company will include income of Abbott and Perclose
for the entire fiscal period in which the combination occurs, and the historical
results of operations of the separate companies for fiscal years before the
merger will be combined and reported as the results of operations of the
combined company. No adjustments have been made to the unaudited pro forma
financial information of Abbott and Perclose to conform the accounting policies
of the combined company as the nature and amounts of these adjustments are not
expected to be significant.
Completion of the merger is conditioned upon receipt by each of Abbott and
Perclose of a letter from its respective independent public accountants stating
that, in their respective opinions, they concur with the conclusions of the
management of Abbott and Perclose as to the appropriateness of pooling of
interests accounting treatment for the merger under APB No. 16, if completed in
accordance with the merger agreement. See "The Merger Agreement, the Stock
Option Agreement and the Stockholders Agreement--The Merger
Agreement--Conditions to the Completion of the Merger" and "--Termination." Some
of the conditions to be met to qualify for pooling of interests accounting
treatment, however, cannot be fully assessed until the passage of specified
periods of time after the effective time of the merger, as certain of the
conditions for pooling of interests accounting treatment address transactions
occurring within such specified periods of time. Certain events, including
certain transactions with respect to Abbott common stock or Perclose common
stock by affiliates of Abbott and Perclose, respectively, could prevent the
merger from qualifying as pooling of interests for accounting purposes. For
information concerning certain restrictions to be imposed on the transferability
of Abbott common stock to be received by affiliates in order, among other
things, to ensure the availability of pooling of interests accounting treatment,
see "--Resale of Abbott Common Stock."
If, after completion of the merger, events occur that cause the merger to no
longer qualify for pooling of interests accounting treatment, the purchase
method of accounting would be applied. The purchase method of accounting could
have a material adverse effect on the reported operating results of Abbott as
compared to pooling of interests accounting treatment. See "Risk
Factors--Failure to Qualify for Pooling of Interests Accounting Treatment May
Impact Reported Operating Results."
FORM OF THE MERGER
Subject to the terms and conditions of the merger agreement and in
accordance with Delaware law, at the effective time of the merger, AL
Acquisition Corp., a wholly-owned subsidiary of Abbott and a party to the merger
agreement, will merge with and into Perclose. Perclose will survive the merger
as a wholly-owned Delaware subsidiary of Abbott and will continue under the name
"Perclose, Inc."
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<PAGE>
MERGER CONSIDERATION
At the effective time of the merger, each outstanding share of Perclose
common stock will be converted into the right to receive between 1.10 and 1.35
shares of Abbott common stock for each share of Perclose common stock, other
than shares held by Perclose, its subsidiaries or Abbott or its subsidiaries.
The exact number will be calculated by dividing (1) $54.00 by (2) the average
closing price of Abbott common stock on the New York Stock Exchange for the
twenty full trading days preceding the date of the last full trading day before
the special meeting of stockholders. If the average closing price of Abbott
common stock is $49.00 or greater, then each share of Perclose common stock will
be exchanged for 1.10 shares of Abbott common stock and the value of the Abbott
common stock received in the merger may be more than $54.00 per share of
Perclose common stock. If the average closing price of Abbott common stock is
$40.00 or less, then each share of Perclose common stock will be exchanged for
1.35 shares of Abbott common stock and the value of the Abbott common stock
received in the merger may be less than $54.00 per share of Perclose common
stock. Stockholders will receive cash for any fractional shares which they would
otherwise receive in the merger.
As of the effective time of the merger, shares of Perclose common stock will
no longer be outstanding and will automatically be canceled and will cease to
exist, and each holder of a certificate representing any shares of Perclose
common stock will cease to have any rights as a stockholder except the right to
receive shares of Abbott common stock, and cash instead of a fractional share,
in the merger. The exchange ratio was determined through arm's-length
negotiations between Abbott and Perclose.
CONVERSION OF SHARES; PROCEDURES FOR EXCHANGE OF CERTIFICATES; FRACTIONAL SHARES
The conversion of Perclose common stock into the right to receive Abbott
common stock will occur automatically at the effective time of the merger. As
soon as practicable after the effective time of the merger, BankBoston N.A., the
exchange agent, will send a transmittal letter to each holder of Perclose common
stock as of the effective time of the merger. The transmittal letter will
contain instructions for obtaining shares of Abbott common stock in exchange for
shares of Perclose common stock. PERCLOSE STOCKHOLDERS SHOULD NOT RETURN STOCK
CERTIFICATES WITH THE ENCLOSED PROXY.
After the effective time of the merger, each certificate that previously
represented shares of Perclose common stock will represent only the right to
receive the Abbott common stock into which such shares were converted in the
merger and the right to receive cash for any fractional shares of Abbott common
stock.
Until holders of certificates previously representing Perclose common stock
have surrendered those certificates to the exchange agent for exchange, holders
will not receive dividends or distributions on the Abbott common stock into
which such shares have been converted with a record date after the effective
time of the merger and will not receive cash for any fractional shares of Abbott
common stock. When holders surrender such certificates, they will receive any
unpaid dividends and any cash for fractional shares of Abbott common stock
without interest.
In the event of a transfer of ownership of Perclose common stock which is
not registered in the records of Perclose's transfer agent, a certificate
representing the proper number of shares of Abbott common stock may be issued to
a person other than the person in whose name the certificate so surrendered is
registered if:
- such certificate is properly endorsed or otherwise is in proper form for
transfer; and
- the person requesting such issuance will (1) pay any transfer or other
taxes resulting from the issuance of shares of Abbott common stock to a
person other than the registered holder of such certificate or (2)
establish to Abbott that such tax has been paid or is not applicable.
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All shares of Abbott common stock issued upon conversion of shares of
Perclose common stock, including any cash paid instead of any fractional shares
of Abbott common stock, will be issued in full satisfaction of all rights
relating to such shares of Perclose common stock. Abbott will remain obligated,
however, to pay any dividends or make any other distributions declared or made
by Perclose with a record date prior to the effective time of the merger and
which remain unpaid at the effective time of the merger.
No fractional shares of Abbott common stock will be issued to any Perclose
stockholder upon surrender of certificates previously representing Perclose
common stock. Promptly after the effective time of the merger, the exchange
agent will determine the excess of (1) the number of whole shares of Abbott
common stock delivered to the exchange agent by Abbott over (2) the aggregate
number of whole shares of Abbott common stock to be distributed to stockholders
of Perclose common stock as of the effective time of the merger. The exchange
agent will sell such excess shares on the New York Stock Exchange and will hold
the proceeds in trust for the stockholders of Perclose common stock as of the
effective time of the merger. The exchange agent will determine the portion of
such proceeds to which each stockholder of Perclose common stock as of the
effective time of the merger is entitled, if any, by multiplying (1) the amount
of net aggregate proceeds held in trust by (2) a fraction, the numerator of
which is the amount of the fractional share interest to which such stockholder
would otherwise be entitled and the denominator of which is the aggregate amount
of fractional share interests to which all stockholders of Perclose common stock
as of the effective time of the merger are entitled.
EFFECTIVE TIME OF THE MERGER
The merger will become effective upon the filing of the certificate of
merger with the Delaware Secretary of State or such later time as is agreed upon
by Abbott and Perclose and specified in the certificate of merger. The filing of
the certificate of merger will occur as soon as practicable, but no later than
the first business day after satisfaction or waiver of the conditions to the
completion of the merger described in the merger agreement, unless another date
is agreed to in writing by Abbott and Perclose.
STOCK EXCHANGE LISTING OF ABBOTT COMMON STOCK
It is a condition to the completion of the merger that Abbott common stock
issuable to Perclose stockholders in the merger be approved for listing on the
New York Stock Exchange, subject to official notice of issuance.
DELISTING AND DEREGISTRATION OF PERCLOSE COMMON STOCK
If the merger is completed, Perclose common stock will be delisted from The
Nasdaq National Market and will be deregistered under the Securities Exchange
Act of 1934.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following discussion summarizes the material United States federal
income tax consequences of the merger. Tax consequences under state, local and
foreign laws are not addressed. The discussion does not address all aspects of
United States federal taxation that may be relevant to you in light of your
particular circumstances. Further, this discussion may not be applicable to
certain Perclose stockholders who are subject to special rules, such as
financial institutions, tax-exempt organizations, insurance companies, dealers
in securities, foreign holders, persons who hold shares of Perclose common stock
as part of a constructive sale, conversion or straddle transaction, or who
acquired their Perclose common stock pursuant to the exercise of Perclose stock
options or otherwise as
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<PAGE>
compensation. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR AS TO THE PARTICULAR TAX
CONSEQUENCES OF THE MERGER TO YOU.
This discussion is based on the Internal Revenue Code, regulations
thereunder, current administrative rulings and practice, and judicial precedent
in effect as of the date of this proxy statement/prospectus, all of which are
subject to change. Any such change, which may or may not be retroactive, could
alter the tax consequences to you as discussed in this proxy
statement/prospectus. This discussion assumes that you hold your Perclose common
stock as a capital asset within the meaning of Section 1221 of the Internal
Revenue Code.
Neither Abbott nor its wholly-owned subsidiary, AL Acquisition Corp., is
required to complete the merger unless Abbott receives an opinion of Skadden,
Arps, Slate, Meagher & Flom (Illinois), special counsel to Abbott, and Perclose
is not required to complete the merger unless Perclose receives an opinion of
Wilson Sonsini Goodrich & Rosati, special counsel to Perclose, in both cases
based upon certain customary assumptions and representations made by Abbott, AL
Acquisition Corp. and Perclose, and to the effect that (1) under currently
applicable law for United States federal income tax purposes the merger will be
treated as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code and (2) each of Abbott, AL Acquisition Corp. and Perclose will be a
party to that reorganization. No ruling has been or will be obtained from the
Internal Revenue Service in connection with the merger. Opinions of counsel are
not binding on the Internal Revenue Service or the courts.
Assuming that the merger qualifies as a reorganization within the meaning of
Section 368(a) of the Code, the following will be the material federal income
tax consequences of the merger:
- You will recognize no gain or loss if you receive solely Abbott common
stock in exchange for shares of Perclose common stock you hold, except
with respect to cash received instead of fractional shares of Abbott
common stock.
- The aggregate adjusted tax basis of the Abbott common stock you receive in
the merger (including any fractional share of Abbott common stock deemed
to be received by you, as described below), will be equal to the aggregate
adjusted tax basis of the shares of Perclose common stock surrendered by
you for the Abbott common stock.
- The holding period of the Abbott common stock you receive in the merger
(including any fractional share of Abbott common stock deemed to be
received by you, as described below), will include the holding period of
the shares of Perclose common stock you exchange for the Abbott common
stock.
- If you receive cash in the merger instead of a fractional share of Abbott
common stock, you will be treated as if you received the fractional share
in the merger and then Abbott redeemed the fractional share in exchange
for the cash. You will generally be required to recognize gain or loss
equal to the difference between the amount of cash received and the
portion of your adjusted tax basis in the Abbott common stock that is
allocable to the fractional share.
- Neither Abbott, AL Acquisition Corp., nor Perclose will recognize material
amounts of gain solely as a result of the merger.
THE FOREGOING IS A GENERAL DISCUSSION OF THE MATERIAL UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER AND IS INCLUDED FOR GENERAL INFORMATION
ONLY. THE FOREGOING DISCUSSION DOES NOT TAKE INTO ACCOUNT THE PARTICULAR FACTS
AND CIRCUMSTANCES OF YOUR TAX STATUS AND TAX ATTRIBUTES. AS A RESULT, THE UNITED
STATES FEDERAL INCOME TAX CONSEQUENCES ADDRESSED IN THE FOREGOING DISCUSSION MAY
NOT APPLY TO YOU. IN VIEW OF THE INDIVIDUAL NATURE OF INCOME TAX CONSEQUENCES,
YOU ARE URGED TO CONSULT YOUR OWN TAX ADVISOR TO DETERMINE THE SPECIFIC TAX
CONSEQUENCES OF THE MERGER TO YOU,
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<PAGE>
INCLUDING THE APPLICATION AND EFFECT OF UNITED STATES FEDERAL, STATE, LOCAL AND
OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN THESE TAX LAWS.
REGULATORY MATTERS
Under the Hart-Scott-Rodino Act and related rules, certain transactions,
including the merger, may not be completed unless certain waiting period
requirements have been satisfied. On July 26, 1999, Abbott filed its
Notification and Report Form with the Antitrust Division of the Department of
Justice and the Federal Trade Commission. On July 26, 1999, Perclose filed its
Notification and Report Form with the Antitrust Division of the Department of
Justice and the Federal Trade Commission. The Federal Trade Commission granted
Abbott and Perclose early termination of the waiting period on August 16, 1999.
At any time before or after the effective time of the merger, the Antitrust
Division, the Federal Trade Commission or others could take action under the
antitrust laws, including seeking to prevent the merger. There can be no
assurance that a challenge to the merger on antitrust grounds will not be made
or, if a challenge is made, that it would not be successful.
The German Act Against Restraints of Competition prohibits Abbott and
Perclose from completing the merger until the Federal Cartel Office has been
notified of the transaction and the Cartel Office has cleared the transaction.
Upon receipt of the notification, the Cartel Office conducts a preliminary
review with a maximum duration of one month. Upon conclusion of the preliminary
review, the Cartel Office may either approve the transaction or initiate an
in-depth review with a maximum four month duration if further examination is
necessary to determine whether the transaction is compatible with the Act
Against Restraints of Competition. Abbott and Perclose jointly filed the
notification with the Cartel Office on August 6, 1999. Abbott and Perclose
believe that the transaction will be approved during the preliminary review
phase. The possibility cannot, however, be ruled out that the Cartel Office
might open an in-depth review to further examine the transaction under the Act
Against Restraints of Competition.
See "The Merger Agreement, the Stock Option Agreement and the Stockholders
Agreement-- Conditions to the Completion of the Merger."
RESALE OF ABBOTT COMMON STOCK
This proxy statement/prospectus does not cover resales of the Abbott common
stock to be received by the stockholders of Perclose upon completion of the
merger, and no person is authorized to make any use of this proxy
statement/prospectus in connection with any such resale.
All Abbott common stock received by Perclose stockholders in the merger will
be freely transferable, except that Abbott common stock received by persons who
are deemed to be "affiliates," as such term is defined under the Securities Act
of 1933, of Perclose may be resold by them only in transactions permitted by the
resale provisions of Rule 145, or Rule 144 in the case of such persons who
become affiliates of Abbott, promulgated under the Securities Act of 1933 or as
otherwise permitted under the Securities Act of 1933. Persons who may be deemed
to be affiliates of Abbott or Perclose generally 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 Abbott or Perclose as well as
significant stockholders.
Securities and Exchange Commission guidelines regarding qualification for
the use of the pooling of interests method of accounting also limit sales by
affiliates of the acquiring and acquired companies in a business combination.
Securities and Exchange Commission guidelines indicate further that the pooling
of interests method of accounting generally will not be challenged on the basis
of sales by affiliates of the acquiring or acquired company if they do not
dispose of any of the shares they own or shares they receive in connection with
a merger during the period beginning 30 days before the merger
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and ending when financial results covering at least 30 days of combined
operations have been published. See "--Expected Accounting Treatment."
The merger agreement requires Perclose to use its reasonable best efforts to
cause each of its affiliates to execute a written agreement restricting the
disposition by such affiliate of the Abbott common stock to be received by such
affiliate in the merger. It also requires Abbott to use its reasonable best
efforts to cause each of its affiliates to comply with such disposition
restrictions.
APPRAISAL RIGHTS
Under Delaware corporate law, holders of Perclose common stock are not
entitled to appraisal rights in connection with the merger because, on the
record date, Perclose common stock was designated and quoted for trading on The
Nasdaq National Market and will be converted into shares of Abbott common stock,
which at the effective time of the merger will be listed on the New York Stock
Exchange.
EFFECT ON AWARDS OUTSTANDING UNDER PERCLOSE STOCK PLANS
Under the merger agreement, at the effective time of the merger, Abbott will
assume each stock option plan of Perclose and all outstanding equity-based
awards. Each option to acquire shares of Perclose common stock under such plans
will be converted into an option to acquire Abbott common stock on the same
terms and conditions. The number of shares of Abbott common stock to be subject
to any such option will be equal to the number of shares of Perclose common
stock subject to such Perclose option multiplied by the applicable exchange
ratio and rounded down to the nearest whole share. The exercise price per share
of Abbott common stock under any such option will be equal to the aggregate
exercise price for the shares of Perclose common stock subject to such Perclose
option divided by the total number of shares of Abbott common stock to be
subject to such option. At the close of business on August 16, 1999, 2,053,421
shares of Perclose common stock were subject to outstanding options under such
plans.
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THE COMPANIES
PERCLOSE, INC.
Perclose, founded in 1992, designs, manufactures and markets less invasive
medical devices that automate the surgical closure or connection of blood
vessels. The Company's first product family, the Prostar-Registered Trademark-
and Techstar-Registered Trademark- products, which are marketed in major
countries worldwide, surgically close the arterial access site in the femoral
artery after catheterizaton procedures such as angioplasty, stenting,
atherectomy and diagnostic angiography. A second group of products, The
Heartflo-TM- System, is under development and is designed to automate the
surgical connection of blood vessels in conventional and minimally invasive
coronary artery bypass surgery.
ABBOTT LABORATORIES
Abbott Laboratories is an Illinois corporation incorporated in 1900.
Abbott's principal business is the discovery, development, manufacture and sale
of a broad and diversified line of health care products and services.
Abbott has six revenue segments:
(1) Pharmaceutical Products--includes a broad line of adult and pediatric
pharmaceuticals which are sold primarily on the prescription or
recommendation of physicians.
(2) Diagnostic Products--includes diagnostic systems and tests for blood
banks, hospitals, commercial laboratories, alternate-care testing sites
and consumers.
(3) Hospital Products--includes drugs and drug delivery systems,
perioperative and intensive care products, cardiovascular products, renal
products, oncology products, intravenous and irrigation solutions,
related manual and electronic administration equipment and diagnostic
imaging products for hospitals and alternate-care sites.
(4) Ross Products--includes a broad line of adult and pediatric
nutritionals. These products are sold primarily on the recommendation of
physicians or health care professionals. The segment also includes
specialty pharmaceuticals and consumer products.
(5) International--includes a broad line of hospital, pharmaceutical and
adult and pediatric nutritional products marketed and primarily
manufactured outside the United States. These products are sold primarily
on the prescription or recommendation of physicians and other health care
professionals. This segments also includes consumer products.
(6) Chemical and Agricultural Products--includes agricultural and chemical
products, bulk pharmaceuticals and animal health products.
Abbott also has a 50% owned joint venture, TAP Holdings Inc. TAP and its
subsidiary develop and market pharmaceutical products in the United States.
TAP's products are generally sold directly to physicians, retailers,
wholesalers, health care facilities and government agencies.
Abbott purchases, in the ordinary course of business, necessary raw
materials and supplies essential to Abbott's operations from numerous suppliers
worldwide. Abbott markets products in approximately 130 countries through
affiliates and distributors. Most of Abbott's products are sold both in the
United States and internationally. Abbott employs approximately 56,000 persons
in its various offices, plants and facilities located throughout North America,
South America, Europe, Africa, Asia and Australia. Abbott's corporate offices
are located at 100 Abbott Park Road, Abbott Park, Illinois 60064-6400, and the
telephone number is (847) 937-6100.
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ACQUISITION OF ALZA CORPORATION. On June 21, 1999, Abbott announced that it
had signed a definitive agreement to acquire ALZA Corporation, a research-based
pharmaceutical products company with leading drug delivery technologies, for
approximately $7.3 billion in Abbott common stock. For the year ended December
31, 1998, ALZA reported net revenue of $646.9 million and net income of $108.3
million. ALZA stockholders will receive a fixed exchange ratio of 1.20 shares of
Abbott common stock for each share of ALZA common stock. The completion of the
transaction is subject to a number of conditions, including regulatory approval
and the approval of ALZA's stockholders. The transaction is intended to receive
pooling of interests accounting treatment and is expected to be completed by the
end of 1999; however, there can be no guarantee that the transaction will be
completed by that time.
SECOND QUARTER RESULTS. On July 9, 1999, Abbott reported net sales of
$3.243 billion for the second quarter of 1999, compared to $3.067 billion for
the second quarter of 1998. For the second quarter of 1999, Abbott reported net
earnings of $642.7 million, or $0.42 per diluted share, compared to $585.6
million, or $0.38 per diluted share, for the second quarter of 1998.
THE MERGER AGREEMENT, THE STOCK OPTION AGREEMENT AND THE
STOCKHOLDERS AGREEMENT
THE FOLLOWING DESCRIPTION SUMMARIZES THE MATERIAL PROVISIONS OF THE MERGER
AGREEMENT, THE STOCK OPTION AGREEMENT AND THE STOCKHOLDERS AGREEMENT.
STOCKHOLDERS SHOULD READ CAREFULLY THE MERGER AGREEMENT, THE STOCK OPTION
AGREEMENT AND THE STOCKHOLDERS AGREEMENT WHICH ARE ATTACHED, RESPECTIVELY, AS
ANNEXES 1,2 AND 3 TO THIS PROXY STATEMENT/PROSPECTUS.
THE MERGER AGREEMENT
CONDITIONS TO THE COMPLETION OF THE MERGER. The closing of the merger will
take place no later than the first business day following satisfaction of the
conditions described in the merger agreement or such other date as is agreed to
in writing by the parties. Each party's obligation to effect the merger is
subject to the satisfaction or waiver of various conditions which include, in
addition to other customary closing conditions, the following:
- the adoption of the merger agreement by the holders of a majority of all
outstanding shares of Perclose common stock;
- approval of the shares of Abbott common stock issuable to Perclose
stockholders in the merger for listing on the New York Stock Exchange,
subject to official notice of issuance;
- no judgment, order, statute, law or regulation being entered, enacted,
enforced or issued by any court or other governmental entity of competent
jurisdiction or other legal restraint or prohibition in effect, and no
suit, action or proceeding by any governmental entity pending that would
prevent the completion of the merger;
- the expiration or termination of the waiting period required under the
Hart-Scott-Rodino Act;
- the expiration of any applicable period for action under the German
antitrust laws; and
- the effectiveness of the registration statement on Form S-4 under the
Securities Act.
In addition, each party's obligation to effect the merger is further subject
to the satisfaction or waiver of the following additional conditions:
- the representations and warranties of the other party set forth in the
merger agreement being true and correct as of the effective time of the
merger except where the failure to be true and correct would not have a
material adverse effect;
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- the other party to the merger agreement having performed in all material
respects all obligations required to be performed by it under the merger
agreement on or before the date on which the merger is to be completed;
- the absence of any material adverse change in the other party from July 8,
1999 until the date on which the merger is to be completed or, if one has
occurred, it has been cured;
- Abbott and Perclose must receive letters, respectively, from Arthur
Andersen LLP and Ernst & Young LLP regarding those firms' concurrence with
Abbott management's and Perclose management's conclusions, respectively,
that pooling of interests accounting is appropriate for the merger under
Accounting Principles Board Opinion No. 16 if completed in accordance with
the merger agreement; and
- Perclose having received from Wilson Sonsini Goodrich & Rosati, its
special counsel, and Abbott having received from Skadden, Arps, Slate,
Meagher & Flom (Illinois), its special counsel, an opinion in each case
dated as of the closing date stating that the merger will qualify as a
reorganization within the meaning of Section 368(a) of the Internal
Revenue Code.
Finally, Abbott's obligation to effect the merger is subject to receipt of
executed affiliate agreements from Perclose affiliates. The form of affiliate
agreement is attached as Annex A to the merger agreement.
The merger agreement provides that a "material adverse change" or "material
adverse effect" means, when used in connection with a party, any change or
effect that is, or is reasonable likely to be within three months, materially
adverse to the business, properties, assets, prospects or financial condition of
that party and its subsidiaries taken as a whole, other than any adverse change
or effect: (1) proximately caused by conditions affecting the economy or the
securities markets generally, (2) resulting from the announcement or pendency of
the merger, except for the loss of the services of a key group of employees of
Perclose and (3) any litigation brought or threatened against Perclose or any
member of its board of directors relating to the merger.
Perclose cannot assure that all of the conditions precedent to the merger
will be satisfied or waived by the party permitted to do so. Perclose cannot, at
this point, determine whether it would resolicit proxies in the event that it
decides to waive any of the items listed above. This decision would depend upon
the facts and circumstances leading to Perclose's decision to complete the
merger and whether Perclose believes there has been a material change in the
terms of the merger and its effect on Perclose stockholders. In making its
determination, Perclose would consider, among other factors, the reasons for the
waiver, the effect of the waiver on the terms of the merger, whether the
requirement being waived was necessary in order to make the deal fair to the
stockholders from a financial point of view, the availability of alternative
transactions and the prospects of Perclose as an independent entity. If Perclose
determines that a waiver of a condition would materially change the terms of the
merger, including the expected qualification of the merger as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code, it will
resolicit proxies.
NO SOLICITATION. The merger agreement provides that Perclose will not, nor
will it authorize or permit any of its directors, officers or employees or any
investment banker, attorney, or other representative or agent of it or any of
its subsidiaries to, directly or indirectly:
- solicit, initiate or encourage any inquiries or takeover proposals, as
described below;
- engage in any negotiations or discussions concerning, or provide any
non-public information or data to any person or entity relating to, a
takeover proposal; or
- agree to, approve or recommend any takeover proposal, or otherwise
facilitate any effort or attempt to make or implement a takeover proposal;
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<PAGE>
provided, that if the Perclose board of directors determines in good faith,
after consultation with its legal advisors, that such action is necessary in
order to comply with its fiduciary duties under applicable law, Perclose may, in
response to a superior proposal, as described below, which was not solicited by
it, subject to providing prior oral and written notice of its decision to do so
to Abbott:
- furnish under a customary and reasonable confidentiality agreement
information about Perclose to any person making a superior proposal; and
- participate in negotiations regarding such superior proposal.
The merger agreement provides that:
- the term "takeover proposal" means any offer or proposal for, any direct
or indirect acquisition or purchase of a substantial amount of assets of
Perclose or at least a 20% interest in Perclose's total voting securities
or any tender offer or exchange offer that if completed would result in
any person beneficially owning 20% or more of any class of equity
securities of Perclose or any merger, consolidation, business combination,
sale of substantially all assets, recapitalization, liquidation,
dissolution or similar transaction involving Perclose; and
- the term "superior proposal" means any bona fide written takeover
proposal, for which financing, to the extent required, is then committed,
made by a third party to acquire, directly or indirectly, more than 50% of
the voting power of the Perclose common stock or all or substantially all
of Perclose's assets and otherwise on terms which the Perclose board of
directors of the Company determines, in good faith, after consultation
with a financial advisor of nationally recognized reputation, to be more
favorable to Perclose stockholders than the merger with Abbott.
Except as expressly permitted by the merger agreement, neither the Perclose
board of directors nor any committee of the board will:
- withdraw or modify, or propose to withdraw or modify, in a manner adverse
to Abbott, the approval or recommendation by the Perclose board of
directors or such committee of the merger or the merger agreement;
- approve or recommend, or propose to approve or recommend, any takeover
proposal; or
- cause Perclose to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement related to any takeover
proposal, other than any such agreement entered into concurrently with a
termination as described in the next sentence in order to facilitate such
action.
Notwithstanding the foregoing, in response to a superior proposal which was
not solicited by Perclose and which did not otherwise result from a breach of
the provisions of the merger agreement described above, the Perclose board of
directors may terminate the merger agreement, but only if (1) the Perclose board
of directors determines in good faith, after consultation with its legal
advisors, that it is necessary to comply with its fiduciary duties to its
stockholders and (2) the Perclose board of directors has delivered written
notice to Abbott advising Abbott that the Perclose board of directors is
prepared to accept a superior proposal. Perclose must pay a fee in the amount of
$20 million in immediately available funds to Abbott upon such termination. See
"--Termination" and "--Termination Fees."
TERMINATION. The merger agreement may be terminated at any time prior to
the effective time of the merger, whether before or after adoption of the merger
agreement by the stockholders of Perclose as follows:
- Abbott and Perclose may jointly agree to terminate the merger agreement at
any time without completing the merger.
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- Either Abbott or Perclose may terminate the merger agreement if:
-- Abbott and Perclose do not complete the merger by December 31, 1999;
-- the holders of a majority of the outstanding shares of Perclose common
stock do not adopt the merger agreement;
-- a statute, rule, regulation or executive order has been enacted,
entered or promulgated, which prohibits the completion of the merger;
-- an order, decree, ruling or injunction has been entered, and is final
and non-appealable, permanently restraining, enjoining or otherwise
prohibiting the merger;
-- the Perclose board of directors receives an unsolicited proposal by a
third party to acquire Perclose on terms determined by the Perclose
board of directors to be more favorable to its stockholders than the
terms of the merger with Abbott, and the board in good faith
determines, after consultation with its legal advisors, that failure
to accept that superior proposal would create a substantial risk of
liability for breach of its fiduciary duties to its stockholders, and
Perclose (1) notifies Abbott of such proposal and (2) pays the
termination fee described below; or
-- the other party breached in any material respect any of its
representations, warranties or obligations under the merger agreement
and has not cured the breach within 45 days of receipt of notice.
- Abbott may also terminate the merger agreement if:
-- the Perclose board of directors withdraws or adversely modifies its
approval or recommendation of the merger agreement or fails to
reconfirm its recommendation upon request by Abbott; or
-- Perclose breaches the stock option agreement in any material respect.
TERMINATION FEES. Perclose must pay Abbott a termination fee of $20 million
in immediately available funds in connection with the merger agreement and the
merger if:
- (1) Perclose receives a takeover proposal or a takeover proposal otherwise
is publicly announced and the Perclose stockholders fail to approve the
merger agreement or (2) the Perclose board of directors withdraws or
adversely modifies its recommendation;
- Perclose terminates the merger agreement because a superior proposal has
been received and entered into, and (1) Perclose has provided notice of
that proposal to Abbott and (2) the Perclose board has determined that
failure to accept that superior proposal would create a substantial risk
of liability for breach of its fiduciary duty to its stockholders;
- Perclose intentionally or in bad faith materially breaches any of its
covenants or agreements;
- Perclose refuses to permit Abbott to exercise the option provided for in
the stock option agreement; or
- Perclose is acquired by another entity or enters into an acquisition
agreement with another entity within twelve months of a termination of the
merger agreement for any other reason, except a willful and material
breach by Abbott of the merger agreement not cured within 45 days notice.
The merger agreement further provides that if Perclose fails to pay any
termination fee due, Perclose must pay the costs and expenses in connection with
any action taken to collect payment, together with interest on the amount of the
termination fee.
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CONDUCT OF BUSINESS PENDING THE MERGER. Under the merger agreement,
Perclose has agreed that, prior to the effective time of the merger, it will use
commercially reasonable efforts to preserve in all material respects its
business organization intact and will conduct its operations in the ordinary and
usual course of business consistent with past practice, including retaining the
services of employees and conducting business with customers, suppliers,
licensors, licensees, distributors, regulators, creditors and others having
business relationships with it. In addition, Perclose has agreed that until the
completion of the merger or unless Abbott consents, Perclose and its subsidiary
will conduct their business in accordance with specific restrictions relating to
the following:
- the issuance of dividends and other distributions;
- the issuance and redemption of securities;
- amendment of the certificate of incorporation or bylaws of Perclose;
- the acquisition of assets or other entities;
- the disposition of properties or assets;
- the incurrence of indebtedness;
- capital expenditures;
- settlement of litigation or claims;
- modification or termination of significant contracts or agreements;
- entering into or extending agreements relating to the distribution, sale,
license, promotion or marketing by third parties of Perclose's products;
- modification of any Perclose product registration or license;
- maintenance of insurance policies;
- employees or employee benefits;
- licenses and intellectual property; or
- accounting principles or practices.
AMENDMENT; EXTENSION AND WAIVER. The merger agreement may, by mutual
agreement, be amended by the parties in writing at any time, except that after
the merger agreement has been adopted by the stockholders of Perclose, no
amendment may be entered into which requires further approval by the
stockholders without the consent of the stockholders. In addition, at any time
prior to the completion of the merger, a party may, by written instrument signed
on behalf of such party, extend the time for performance of the obligations of
any other party to the merger agreement, waive inaccuracies in representations
and warranties of any other party contained in the merger agreement or in any
related document and, except as provided in the merger agreement, waive
compliance by any other party with any agreements or conditions in the merger
agreement.
EXPENSES. Whether or not the merger is completed, all fees and expenses
incurred in connection with the merger and the merger agreement will be paid by
the party incurring such fees or expenses, except as otherwise provided in the
merger agreement and except that Abbott and Perclose will share equally the
expenses incurred in connection with printing and mailing this proxy
statement/prospectus and the registration statement of which it is a part.
REPRESENTATIONS AND WARRANTIES. The merger agreement contains customary
representations and warranties relating to, among other things:
- corporate organization and similar corporate matters of Abbott and
Perclose;
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- the capital structure of Perclose;
- authorization of the merger agreement, the stock option agreement and the
stockholders agreement and related matters of Abbott and Perclose;
- absence of material changes or events concerning Abbott or Perclose not
previously disclosed in documents filed by Abbott or Perclose, as the case
may be, with the SEC;
- the accuracy of information contained in documents filed by each of Abbott
and Perclose with the SEC and the absence of undisclosed liabilities of
Perclose;
- the accuracy of information supplied by each of Abbott and Perclose in
connection with this proxy statement/prospectus and the related
registration statement;
- the treatment of the merger as a pooling of interests and a tax-free
reorganization;
- compliance with applicable laws by Perclose;
- litigation of Perclose;
- existing benefit plans of Perclose;
- matters relating to compliance with the Employee Retirement Income
Security Act by Perclose;
- title to properties of Perclose;
- filing of tax returns and payment of taxes by Perclose;
- required stockholder vote of Perclose;
- satisfaction or inapplicability of certain state takeover statutes'
requirements for Perclose;
- engagement and payment of fees of brokers, investment bankers, finders and
financial advisors by Perclose;
- receipt of a fairness opinion by Perclose from its financial advisor;
- intangible assets of Perclose;
- the possession of and compliance with permits necessary to conduct
Perclose's business;
- the inapplicability of Perclose's rights agreement or "poison pill" to the
merger;
- intellectual property and year 2000 matters of Perclose;
- product registrations of Perclose;
- insurance policies of Perclose;
- products of Perclose;
- performance of contracts of Perclose; and
- interim operations of AL Acquisition Corp.
The representations and warranties in the merger agreement are complicated
and not easily summarized. You are urged to carefully read the article of the
merger agreement entitled "Representations and Warranties."
CERTIFICATE OF INCORPORATION AND BYLAWS. The certificate of incorporation
and bylaws of AL Acquisition Corp., as in effect immediately prior to the
effective time of the merger, will be the certificate of incorporation and
bylaws of the surviving corporation following the merger, except that the name
of the surviving corporation will be changed to "Perclose, Inc."
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THE STOCK OPTION AGREEMENT
Abbott required Perclose to enter into the stock option agreement as a
prerequisite to entering into the merger agreement. The stock option agreement
grants Abbott the option to buy up to 2,223,818 shares of Perclose common stock
at an exercise price of $54.00 per share. The number of shares issuable upon
exercise of the option and the exercise price of the option are subject to
adjustment to prevent dilution. Based on the number of shares of Perclose common
stock outstanding on July 8, 1998, the option would be exercisable for
approximately 19.9% of the outstanding shares of Perclose common stock, or 16.6%
after issuance of the shares of Perclose common stock subject to the option.
The option is intended to increase the likelihood that the merger will be
completed. Consequently, aspects of the stock option agreement may have the
effect of discouraging persons who might now or at any time be interested in
acquiring all or a significant interest in Perclose or its assets before
completion of the merger.
Abbott may exercise the option, in whole or part, up to one year from the
date on which Abbott first has the right to receive the termination fee.
The option will terminate and not become exercisable upon any of the
following:
- completion of the merger;
- the termination of the merger agreement other than under circumstances
which cause the option to become exercisable or in which it is still
possible that the option would become exercisable; or
- twelve months after termination of the merger agreement if the option has
not become exercisable.
Upon the occurrence of events set forth in the stock option agreement,
Perclose is required to repurchase the option or the shares issued upon exercise
of the option. In addition, the stock option agreement grants registration
rights to Abbott with respect to the shares of Perclose common stock represented
by the option.
THE STOCKHOLDERS AGREEMENT
As a condition to entering into the merger agreement, Abbott required all of
the directors and executive officers of Perclose to enter into a stockholders
agreement pursuant to which they agreed to vote all of their Perclose shares
"FOR" adoption of the merger agreement.
As of the record date, the Perclose stockholders who entered into the
stockholders agreement collectively held approximately 2,161,013 shares of
Perclose common stock which represented approximately 19.3% of the outstanding
Perclose common stock. None of these stockholders was paid additional
consideration in connection with the stockholders agreement.
Each party to the stockholders agreement agreed not to sell, assign, pledge,
transfer or otherwise dispose of, or grant any proxies with respect to, the
Perclose stock and options owned, controlled or acquired, either directly or
indirectly, by that person.
The stockholders agreement will terminate upon the earliest to occur of (1)
the completion of the merger, (2) the termination of the merger agreement and
(3) March 31, 2000.
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COMPARATIVE STOCK PRICES AND DIVIDENDS
Abbott common stock is listed on the New York Stock Exchange under the
trading symbol "ABT." Perclose common stock is quoted on The Nasdaq National
Market under the trading symbol "PERC." The following table sets forth, for the
periods indicated, dividends and the high and low sales prices per share of
Abbott common stock on the New York Stock Exchange Composite Transaction Tape
and of Perclose common stock on The Nasdaq National Market. For current price
information, stockholders are urged to consult publicly available sources.
<TABLE>
<CAPTION>
ABBOTT PERCLOSE
COMMON STOCK COMMON STOCK
----------------------------------- --------------------------------
DIVIDENDS DIVIDENDS
CALENDAR PERIOD HIGH LOW DECLARED HIGH LOW DECLARED
- ------------------------------------------------------------ -------- --- --------- -------- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
1997
First Quarter............................................. $30 1/4 $24 7/8 $.135 $28 1/2 $19 N/A
Second Quarter............................................ 34 7/16 26 7/16 .135 27 1/4 20 N/A
Third Quarter............................................. 34 1/4 29 3/8 .135 27 3/8 20 3/4 N/A
Fourth Quarter............................................ 34 5/8 28 1/2 .135 27 1/2 18 N/A
1998
First Quarter............................................. 39 7/16 32 1/2 .15 32 3/8 17 3/4 N/A
Second Quarter............................................ 42 11/16 34 7/8 .15 31 15/16 22 21/32 N/A
Third Quarter............................................. 45 11/16 36 5/8 .15 30 1/4 9 3/8 N/A
Fourth Quarter............................................ 50 1/16 39 .15 38 1/16 13 3/8 N/A
1999
First Quarter............................................. 51 7/16 43 .17 50 29 1/8 N/A
Second Quarter............................................ 53 5/16 41 15/16 .17 49 3/8 24 1/8 N/A
Third Quarter (through August 24, 1999)................... 45 11/16 40 11/16 .17 52 38 7/8 NA
</TABLE>
N/A--Not applicable
The following table sets forth the high and low sales prices per share of
Abbott common stock on the New York Stock Exchange Composite Transaction Tape
and of Perclose common stock on The Nasdaq National Market on July 7, 1999, the
last full trading day before the public announcement of the merger agreement,
and on August 24, 1999, the last day for which that information could be
calculated prior to the date of this proxy statement/prospectus:
<TABLE>
<CAPTION>
ABBOTT PERCLOSE
COMMON STOCK COMMON STOCK
----------------------------- -----------------------------
HIGH LOW HIGH LOW
----- --- ----- ---
<S> <C> <C> <C> <C>
July 7, 1999...................................... $44 7/16 $43 7/16 $52 $48
August 24, 1999................................... $44 5/16 $43 5/16 $51 11/16 $51
</TABLE>
COMPARISON OF RIGHTS OF COMMON SHAREHOLDERS
OF ABBOTT AND COMMON STOCKHOLDERS OF PERCLOSE
The rights of Perclose stockholders are currently governed by the Delaware
General Corporation Law, Perclose's restated certificate of incorporation and
Perclose's bylaws. After completion of the merger, a Perclose stockholder will
become a shareholder of Abbott, and, accordingly, his or her rights will be
governed by the Illinois Business Corporation Act, Abbott's restated articles of
incorporation and Abbott's bylaws.
The following description summarizes some differences between the rights of
holders of Abbott common stock and Perclose common stock. While we believe the
description covers the material differences between the two, this summary may
not contain all of the information that is important to
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you. You should carefully read the entire document and the other documents we
refer to for a more complete understanding of the differences between being a
stockholder of Perclose and a shareholder of Abbott.
CAPITALIZATION
ABBOTT. The total authorized shares of capital stock of Abbott consist of
(1) 2.4 billion common shares, without par value, and (2) one million preferred
shares, $1.00 par value per share. At the close of business on August 20, 1999,
approximately 1.5 billion Abbott common shares were issued and outstanding, and
no Abbott preferred shares were issued and outstanding. Abbott is not prohibited
under the merger agreement or otherwise from issuing additional Abbott common
shares or preferred shares.
PERCLOSE. The total authorized shares of capital stock of Perclose consists
of (1) 30 million shares of common stock, $0.001 par value per share, and (2) 5
million shares of preferred stock, $0.001 par value per share. The board of
directors has designated 30,000 shares of preferred stock as Series A
Participating Preferred Stock. At the close of business on August 16, 1999,
there were approximately 11.2 million shares of Perclose common stock
outstanding, and no shares of Perclose preferred stock outstanding. Perclose's
restated certificate of incorporation and bylaws do not prohibit Perclose from
issuing additional shares of Perclose common stock or Perclose preferred stock.
Under the merger agreement, however, Perclose is prohibited from issuing
additional Perclose common stock or Perclose preferred stock, except for
Perclose common stock issued pursuant to options and other awards outstanding as
of July 8, 1999 under Perclose's stock option plans or as is otherwise permitted
under the merger agreement.
VOTING RIGHTS
ABBOTT. Each holder of Abbott common shares is entitled to one vote for
each share on all matters submitted to a vote of the shareholders. Abbott's
restated articles of incorporation provide that each shareholder may cumulate
votes in the election of directors and give one candidate the number of votes
equal to the number of directors multiplied by the number of the shareholder's
shares or to distribute those cumulative votes in any proportion among the
candidates.
PERCLOSE. Each holder of Perclose common stock is entitled to one vote for
each share held of record on all matters submitted to a vote of the stockholders
and may not cumulate votes for the election of directors. The absence of
cumulative voting rights effectively means that the holders of a majority of the
shares voted at a meeting of stockholders may, if they so choose, elect all
directors to be selected at that meeting, thereby precluding minority
stockholder representation on Perclose's board of directors.
BOARD OF DIRECTORS
ABBOTT. Abbott's bylaws provide that Abbott's entire board of directors is
elected each year.
PERCLOSE. Perclose's bylaws provide that Perclose's board of directors is
divided into three classes of directors serving staggered three-year terms. As a
result, approximately one-third of Perclose's board of directors is elected each
year.
NUMBER, ELECTION, VACANCY AND REMOVAL OF DIRECTORS
ABBOTT. Abbott's board of directors currently has 13 members. The number of
directors may be changed by a resolution adopted by Abbott's board of directors
and also by Abbott's shareholders under Illinois law. The term of each director
expires at the next annual meeting of shareholders following his or her
election.
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Abbott's bylaws further provide that vacancies and newly created
directorships shall be filled by a majority of directors then in office, even if
less than a quorum. According to Abbott's bylaws, not more than one-third of the
directors of Abbott may be selected to fill vacancies in this manner during any
period between shareholder meetings.
Abbott's restated articles of incorporation do not address removal of
directors. As such, Illinois law provides that the holders of a majority of the
outstanding shares entitled to vote at an election of directors may remove any
director, with or without cause, at a meeting of shareholders. However, if less
than the entire board is to be removed, no director may be removed, with or
without cause, if the votes cast against his or her removal would be sufficient
to elect him or her if then cumulatively voted at an election of the entire
board of directors.
PERCLOSE. Perclose's board of directors currently has 7 members. Perclose's
bylaws provide that the number of directors may be changed by an amendment to
the bylaws, duly adopted by the board of directors or a majority of the
stockholders, or by a duly adopted amendment to the certificate of
incorporation.
Under Perclose's restated certificate of incorporation, vacancies on the
board of directors and newly created directorships resulting from any increase
in the authorized number of directors may be filled by a majority of the
remaining directors, even if less than a quorum or by a sole director; however,
a vacancy created by the removal of a director by the vote of the stockholders
or by a court order may be filled only by the affirmative vote of a majority of
the shares represented and voting at a duly held stockholder meeting at which a
quorum is present.
Perclose's bylaws provide that unless otherwise specified by statute,
directors may be removed, with or without cause, by holders of a majority of the
shares then entitled to vote at an election of directors. Delaware law states
that, with a staggered board, directors may only be removed for cause unless the
certificate of incorporation, not bylaws, provides otherwise. Thus, removal of
Perclose's directors may be done only for cause.
AMENDMENTS TO CERTIFICATES OF INCORPORATION
ABBOTT. Under Illinois law, amendments to a corporation's articles of
incorporation must be adopted by the action of the board of directors and
approved by two-thirds of all votes entitled to vote on that amendment.
Additionally, if any class or series of shares is entitled to vote as a class,
the proposed amendment must be approved by at least two-thirds of the votes of
the shares of each class or series of shares entitled to vote as a class.
Illinois law permits a corporation to decrease the voting requirement. Abbott's
restated articles of incorporation do not provide for a decrease of the voting
requirement. Illinois law permits certain non-economic changes to be made to a
corporation's articles of incorporation with the approval of a majority of the
entire board of directors, without shareholder approval.
PERCLOSE. Under Delaware law, amendments to a corporation's certificate of
incorporation must be approved by the board of directors, the affirmative vote
of the holders of a majority of the outstanding shares entitled to vote for the
amendment, and the affirmative vote of the holders of a majority of the
outstanding stock of each class entitled to vote for the amendment, unless a
higher vote is required by the corporation's certificate of incorporation.
Perclose's restated certificate of incorporation requires the affirmative vote
of two-thirds of the then outstanding voting securities of the corporation,
voting together as a single class, to amend the provisions relating to
cumulative voting, the number and election of directors, and stockholder action.
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AMENDMENTS TO BYLAWS
ABBOTT. Abbott's bylaws provide that the bylaws may be made, altered,
amended or repealed by the shareholders or the board of directors.
PERCLOSE. Perclose's restated certificate of incorporation and bylaws give
the stockholders entitled to vote and the board of directors each the power to
adopt, amend or repeal Perclose's bylaws by a vote of a majority of the total
number of directors or at any regular or special meeting of the stockholders by
the affirmative vote of the holders of a majority of the voting power of all of
the then outstanding shares entitled to vote thereon. The fact that such power
has been conferred upon the directors does not divest the stockholders of the
power, nor limit their power to adopt, amend or repeal bylaws.
STOCKHOLDER ACTION
ABBOTT. Under Illinois law, unless otherwise provided in a corporation's
articles of incorporation, any action required or permitted to be taken at a
meeting of shareholders may be taken without a meeting and without a vote, if a
consent in writing is signed by holders of shares having at least the number of
votes necessary to authorize or take such action at a shareholder meeting.
Abbott's restated articles of incorporation are silent on this matter so
Abbott's shareholders may act by written consent.
PERCLOSE. Under Delaware law, unless otherwise provided in a corporation's
certificate of incorporation, any action required or permitted to be taken by a
corporation's stockholders may be effected by less than unanimous consent
without prior notice and without a vote. Perclose's restated certificate of
incorporation states that no action can be taken by the stockholders except at
an annual or special meeting of the stockholders, and no action can be taken by
the stockholders' written consent.
SPECIAL STOCKHOLDER MEETINGS
ABBOTT. Abbott's bylaws provide that a special meeting of Abbott's
shareholders may be called only by:
- the chairman of the board of directors;
- the chief executive officer;
- the president;
- the board of directors; or
- the holders of not less than one-fifth of all outstanding shares entitled
to vote on the matter for which the meeting is called.
PERCLOSE. Perclose's bylaws provide that special meetings of the
stockholders may be called only by:
- the chairman of the board of directors;
- the president;
- the board of directors; or
- one or more stockholders holding shares in the aggregate entitled to cast
not less than 10% of the votes at that meeting.
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<PAGE>
ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER PROPOSALS OTHER THAN ELECTION OF
DIRECTORS
ABBOTT. Abbott's bylaws provide that a shareholder must give advance
written notice to bring business properly before an annual meeting of
shareholders. Abbott's bylaws provide that a shareholder's written notice must
be delivered to or mailed and received:
- not earlier than October 1 nor later than the first business day of
January prior to the annual meeting; or
- if the annual meeting is not in April and less than 65 days' notice or
prior public disclosure of the date of an annual meeting is given or made
to shareholders, a shareholder's notice must be received not later than
the close of business on the fifteenth day following the date on which
Abbott mailed its annual meeting notice or such public disclosure was
made, whichever first occurs.
Abbott's bylaws require that, to be in proper form, a shareholder's notice
must contain:
- a brief description of the business the shareholder desires to bring
before the annual meeting and the reasons for conducting the business at
the annual meeting;
- the shareholder's name and address;
- the class and number of shares of capital stock that the shareholder
beneficially owns; and
- any material interest the shareholder has in the proposal.
PERCLOSE. Perclose's bylaws provide that a stockholder must deliver advance
written notice to propose business to be brought before a meeting. Perclose's
bylaws provide that a stockholder's notice must be delivered to or mailed and
received:
- not less than 120 calendar days in advance of the date specified in
Perclose's prior year proxy statement; or
- if no annual meeting was held in the previous year or the date of the
annual meeting has been changed by more than 30 days from the date
contemplated at the time of the previous year's proxy statement, notice by
the stockholder must be received by Perclose a reasonable time before the
solicitation is made.
Perclose's bylaws require that, to be in proper form, a stockholder's notice
to the secretary shall set forth:
- the name and address of the stockholder who intends to propose the
business and the business to be proposed; and
- a representation that the stockholder is a holder of record of stock of
the corporation entitled to vote at such meeting and, if applicable,
intends to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice.
ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER NOMINATIONS OF DIRECTORS
ABBOTT. Abbott's bylaws also require advance notice from shareholders who
want to nominate candidates for election as directors. Abbott's bylaws provide
that a shareholder's notice must be delivered to or mailed and received at the
principal executive offices of Abbott:
- not earlier than October 1 nor later than the first business day of
January prior to the annual meeting; or
- if the annual meeting is not in April and less than 65 days' notice or
prior public disclosure of the date of an annual meeting is given or made
to shareholders, a shareholder's notice must be received not later than
the close of business on the fifteenth day following the day on which
Abbott mailed its annual meeting notice or such public disclosure was
made, whichever first occurs.
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Abbott's bylaws require that, to be in proper form, a shareholder's notice
must contain:
- as to each person whom the shareholder proposes to nominate for election
or re-election as a director:
-- the nominee's name, age, business address and residence address;
-- the nominee's principal occupation or employment;
-- the class and number of shares of capital stock that the nominee
beneficially owns;
-- the nominee's signed consent to serve as a director of the
corporation if elected;
-- any other information relating to the nominee that is required to be
disclosed in solicitations for proxies for election of director
pursuant to Securities and Exchange Commission rules; and
-- any other information as Abbott may reasonably require to determine
the nominee's eligibility to serve as a director; and
- as to the shareholder giving notice:
-- the shareholder's name and record address; and
-- the class and number of shares of capital stock that the shareholder
beneficially owns.
PERCLOSE. Perclose's bylaws also require advance notice from stockholders
who want to nominate candidates for election as directors. Perclose's bylaws
provide that a stockholder's notice must be delivered to or mailed and received:
- not less than 120 calendar days in advance of the date specified in
Perclose's prior year proxy statement; or
- if no annual meeting was held in the previous year or the date of the
annual meeting has been changed by more than 30 days from the date
contemplated at the time of the previous year's proxy statement, notice by
the stockholder must be received by Perclose a reasonable time before the
solicitation is made.
Perclose's bylaws require that, to be in proper form, a stockholder's notice
to the secretary shall set forth:
- the name and address of the stockholder who intends to make the
nominations and of the person or persons to be nominated;
- a representation that the stockholder is a holder of record of stock of
Perclose entitled to vote at such meeting and, if applicable, intends to
appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice;
- if applicable, a description of all arrangements or understandings between
the stockholder and each nominee and any other person or persons pursuant
to which the nomination or nominations are to be made by the stockholder;
- such other information regarding each nominee or each matter of business
to be proposed by such stockholder as would be required to be included in
a proxy statement filed pursuant to the proxy rules of the Securities and
Exchange Commission had the nominee been nominated, or intended to be
nominated, or the matter been proposed, or intended to be proposed by the
board of directors; and
- if applicable, the consent of each nominee to serve as director of the
corporation if so elected.
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LIMITATION OF PERSONAL LIABILITY OF DIRECTORS
ABBOTT. Illinois law permits a corporation to include in its articles of
incorporation a provision limiting the liability of its directors to the
corporation and its shareholders for money damages for breach of fiduciary duty
as a director, except:
- for any breach of the director's duty of loyalty to the corporation or its
shareholders;
- for acts or omissions not in good faith or that involved intentional
misconduct or a knowing violation of law;
- for unlawful payment of dividends or other unlawful acts after the
dissolution of the corporation; or
- for any transaction from which the director derived an improper personal
benefit.
The provision does not eliminate or limit the liability of a director for
any act or omission occurring before the date the provision became effective.
Abbott's restated articles of incorporation contain such a provision which
limits director's liability, except for the exceptions listed above.
PERCLOSE. Delaware law permits a corporation to eliminate or limit the
personal liability of directors to the corporation or its stockholders for
damages for any breach of fiduciary duty in such capacity. However, no such
provision can eliminate or limit the liability of any director:
- for any breach of the director's duty of loyalty to the corporation or its
stockholders;
- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- for unlawful payment of dividends or other unlawful acts after the
dissolution of the corporation; or
- for any transaction from which the director derived an improper personal
benefit.
The provision does not eliminate or limit the liability of a director for
any act or omission occurring before the date the provision became effective.
Perclose's restated certificate of incorporation contains a provision
eliminating the personal liability of directors to the corporation and the
stockholders for damages for any breach of fiduciary duty in such capacity to
the fullest extent permitted under Delaware law.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
ABBOTT. Generally, Illinois law provides that a corporation may indemnify
any person who is a party or is threatened to be made a party to any proceeding
by reason of the fact that such person is a director, officer, employee or agent
of the corporation if such person acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, the best interests of the
corporation and, with respect to any criminal action, had no reasonable cause to
believe his or her actions were unlawful.
Abbott's restated articles of incorporation provide that any person who was
or is a party, or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he or she is or was a director,
officer, employee or agent of the corporation, or who is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, must, in the
case of persons who are or were directors or officers of the corporation, and
may, as to such other persons, be indemnified, and the corporation must, in the
case of persons who are or were directors or officers of the corporation, and
may, as to such other persons,
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<PAGE>
advance expenses incurred in defending such actions, suits or proceedings, to
the fullest extent permitted by law.
PERCLOSE. Delaware law permits a corporation to indemnify officers and
directors for actions taken in good faith and in a manner they reasonably
believed to be in, or not opposed to, the best interests of the corporation and,
with respect to any criminal action, which they had no reasonable cause to
believe was unlawful.
Perclose's restated certificate of incorporation states that Perclose may
indemnify to the fullest extent permitted by law any person made or threatened
to be made a party to any action or proceeding, whether criminal, civil,
administrative, or investigative, by reason of the fact that such person or his
or her testator or intestate is or was a director, officer or employee of
Perclose or serves or served at any other enterprise as a director, officer or
employee at the request of Perclose or any predecessor to Perclose.
DIVIDENDS
ABBOTT. Under Illinois law, no distribution to shareholders may be made if,
after giving it effect: (1) the corporation would be insolvent; or (2) the net
assets of the corporation would be less than zero or less than the maximum
amount payable at the time of distribution to shareholders having preferential
rights in liquidation if the corporation were then to be liquidated.
Abbott's restated articles of incorporation provide that before any
dividends on the common shares or on any other class or classes of shares
ranking junior to the preferred shares with respect to payment of dividends can
be paid or declared or set apart for payment, the holders of preferred shares
are entitled to receive when and as declared by Abbott's board of directors,
cumulative cash dividends, out of any funds legally available for the
declaration of dividends. No dividends will be paid on any series of the
preferred shares in respect of any dividend period unless all cumulative
dividends accrued prior to that dividend period with respect to all preferred
shares of each other series have been paid or declared and set aside for
payment. Subject to any preferential rights of any other class or series of
shares, holders of Abbott common shares are entitled to receive dividends if, as
and when Abbott's board of directors declares dividends payable out of funds
legally available for distribution.
PERCLOSE. Under Delaware law, the directors of every corporation may
declare and pay dividends upon the shares of its capital stock either (1) out of
its surplus or (2) in case there is no surplus, out of its net profits for the
fiscal year in which the dividend is declared and/or the preceding fiscal year.
Perclose's restated certificate of incorporation is silent on this issue.
BUSINESS COMBINATIONS
ABBOTT. Abbott is governed by the provisions of section 11.75 of the
Illinois Business Corporation Act. Section 11.75 provides that a merger,
consolidation or disposition of assets or securities involving an "interested
shareholder" defined as a person beneficially owning 15% or more of a
corporation's voting stock, would be prohibited for three years following the
date such person became an interested shareholder unless:
- before such person became an interested shareholder, the board of
directors of the corporation approved the transaction in which the
interested shareholder became an interested shareholder;
- upon consummation of the transaction that resulted in the interested
shareholder becoming an interested shareholder, the interested shareholder
owned at least 85% of the voting shares of the corporation outstanding at
the time the transaction commenced; or
- following the transaction in which such person became an interested
shareholder, the transaction is approved by the board of directors and
authorized at a meeting of shareholders by the
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<PAGE>
affirmative vote of the holders of two-thirds of the outstanding voting
shares not owned by the interested shareholder.
Illinois law provides an extra protection for Illinois interested
shareholder transactions in Section 7.85 of the Illinois Business Corporation
Act by requiring any business combination to be approved by at least 80% of the
combined voting power of outstanding shares of all classes and two-thirds of the
disinterested shares. The higher voting requirements of this provision do not
apply to a transaction if (1) two-thirds of the disinterested directors approve
the transaction or (2) certain price and procedure requirements of Section 7.85
are satisfied.
Sections 7.85 and 11.75 only apply to Illinois corporations, such as Abbott,
which have a class of voting shares that is listed on a national securities
exchange, is quoted on an interdealer quotation system such as Nasdaq or is held
of record by more than 2,000 shareholders. An Illinois corporation may elect not
to be governed by Sections 7.85 and 11.75 in its original articles of
incorporation or an amendment thereto or in its bylaws, which amendment must be
approved by majority shareholder vote and may not be further amended by the
board of directors. Abbott is governed by Sections 7.85 and 11.75.
PERCLOSE. Under Section 203 of the Delaware General Corporation Law, a
Delaware corporation is also prohibited from engaging in a business combination
with an interested stockholder for a period of three years following the date
such person became an interested stockholder unless certain conditions are
satisfied. The definition of "interested stockholder" and the conditions to be
satisfied are the same as under Section 11.75 of the Illinois Business
Corporation Act.
MERGER OR SALE OF ASSETS
ABBOTT. Abbott's articles of incorporation contain no provisions governing
a merger or the sale of all or substantially all of its property and assets, but
Illinois corporate law requires such transactions to be approved by holders of
two-thirds of the outstanding stock entitled to vote thereon.
PERCLOSE. Perclose's restated certificate of incorporation contains no
provisions governing a merger or the sale of all or substantially all of its
property and assets, but Delaware corporate law, unlike Illinois corporate law,
requires such transactions to be approved by holders of a simple majority of the
outstanding stock entitled to vote thereon.
DISSENTERS OR APPRAISAL RIGHTS
ABBOTT. Under Illinois law, shareholders are entitled to dissent from and
obtain payment for his or her shares in the event of any of the following
corporate actions:
- mergers and share exchanges if shareholder authorization is required for
the transaction by the Illinois Business Corporation Act or the
corporation's articles of incorporation;
- the sale, lease or exchange of all or substantially all of the corporate
assets; or
- amendments to the articles of incorporation that materially and adversely
affect rights in respect of a dissenter's shares.
PERCLOSE. Under Delaware law, appraisal rights may be available in
connection with a statutory merger or consolidation in certain specific
situations. Appraisal rights are not available when a corporation is to be the
surviving corporation and no vote of its stockholders is required to approve the
merger or consolidation. In addition, no appraisal rights are available to
holders of shares of any class of stock which is either: (1) listed on a
national securities exchange or designated as a national market system security
on an interdealer quotation system by the National Association of Securities
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<PAGE>
Dealers, Inc. or (2) held of record by more than 2,000 stockholders, unless such
stockholders are required by the terms of the merger or consolidation to accept
anything other than:
- shares of the surviving corporation;
- shares of stock that are listed on a national securities exchange or
designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc.
or held of record by more than 2,000 stockholders;
- cash in lieu of fractional shares; or
- any combination of the foregoing.
Stockholders do not have dissenters' appraisal rights with respect to any
transaction involving the sale, lease or exchange of all or substantially all of
the assets of the corporation.
Stockholders who perfect their appraisal rights are entitled to receive cash
from the corporation equal to the value of their shares as established by
judicial appraisal. Corporations may enlarge these statutory rights by including
in their certificate of incorporation a provision allowing the appraisal rights
in any merger or consolidation in which the corporation is a constituent
corporation. Perclose's restated certificate of incorporation does not enlarge
these rights.
RIGHTS PLAN
ABBOTT. Abbott does not currently have a rights plan.
PERCLOSE. Perclose has a rights plan that effectively limits ownership of
common stock by any person or group to 20%. The rights plan generally contains
the following provisions:
The board of directors declared a dividend of one right for each share of
common stock outstanding on December 31, 1997. Prior to the distribution date
referred to below, the rights are evidenced by and trade with the certificates
for the common stock. After the distribution date, Perclose will mail rights
certificates to its stockholders, and the rights will become transferable apart
from the common stock.
Rights will separate from the common stock and become exercisable following
(1) the tenth day (or such later date as may be determined by a majority of the
board not affiliated with the acquiring person or group) after a person or group
acquires beneficial ownership of 20% or more of the common stock or (2) the
tenth business day (or such later date as may be determined by a majority of the
board of directors) after a person or group announces a tender or exchange
offer, the consummation of which would result in ownership by a person or group
of 20% or more of the Perclose common stock.
After the distribution date, each right will entitle the holder to purchase
for $100.00, one one-thousandth of a share of the Series A Participating
Preferred Stock of Perclose with economic terms similar to that of one share of
Perclose common stock.
If an acquiror obtains 20% or more of the Perclose common stock (other than
pursuant to a tender offer deemed adequate and in the best interests of Perclose
and its stockholders by the board of directors), then each right (other than
rights owned by an acquiring person or its affiliates) will entitle the holder
thereof to purchase, for the exercise price, a number of shares of Perclose
common stock having a then current market value of twice the exercise price.
If, after an acquiring person obtains 20% or more of the Perclose common
stock, (1) Perclose merges into another entity, (2) an acquiring entity merges
into Perclose or (3) Perclose sells more than 50% of its assets or earning
power, then each right (other than rights owned by an acquiring person or its
affiliates) will entitle the holder thereof to purchase, for the exercise price,
a number of shares of common stock of the person engaging in the transaction
having a then current market value of twice
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the exercise price (unless the transaction satisfies certain conditions and is
consummated with a person who acquired shares pursuant to a permitted offer, in
which case the rights will expire).
At any time after the date an acquiring person obtains 20% or more of
Perclose common stock and prior to the acquisition by the acquiring person of
50% of the outstanding shares of Perclose common stock, a majority of the
Perclose board of directors may exchange the rights (other than rights owned by
the acquiring person or its affiliates), in whole or in part, for shares of
Perclose common stock at an exchange ratio of one share of Perclose common stock
per right (subject to adjustment).
Rights will be redeemable at Perclose's option for $0.01 per right at any
time on or prior to the tenth day (or such later date as may be determined by a
majority of the Perclose board of directors) after public announcement that a
person has acquired beneficial ownership of 20% or more of the Perclose common
stock.
The rights expire on the earliest of (1) November 26, 2006, (2) exchange or
redemption of the rights as described above or (3) consummation of a merger,
consolidation or asset sale resulting in expiration of the rights as described
above.
The terms of the rights and the rights agreement may be amended in any
respect without the consent of the rights holders on or prior to the
distribution date; thereafter, the terms of the rights and the rights agreement
may be amended without the consent of the rights holders in order to cure any
ambiguities or to make changes which do not adversely affect the interests of
rights holders (other than the acquiring person).
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OWNERSHIP OF PERCLOSE COMMON STOCK
The following table sets forth certain information known to Perclose with
respect to the beneficial ownership of the Perclose common stock as of August
16, 1999, by (1) each person who is known to Perclose to beneficially own more
than five percent of the outstanding shares of the Perclose common stock, (2)
each director of Perclose, (3) each executive officer of Perclose and (4) all
Perclose directors and executive officers as a group. Unless otherwise
indicated, the address of each Perclose director and executive officer is the
address of Perclose's principal executive offices. A total of 11,197,814 shares
of the Perclose common stock was issued and outstanding as of August 16, 1999.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) OF CLASS(2)
- -------------------------------------------------------------------------------- -------------------- -------------
<S> <C> <C>
John B. Simpson, Ph.D., M.D.(3)................................................. 1,653,885 14.7
Putnam Investment Management, Inc. ............................................. 1,197,697 10.7
One Post Office Square
Boston, MA 02109
TCW Asset Management ........................................................... 759,993 6.8
865 South Figueroa Street
Suite 1800
Los Angeles, CA 90017
Deerfield Management ........................................................... 600,000 5.4
450 Lexington Avenue
Suite 1450
New York, NY 10017
Henry A. Plain, Jr.(4).......................................................... 245,778 2.2
James W. Vetter(5).............................................................. 229,053 2.0
Vaughn D. Bryson(6) ............................................................ 79,716 *
800 Pembroke Court
Vero Beach, FL 32963
Serge Lashutka(7) .............................................................. 22,000 *
Unocal Corporation
2141 Rosecrans Avenue, Suite 4000
El Segundo, CA 90245
Michael L. Eagle(8) ............................................................ 20,000 *
Eli Lilly and Company
Lilly Corporate Center
Indianapolis, IN 46285
Mark A. Wan(9) ................................................................. 8,436 *
Three Arch Partners
2800 Sand Hill Road, Suite 270
Menlo Park, CA 94025
Ronald W. Songer(10)............................................................ 101,391 *
Coy F. Blevins(11).............................................................. 58,875 *
John G. McCutcheon(12).......................................................... 49,235 *
Kenneth E. Ludlum(13)........................................................... 85,902 *
Randolph E. Campbell(14)........................................................ 52,296 *
All directors and executive officers as a group 2,607,150 22.4%
(includes 12 persons)(15).....................................................
</TABLE>
- ------------------------
* Less than 1%.
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(1) Except as indicated in the footnotes to this table, the persons or entities
named in the table have sole voting and investment power with respect to
all shares of Perclose common stock shown as beneficially owned by them,
subject to community property laws where applicable.
(2) Percent of the outstanding shares of Perclose common stock, treating as
outstanding all shares issuable on exercise of options held by the
particular beneficial owner that are included in the first column.
(3) Includes (a) 1,202,143 shares held by the Simpson Family Trust over which
Dr. Simpson and his wife hold voting and dispositive control, (b) 49,200
shares held by the John David Simpson Trust over which Dr. Simpson and his
wife hold voting and dispositive control and (c) 356,294 shares held by Fox
Hollow, Ltd. Also includes 46,248 shares issuable upon exercise of stock
options exercisable within 60 days after August 16, 1999.
(4) Includes (a) 95,349 shares held by the Plain Family Trust over which Mr.
Plain and his wife hold voting and dispositive control, (b) 20,000 shares
held by the Alexandra Marie Plain Trust, (c) 20,000 shares held by the
Henry Albert Plain III Trust. Also includes 52,643 shares issuable upon
exercise of stock options exercisable within 60 days after August 16, 1999.
(5) Includes 34,061 shares issuable upon exercise of stock options exercisable
within 60 days after August 16, 1999.
(6) Includes 30,000 shares held by the Vaughn D. Bryson Irrevocable Trust. Also
includes 49,716 shares issuable upon exercise of stock options exercisable
within 60 days after August 16, 1999.
(7) Includes 20,000 shares issuable upon exercise of stock options exercisable
within 60 days after August 16, 1999.
(8) Consists of 20,000 shares issuable upon exercise of stock options
exercisable within 60 days after August 16, 1999.
(9) Includes 8,436 shares issuable upon exercise of stock options exercisable
within 60 days after August 16, 1999.
(10) Includes 34,563 shares issuable upon exercise of stock options exercisable
within 60 days after August 16, 1999.
(11) Includes 30,475 shares issuable upon exercise of stock options exercisable
within 60 days after August 16, 1999.
(12) Includes 41,837 shares issuable upon exercise of stock options exercisable
within 60 days after August 16, 1999.
(13) Consists of 85,902 shares issuable upon exercise of stock options
exercisable within 60 days after August 16, 1999.
(14) Includes 22,256 shares issuable upon exercise of stock options exercisable
within 60 days after August 16, 1999.
(15) Includes 446,137 shares issuable upon exercise of stock options
exercisable within 60 days after August 16, 1999.
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LEGAL MATTERS
The validity of the shares of Abbott common stock to be issued in connection
with the merger will be passed upon for Abbott by Skadden, Arps, Slate, Meagher
& Flom (Illinois). The support for the discussion set forth under "The
Merger--Material United States Federal Income Tax Consequences of the Merger" in
this proxy statement/prospectus and the federal income tax consequences of the
merger to Perclose and its stockholders will be passed upon for Perclose by
Wilson Sonsini Goodrich & Rosati, Palo Alto, California.
EXPERTS
Arthur Andersen LLP, independent public accountants, has audited Abbott's
consolidated financial statements and schedule included in the Annual Report on
Form 10-K for the year ended December 31, 1998, as indicated in its reports,
which is incorporated by reference in this registration statement. The
consolidated financial statements and schedule are incorporated by reference in
reliance on Arthur Andersen LLP's report, which is given on its authority as an
expert in accounting and auditing.
The consolidated financial statements and financial statement schedule of
Perclose at March 31, 1999 and March 31, 1998 and for each of the three years in
the period ended March 31, 1999 appearing in Perclose's 1999 Annual Report (Form
10-K) have been audited by Ernst & Young, LLP, independent auditors, as set
forth in their report thereon included therein and incorporated by reference in
the proxy statement of Perclose, which is referred to and made part of this
prospectus and registration statement of Abbott. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report,
given on the authority of such firm as experts in accounting and auditing.
STOCKHOLDER PROPOSALS
If the merger is not consummated, it is currently anticipated that the 1999
Annual Meeting of stockholders of Perclose will be held on or about November 30,
1999. The period during which stockholder proposals could be submitted in order
to be considered for inclusion in the proxy materials for the 1999 Annual
Meeting, should such meeting occur, has already expired.
WHERE YOU CAN FIND MORE INFORMATION
Abbott and Perclose file annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information that Abbott and Perclose file with the
SEC at the SEC's public reference rooms at the following locations:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, NY 10048 Suite 1400
Chicago, IL 60661-2511
</TABLE>
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. These SEC filings are also available to the public from
commercial document retrieval services and at the Internet world wide web site
maintained by the SEC at "http://www.sec.gov." Reports, proxy statements and
other information concerning Abbott may also be inspected at the offices of the
New York Stock Exchange at 20 Broad Street, New York, New York 10005. Reports,
proxy statements and other information pertaining to Abbott are also available
for inspection at the offices of the Pacific Stock Exchange at 301 Pine Street,
San Francisco, California 94104 and the Chicago Stock Exchange at One Financial
Place, 440 S. LaSalle Street, Chicago, Illinois 60605. Reports, proxy statements
and other
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information pertaining to Perclose are also available for inspection at the
offices of The Nasdaq Stock Market, which is located at 1735 K Street, N.W.,
Washington, D.C. 20006.
Abbott filed a registration statement on Form S-4 on August 25, 1999 to
register with the SEC the Abbott common stock to be issued to Perclose
stockholders in the merger. This proxy statement/ prospectus is a part of that
registration statement and constitutes a prospectus of Abbott in addition to
being a proxy statement of Perclose. As allowed by SEC rules, this proxy
statement/prospectus does not contain all the information you can find in
Abbott's registration statement or the exhibits to the registration statement.
The SEC allows Abbott and Perclose to "incorporate by reference" information
into this proxy statement/prospectus, which means that the companies can
disclose important information to you by referring you to other documents filed
separately with the SEC. The information incorporated by reference is considered
part of this proxy statement/prospectus, except for any information superseded
by information contained directly in this proxy statement/prospectus or in later
filed documents incorporated by reference in this proxy statement/prospectus.
This proxy statement/prospectus incorporates by reference the documents set
forth below that Abbott and Perclose have previously filed with the SEC. These
documents contain important business and financial information about Abbott and
Perclose that is not included in or delivered with this proxy
statement/prospectus.
ABBOTT FILINGS (FILE NO. 001-02189):
1. Annual Report on Form 10-K for the year ended December 31, 1998;
2. Quarterly Reports on Form 10-Q for the quarters ended March 31, 1999 and
June 30, 1999;
3. Current Report on Form 8-K filed on June 30, 1999;
4. Definitive Proxy Statement filed on March 9, 1999; and
5. The description of Abbott common stock set forth in Abbott's registration
statement filed on Form S-3 on July 23, 1999.
PERCLOSE FILINGS (FILE NO. 000-26890)
1. Annual Report on Form 10-K for the year ended March 31, 1999;
2. Quarterly Report on Form 10-Q for the quarter ended June 30, 1999;
3. Definitive Proxy Statement filed on June 18, 1998; and
4. The description of Perclose common stock filed under Section 12 of the
Exchange Act on September 29, 1995 and Perclose's rights to acquire junior
participating preferred stock set forth in the Perclose Registration
Statement on Form 8/A, as amended, filed on January 28, 1997 and as
subsequently amended, filed on August 9, 1999.
Abbott and Perclose also incorporate by reference additional documents that
may be filed with the SEC under Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act between the date of this proxy statement/prospectus and the date of
the special meeting. These include periodic reports, such as Annual Reports on
Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as
well as proxy statements.
Abbott has supplied all information contained or incorporated by reference
in this proxy statement/prospectus relating to Abbott, and Perclose has supplied
all such information contained or incorporated by reference in this proxy
statement/prospectus relating to Perclose.
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Perclose stockholders should not send in their Perclose certificates until
they receive the transmittal materials from the exchange agent. Perclose
stockholders of record who have further questions about their share certificates
or the exchange of their Perclose common stock for Abbott common stock should
call the exchange agent.
If you are a stockholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through the companies,
the SEC or the SEC's Internet web site as described above. Documents
incorporated by reference are available from the companies without charge,
excluding all exhibits, except that if the companies have specifically
incorporated by reference an exhibit in this proxy statement/prospectus, the
exhibit will also be provided without charge. Stockholders may obtain documents
incorporated by reference in this proxy statement/prospectus by requesting them
in writing or by telephone from the appropriate company at the following
addresses:
<TABLE>
<S> <C>
Abbott Laboratories Perclose, Inc.
100 Abbott Park Road 400 Saginaw Drive
Abbott Park, Illinois 60064-6400 Redwood City, California 94063
Attention: Shareholder Services Attention: Investor Relations
Telephone: (847) 937-6100 Telephone: (650) 473-3100
</TABLE>
You should rely only on the information contained or incorporated by
reference in this proxy statement/prospectus. We have not authorized anyone to
provide you with information that is different from what is contained in this
proxy statement/prospectus. You should not assume that the information contained
in this proxy statement/prospectus is accurate as of any date other than the
date set forth on the cover page. Neither the mailing of this proxy
statement/prospectus to stockholders nor the issuance of Abbott common stock in
the merger creates any implication to the contrary.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement/prospectus contains certain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 with
respect to the financial condition, results of operations, business strategies,
operating efficiencies or synergies, competitive positions, growth opportunities
for existing products, plans and objectives of management, markets for stock of
Abbott and Perclose and other matters. Statements in this proxy
statement/prospectus that are not historical facts are hereby identified as
"forward-looking statements" for the purpose of the safe harbor provided by
Section 21E of the Exchange Act and Section 27A of the Securities Act. Such
forward-looking statements, including, without limitation, those relating to the
future business prospects, revenues and income, in each case relating to Abbott
and Perclose, wherever they occur in this proxy statement/ prospectus, are
necessarily estimates reflecting the best judgment of the senior management of
Abbott and Perclose, as the case may be, and involve a number of risks and
uncertainties that could cause actual results to differ materially from those
suggested by the forward-looking statements. Such forward-looking statements
should, therefore, be considered in light of various important factors,
including those set forth in this proxy statement/prospectus. Important factors
that could cause actual results to differ materially from estimates or
projections contained in the forward-looking statements include, without
limitation:
- competitive pressures among health care products manufacturers and service
providers may increase significantly;
- costs or difficulties related to the integration of the business of Abbott
and Perclose may be greater than expected;
- general economic or business conditions, either internationally,
nationally or in the states in which Abbott or Perclose is doing business,
may be less favorable than expected resulting in, among other things, a
reduced demand for health care products and services;
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- legislative or regulatory changes may adversely affect the business in
which Abbott and Perclose are engaged;
- technological changes, including "Year 2000" data systems compliance
issues, may be more difficult or expensive than anticipated; and
- changes may occur in the securities markets.
Words such as "estimate," "project," "plan," "intend," "expect," "believe"
and similar expressions are intended to identify forward-looking statements.
These forward-looking statements are found at various places throughout this
proxy statement/prospectus and the other documents incorporated by reference,
including, but not limited to, the Annual Report on Form 10-K for the year ended
December 31, 1998 of Abbott, including any amendments, and the Annual Report on
Form 10-K for the year ended March 31, 1999 of Perclose, including any
amendments. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this proxy
statement/prospectus. Neither Abbott nor Perclose undertakes any obligation to
publicly update or release any revisions to these forward-looking statements to
reflect events or circumstances after the date of this proxy
statement/prospectus or to reflect the occurrence of unanticipated events.
57
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ANNEX 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
DATED AS OF JULY 8, 1999
AMONG
ABBOTT LABORATORIES,
AL ACQUISITION CORP.
AND
PERCLOSE, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
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<S> <C> <C> <C>
ARTICLE I
The Merger.......................................................................................... 1-1
Section 1.1 The Merger.......................................................... 1-1
Section 1.2 Closing............................................................. 1-1
Section 1.3 Effective Time...................................................... 1-2
Section 1.4 Effects of the Merger............................................... 1-2
Section 1.5 Certificate of Incorporation and By-Laws............................ 1-2
Section 1.6 Directors........................................................... 1-2
Section 1.7 Officers............................................................ 1-2
ARTICLE II
Effect of the Merger on the Capital Stock of the Constituent Corporations; Exchange of
Certificates....................................................................................... 1-2
Section 2.1 Effect on Capital Stock............................................. 1-2
Section 2.2 Exchange of Certificates............................................ 1-3
ARTICLE III
Representations and Warranties...................................................................... 1-5
Section 3.1 Representations and Warranties of the Company....................... 1-5
Section 3.2 Representations and Warranties of Parent and Sub.................... 1-19
ARTICLE IV
Covenants Relating to Conduct of Business........................................................... 1-22
Section 4.1 Conduct of Business................................................. 1-22
Section 4.2 No Solicitation..................................................... 1-24
ARTICLE V
Additional Agreements............................................................................... 1-26
Section 5.1 Preparation of the Form S-4 and the Proxy Statement; Stockholders
Meeting............................................................. 1-26
Section 5.2 Letters of the Company's Accountants................................ 1-26
Section 5.3 Letters of Parent's Accountants..................................... 1-27
Section 5.4 Access to Information; Confidentiality.............................. 1-27
Section 5.5 Reasonable Efforts; Notification.................................... 1-27
Section 5.6 Stock Options....................................................... 1-28
Section 5.7 Indemnification and Insurance....................................... 1-29
Section 5.8 Fees and Expenses................................................... 1-30
Section 5.9 Public Announcements................................................ 1-31
Section 5.10 Affiliates.......................................................... 1-31
Section 5.11 Stock Exchange Listing.............................................. 1-31
Section 5.12 Pooling of Interests................................................ 1-32
Section 5.13 Service Credit...................................................... 1-32
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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<S> <C> <C> <C>
ARTICLE VI
Conditions Precedent................................................................................ 1-32
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger.......... 1-32
Section 6.2 Conditions to Obligations of Parent and Sub......................... 1-32
Section 6.3 Conditions to Obligation of the Company............................. 1-33
Section 6.4 Frustration of Closing Conditions................................... 1-34
ARTICLE VII......
Termination, Amendment and Waiver................................................................... 1-34
Section 7.1 Termination......................................................... 1-34
Section 7.2 Effect of Termination............................................... 1-35
Section 7.3 Amendment........................................................... 1-35
Section 7.4 Extension; Waiver................................................... 1-36
ARTICLE VIII
General Provisions.................................................................................. 1-36
Section 8.1 Nonsurvival of Representations and Warranties....................... 1-36
Section 8.2 Notices............................................................. 1-36
Section 8.3 Definitions......................................................... 1-37
Section 8.4 Interpretation...................................................... 1-37
Section 8.5 Counterparts........................................................ 1-37
Section 8.6 Entire Agreement; No Third-Party Beneficiaries...................... 1-38
Section 8.7 Governing Law....................................................... 1-38
Section 8.8 Assignment.......................................................... 1-38
Section 8.9 Enforcement......................................................... 1-38
Section 8.10 Severability........................................................ 1-38
</TABLE>
<PAGE>
AGREEMENT AND PLAN OF MERGER dated as of July 8, 1999, among Abbott
Laboratories, an Illinois corporation ("Parent"), AL Acquisition Corp., a
Delaware corporation and a wholly owned subsidiary of Parent ("Sub"), and
Perclose, Inc., a Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company,
and Parent, acting as the sole stockholder of Sub, have approved the merger of
Sub with and into the Company (the "Merger"), upon the terms and subject to the
conditions set forth in this Agreement, whereby each issued and outstanding
share of common stock, par value $.001 per share, of the Company, together with
the associated right (a "Right") to purchase, pursuant to the Company's January
27, 1997 Preferred Shares Rights Agreement, as amended effective July 2, 1999
(the "Rights Agreement"), one one-thousandth of a share of the Company's Series
A Participating Preferred Stock, par value $.001 per share (such common stock,
together with the Rights, "Company Common Stock"), other than Company Common
Stock owned by Parent, Sub or the Company, will be converted into the right to
receive common shares, no par value per share, of Parent ("Parent Common
Stock");
WHEREAS, concurrently herewith, the Company has entered into a Stock Option
Agreement (the "Option Agreement") with Parent granting Parent an irrevocable
option to purchase from the Company up to a number of authorized but unissued
shares representing 19.9% of the outstanding shares of Company Common Stock,
upon the terms and subject to the conditions set forth therein;
WHEREAS, substantially concurrently herewith and as a condition and
inducement to the willingness of Parent and Sub to enter into this Agreement,
Parent and certain affiliate stockholders of the Company have entered into a
Stockholders Agreement (the "Stockholders Agreement");
WHEREAS, Parent, Sub and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger;
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for financial accounting purposes, it is intended that the Merger
will be accounted for as a pooling of interests transaction;
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties hereto agree
as follows:
ARTICLE I
THE MERGER
Section 1.1 THE MERGER. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the Delaware General Corporation
Law (the "DGCL"), Sub shall be merged with and into the Company at the Effective
Time (as defined in Section 1.3). Following the Merger, the separate corporate
existence of Sub shall cease, and the Company shall continue as the surviving
corporation (the "Surviving Corporation") and shall succeed to and assume all
the rights and obligations of Sub in accordance with the DGCL. At the election
of Parent, any direct wholly owned subsidiary (as defined in Section 8.3) of
Parent may be substituted for Sub as a constituent corporation in the Merger. In
such event, the parties hereto agree to execute an appropriate amendment to this
Agreement in order to reflect such substitution.
Section 1.2 CLOSING. The closing of the Merger (the "Closing") shall take
place at 10:00 a.m., Chicago time, on a date to be specified by the parties,
which shall be no later than the first business day after satisfaction or waiver
of the conditions set forth in Article VI (the "Closing Date"), at the offices
of Skadden, Arps, Slate, Meagher & Flom (Illinois), 333 West Wacker Drive,
Chicago, Illinois, unless another date or place is agreed to in writing by the
parties hereto.
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<PAGE>
Section 1.3 EFFECTIVE TIME. Subject to the provisions of this Agreement,
as soon as practicable on or after the Closing Date, the parties shall file with
the Secretary of State of the State of Delaware a certificate of merger or other
appropriate documents (in any such case, the "Certificate of Merger") executed
in accordance with the relevant provisions of the DGCL and shall make all other
filings or recordings required under the DGCL in order to effect the Merger. The
Merger shall become effective at such time as the Certificate of Merger is duly
filed with the Secretary of State of the State of Delaware, or at such other
time as Parent and the Company shall agree should be specified in the
Certificate of Merger (the time the Merger becomes effective being the
"Effective Time").
Section 1.4 EFFECTS OF THE MERGER. The Merger shall have the effects set
forth in Section 259 of the DGCL.
Section 1.5 CERTIFICATE OF INCORPORATION AND BY-LAWS.
(a) The Certificate of Incorporation of Sub, as in effect immediately prior
to the Effective Time, shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter changed or amended as provided therein or
by applicable law, except that the name of the Surviving Corporation in such
Certificate of Incorporation shall be changed to "Perclose, Inc."
(b) The By-Laws of Sub, as in effect immediately prior to the Effective
Time, shall be the By-Laws of the Surviving Corporation until thereafter changed
or amended as provided therein or by applicable law.
Section 1.6 DIRECTORS. The directors of Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
Section 1.7 OFFICERS. The officers of the Company immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
Section 2.1 EFFECT ON CAPITAL STOCK. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any shares of
Company Common Stock or any shares of capital stock of Sub:
(a) CAPITAL STOCK OF SUB. Each issued and outstanding share of capital
stock of Sub shall be converted into and become one validly issued, fully paid
and nonassessable share of common stock, par value $.001 per share, of the
Surviving Corporation.
(b) CANCELLATION OF TREASURY STOCK AND PARENT-OWNED STOCK. Each share of
Company Common Stock that is owned by the Company and each share of Company
Common Stock that is owned by Parent or Sub shall automatically be canceled and
retired and shall cease to exist, and no Parent Common Stock or other
consideration shall be delivered in exchange therefor.
(c) CONVERSION OF COMPANY COMMON STOCK. Subject to Section 2.2(e), each
issued and outstanding share of Company Common Stock (other than shares to be
canceled in accordance with Section 2.1(b)) shall be converted into the right to
receive that number (the "Exchange Ratio") of fully paid and nonassessable
shares of Parent Common Stock (the "Merger Consideration") equal to the amount
obtained by dividing the Per Share Price (as hereinafter defined) by the Average
Price (as hereinafter defined); provided, however, that in no event shall the
Exchange Ratio exceed 1.35 or be less than 1.10. The "Per Share Price" shall
mean $54.00. The "Average Price" shall mean the average per share closing price
of Parent Common Stock during the 20 full trading days preceding the date of
1 - 2
<PAGE>
the last full trading day prior to the Stockholders Meeting (as defined in
Section 5.1) or any adjournment or postponement at which the Stockholder
Approval (as defined in Section 3.1(q)) is obtained, as such prices are reported
on the New York Stock Exchange ("NYSE") Composite Transactions Tape (as reported
by The Wall Street Journal, or, if not reported thereby, any other authoritative
source). As of the Effective Time, all such shares of Company Common Stock shall
no longer be outstanding and shall automatically be canceled and retired and
shall cease to exist, and each holder of a certificate which immediately prior
to the Effective Time represented any such shares of Company Common Stock shall
cease to have any rights with respect thereto, except the right to receive
shares of Parent Common Stock and any cash in lieu of fractional shares of
Parent Common Stock to be issued or paid in consideration therefor upon
surrender of such certificate in accordance with Section 2.2, without interest.
Notwithstanding the foregoing, if between the date of this Agreement and the
Effective Time the outstanding shares of Parent Common Stock shall have been
changed into a different number of shares or a different class, by reason of the
occurrence or record date of any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares or if Parent pays or
declares an extraordinary dividend with a record date prior to the Effective
Date, the Exchange Ratio shall be appropriately adjusted to reflect such stock
dividend, subdivision, reclassification, recapitalization, split, combination or
exchange or extraordinary dividend.
Section 2.2 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. As of the Effective Time, Parent shall deposit with
BankBoston N.A. (the "Exchange Agent"), or such other exchange agent selected by
Parent and reasonably acceptable to the Company, for the benefit of the holders
of shares of Company Common Stock, for exchange in accordance with this Article
II, through the Exchange Agent, certificates representing the shares of Parent
Common Stock (such shares of Parent Common Stock, being hereinafter referred to
as the "Exchange Fund") issuable pursuant to Section 2.1 in exchange for
outstanding shares of Company Common Stock.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time, but in any event within 10 business days thereafter, Parent
shall cause the Exchange Agent to mail to each holder of record of a certificate
or certificates which, immediately prior to the Effective Time, represented
outstanding shares of Company Common Stock (the "Certificates") whose shares
were converted into the right to receive shares of Parent Common Stock pursuant
to Section 2.1(c), (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other provisions as Parent may reasonably specify)
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Parent Common Stock. Upon
surrender of a Certificate for cancellation to the Exchange Agent, together with
such letter of transmittal, duly executed, and such other documents as may
reasonably be required by the Exchange Agent, the holder of such Certificate
shall be entitled to receive in exchange therefor a certificate representing
that number of whole shares of Parent Common Stock which such holder has the
right to receive pursuant to the provisions of this Article II after taking into
account all the shares of Company Common Stock then held by such holder under
all such Certificates so surrendered, cash in lieu of fractional shares of
Parent Common Stock to which such holder is entitled pursuant to Section 2.2(e)
and any dividends or other distributions to which such holder is entitled
pursuant to Section 2.2(c), and the Certificate so surrendered shall forthwith
be canceled. In the event of a transfer of ownership of Company Common Stock
which is not registered in the transfer records of the Company, a certificate
representing the proper number of shares of Parent Common Stock may be issued to
a person other than the person in whose name the Certificate so surrendered is
registered, if, upon presentation to the Exchange Agent, such Certificate shall
be properly endorsed or otherwise be in proper form for transfer and the person
requesting such issuance shall pay any transfer or other taxes required by
reason of the issuance of shares of Parent Common Stock to a person other than
the registered holder of such Certificate or establish to the reasonable
satisfaction of Parent that such tax
1 - 3
<PAGE>
has been paid or is not applicable. Until surrendered as contemplated by this
Section 2.2(b), each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender the certificate
representing shares of Parent Common Stock, cash in lieu of any fractional
shares of Parent Common Stock as contemplated by Section 2.2(e) and any
dividends or other distributions to which such holder is entitled pursuant to
Section 2.2(c). No interest shall be paid or shall accrue on any cash payable
pursuant to Sections 2.2(c) or 2.2(e). Holders of unsurrendered Certificates
shall not be entitled to vote at any meeting of shareholders of Parent.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions with respect to Parent Common Stock with a record date after
the Effective Time shall be paid to the holder of any unsurrendered Certificate
with respect to the shares of Parent Common Stock represented thereby, and no
cash payment in lieu of fractional shares shall be paid to any such holder
pursuant to Section 2.2(e) until the holder of record of such Certificate shall
surrender such Certificate. Following surrender of any such Certificate, there
shall be paid to the record holder of the certificate representing whole shares
of Parent Common Stock issued in exchange therefor, without interest, (i) at the
time of such surrender, the amount of any cash payable in lieu of a fractional
share of Parent Common Stock to which such holder is entitled pursuant to
Section 2.2(e) and the amount of dividends or other distributions with a record
date after the Effective Time theretofore paid with respect to such whole shares
of Parent Common Stock, and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time but
prior to such surrender and a payment date subsequent to such surrender payable
with respect to such whole shares of Parent Common Stock.
(d) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All shares of
Parent Common Stock issued upon the surrender for exchange of shares of Company
Common Stock in accordance with the terms hereof (including any cash paid
pursuant to Section 2.2(c) or 2.2(e)) shall be deemed to have been issued in
full satisfaction of all rights pertaining to such shares of Company Common
Stock, subject, however, to the Surviving Corporation's obligation to pay any
dividends or make any other distributions with a record date prior to the
Effective Time which may have been declared or made by the Company on such
shares of Company Common Stock in accordance with the terms of this Agreement or
prior to the date of this Agreement and which remain unpaid at the Effective
Time, and there shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the shares of Company Common
Stock which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation or
the Exchange Agent for any reason, they shall be canceled and exchanged as
provided in this Article II.
(e) NO FRACTIONAL SHARES.
(i) No certificates or scrip representing fractional shares of Parent
Common Stock shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests shall not entitle the
owner thereof to vote or to any rights of a shareholder of Parent.
(ii) Notwithstanding any other provision of this Agreement, each holder
of shares of Company Common Stock exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of Parent
Common Stock (after taking into account all Certificates delivered by such
holder) shall receive, in lieu thereof, cash (without interest) in an
amount, less the amount of any withholding taxes which may be required
thereon, equal to such fractional part of a share of Parent Common Stock
multiplied by the per share closing price of Parent Common Stock on the
Closing Date, as such price is reported on the NYSE Composite Transactions
Tape (as reported by The Wall Street Journal, or, if not reported thereby,
any other authoritative source).
1 - 4
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(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund which
remains undistributed to the holders of the Certificates for six months after
the Effective Time shall be delivered to Parent, upon demand, and any holders of
the Certificates who have not theretofore complied with this Article II shall
thereafter look only to Parent or the Surviving Corporation for, and Parent
shall remain liable for, payment of their claim for Parent Common Stock, any
cash in lieu of fractional shares of Parent Common Stock and any dividends or
distributions with respect to Parent Common Stock, without interest thereon.
(g) NO LIABILITY. None of Parent, Sub, the Company or the Exchange Agent
shall be liable to any person in respect of any shares of Parent Common Stock
(or dividends or distributions with respect thereto) or cash from the Exchange
Fund in each case delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any Certificate shall not have
been surrendered prior to the date immediately prior to the date on which such
Merger Consideration would otherwise escheat to or become the property of any
governmental body or authority, any such Merger Consideration, to the extent
permitted by applicable law, shall become the property of the Surviving
Corporation, free and clear of all claims or interest of any person previously
entitled thereto.
(h) LOST CERTIFICATES. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such person of a bond in such reasonable
amount as the Surviving Corporation may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed Certificate the
shares of Parent Common Stock and any cash in lieu of fractional shares, and
unpaid dividends and distributions on shares of Parent Common Stock deliverable
in respect thereof, pursuant to this Agreement.
(i) AFFILIATES OF THE COMPANY. Notwithstanding anything herein to the
contrary, Certificates surrendered for exchange into Merger Consideration by any
"affiliate" (as set forth on Section 3.1(u) of the Company Disclosure Schedule
(as defined in Section 3.1)) of the Company shall not be exchanged until the
Parent has received a written agreement from such person as provided in Section
5.10(a) hereof.
(j) WITHHOLDING OF TAX. The Exchange Agent or Parent shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of Company Common Stock such amounts as the Exchange
Agent, Parent or the Surviving Corporation, as the case may be, is required to
deduct and withhold with respect to such payment under the Code or any
provisions of state, local or foreign tax law. Any amounts so withheld shall be
treated for all purposes of this Agreement as having been paid to the holder of
the Company Common Stock in respect of which such deduction and withholding was
made.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set
forth on the disclosure schedule delivered by the Company to Parent
contemporaneous with the execution of this Agreement (the "Company Disclosure
Schedule"), the Company hereby represents and warrants to Parent and Sub as
follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
own its properties and assets and to carry on its business as now being
conducted. The Company is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the nature of its business or the
ownership, leasing or operation of its
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properties makes such qualification or licensing necessary, other than in such
jurisdictions where the failure to be so qualified or licensed individually or
in the aggregate would not have a material adverse effect (as defined in Section
8.3) on the Company. The Company has delivered to Parent complete and correct
copies of its Restated Certificate of Incorporation and By-Laws, in each case as
amended to the date hereof. The Company is not in violation of any of the
provisions of its Restated Certificate of Incorporation and By-Laws.
(b) SUBSIDIARIES. The Company has no subsidiaries other than Perclose GmbH
(the "Company Sub"). The Company Sub is a corporation duly organized, validly
existing and in good standing under the laws of Germany and has all requisite
corporate power and authority to own its properties and assets and to carry on
its business as now being conducted. The Company Sub is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership, leasing or operation of its
properties makes such qualification or licensing necessary, other than in such
jurisdictions where the failure to be so qualified or licensed individually or
in the aggregate would not have a material adverse effect on the Company. The
Company has delivered to Parent complete and correct copies of the Company Sub's
organizational documents, as amended to the date hereof. The Company Sub is not
in violation of any of the provisions of its organizational documents. All of
the outstanding shares of capital stock or other ownership interests in the
Company Sub are duly authorized, validly issued, fully paid and non-assessable
and are owned by the Company, free and clear of all Liens (as defined in Section
3.1(d)). Except as set forth in Section 3.1(b) of the Company Disclosure
Schedule, other than the Company Sub, there are no other entities in which the
Company owns, of record or beneficially, any direct or indirect equity interest
or any right (including contingent rights) to acquire the same.
(c) CAPITAL STRUCTURE. The authorized capital stock of the Company
consists of 30,000,000 shares of Company Common Stock and 5,000,000 shares of
preferred stock, par value $.001 per share ("Preferred Stock"). At the close of
business on June 30, 1999, (i) 11,174,966 shares of Company Common Stock were
issued and outstanding, (ii) no shares of Company Common Stock were held by the
Company in its treasury, (iii) 2,060,871 shares of Company Common Stock were
subject to outstanding Stock Options (as defined in Section 5.6(a)), (iv)
150,000 shares of Company Common Stock were reserved for issuance pursuant to
the Company's 1995 Employee Stock Purchase Plan (the "ESPP") and (v) 30,000
shares of the Company's Series A Participating Preferred Stock were reserved for
issuance in connection with the Rights Agreement. Except as set forth above, at
the close of business on June 30, 1999, no shares of capital stock or other
voting securities of the Company were issued, reserved for issuance or
outstanding. All outstanding shares of capital stock of the Company are, and all
shares which may be issued pursuant to the Stock Option Plans (as defined in
Section 5.6(a)) and the ESPP shall be, when issued in accordance with the terms
thereof, duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights. There are no bonds, debentures, notes or other
indebtedness of the Company having the right to vote (or convertible into
securities having the right to vote) on any matters on which stockholders of the
Company may vote. Except as set forth above and except for the Option Agreement,
there are no securities, options, warrants, calls, conversion rights, stock
appreciation rights, redemption rights, repurchase rights, preemptive rights,
subscriptions or other rights, commitments, agreements, arrangements or
undertakings of any kind to which the Company or the Company Sub is a party, or
by which either is bound, obligating the Company or the Company Sub to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other securities or assets of the Company or the Company Sub or
obligating the Company or the Company Sub to issue, grant, extend or enter into
any such security, option, warrant, call, conversion right, stock appreciation
right, redemption right, repurchase right, preemptive right, subscription or
other right, commitment, agreement, arrangement or undertaking. There are not
any outstanding contractual obligations of the Company to repurchase, redeem or
otherwise acquire any shares of capital stock of the Company. None of the
outstanding shares of the Company's capital stock is owned by a subsidiary of
the
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Company. The Company has not repurchased any shares of the Company Common Stock
since October 10, 1998.
(d) AUTHORITY; NONCONTRAVENTION. The Company has the requisite corporate
power and authority to enter into this Agreement and the Option Agreement and,
subject to approval of this Agreement by the holders of a majority of the
outstanding shares of Company Common Stock, to consummate the transactions
contemplated by this Agreement and the Option Agreement. The execution and
delivery of this Agreement and the Option Agreement by the Company and the
consummation by the Company of the transactions contemplated by this Agreement
and the Option Agreement have been duly authorized by all necessary corporate
action on the part of the Company, subject to approval of this Agreement by the
holders of a majority of the outstanding shares of Company Common Stock. This
Agreement and the Option Agreement have been duly executed and delivered by the
Company and constitute a valid and binding obligation of the Company,
enforceable against the Company in accordance with their terms, except as
enforceability may be limited by bankruptcy and other similar laws and general
principles of equity. The execution and delivery of this Agreement and the
Option Agreement do not, and the consummation of the transactions contemplated
by this Agreement and the Option Agreement and compliance with the provisions of
this Agreement and the Option Agreement shall not, and the execution, delivery
and performance of the Stockholders Agreement by the parties thereto shall not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to a loss of a material
benefit under, or result in the creation of any pledge, claim, lien, charge,
encumbrance or security interest of any kind or nature whatsoever (collectively,
"Liens") in or upon any of the properties or assets of the Company or the
Company Sub under any provision of (i) the Restated Certificate of Incorporation
or By-Laws of the Company or the organizational documents of the Company Sub,
(ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or
other agreement, contract, instrument, permit, concession, franchise or license
applicable to the Company or the Company Sub or their respective properties or
assets or (iii) subject to the governmental filings and other matters referred
to in the following sentence, any (A) statute, law, ordinance, rule or
regulation or (B) judgment, order or decree applicable to the Company or the
Company Sub or their respective properties or assets, other than, in the case of
clauses (ii) and (iii), any such conflicts, violations, defaults, rights or
Liens that individually or in the aggregate would not (x) have a material
adverse effect on the Company, (y) impair in any material respect the ability of
the Company to perform its obligations under this Agreement or the Option
Agreement, or (z) prevent or materially delay the consummation of any of the
transactions contemplated by this Agreement or the Option Agreement, except that
in the case of clause (iii)(B), such representation shall be made only as the
date hereof. No consent, approval, order or authorization of, or registration,
declaration or filing with, any Federal, state or local government or any court,
administrative agency or commission or other governmental authority or agency,
domestic or foreign (a "Governmental Entity"), is required by or with respect to
the Company or the Company Sub in connection with the execution and delivery of
this Agreement or the Option Agreement by the Company or the consummation by the
Company of the Merger, except for (1) the filing of a premerger notification and
report form by the Company under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), and the filing by the Company Sub of
any pre-merger notification required to be filed with the German Federal Cartel
Office, (2) the filing with the Securities and Exchange Commission (the "SEC")
of a proxy statement relating to the approval by the Company's stockholders of
this Agreement (as amended or supplemented from time to time, the "Proxy
Statement") and such reports under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as may be required in connection with this
Agreement and the Option Agreement and the transactions contemplated by this
Agreement and the Option Agreement, (3) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware and appropriate documents
with the relevant authorities of other states in which the Company is qualified
to do business, and (4) such other consents, approvals, orders, authorizations,
registrations, declarations, filings and notifications, the failure of which to
be obtained or made would
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not, individually or in the aggregate, have a material adverse effect on the
Company or prevent or materially delay the consummation of any of the
transactions contemplated by this Agreement.
(e) SEC DOCUMENTS. The Company has filed all required reports, schedules,
forms, statements and other documents with the SEC since March 31, 1996 (the
"SEC Documents") in a timely manner. As of their respective dates or, if
amended, as of the date of the last such amendment, the SEC Documents complied
in all material respects with the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), or the Exchange Act, as the case may be, and the
rules and regulations of the SEC promulgated thereunder applicable to such SEC
Documents, and none of the SEC Documents at the time they were filed contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Except to the extent that information contained in any SEC Document
has been revised or superseded by a later-filed SEC Document filed and publicly
available prior to the date of this Agreement, none of the SEC Documents
contains any untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly presented
the financial position of the Company as of the dates thereof and the results of
its operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to usual and recurring year-end audit adjustments that
have not been and are not expected to be material in amount and the absence of
footnotes). Since the date of the most recent audited financial statements
included in the Filed SEC Documents (as defined in Section 3.1(g)) and except as
described in Section 3.1(e) of the Company Disclosure Schedule, the Company has
not incurred any liabilities or obligations of any nature which would be
required under GAAP to be recorded or disclosed in the Company's financial
statements or footnotes thereto or contingent or other liabilities required to
be recorded or disclosed in the Company's financial statements or footnotes
thereto and which, individually or in the aggregate, would have a material
adverse effect on the Company.
(f) INFORMATION SUPPLIED. None of the information supplied or to be
supplied by the Company specifically for inclusion or incorporation by reference
in (i) the registration statement on Form S-4 to be filed with the SEC by Parent
in connection with the issuance of Parent Common Stock in the Merger (the "Form
S-4") will, at the time the Form S-4 is filed with the SEC, at any time it is
amended or supplemented and at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are made, not
misleading and (ii) the Proxy Statement will, at the date it is first mailed to
the Company's stockholders and at the time of the meeting of the Company's
stockholders held to vote on approval and adoption of this Agreement, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement will comply as to form in all material respects
with the requirements of the Exchange Act and the rules and regulations
thereunder, except that no representation is made by the Company with respect to
statements made or incorporated by reference therein based on information
supplied in writing by Parent or Sub specifically for inclusion or incorporation
by reference in the Proxy Statement.
(g) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as described in Section
3.1(g) of the Company Disclosure Schedule, since the date of the most recent
audited financial statements included in the Filed SEC Documents, the Company
has conducted its business only in the ordinary course consistent with past
practice, and there has not been (i) any material adverse change in the Company,
(ii) any
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declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of the Company's
capital stock (other than the Rights issued or to be issued pursuant to the
Rights Agreement), (iii) any split, combination or reclassification of any of
its capital stock or any issuance or the authorization of any issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock, (iv) (A) any granting by the Company to any officer of the
Company of any increase in compensation, except in the ordinary course of
business consistent with prior practice or as was required under employment
agreements in effect as of the date of the most recent audited financial
statements included in the SEC Documents filed prior to the date of this
Agreement (the "Filed SEC Documents"), (B) any granting by the Company to any
officer of the Company of any increase in severance or termination pay, except
as was required under any employment, severance or termination agreements in
effect as of the date of the most recent audited financial statements included
in the Filed SEC Documents or (C) any entry by the Company into any employment,
severance or termination agreement with any officer of the Company, (v) any
damage, destruction or loss, whether or not covered by insurance, that
individually or in the aggregate could reasonably be expected to have a material
adverse effect on the Company, (vi) any change in accounting methods, principles
or practices, except insofar as may have been required by a change in GAAP,
(vii) any tax election that individually or in the aggregate would have a
material adverse effect on the Company or any of its tax attributes or any
settlement or compromise of any material income tax liability claim, (viii) the
discovery of any environmental, FDA or other regulatory conditions or events
which could reasonably be expected to have a material adverse effect on the
Company, or (ix) any other action, which if taken after the date hereof would
constitute a breach of any provision set forth in Section 4.1 hereof.
(h) LITIGATION.
(i) Except as described in Section 3.1(h) of the Company Disclosure
Schedule, there is no suit, claim, action or proceeding pending or, to the
knowledge of the Company after consultation with the Company's outside legal
counsel, threatened against or affecting the Company or the Company Sub
that, if concluded adversely to the Company or the Company Sub, individually
or in the aggregate could reasonably be expected to have a material adverse
effect on the Company, nor is there any judgment, decree, injunction, rule,
order or citation of any Governmental Entity or arbitrator outstanding
against, or, to the knowledge of the Company after consultation with the
Company's outside legal counsel, investigation by any Governmental Entity
involving, the Company or the Company Sub that individually or in the
aggregate could reasonably be expected to have a material adverse effect on
the Company.
(ii) There is no outstanding order, judgment, injunction, award or
decree of any Governmental Entity against the Company or the Company Sub,
any of their properties, assets or businesses, or, to the knowledge of the
Company, any of the Company's current or former directors or officers or any
other person whom the Company has agreed to indemnify that individually or
in the aggregate, could reasonably be expected to have a material adverse
effect on the Company.
(i) CONTRACTS.
(i) Set forth in Section 3.1(i)(i) of the Company Disclosure Schedule is
a list of (A) all written agreements between the Company or the Company Sub
and any customer, supplier or distributor currently in effect, (B) a
description of the terms of any on-going oral agreements, arrangements or
understandings between the Company or the Company Sub and any customer,
supplier or distributor or reseller of the Company's Products (as defined in
Section 3.1(y)(i)), the terms of which are not in the ordinary course and
consistent with past practice or are material and (C) a list of all
contracts or agreements that are of a nature required to be filed as an
exhibit under the Exchange Act and the rules and regulations promulgated
thereunder (collectively, the "Significant Agreements"). The Company has
made available to Parent prior to the date of this
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Agreement complete and correct copies of each of the written Significant
Agreements, each as amended or modified to the date hereof (including any
waivers currently in effect with respect thereto). Each of the Significant
Agreements is in full force and effect and enforceable in accordance with
its terms, except in each case where the failure to be in full force and
effect and enforceable would not, individually or in the aggregate, be
reasonably likely to have a material adverse effect on the Company. Neither
the Company or the Company Sub has received any notice (written or oral) of
cancellation or termination of, or any expression or indication of an
intention or desire to cancel or terminate, any of the Significant
Agreements except in each case for those that are not, individually or in
the aggregate, reasonably likely to have a material adverse effect on the
Company.
(ii) The Company is not in violation of or in default under or, to the
knowledge of the Company, is any other party in violation of or in default
under (or does there exist any condition which upon the passage of time or
the giving of notice or both would cause such a violation of or default
under) any lease, sublease, permit, concession, franchise, license or any
other contract, agreement, arrangement or understanding to which it is a
party or by which it or any of its properties or assets is bound, except for
violations or defaults that individually or in the aggregate would not have
a material adverse effect on the Company.
(iii) The Company has not entered into any contract, agreement
arrangement or understanding with any affiliate of the Company that is
currently in effect other than agreements that are described in Sections
3.1(i)(iii), 3.1(l)(vii) and 5.7(a) of the Company Disclosure Schedule. The
Company is not subject to the terms of any non-competition, right of first
refusal, option or other agreement (including any area restrictions) which
may restrict in any way the conduct or operations or future conduct or
operations of the business of the Company or the use of the Company's
Intellectual Property (as defined in Section 3.1(p)).
(j) COMPLIANCE WITH LAWS.
(i) The Company and the Company Sub are in compliance with all
applicable statutes, laws, ordinances, regulations, rules, judgments,
decrees and orders of any Governmental Entity (collectively, "Legal
Provisions") applicable to their business or operations, except for
instances of possible noncompliance that, individually or in the aggregate,
would not have a material adverse effect on the Company or prevent or
materially delay the consummation of the Merger. The Company and the Company
Sub have in effect all Federal, state, local and foreign governmental
approvals, authorizations, certificates, filings, franchises, licenses,
notices, permits and rights, including all authorizations under
Environmental Laws (as hereinafter defined) ("Permits"), necessary for them
to own, lease or operate their properties and assets and to carry on their
businesses as now conducted, and there has occurred no default under, or
violation of, any such Permit, except for the lack of Permits and for
defaults under, or violations of, Permits which lack, default or violation
individually or in the aggregate would not have a material adverse effect on
the Company.
(ii) The term "Environmental Laws" means any Federal, state or local
statute, ordinance, rule, regulation, permit, consent, approval, license,
judgment, order, decree or injunction relating to: (A) Releases (as defined
in 42 U.S.C. Section 9601(22)) or threatened Releases of Hazardous Material
(as hereinafter defined) into the environment, (B) the generation,
treatment, storage, disposal, use, handling, manufacturing, transportation
or shipment of Hazardous Material or (C) the health or safety of employees
in the workplace environment. The term "Hazardous Material" means (1)
hazardous substances (as defined in 42 U.S.C. Section 9601(14)), (2)
petroleum, including crude oil and any fractions thereof, (3) natural gas,
synthetic gas and any mixtures thereof, (4) asbestos and/or asbestos
containing material, (5) PCBs or materials containing PCBs and (6) any
material regulated as a medical waste or infectious waste.
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(iii) During the period of ownership or operation by the Company of any
of its current or previously owned or leased properties, there have been no
Releases of Hazardous Material in, on, under or affecting such properties or
any surrounding site, and the Company has not disposed of any Hazardous
Material in a manner that has led, or could reasonably be anticipated to
lead to a Release, except in each case for those which individually or in
the aggregate would not have a material adverse effect on the Company, and
except as described in Section 3.1(j)(iii) of the Company Disclosure
Schedule. Prior to the period of ownership or operation by the Company of
any of its current or previously owned or leased properties, to the
knowledge of the Company after consultation with the Company's outside legal
counsel, no Hazardous Material was generated, treated, stored, disposed of,
used, handled or manufactured at, or transported shipped or disposed of
from, such current or previously owned or leased properties, and there were
no Releases of Hazardous Material in, on, under or affecting any such
property or any surrounding site, except in each case for the generation,
treatment, storage, disposal, use, handling, manufacturing, transportation
or shipment of Hazardous Material and Releases which individually or in the
aggregate would not have a material adverse effect on the Company, and
except as described in Section 3.1(j)(iii) of the Company Disclosure
Schedule. The Company has not received any written notice of, or entered
into any order, settlement or decree relating to: (A) any violation of any
Environmental Laws or the institution or pendency of any suit, action,
claim, proceeding or investigation by any Governmental Entity or any third
party in connection with any alleged violation of Environmental Laws, (B)
the response to or remediation of Hazardous Material at or arising from any
of the Company's properties or any other properties or (C) payment for,
response to or remediation of Hazardous Material at or arising from any of
the Company's properties or any other properties, except in each case for
any such notices, orders, settlements or decrees which individually or in
the aggregate would not have a material adverse effect on the Company.
(iv) Set forth in Section 3.1(j)(iv) of the Company Disclosure Schedule
is a true and complete list of all chemicals used by the Company that are
subject to the California Safe Drinking Water and Toxic Enforcement Act of
1986 ("Proposition 65"). With respect to such products, the Company has
either (A) made a determination that there is no violation of Proposition 65
or (B) provided the warning required under Proposition 65.
(k) ABSENCE OF CHANGES IN BENEFIT PLANS; LABOR RELATIONS. Except as
described in Section 3.1(k) of the Company Disclosure Schedule, since the date
of the most recent audited financial statements included in the Filed SEC
Documents, neither the Company nor the Company Sub has become liable under,
adopted or amended in any material respect any collective bargaining agreement
or any bonus, pension, profit sharing, deferred compensation, incentive or
equity compensation, stock ownership, stock purchase, stock option, phantom
stock, retirement, vacation, severance or termination pay, disability, death
benefit, hospitalization, medical, insurance or other material plan, arrangement
or understanding (whether or not legally binding) providing benefits to any
current or former employee, consultant, officer or director of the Company
(collectively, "Benefit Plans"). Except as described in Section 3.1(k) of the
Company Disclosure Schedule, as of the date hereof, there exist no employment,
consulting, severance, termination or indemnification agreements, arrangements
or understandings between the Company or the Company Sub, any current or former
employee, officer or director of the Company or the Company Sub. There are no
collective bargaining or other labor union agreements to which the Company or
the Company Sub is a party or by which it is bound. Since April 1, 1997, the
Company or the Company Sub has not encountered any labor union organizing
activity, nor had any actual or threatened employee strikes, work stoppages,
slowdowns or lockouts.
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(l) ERISA COMPLIANCE.
(i) Section 3.1(l)(i) of the Company Disclosure Schedule contains a true
and complete list of all "employee pension benefit plans" (as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) (sometimes referred to herein as "Pension Plans"),
"employee welfare benefit plans" (as defined in Section 3(l) of ERISA) and
all other Benefit Plans maintained, or contributed to, by the Company or any
person or entity that, together with the Company, is treated as a single
employer under Section 414(b), (c), (m) or (o) of the Code (the Company and
each such other person or entity, a "Commonly Controlled Entity") for the
benefit of any current or former employees, officers or directors of the
Company. The Company has made available to Parent true, complete and correct
copies of (A) each Benefit Plan (or, in the case of any unwritten Benefit
Plans, both a statement on Section 3.1(l)(i) of the Company Disclosure
Schedule identifying the Benefit Plan as being an unwritten Benefit Plan and
a description thereof), (B) the most recent annual report on Form 5500 filed
with the Internal Revenue Service with respect to each Benefit Plan (if any
such report was required), (C) the most recent summary plan description for
each Benefit Plan for which such summary plan description is required and
(D) each trust agreement or funding vehicle relating to any Benefit Plan.
Each Benefit Plan has been operated and administered in all material
respects in accordance with its terms and applicable laws, including, but
not limited to, ERISA and the Code.
(ii) Other than routine claims for benefits, there are no pending or, to
the Company's knowledge, threatened or anticipated, claims with respect to
any Benefit Plan, by any employee or beneficiary covered under any such
Benefit Plan, or otherwise involving any such Benefit Plan.
(iii) All Pension Plans have been the subject of determination letters
from the Internal Revenue Service to the effect that such Pension Plans are
qualified and exempt from Federal income taxes under Sections 401(a) and
501(a), respectively, of the Code, and no such determination letter has been
revoked or has any event occurred since the date of its most recent
determination letter or application therefor that would adversely affect its
qualification or materially increase its costs.
(iv) Neither the Company nor any Commonly Controlled Entity has ever
maintained, contributed or been obligated to contribute to any Benefit Plan
that is subject to Title IV of ERISA.
(v) There are no understandings, agreements or undertakings, written or
oral, that would prevent any Benefit Plan maintained by the Company or any
Commonly Controlled Entity (including any such plan covering retirees or
other former employees) from being amended or terminated without material
liability to the Company on or at any time after the Effective Time.
(vi) No Benefit Plan provides medical, surgical, hospitalization, death
or similar benefits (whether or not insured) for employees or former
employees of the Company or any subsidiary of the Company for periods
extending beyond their retirement or other termination of service, other
than (A) coverage mandated by applicable law, (B) insured death benefits or
(C) benefits the full cost of which is borne by the current or former
employee (or his or her beneficiary).
(vii) Section 3.1(l)(vii) of the Company Disclosure Schedule lists all
outstanding Stock Options as of June 30, 1999, showing for each Stock
Option: (A) the number of shares issuable, (B) the number of vested shares,
(C) the date of expiration and (D) the exercise price.
(viii) Except as expressly set forth in Section 3.1(l)(viii) of the
Company Disclosure Schedule, the consummation of the transactions
contemplated by this Agreement and the Option Agreement will not, either
alone or in combination with another event, (A) entitle any current or
former employee or officer of the Company or any Commonly Controlled Entity
to severance pay, unemployment compensation or any other payment, except as
expressly provided in this
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Agreement, or (B) accelerate the time of payment or vesting, or increase the
amount of compensation due any such employee or officer.
(ix) Except as described in Section 3.1(l)(ix) of the Company Disclosure
Schedule, the deduction of any amount payable pursuant to the terms of the
Benefit Plans shall not be subject to disallowances under Section 162(m) of
the Code.
(x) Except as described in Section 3.1(l)(x) of the Company Disclosure
Schedule, there are no suits, claim, actions, audits, investigations,
voluntary compliance requests or proceedings pending or, to the knowledge of
the Company after consultation with the Company's independent accountants,
threatened against or affecting any Benefit Plans.
(m) TAXES.
(i) The Company has timely and properly filed, and shall through the
Effective Time timely and properly file, all Federal, and material state,
local and foreign Tax Returns (as hereinafter defined) which were or will be
required to be filed through the Effective Time (taking into account any
applicable extensions), and all such Tax Returns are complete and accurate
in all material respects. The Company has duly and timely paid all Taxes (as
hereinafter defined). No material Tax deficiencies have been proposed or
assessed against the Company. To the knowledge of the Company, no issue has
been raised in any Tax audit of the Company which, by application of the
same or similar principles, could reasonably be expected upon a future Tax
audit of the Company to result in a proposed material deficiency for any
period. The Company is not liable for any Taxes attributable to any other
person, whether by reason of being a member at any time of any affiliated
group, being a party to a Tax sharing, Tax indemnity or other agreement
relating to Taxes, as a transferee or successor, or otherwise.
(ii) The Company has not consented to any extension of the statute of
limitations on assessment or collection with respect to any open Tax
Returns.
(iii) There are no Tax liens upon any property or assets of the Company
except for liens for current Taxes not yet due and payable.
(iv) The Company has delivered to Parent correct and complete copies of
all material Tax Returns of the Company filed for all periods not barred by
the applicable statute of limitations through the Effective Time. No
examination or audit of any Tax Return for any period not barred by the
applicable statute of limitations has occurred, no such examination or audit
is in progress and, to the knowledge of the Company (after consultation with
the Company's outside tax counsel), no such examination or audit is planned.
(v) The Company has properly withheld and timely paid to the appropriate
taxing authority all withholding or employment Taxes which it was required
to withhold and pay relating to salaries, compensation and other amounts
paid to its employees or other persons. All Forms W-2 and 1099 required to
be filed with respect thereto have been timely and properly filed.
(vi) The Company has not made any elections under Section 341(f) of the
Code.
(vii) The Company has not made any payment and is not obligated and will
not become obligated under any contract entered into before the Effective
Time, to make any payment that will or would reasonably be expected, as a
result of the Merger or otherwise, to be non-deductible under Sections 280G
or 162(m) of the Code (or any similar provision of state, local or foreign
law);
(viii) The Company does not have any knowledge (after consultation with
the Company's outside tax counsel) of any fact or circumstance that is
reasonably likely to prevent the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code.
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(ix) As used in this Agreement, (A) "Taxes" shall mean all Federal,
state, local and foreign taxes and other assessments of a similar nature,
tariffs, duties and governmental charges of any kind whatsoever (whether
imposed directly or through withholding), including any interest, additions
to tax, or penalties applicable thereto and (B) "Tax Returns" shall mean all
Federal, state, local and foreign tax returns, declarations, statements,
reports, schedules, forms and information returns and any amendments to any
of the foregoing that are filed or required to be filed relating to Taxes.
(n) NO EXCESS PARACHUTE PAYMENTS. No amount that could be received
(whether in cash or property or the vesting of property) as a result of any of
the transactions contemplated by this Agreement (whether solely or in
combination with another event) by any employee, officer or director of the
Company who is a "disqualified individual" (as such term is defined in proposed
Treasury Regulation Section 1.280G-1) under any employment, severance or
termination agreement, other compensation arrangement or Benefit Plan currently
in effect would be an "excess parachute payment" (as such term is defined in
Section 280G(b)(1) of the Code). No such person is entitled to receive any
additional payment from the Company, the Surviving Corporation or any other
person (a "Parachute Gross-Up Payment") in the event that the excise tax of
Section 4999(a) of the Code is imposed on such person. The Board of Directors of
the Company has not granted to any officer, director or employee of the Company
any right to receive any Parachute Gross-Up Payment.
(o) TITLE TO PROPERTIES.
(i) Set forth in Section 3.1(o) of the Company Disclosure Schedule is a
list of all of the real property leased or subleased by the Company or the
Company Sub. The Company has good and valid title to, or valid leasehold
interests in, all its properties and assets except for defects in title,
easements, restrictive covenants and similar encumbrances that individually
or in the aggregate would not have a material adverse effect on the Company.
All such assets and properties, other than assets and properties in which
the Company has a leasehold interest, are free and clear of all Liens,
except for Liens that individually or in the aggregate would not have a
material adverse effect on the Company. Except as described in Section
3.1(o) of the Disclosure Schedule, the Company or the Company Sub does not
currently own and has not owned in the past any real property.
(ii) The Company and the Company Sub have complied in all material
respects with the terms of all leases and subleases to which it is a party
and under which it is in occupancy, and all such leases and subleases are in
full force and effect in all material respects. The Company enjoys peaceful
and undisturbed possession in all material respects under all such leases.
(p) INTELLECTUAL PROPERTY.
(i) Section 3.1(p)(i) of the Company Disclosure Schedule sets forth a
complete and accurate list of all United States and foreign (A) patents and
patents applications; (B) Trademark registrations (including material
internet domain registrations) and applications and material unregistered
Trademarks; and (C) copyright registrations and applications; indicating for
each, the applicable jurisdiction, registration number (or application
number) and date issued (or date filed) owned, licensed or sublicensed by
the Company. For purposes of this Agreement, the term "Intellectual
Property" means the trademarks, service marks, trade names, URLs and
Internet domain names, databases, designs, slogans and general intangibles
of like nature, together with all goodwill related to the foregoing
(collectively, "Trademarks"); patents (including any registrations,
continuations, continuations in part, renewals and applications for any of
the foregoing); copyrights (including any registrations and applications
therefor); Software (as defined in Section 3.1(p)(ix)); technology, trade
secrets and other confidential information, know-how, proprietary processes,
customer lists, inventions, methodologies and, with respect to all of the
foregoing, related confidential documentation (collectively, "Trade
Secrets").
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(ii) Section 3.1(p)(ii) of the Company Disclosure Schedule sets forth a
complete and accurate list of all license agreements granting to the Company
any right to use or practice any rights under any Intellectual Property
licensed for use in or in connection with the Company's Products and
excluding licenses to Intellectual Property which is used for
infrastructural and general business purposes and is commercially available
on reasonable terms (collectively, the "License Agreements"), indicating for
each the title and the parties thereto.
(iii) Except as set forth in Section 3.1(p)(iii) of the Company
Disclosure Schedule and except as would not be materially adverse to the
Company, the Company owns or has licensed or sublicensed, free and clear of
Liens, orders and arbitration awards, all owned, licensed or sublicensed
Intellectual Property used in the Company's business, and has a valid and
enforceable right to use all of the Intellectual Property licensed and
sublicensed to the Company or the Company Sub and used in the Company's
business.
(iv) The Company has used its reasonable best efforts to protect the
Intellectual Property owned or licensed or sublicensed by the Company and
the Company Sub.
(v) Except as would not be materially adverse to the Company and except
as set forth in Section 3.1(p)(v) of the Company Disclosure Schedule, the
conduct of the Company's business as currently conducted does not infringe
upon any Intellectual Property rights owned or controlled by any third
party.
(vi) Except as described in Section 3.1(p)(vi) of the Company Disclosure
Schedule, there is no action, suit, claim or proceeding pending or, to the
Company's knowledge, threatened or any written claim from any person (A)
alleging that the Company's activities or the conduct of its business
infringes upon, violates, or constitutes the unauthorized use of the
Intellectual Property rights of any third party or (B) challenging the
ownership, use, validity or enforceability of any Intellectual Property of
the Company.
(vii) To the knowledge of the Company, after consultation with its
outside legal counsel, no third party is misappropriating, infringing,
diluting or violating any Intellectual Property owned by, or licensed to or
sublicensed to, the Company, and no such claims have been brought against
any third party by the Company; provided, however, that with respect to
Intellectual Property licensed or sublicensed to the Company or the Company
Sub, such representation shall be deemed to be made only with respect to the
field(s) covered in the license or sublicense agreement relating to such
Intellectual Property.
(viii) The execution, delivery and performance by the Company of this
Agreement and the Option Agreement, and the consummation of the transactions
contemplated hereby and thereby, will not result in the loss or impairment
of, or give rise to any right of any third party to terminate, any of the
Company's rights to own, license or sublicense any of its Intellectual
Property or its respective rights under the License Agreements, or require
the consent of any Governmental Entity or third party in respect of any such
Intellectual Property.
(ix) The Software owned or purported to be owned by the Company was
either (A) developed by employees of the Company within the scope of their
employment; (B) developed by independent contractors who have assigned their
rights to the Company pursuant to written agreements; or (C) otherwise
acquired by the Company from a third party. For purposes of this Section
3.1(p), "Software" means any and all (1) computer programs, (2) databases
and compilations, including any and all data and collections of data,
whether machine readable or otherwise; (3) descriptions, flow-charts and
other work product used to design, plan, organize and develop any of the
foregoing, and (4) all documentation, including user manuals and training
materials, relating to any of the foregoing.
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(x) All Trademarks registered in the United States and in any foreign
country have been in continuous use by the Company or the Company Sub. To
the knowledge of the Company, (A) there has been no prior use of such
Trademarks by any third party which would confer upon said third party
superior rights in such Trademarks; (B) the Company has taken reasonable
measures to police the Trademarks against third party infringement; (C) and
the Trademarks registered in the United States have been continuously used
in the form appearing in, and in connection with the goods and services
listed in, their respective registration certificates.
(xi) The Company has taken reasonable steps in accordance with normal
industry practice to protect the Company's rights in confidential
information and Trade Secrets of the Company. Without limiting the
foregoing, the Company enforces a policy of requiring each relevant
employee, consultant and contractor to execute proprietary information,
confidentiality and assignment agreements substantially in the Company's
standard forms, and, to the Company's knowledge, except under
confidentiality obligations, there has been no disclosure by the Company of
material confidential information of the Company or Trade Secrets.
(xii) The Company has instituted processes and controls to attain Year
2000 Compliance (as defined below), and the reasonably foreseeable expenses
or other liabilities associated with the process of securing full Year 2000
Compliance are not reasonably expected to have a material adverse effect on
the Company. "Year 2000 Compliance" means, except for any noncompliance that
would not be reasonably expected to cause a material adverse effect on the
Company, that hardware or Software used by the Company or the Company Sub
including, but not limited to, microcode, firmware, system and application
programs, files, databases, computer services, and microcontrollers,
including those embedded in computer and non-computer equipment (the
"Computer Systems") shall: (A) process date data from at least the years
1900 through 2101 without error or interruption; (B) maintain functionality
with respect to the introduction, processing or output of records containing
dates falling on or after January 1, 2000; and (C) be interoperable with
other software or hardware which may deliver records to, receive records
from, or interact with such Computer Systems in the course of conducting the
business of the Company, including processing data and manufacturing the
Products of the Company.
(q) VOTING REQUIREMENTS. The affirmative vote of the holders of a majority
of the outstanding shares of Company Common Stock at the Stockholders Meeting or
any adjournment or postponement thereof to approve this Agreement (the
"Stockholder Approval") is the only vote of the holders of any class or series
of the Company's capital stock necessary to approve this Agreement and the
transactions contemplated hereby.
(r) STATE TAKEOVER STATUTES. The Board of Directors of the Company has
approved the Merger, this Agreement, the Option Agreement and the Stockholders
Agreement, and such approval is sufficient to render inapplicable to the Merger,
this Agreement, the Option Agreement, the Stockholders Agreement and the
transactions contemplated by this Agreement, the Option Agreement and the
Stockholders Agreement, the provisions of Section 203 of the DGCL to the extent,
if any, such Section is applicable to the Merger, this Agreement, the Option
Agreement, the Stockholders Agreement and the transactions contemplated by this
Agreement, the Option Agreement and the Stockholders Agreement. To the Company's
knowledge after consultation with the Company's outside legal counsel, no other
state takeover statute or similar statute or regulation applies to or purports
to apply to the Merger, this Agreement, the Option Agreement, the Stockholders
Agreement or the transactions contemplated by this Agreement, the Option
Agreement or the Stockholders Agreement.
(s) RIGHTS AGREEMENT. The Rights Agreement has been amended to (i) render
the Rights Agreement inapplicable to the Merger and the other transactions
contemplated by this Agreement, the Option Agreement and the Stockholders
Agreement, (ii) ensure that (A) none of Parent, Sub, Parent's other subsidiaries
or their permitted assignees or transferees under the Option Agreement or the
Stockholders Agreement is an Acquiring Person (as defined in the Rights
Agreement) pursuant to the
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<PAGE>
Rights Agreement solely by virtue of the execution of this Agreement, the Option
Agreement and the Stockholders Agreement or the consummation of the Merger or
the other transactions contemplated by the Option Agreement or the Stockholders
Agreement and (B) a Distribution Date, a Triggering Event or a Shares
Acquisition Date (as such terms are defined in the Rights Agreement) does not
occur solely by reason of the execution of this Agreement, the Option Agreement
and the Stockholders Agreement, the consummation of the Merger, or the
consummation of the other transactions contemplated by the Option Agreement or
the Stockholders Agreement and (iii) provide that the Final Expiration Date (as
defined in the Rights Agreement) shall occur immediately prior to the Effective
Time, and such amendment may not be further amended by the Company without the
prior written consent of Parent.
(t) POOLING; TAX MATTERS. As of the date hereof, to the knowledge of the
Company, after consultation with its outside legal counsel and accountants,
neither the Company nor any of its affiliates has taken or agreed to take any
action or failed to take any action that would prevent (i) the Merger from being
treated for financial accounting purposes as a "pooling of interests" in
accordance with GAAP and the regulations and interpretations of the SEC or (ii)
the Merger from constituting a reorganization within the meaning of Section
368(a) of the Code.
(u) AFFILIATE LETTERS. Section 3.1(u) of the Company Disclosure Schedule
contains a true and complete list of all persons who, as of the date hereof, to
the knowledge of the Company, may be deemed to be affiliates of the Company,
including all directors and executive officers of the Company.
(v) CERTAIN BUSINESS PRACTICES. Neither the Company nor any director,
officer, employee or agent of the Company acting on behalf of the Company has
(i) used any funds for unlawful contributions, gifts, entertainment or other
unlawful payments relating to political activity, (ii) made any unlawful payment
to any foreign or domestic government official or employee or to any foreign or
domestic political party or campaign or violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended, (iii) consummated any transaction,
made any payment, entered into any agreement or arrangement or taken any other
action in violation of Section 1128B(b) of the Social Security Act, as amended,
or (iv) made any other unlawful payment.
(w) BROKERS; SCHEDULE OF FEES AND EXPENSES. No broker, finder, investment
banker, financial advisor or other person, other than U.S. Bancorp Piper Jaffray
Inc., is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Company.
Section 3.1(w) of the Company Disclosure Schedule sets forth the total fee
payable to U.S. Bancorp Piper Jaffray Inc. in connection with the transactions
contemplated by this Agreement.
(x) OPINION OF FINANCIAL ADVISOR. The Board of Directors of the Company
has received the opinion of U.S. Bancorp Piper Jaffray Inc., the Company's
financial advisor, dated the date hereof, to the effect that, as of such date,
the consideration to be received in the Merger by the Company's stockholders is
fair to the Company's stockholders from a financial point of view, a copy of
which has been, or promptly shall be, provided to Parent.
(y) REGULATORY COMPLIANCE.
(i) (A) With respect to each of the Company's products and, to the
extent applicable, products under development (collectively, "Products"),
(1) the Company or the Company Sub has obtained, unless otherwise exempt,
all applicable approvals, clearances, authorizations, licenses and
registrations required by United States or foreign governments or government
agencies, to permit any manufacturing, distribution, sales, marketing or
human research activities of the Company (the "Activities to Date") with
respect to each Product (collectively, "Licenses"); (2) the Company and the
Company Sub are in compliance in all material respects with all terms and
conditions of each License and with all requirements pertaining to the
Activities to Date with respect to each Product which is not required to be
the subject of a License; (3) the Company and the Company Sub are
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in compliance in all material respects with all applicable statutes and
regulations regarding registration, licensure or notification for each site
(in any country) at which each Product is manufactured, processed, packed,
held for distribution or from which and into which it is distributed; and
(4) to the extent any Product has been exported from the United States, the
Company has exported the Product in compliance in all material respects with
21 U.S.C. Section381(e) or Section382; (B) all manufacturing operations
performed by or on behalf of the Company have been and are being conducted
in all material respects in compliance with current good manufacturing
practices, and Quality System regulations issued by the FDA and, to the
extent applicable, counterpart regulations in the European Union and all
other countries where compliance is required; (C) all nonclinical laboratory
studies of Products under development, as described in 21 C.F.R.
Section58.3(d), sponsored by the Company and intended to be used to support
regulatory clearance or approval, have been and are being conducted in
compliance in all material respects with the good laboratory practice
regulations set forth in 21 C.F.R. Part 58 and applicable counterpart
regulations in the European Union and all other countries; (D) the Company
and the Company Sub are in compliance in all material respects with all
applicable reporting requirements for all licenses or plant registrations
described in clause (A) above, including, but not limited to, the applicable
adverse event reporting requirements of 21 C.F.R. Section 803; except, in
the case of the preceding clauses (A) through (D), for any such failures to
obtain or noncompliance which, individually or in the aggregate, would not
have a material adverse effect on the Company. For purposes of this Section
3.1(y)(i), the term "Licenses" shall specifically include, with respect to
the United States, product license applications, premarket approval
applications, premarket notifications under Section 510(k) of the Federal
Food, Drug and Cosmetic Act, as amended and investigational device
exemptions, and product export applications issued by the FDA.
(ii) To the knowledge of the Company, no filing or submission to the FDA
or any other Governmental Entity with regard to the Products that is the
basis for any approval or clearance contains any material omission or
material false information.
(iii) The Company is in compliance with all FDA and non-United States
equivalent agencies and similar state and local governmental agency
requirements concerning the maintenance, compilation and filing of reports,
including medical device reports, with regard to the Products, except where
such non-compliance would not reasonably be expected to result in a material
adverse effect.
(iv) Except as disclosed in Section 3.1(y)(iv) of the Company Disclosure
Schedule, the Company has not received any notice or other communication
from the FDA or any other Governmental Entity (A) contesting the premarket
clearance or approval of, the uses of or the labeling and promotion of any
of the Products or (B) otherwise alleging any violation of any laws or
regulations by the Company.
(v) Except as set forth in Section 3.1(y)(v) of the Company Disclosure
Schedule, there have been no recalls, field notifications or seizures
ordered (or to the Company's knowledge threatened) by the FDA or the Company
or any other United States or foreign governmental or regulatory body,
agency or office or any other governmental or regulatory body, agency or
office outside the United States, with respect to any of the Products,
including any facilities where any such Products are produced, processed,
packaged or stored.
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(z) PRODUCT REGISTRATIONS. Except as set forth in Section 3.1(z) of the
Company Disclosure Schedule, the Company and the Company Sub own and hold all
Product registrations, licenses, pricing approvals, marketing authorizations and
all other approvals ("Registrations") necessary to manufacture, market, sell and
distribute the Products in each country where the Products are currently
marketed, sold and distributed. For each Registration not owned or held by the
Company or Company Sub, Section 3.1(z) of the Company Disclosure Schedule sets
forth the following: the full corporate name and address of the owner and
holder, contact information, country and date of each Registration by product.
Except as set forth in Section 3.1(z) of the Company Disclosure Schedule, for
each Registration not owned or held by the Company or Company Sub, the owner or
holder of the Registration is obligated to transfer the Registration to the
Company.
(aa) INSURANCE. Section 3.1(aa) of the Company Disclosure Schedule sets
forth a complete and correct list of all material insurance policies in effect
as of the date hereof (including a brief summary of the nature and terms thereof
and any amounts paid or payable to the Company or Company Sub thereunder)
providing coverage in favor of the Company or Company Sub or any of their
respective properties. Each such policy is in full force and effect, no notice
of termination, cancellation or reservation of rights has been received with
respect to any such policy, to the knowledge of the Company there is no default
with respect to any provision contained in any such policy, and there has not
been any failure to give any notice or present any claim under any such policy
in a timely fashion or in the manner or detail required by any such policy,
except for any such failures to be in full force and effect, any such
terminations, cancellations, reservations or defaults, or any such failures to
give notice or present claims which, individually or in the aggregate, would not
reasonably be expected to have a material adverse effect. The coverage provided
by such policies is reasonable in scope and amount, in light of the risks
attendant to the business and activities of the Company and Company Sub except
for such absences of coverage which would not, individually or in the aggregate,
have a material adverse effect.
(bb) PRODUCTS. The Company (i) has taken all commercially reasonable steps
to identify all manufacturing problems or variations among Products, (ii) has
taken all commercially reasonable steps to identify a solution for all such
manufacturing problems or variations among Products and has implemented or will
implement such solution, (iii) has in inventory sufficient quantities of
Products to fill customer orders, (iv) has maintained substantially all of its
customer base existing as of June 30, 1999, and (v) has not been required by the
FDA to re-file any Registrations or Licenses for a Product or has not
experienced a disruption in its manufacture or supply of Products, the failure
of which to be true, individually or in the aggregate, would not have a material
adverse effect on the Company.
Section 3.2 REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB. Parent and
Sub hereby represent and warrant to the Company as follows:
(a) ORGANIZATION, STANDING AND CORPORATE POWER. Each of Parent and Sub is
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is incorporated and has all requisite
corporate power and authority to own its properties and assets and to carry on
its business as now being conducted. Each of Parent and Sub is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership, leasing or operation of its
properties makes such qualification or licensing necessary, other than in such
jurisdictions where the failure to be so qualified or licensed individually or
in the aggregate would not have a material adverse effect on Parent. Parent has
delivered to the Company complete and correct copies of its Articles of
Incorporation and By-Laws and the Certificate of Incorporation and By-Laws of
Sub, in each case as amended to the date hereof.
(b) AUTHORITY; NONCONTRAVENTION. Parent and Sub have the requisite
corporate power and authority to enter into this Agreement (and, in the case of
Parent, the Option Agreement and the Stockholders Agreement), and to consummate
the transactions contemplated by this Agreement (and, in the case of Parent,
those contemplated by the Option Agreement and the Stockholders Agreement).
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The execution and delivery of this Agreement (and, in the case of Parent, the
Option Agreement and the Stockholders Agreement) and the consummation of the
transactions contemplated by this Agreement (and, in the case of Parent, those
contemplated by the Option Agreement and the Stockholders Agreement) have been
duly authorized by all necessary corporate action on the part of Parent and Sub.
This Agreement (and, in the case of Parent, the Option Agreement and the
Stockholders Agreement) has been duly executed and delivered by Parent and Sub,
and constitutes a valid and binding obligation of each such party, enforceable
against each such party in accordance with its terms except as enforceability
may be limited by bankruptcy and other similar laws and general principles of
equity. The execution and delivery of this Agreement, the Option Agreement and
the Stockholders Agreement do not, and the consummation of the transactions
contemplated by this Agreement, the Option Agreement and the Stockholders
Agreement and compliance with the provisions of this Agreement, the Option
Agreement and the Stockholders Agreement shall not, conflict with, or result in
any violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of a material benefit under, or result in the creation
of any Lien in or upon any of the properties or assets of Parent or Sub under,
any provision of (i) the Articles of Incorporation or By-Laws of Parent or
Certificate of Incorporation or By-Laws of Sub, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement, contract,
instrument, permit, concession, franchise or license applicable to Parent or Sub
or their respective properties or assets or (iii) subject to the governmental
filings and other matters referred to in the following sentence, any (A)
statute, law, ordinance, rule or regulation or (B) judgment, order or decree
applicable to Parent or Sub or their respective properties or assets, other
than, in the case of clauses (ii) and (iii), any such conflicts, violations,
defaults, rights or Liens that individually or in the aggregate would not (x)
have a material adverse effect on Parent, (y) impair in any material respect the
ability of each of Parent and Sub to perform its obligations under this
Agreement, or (z) prevent or materially delay the consummation of any of the
transactions contemplated by this Agreement, except that in the case of clause
(iii)(B), such representation shall be made only as the date hereof. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity is required by or with respect to Parent or Sub in
connection with the execution and delivery of this Agreement (and, in the case
of Parent, the Option Agreement and the Stockholders Agreement) by Parent and
Sub or the consummation by Parent and Sub of the transactions contemplated by
this Agreement (and, in the case of Parent, those contemplated by the Option
Agreement and the Stockholders Agreement), except for (1) the filing of a
premerger notification and report form under the HSR Act and the filing of any
pre-merger notification required to be filed with the German Federal Cartel
Office, (2) the filing with the SEC of the Form S-4 and such reports under the
Exchange Act as may be required in connection with this Agreement, the Option
Agreement or the Stockholders Agreement and the transactions contemplated by
this Agreement, the Option Agreement or the Stockholders Agreement, (3) the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware and appropriate documents with the relevant authorities of other states
in which Parent and Sub are qualified to do business and (4) such other
consents, approvals, orders, authorizations, registrations, declarations and
filings, the failure of which to be obtained or made would not, individually or
in the aggregate, have a material adverse effect on Parent or prevent or
materially delay the consummation of any of the transactions contemplated by
this Agreement.
(c) INFORMATION SUPPLIED. None of the information supplied or to be
supplied by Parent or Sub specifically for inclusion or incorporation by
reference in (i) the Form S-4 shall, at the time the Form S-4 is filed with the
SEC, at any time it is amended or supplemented and at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading, and (ii) the Proxy Statement shall, at the
date it is first mailed to the Company's stockholders and at the time of the
meeting of the Company's stockholders held to vote on approval and adoption of
this Agreement, contain any untrue statement of
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a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Form S-4 shall
comply as to form in all material respects with the requirements of the
Securities Act and the rules and regulations thereunder, except that no
representation is made by Parent or Sub with respect to statements made or
incorporated by reference therein based on information supplied in writing by
the Company specifically for inclusion or incorporation by reference in the Form
S-4.
(d) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in the
Parent SEC Documents (as defined in Section 3.2(h)) filed with the SEC by Parent
prior to the date of this Agreement ("Filed Parent SEC Documents"), since the
date of the most recent audited financial statements included in the Filed
Parent SEC Documents, there has not been (i) any material adverse change in
Parent or (ii) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to any of
the Parent's capital stock (except for regular quarterly cash dividends not in
excess of 150% of the most recent quarterly dividend).
(e) BROKERS. No broker, finder, investment banker, financial advisor or
other person, other than Goldman, Sachs & Co., is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of Parent or Sub.
(f) INTERIM OPERATIONS OF SUB. Sub was formed solely for the purpose of
engaging in the transactions contemplated hereby, has engaged in no other
business activities and has conducted its operations only as contemplated
hereby.
(g) POOLING; TAX MATTERS. As of the date hereof, assuming the disposition
by the Parent of any "tainted shares" required to be disposed of prior to the
Effective Time, to the knowledge of Parent, after consultation with its outside
legal counsel and accountants, neither Parent nor any of its affiliates has
taken or agreed to take any action or failed to take any action that would
prevent (i) the Merger from being treated for financial accounting purposes as a
"pooling of interests" in accordance with GAAP and the regulations and
interpretations of the SEC or (ii) the Merger from constituting a reorganization
within the meaning of Section 368(a) of the Code.
(h) PARENT SEC DOCUMENTS. Parent has filed all required reports,
schedules, forms, statements and other documents with the SEC since January 1,
1996 (the "Parent SEC Documents"). As of their respective dates or, if amended,
as of the date of the last such amendment, the Parent SEC Documents complied in
all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such Parent SEC Documents, and none of the
Parent SEC Documents at the time they were filed contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Except to the extent
that information contained in any Parent SEC Document has been revised or
superseded by a later-filed Parent SEC Document filed and publicly available
prior to the date of this Agreement, none of the Parent SEC Documents contains
any untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of Parent included in the Parent SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly presented the consolidated financial position of
Parent as of the dates thereof and the consolidated results of its operations
and cash flows for the periods then ended (subject, in the case of unaudited
statements, to usual and recurring year-end audit adjustments that have not been
and are not expected to be material in amount and the absence of footnotes).
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ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 CONDUCT OF BUSINESS.
(a) CONDUCT OF BUSINESS BY THE COMPANY. During the period from the date of
this Agreement to the Effective Time, the Company shall, and shall cause the
Company Sub to, carry on its businesses in the ordinary course consistent with
the manner as heretofore conducted and, to the extent consistent therewith, use
all commercially reasonable efforts to preserve intact its current business
organization and preserve its relationships with customers, suppliers,
licensors, licensees, distributors, regulators, creditors, employees and others
having business dealings with it. Without limiting the generality of the
foregoing, other than as set forth in Section 4.1 of the Company Disclosure
Schedule or with respect to the amendment of the Rights Agreement (as described
in Section 3.1(s)), during the period from the date of this Agreement to the
Effective Time, the Company shall not, and shall cause the Company Sub not to,
without Parent's prior written consent:
(i) (A) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, stock or property), in respect of, any of
its capital stock, (B) split, combine or reclassify any of its capital stock
or issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock (other than the
issuance of shares of Company Common Stock upon the exercise of Stock
Options outstanding on the date of this Agreement and in accordance with
their present terms or as contemplated by Section 5.6 or as provided for in
the Option Agreement) or (C) purchase, redeem or otherwise acquire any
shares of capital stock of the Company or the Company Sub or any other
securities thereof or any rights, warrants or options to acquire any such
shares or other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber any shares of
its capital stock, any other securities or any securities convertible into,
or any rights, warrants, options, calls, conversion rights, stock
appreciation rights, redemption rights, repurchase rights, preemptive
rights, subscriptions or other rights, commitments, agreements, arrangement
or undertakings of any kind to acquire, any securities (other than (A) the
issuance of Stock Options to newly hired employees, consistent in amount and
terms with past practice, in an amount not in excess of Stock Options for
5,000 shares of Company Common Stock to any individual new hire and an
amount not in excess of Stock Options for 100,000 shares of Company Common
Stock in the aggregate, (B) the issuance of shares of Company Common Stock
upon the exercise of Stock Options outstanding on the date of this Agreement
and in accordance with their present terms, (C) the issuance of shares of
Company Common Stock pursuant to the ESPP in accordance with its present
terms or (D) as set forth on Section 4.1(a)(ii) of the Company Disclosure
Schedule;
(iii) amend its Restated Certificate of Incorporation, Bylaws or other
comparable charter or organizational documents;
(iv) acquire or agree to acquire (A) by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, joint venture,
association or other business organization or division thereof or (B) any
assets, except purchases of inventory, materials and supplies in the
ordinary course of business and except for capital expenditures (which are
covered in clause (vii) below);
(v) sell, lease, license, mortgage or otherwise encumber or otherwise
dispose of any of its properties or assets, except sales of inventory,
products or used equipment in the ordinary course of business consistent
with past practice;
(vi) (A) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt
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securities of the Company or the Company Sub, guarantee any debt securities
of another person, enter into any "keep well" or other agreement to maintain
any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing, except for
short-term borrowings incurred in the ordinary course of business consistent
with past practice or (B) make any loans, advances or capital contributions
to, or investments in, any other person, other than extensions of credit to
customers and advances to employees, in each case in the ordinary course of
business consistent with past practice;
(vii) except for the items listed on Section 4.1(a)(vii) of the Company
Disclosure Schedule or in the Company's fiscal 2000 operating budget (a copy
of which has been provided to Parent), make or agree to make any new capital
expenditure or expenditures;
(viii) discharge, settle, assign or satisfy any claims, whether or not
pending before a Governmental Entity, in excess of $50,000 individually or
$250,000 in the aggregate, or waive any material benefits of, or agree to
modify in any respect adverse to the Company, any confidentiality,
standstill or similar agreements to which the Company or the Company Sub is
a party;
(ix) except in the ordinary course of business, consistent with past
practice, modify, amend or terminate any contract or agreement to which the
Company or the Company Sub is a party or waive, release or assign any rights
or claims thereunder, in any such case in a manner adverse to the Company;
(x) enter into or extend any contracts, agreements, binding arrangements
or binding understandings relating to the distribution, sale, license,
promotion or marketing by third parties of the Products (including Products
under development), other than pursuant to any such agreements currently in
place in accordance with their terms as of the date hereof;
(xi) transfer, assign, terminate, cancel, abandon or modify all
Registrations and Licenses or fail to maintain such Registrations and
Licenses as currently in effect;
(xii) fail to maintain all insurance policies as currently in effect or
allow any of such policies to lapse;
(xiii) except as required to comply with applicable law or as expressly
contemplated by this Agreement, (A) adopt, enter into, terminate or amend
any collective bargaining agreement or Benefit Plan for the benefit or
welfare of any current or former employee, officer or director, (B) increase
in any manner the compensation or fringe benefits of, or pay any bonus to,
any director, officer or employee (except for normal increases of cash
compensation to employees other than executive officers consistent with past
practice both in amount and timing), (C) pay any benefit not provided for
under any Benefit Plan or any other benefit plan or arrangement of the
Company, (D) increase in any manner the severance or termination pay of or
obligation to any employee, (E) enter into any employment, consulting,
severance, termination or indemnification agreement, arrangement or
understanding with any current or former employee, officer or director, (F)
except as permitted in clause (B) and clause 4.1(a)(ii), grant any awards
under any bonus, incentive, performance or other compensation plan or
arrangement or Benefit Plan (including the grant of stock options, stock
appreciation rights, stock based or stock related awards, performance units
or restricted stock or the removal of existing restrictions in any Benefit
Plans or agreements or awards made thereunder) or (G) take any action to
fund or in any other way secure the payment of compensation or benefits
under any employee plan, agreement, contract or arrangement or Benefit Plan;
(xiv) waive, amend or otherwise alter the Rights Agreement or redeem the
Rights or take any action to render Section 203 of the DGCL inapplicable to
any transaction other than the transactions contemplated by this Agreement,
the Option Agreement and the Stockholders Agreement;
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(xv) transfer or license to any person or entity or otherwise extend,
amend or modify any right to Intellectual Property of the Company;
(xvi) take any action that would cause the representations and warranties
set forth in Section 3.1(t) to no longer be true and correct;
(xvii) form any direct or indirect subsidiaries of the Company;
(xviii) except as required by GAAP, make any change in accounting methods,
principles or practices;
(xix) except as described in Section 4.1(a)(xix) of the Company
Disclosure Schedule, enter into any license agreement with any person or
entity to obtain any right to Intellectual Property; or
(xx) authorize any of, or commit or agree to take any of, the foregoing
actions.
(b) CERTAIN TAX MATTERS. From the date hereof until the Effective Time,
(i) the Company will file all Tax Returns ("Post-Signing Returns") required to
be filed by it (after taking into account any applicable extensions); (ii) the
Company will timely pay all Taxes due and payable with respect to such
Post-Signing Returns that are so filed; (iii) the Company will accrue a
liability in its books and records and financial statements in accordance with
past practice and GAAP for all Taxes payable by the Company for which no
Post-Signing Return is due prior to the Effective Time; (iv) the Company will
promptly notify Parent of any action, suit, proceeding, claim or audit
(collectively, "Actions") pending against or with respect to the Company in
respect of any Tax where there is a reasonable possibility of a determination or
decision which would have a material adverse effect on the Company's Tax
liabilities or Tax attributes and will not settle or compromise any such Action
without Parent's consent; and (v) the Company will not make any material Tax
election or file any amended Tax Return without Parent's prior written consent.
Section 4.2 NO SOLICITATION.
(a) The Company shall not, nor shall it authorize or permit any of its
officers, directors or employees or any investment banker, attorney or other
advisor or representative retained by it to, directly or indirectly, (i)
solicit, initiate or encourage the submission of any Takeover Proposal (as
hereinafter defined) or (ii) participate in any discussions or negotiations
regarding, or furnish to any person any information with respect to, or take any
other action to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Takeover Proposal;
provided, however, that if, at any time prior to the Effective Time the Board of
Directors of the Company determines in good faith, (i) after consultation with
outside legal counsel, that failure to do so would create a substantial risk of
liability for breach of its fiduciary duties to the Company's stockholders under
applicable law and (ii) that such Takeover Proposal constitutes a Superior
Proposal (as hereinafter defined), the Company may, in response to a written
Takeover Proposal that was unsolicited or that did not otherwise result from a
breach of this Section 4.2(a), and subject to compliance with Section 4.2(c),
(x) furnish information with respect to the Company to any person pursuant to a
customary and reasonable confidentiality agreement no less favorable to the
Company, and no less onerous to such person, than the Confidentiality Agreement
(as defined in Section 5.4) and (y) participate in negotiations regarding such
Takeover Proposal. Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in the preceding sentence by any
officer, director or employee of the Company or any investment banker, attorney
or other advisor or representative of the Company, acting on behalf of the
Company, shall be deemed to be a breach of this Section 4.2(a) by the Company.
The Company will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted prior to the
date of this Agreement with respect to any Takeover Proposal and request the
return of all information provided to third parties pursuant to one or more
confidentiality agreements. For purposes of this Agreement, "Takeover Proposal"
means any proposal or offer from any person relating to any direct or indirect
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acquisition or purchase of a substantial amount of assets of the Company (other
than Products of the Company) or at least a 20% interest in the total voting
securities of the Company or any tender offer or exchange offer that if
consummated would result in any person beneficially owning 20% or more of any
class of equity securities of the Company or any merger, consolidation, business
combination, sale of substantially all assets, recapitalization, liquidation,
dissolution or similar transaction involving the Company, other than the
transactions contemplated by this Agreement, the Stockholders Agreement or the
Option Agreement.
(b) Except as expressly permitted by this Section 4.2, neither the Board of
Directors of the Company nor any committee thereof shall (i) withdraw or modify,
or propose to withdraw or modify, in a manner adverse to Parent or Sub, the
approval or recommendation by such Board of Directors or any such committee of
this Agreement or the Merger, (ii) approve or recommend, or propose to approve
or recommend, any Takeover Proposal or (iii) cause the Company to enter into any
letter of intent, agreement in principle, acquisition agreement or other similar
agreement (an "Acquisition Agreement") with respect to any Takeover Proposal.
Notwithstanding the foregoing, prior to the Effective Time, the Board of
Directors of the Company, to the extent it determines in good faith, after
consultation with outside legal counsel, that failure to do so would create a
substantial risk of liability for breach of its fiduciary duties to the
Company's stockholders under applicable law, may withdraw or modify its approval
or recommendation of this Agreement or the Merger or recommend any Superior
Proposal (as hereinafter defined), in each case at any time after the third
business day following Parent's receipt of written notice (a "Notice of Superior
Proposal") advising Parent that the Board of Directors of the Company has
received a Superior Proposal, specifying the identity of the person making the
Takeover Proposal and the material terms and conditions of the Superior Proposal
(it being understood that any amendment to the price or material terms of a
Superior Proposal shall require an additional Notice of Superior Proposal and an
additional three business day period thereafter to the extent permitted under
applicable law). In addition, prior to the Effective Time, the Board of
Directors of the Company, to the extent it determines in good faith, after
consultation with outside legal counsel, that failure to do so would create a
substantial risk of liability for breach of its fiduciary duties to the
Company's stockholders under applicable law, may cause the Company to terminate
this Agreement in accordance with Section 7.1(b)(iv) (and concurrently with or
after such termination, if it so chooses, cause the Company to enter into an
Acquisition Agreement with respect to a Superior Proposal). For purposes of this
Agreement, a "Superior Proposal" means any bona fide written proposal made by a
third party to acquire, directly or indirectly, for consideration consisting of
cash and/or securities, more than 50% of the voting power of the Company Common
Stock or all or substantially all the assets of the Company and otherwise on
terms which the Board of Directors of the Company determines in its good faith
judgment (after consultation with a financial advisor of nationally recognized
reputation) to be more favorable to the Company's stockholders than the Merger
and for which financing, to the extent required, is then committed.
(c) In addition to the obligations of the Company set forth in paragraphs
(a) and (b) of this Section 4.2, the Company shall, within twenty-four hours
after receipt, advise Parent orally and in writing of any request for nonpublic
information which the Company reasonably believes could lead to a Takeover
Proposal or of any Takeover Proposal, or any inquiry with respect to or which
the Company reasonably believes could lead to any Takeover Proposal, the
identity of the person making the Takeover Proposal and the material terms and
conditions of such request, Takeover Proposal or inquiry. The Company will keep
Parent promptly informed in all material respects of the status and details
(including amendments or proposed amendments) of any such Takeover Proposal or
inquiry.
(d) Nothing contained in this Section 4.2 or elsewhere in this Agreement
shall prohibit the Company from (i) taking and disclosing to its stockholders a
position contemplated by Rules 14d-9 and 14e-2(a) promulgated under the Exchange
Act or (ii) making any disclosure to the Company's stockholders required by
applicable law; provided that the Company shall not, except in accordance with
the provisions of Section 4.2(b), withdraw or modify, or propose to withdraw or
modify, its
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recommendation of the Merger or approve or recommend, or propose to approve or
recommend, a Takeover Proposal.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 PREPARATION OF THE FORM S-4 AND THE PROXY STATEMENT;
STOCKHOLDERS MEETING.
(a) As soon as practicable following the date of this Agreement, the Company
and Parent shall prepare and the Company shall file with the SEC the Proxy
Statement and Parent shall prepare and file with the SEC the Form S-4, in which
the Proxy Statement will be included as a prospectus. Each of the Company and
Parent shall use all reasonable efforts to have the Form S-4 declared effective
under the Securities Act as promptly as practicable after such filing, including
responding reasonably promptly to the SEC. No amendment to the Proxy Statement
or Form S-4 shall be made by the Company or Parent, respectively, without
consultation with the other party. The Company shall use all reasonable efforts
to cause the Proxy Statement to be mailed to the Company's stockholders as
promptly as practicable after the Form S-4 is declared effective under the
Securities Act. Parent shall also take any action (other than qualifying to do
business in any jurisdiction in which it is not now so qualified) required to be
taken under any applicable state securities laws in connection with the issuance
of Parent Common Stock in the Merger. Each of Parent and the Company shall
furnish all information concerning itself to the other as may be reasonably
requested in connection with any such action and the preparation, filing and
distribution of the Proxy Statement.
(b) The Company shall, as soon as practicable following the date of this
Agreement, establish a record date (which will be as soon as practicable
following the date of this Agreement) for, duly call, give notice of, convene
and hold a meeting of its stockholders (the "Stockholders Meeting") for the
purpose of obtaining the Stockholder Approval. The Company shall, through its
Board of Directors, recommend to its stockholders that they approve and adopt
this Agreement and the Merger and include such recommendation in the Proxy
Statement, except to the extent that the Board of Directors of the Company shall
have withdrawn or modified its approval or recommendation of this Agreement or
the Merger as permitted by Section 4.2(b). Unless the Board of Directors has
withdrawn or modified its recommendation in compliance with this Agreement, the
Company shall use its reasonable best efforts to solicit from its stockholders
proxies in favor of the approval and adoption of this Agreement and the Merger
and to secure the Stockholder Approval.
Section 5.2 LETTERS OF THE COMPANY'S ACCOUNTANTS.
(a) The Company shall use its reasonable best efforts to cause to be
delivered to Parent two comfort letters from Ernst & Young LLP, the Company's
independent public accountants, one dated a date within five business days
before the date on which the Form S-4 shall become effective and one dated a
date within five business days before the Closing Date, each addressed to
Parent, in form and substance customary for transactions effected pursuant to a
registration statement on Form S-4.
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(b) The Company shall use its reasonable best efforts to cause to be
delivered to Parent a letter from Ernst & Young LLP, addressed to the Company,
dated as of the Closing Date, stating that (i) Ernst & Young concurs with
management's conclusion that, as of such date, no conditions exist with respect
to the Company which would preclude accounting for the Merger as a pooling of
interests transaction under Opinion 16 of the Accounting Principles Board and
applicable SEC rules and regulations and (ii) the basis for such a concurrence
is Ernst & Young LLP's belief that the criteria for such accounting treatment
specified by APB 16, relative to the Company which can be asserted at that time,
have been met.
Section 5.3 LETTERS OF PARENT'S ACCOUNTANTS.
(a) Parent shall use its reasonable best efforts to cause to be delivered to
the Company two comfort letters from Arthur Andersen LLP, Parent's independent
public accountants, one dated a date within five business days before the date
on which the Form S-4 shall become effective and one dated a date within five
business days before the Closing Date, each addressed to the Company, in form
and substance customary for transactions effected pursuant to a registration
statement on Form S-4.
(b) Parent shall use its reasonable best efforts to cause to be delivered to
the Company a letter from Arthur Andersen LLP, addressed to Parent, dated as of
the Closing Date, stating that (i) Arthur Andersen LLP concurs with management's
conclusion that, as of such date, no conditions exist which would preclude
accounting for the Merger as a pooling of interests transaction under Opinion 16
of the Accounting Principles Board and applicable SEC rules and regulations and
(ii) the basis for such a concurrence is Arthur Andersen LLP's belief that the
criteria for such accounting treatment specified by APB 16, relative to Parent
which can be asserted at that time, have been met.
Section 5.4 ACCESS TO INFORMATION; CONFIDENTIALITY. The Company shall
afford to Parent, and to Parent's officers, employees, accountants, legal
counsel, financial advisors and other representatives, full and complete access
upon reasonable notice during normal business hours during the period prior to
the Effective Time or the termination of this Agreement to all its properties,
books, contracts, commitments, personnel and records and, during such period,
the Company shall make available to Parent (a) a copy of each report, schedule,
registration statement and other document filed by it during such period
pursuant to the requirements of Federal or state securities laws and (b) all
other information concerning its business, properties and personnel as Parent
may reasonably request. Except as required by law, Parent shall hold, and shall
cause its officers, employees, accountants, legal counsel, financial advisors
and other representatives and affiliates to hold, any and all information
received from the Company, directly or indirectly, in confidence, in accordance
with the Confidentiality Agreement dated as of April 13, 1999 between Parent and
the Company (as it may be amended from time to time, the "Confidentiality
Agreement") and shall agree to be bound thereby as if Parent had been a party
thereto. No investigation pursuant to this Section 5.4 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.
Section 5.5 REASONABLE EFFORTS; NOTIFICATION.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including, but not limited to, (i) the obtaining of all necessary
actions or nonactions, waivers, consents and approvals from Governmental
Entities and the making of all necessary registrations and filings (including
filings with Governmental Entities pursuant to the HSR Act, German antitrust
laws or otherwise, if any) and the taking of all reasonable steps as may be
necessary to avoid an action or proceeding by any Governmental Entity, (ii) the
obtaining of all necessary consents, approvals or waivers from third parties,
(iii) the defending of any lawsuits or other legal proceedings, whether judicial
or administrative, challenging this
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Agreement or the consummation of the transactions contemplated hereby, including
seeking to have any stay or temporary restraining order entered by any court or
other Governmental Entity vacated or reversed and (iv) the execution and
delivery of any additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this Agreement. In
connection with and without limiting the foregoing, the Company and its Board of
Directors shall, if any state takeover statute or similar statute or regulation
is or becomes applicable to the Merger, this Agreement, the Stockholders
Agreement, the Option Agreement or any other transactions contemplated by this
Agreement, the Stockholders Agreement or the Option Agreement, use its
reasonable best efforts to ensure that the Merger and the other transactions
contemplated by this Agreement may be consummated as promptly as practicable on
the terms contemplated by this Agreement and otherwise to minimize the effect of
such statute or regulation on the Merger, this Agreement, the Stockholders
Agreement, the Option Agreement and the other transactions contemplated by this
Agreement, the Stockholders Agreement or the Option Agreement. Nothing in this
Agreement shall be deemed to require Parent to dispose of any asset or
collection of assets. Prior to making any application to or filing with a
Governmental Entity or other entity in connection with this Agreement (other
than the HSR Act pre-merger notification and report form), each party shall
provide the other party with drafts thereof and afford the other party a
reasonable opportunity to comment on such drafts.
(b) The Company shall give prompt notice to Parent of any representation or
warranty made by it contained in this Agreement becoming untrue or inaccurate
such that the condition set forth in Section 6.2(a) would not be satisfied;
provided, however, that no such notification shall affect the representations,
warranties, covenants or agreements of the parties or the conditions to the
obligations of the parties under this Agreement.
(c) Parent shall give prompt notice to the Company of any representation or
warranty made by it or Sub contained in this Agreement becoming untrue or
inaccurate such that the condition set forth in Section 6.3(a) would not be
satisfied; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
(d) The Company and Parent each shall keep the other apprised of the status
of matters relating to completion of the transactions contemplated hereby,
including promptly furnishing the other with copies of notices or other
communications received by the Parent, the Sub or the Company, as the case may
be, or any of their respective subsidiaries, from any third party and/or any
Governmental Entity with respect to the transactions contemplated by this
Agreement.
(e) The Company and Parent each shall exercise reasonable efforts to cure
any breach of any representation, warranty, covenant or agreement on the part of
the Company or Parent, as the case may be, or any inaccuracy of any
representation or warranty on the part of the Company or Parent, as the case may
be.
Section 5.6 STOCK OPTIONS.
(a) At the Effective Time, each outstanding option to purchase Company
Common Stock (a "Stock Option") under the Company's 1992 Stock Plan, 1997 Stock
Plan and 1995 Director Option Plan (the "Stock Option Plans"), whether vested or
unvested, shall be converted to an option to acquire, on the same terms and
conditions as were applicable under such Stock Option, the same number of shares
of Parent Common Stock as the holder of such Stock Option would have been
entitled to receive pursuant to the Merger had such holder exercised such Stock
Option in full immediately prior to the Effective Time (rounded down to the
nearest whole number) (a "Substitute Option"), at an exercise price per share
(rounded up to the nearest whole cent) equal to (i) the aggregate exercise price
for the Company Common Stock otherwise purchasable pursuant to such Stock Option
divided by (ii) the number of full shares of Parent Common Stock deemed
purchasable
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pursuant to such Stock Option in accordance with the foregoing. Notwithstanding
the foregoing, each purchase right granted under the ESPP that is outstanding at
the Effective Time shall be converted to a right to acquire upon the same terms
and conditions as were applicable to such right immediately before the Effective
Time, that number of shares (rounded down to the nearest whole share) of Parent
Common Stock equal to the Exchange Ratio multiplied by the number of Company
Common Stock for which such purchase right would otherwise have been exercisable
determined as of the relevant grant date under the ESPP at a purchase price per
share equal to 85% of the lower of (A) the fair market value of a share of
Company Common Stock on the relevant grant date divided by the Exchange Ratio or
(B) the fair market value of a share of Parent Common Stock on the relevant
purchase date.
(b) As promptly as practicable after the Effective Time, the Surviving
Corporation shall deliver to the participants in the Stock Option Plans
appropriate notices setting forth such participants' rights pursuant to the
Substitute Options.
(c) All Stock Option Plans shall terminate as of the Effective Time, and the
provisions in any other Benefit Plan providing for the issuance, transfer or
grant of any capital stock of the Company or any interest in respect of any
capital stock of the Company shall be deleted as of the Effective Time, and the
Company shall ensure that following the Effective Time no holder of a Stock
Option or any participant in any Stock Option Plan shall have any right
thereunder to acquire any capital stock of the Company, Parent or the Surviving
Corporation, except as provided in Section 5.6(a).
(d) As soon as practicable after the Effective Time, Parent shall deliver to
the holders of Stock Options appropriate notices setting forth such holders'
rights pursuant to the respective Stock Option Plans and the agreements
evidencing the grants of such Stock Options shall continue in effect on the same
terms and conditions (including the continuation of vesting without
interruption, and subject to adjustments required by this Section 5.6 after
giving effect to the Merger). Except as otherwise provided in this Section 5.6,
Parent shall comply with the terms of the Stock Option Plans and use all
reasonable efforts to ensure, to the extent required by, and subject to the
provisions of such Stock Option Plans, that the Stock Options which qualified as
incentive stock options prior to the Effective Time continue to qualify as
incentive stock options after the Effective Time.
(e) Parent agrees to use all commercially reasonable efforts to take such
actions as are necessary for the conversion of the Stock Options of the Company
in accordance with this Section 5.6, including (i) the reservation, issuance and
listing of Parent Common Stock as is necessary to effectuate the transactions
contemplated by Section 5.6(a) and (ii) the filing of a registration statement
on Form S-8, if necessary, to facilitate the public sale of stock issuable upon
the exercise of such Stock Options.
(f) A holder of a Stock Option adjusted in accordance with this Section 5.6
may exercise such adjusted Stock Option in whole or in part in accordance with
its terms by delivering a properly executed notice of exercise to Parent,
together with the consideration therefor and the Federal withholding tax
information, if any, required in accordance with the related Stock Option Plan.
Section 5.7 INDEMNIFICATION AND INSURANCE.
(a) From and after the Effective Time, Parent shall cause the Surviving
Corporation to fulfill and honor in all respects the obligations of the Company
pursuant to (i) each indemnification agreement currently in effect between the
Company and each person who is or was a director or officer of the Company at or
prior to the Effective Time and (ii) any indemnification provision under the
Company's Restated Certificate of Incorporation or By-Laws as each is in effect
on the date hereof (the persons to be indemnified pursuant to the agreements or
provisions referred to in clauses (i) and (ii) of this Section 5.7(a) shall be
referred to as, collectively, the "Indemnified Parties"). Section 5.7(a) of the
Company Disclosure Schedule sets forth a list of all indemnification agreements
between the Company and its directors and officers. In addition to the
foregoing, Parent shall guarantee the Surviving Corporation's performance of its
obligations pursuant to this Section 5.7(a).
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(b) For six years after the Effective Time, Parent shall maintain in effect
the current level and scope of directors' and officers' liability insurance
covering those persons who are currently covered by the Company's directors' and
officers' liability insurance policy (a true and complete copy of which has been
heretofore delivered to Parent); provided, however, that in no event shall
Parent be required to expend in any one year an amount in excess of 150% of the
annual premium currently paid by the Company for such insurance, and provided,
further, that if the annual premiums of such insurance coverage exceed such
amount, Parent shall be obligated to obtain a policy with the greatest coverage
available for such six-year period for a cost not exceeding such amount.
(c) Parent and the Surviving Corporation jointly and severally agree to pay
all expenses, including attorneys' fees, that may be incurred by the Indemnified
Parties in enforcing the indemnity and other obligations provided for in this
Section 5.7; provided, however, that Parent and the Surviving Corporation shall
be responsible for such expenses only to the extent that an Indemnified Party is
successful on the merits of a proceeding seeking indemnification.
(d) This Section 5.7 shall survive the consummation of the Merger at the
Effective Time, is intended to benefit the Company, Parent, the Surviving
Corporation and the Indemnified Parties, and shall be binding on all successors
and assigns of Parent and the Surviving Corporation.
Section 5.8 FEES AND EXPENSES.
(a) All fees and expenses incurred in connection with the Merger, this
Agreement and the transactions contemplated by this Agreement shall be paid by
the party incurring such fees or expenses, whether or not the Merger is
consummated, except that expenses incurred in connection with printing and
mailing the Proxy Statement and the Form S-4 shall be shared equally by Parent
and the Company.
(b) In the event that this Agreement is terminated (i) by any party hereto
(A) pursuant to Section 7.1(b)(iii) and at or prior to the time of the
Stockholders Meeting a Takeover Proposal shall have been publicly announced or
(B) pursuant to Section 7.1(b)(iv), (ii) by Parent pursuant to Section 7.1(c) or
(iii) by Parent pursuant to Section 7.1(e) in respect of a willful and material
breach of a covenant or agreement by the Company, then in any such case the
Company shall immediately prior to such termination by the Company or, in the
event of a termination by Parent, promptly, but in no event later than two days
after the date of such termination, pay Parent a fee equal to $20 million in
immediately available funds by wire transfer (the "Termination Fee"). If this
Agreement is terminated by any party hereto pursuant to Section 7.1(b)(i) (to
the extent the Company has theretofore failed to hold the Stockholders Meeting
in breach of its obligations under Section 5.1(b)) and, prior to the date 12
months following the date of the termination of this Agreement, the Company
shall either (x) consummate a Company Acquisition (as hereinafter defined) or
(y) enter into a written Acquisition Agreement providing for a Company
Acquisition, then the Company shall pay the Termination Fee in the case of
clause (x) concurrently with the consummation of such Company Acquisition or in
the case of clause (y) concurrently with the consummation of the transaction
subject to such Acquisition Agreement (whether or not such transaction is
consummated prior to the date 12 months following the date of the termination of
this Agreement, but only in the event that such transaction subject to such
Acquisition Agreement is in fact consummated). The Company acknowledges that the
agreements contained in this Section 5.8(b) are an integral part of the
transactions contemplated by this Agreement, and that, without these agreements,
Parent would not enter into this Agreement. Accordingly, if the Company fails
promptly to pay the amounts due pursuant to this Section 5.8(b), and, in order
to obtain such payment, Parent commences a suit which results in a judgment
against the Company for the amounts set forth in this Section 5.8(b), the
Company shall pay to Parent its reasonable costs and expenses (including
attorneys' fees and expenses) in connection with such suit, together with
interest on the amounts set forth in this Section 5.8(b) at the prime rate of
Bank of America N.T. & S.A. in effect on the date such payment was required to
be made. "Company Acquisition" shall mean any transaction or series of related
transactions involving (i) a merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction
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involving the Company pursuant to which the stockholders of the Company
immediately preceding such transaction or series of related transactions hold
less than 60% of the equity interests in the surviving or resulting entity of
such transaction or transactions (other than the transactions contemplated by
this Agreement); (ii) a sale by the Company of assets (excluding inventory and
used equipment sold in the ordinary course of business) representing in excess
of 40% of the fair market value of the Company's business immediately prior to
such sale; or (iii) the acquisition by any person or group (including without
limitation by way of a tender offer or an exchange offer or issuance by the
Company), directly or indirectly, of beneficial ownership or a right to acquire
beneficial ownership of 40% or more of the then outstanding shares of capital
stock of the Company.
Section 5.9 PUBLIC ANNOUNCEMENTS. Parent and Sub, on the one hand, and the
Company, on the other hand, shall consult with each other and shall mutually
agree upon any press release or other public statements with respect to the
transactions contemplated by this Agreement, including the Merger, the Option
Agreement and the Stockholders' Agreement, except as may be required by
applicable law, court process or by obligations pursuant to any listing
agreement with any national securities exchange or national securities quotation
system, in which case the party proposing to issue such press release shall use
all reasonable efforts to consult in good faith with the other party before
issuing such press release or making any such public announcement. The parties
agree that the initial press release to be issued with respect to the
transactions contemplated by this Agreement shall be in the form heretofore
agreed to by the parties.
Section 5.10 AFFILIATES.
(a) The Company shall use its reasonable best efforts to obtain an executed
letter agreement substantially in the form of Annex A hereto from (i) each
person identified as an "affiliate" in Section 3.1(u) of the Company Disclosure
Schedule within 15 days following the execution and delivery of this Agreement
and (ii) from any person who, to the Company's knowledge, may be deemed to have
become an affiliate of the Company after the date of this Agreement and prior to
the Effective Time as soon as practicable after attaining such status.
(b) Parent shall use its reasonable best efforts to cause all persons who
are, in Parent's reasonable judgment, "affiliates" of Parent for purposes of
qualifying the Merger for pooling of interests accounting treatment under
Opinion 16 of the Accounting Principles Board and applicable SEC rules and
regulations to comply with the paragraphs G and H of Annex A hereto.
(c) Parent shall not be required to maintain the effectiveness of the Form
S-4 for the purpose of resale by stockholders of the Company who may be
affiliates of the Company pursuant to Rule 145 under the Securities Act.
(d) Parent and the Company shall each use its reasonable best efforts before
and after the Closing to cause the Merger to qualify as a reorganization within
the meaning of Section 368(a) of the Code, and shall not take, and shall use its
reasonable best efforts to prevent any affiliate of such party from taking, any
actions which could prevent the Merger from qualifying as such a reorganization,
and shall take such action as is available and may be reasonably required to
negate the impact of any past actions by such party or its respective affiliates
which would reasonably be expected to adversely impact the qualification of the
Merger as a reorganization within the meaning of Section 368(a) of the Code.
Parent and the Company shall each use its reasonable best efforts to obtain
executed representation letters described in Section 6.2(g) and Section 6.3(c).
Section 5.11 STOCK EXCHANGE LISTING. To the extent Parent does not issue
treasury shares in the Merger which are already listed, Parent shall use its
reasonable efforts to cause the shares of Parent Common Stock to be issued in
the Merger and under the Stock Option Plans to be approved for listing on the
NYSE, subject to official notice of issuance, prior to the Closing Date.
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Section 5.12 POOLING OF INTERESTS. Each of the Company and Parent shall
use its reasonable best efforts to cause the transactions contemplated by this
Agreement, including the Merger, to be accounted for as a pooling of interests
under Opinion 16 of the Accounting Principles Board and applicable SEC rules and
regulations, and such accounting treatment to be accepted by each of the
Company's and Parent's independent public accountants, and by the SEC,
respectively, and each of the Company and Parent agrees that it shall take no
action or refrain from taking any action that would cause (to its knowledge
after consultation with its independent public accountants) such accounting
treatment not to be obtained. If necessary, Parent agrees that it shall dispose
of such amount of "tainted" shares as may be required to be disposed of in order
to cause the transactions contemplated by this Agreement, including the Merger,
to be accounted for as a pooling of interests. The Company agrees that its Board
of Directors shall rescind its stock repurchase program and publicly announce
such rescission with the same level of prominence as the authorization of the
stock repurchase program was first announced. The Company's announcement of its
rescission of its stock repurchase program shall be subject to Parent's prior
approval.
Section 5.13 SERVICE CREDIT. In the event that, at or after the Effective
Time, employees of the Company become eligible to participate in a vacation pay
program of Parent or its affiliates, such employees shall be given credit under
that vacation pay program for their service with the Company for periods prior
to the Effective Time to the same extent that such service was taken into
account for purposes of the vacation pay program for which they were eligible
immediately prior to the Effective Time.
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligation of each party to effect the Merger is subject
to the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) STOCKHOLDER APPROVAL. This Agreement shall have been approved and
adopted by the affirmative vote of the holders of a majority of the outstanding
shares of Company Common Stock.
(b) NYSE LISTING. The shares of Parent Company Stock issuable to the
Company's stockholders pursuant to this Agreement shall have been approved for
listing on the NYSE, subject to official notice of issuance.
(c) HSR ACT. The waiting period (and any extension thereof) applicable to
the Merger under the HSR Act shall have been terminated or shall have expired.
(d) GERMAN CARTEL OFFICE. Parent shall have received any necessary
approvals, or any applicable period for action shall have expired, under the
German antitrust laws.
(e) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction and no law or regulation shall be in effect
(collectively, "Restraints") preventing the consummation of the Merger shall be
in effect.
(f) FORM S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order.
Section 6.2 CONDITIONS TO OBLIGATIONS OF PARENT AND SUB. The obligations
of Parent and Sub to effect the Merger are further subject to the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Company contained in this Agreement shall be true and correct (other than
the representations in Sections 3.1(c), which shall be true and correct in all
material respects) on and as of the Closing Date except for
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changes contemplated by this Agreement and except for those representations and
warranties which address matters only as of a particular date, which shall
remain true and correct (other than the representations in Sections 3.1(c),
which shall be true and correct in all material respects) as of such particular
date, with the same force and effect as if made on and as of the Closing Date,
except in such cases (other than the representations in Sections 3.1(c)) where
the failure to be so true and correct would not have a material adverse effect
on the Company.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date.
(c) LETTERS FROM COMPANY AFFILIATES. Parent shall have received from each
person named in Section 3.1(u) of the Company Disclosure Schedule an executed
copy of an agreement substantially in the form of Annex A hereto.
(d) NO GOVERNMENTAL LITIGATION. There shall not be pending any suit by,
action by or proceeding by any Governmental Entity, (i) seeking to place
limitations on the ownership of shares of Company Common Stock (or shares of
common stock of the Surviving Corporation) by Parent or Sub or seeking to obtain
from the Company, Parent or Sub any damages that are material in relation to the
Company, (ii) seeking to prohibit or materially limit the ownership or operation
by the Company, Parent or any of Parent's subsidiaries of any material portion
of any business or of any assets of the Company, Parent or any of Parent's
subsidiaries, or to compel the Company, Parent or any of Parent's subsidiaries
to dispose of or hold separate any material portion of any business or of any
assets of the Company, Parent or any of Parent's subsidiaries, as a result of
the Merger or (iii) seeking to prohibit Parent or any of its subsidiaries from
effectively controlling in any material respect the business or operations of
the Company.
(e) NO MATERIAL ADVERSE CHANGE. At any time on or after the date of this
Agreement, there shall not have occurred any material adverse change in the
Company (or, if one shall have occurred, it shall have been cured).
(f) POOLING LETTERS. Parent and the Company shall have received letters,
respectively, from Arthur Andersen LLP and Ernst & Young LLP, dated as of the
Closing Date, addressed to Parent and the Company, stating in substance the
matters to be stated by Arthur Andersen LLP and Ernst & Young LLP pursuant to
Sections 5.3(b) and 5.2(b), respectively.
(g) TAX OPINION. Parent shall have received an opinion dated the Closing
Date from Skadden, Arps, Slate, Meagher & Flom (Illinois), special counsel to
Parent, in form and substance reasonably satisfactory to Parent, substantially
to the effect that, on the basis of facts, representations and assumptions set
forth in such opinion which are consistent with the state of facts expected to
exist at the Effective Time, the Merger will be treated for Federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code.
In rendering such opinion, Skadden, Arps, Slate, Meagher & Flom (Illinois) may
require and rely upon (and may incorporate by reference) representations and
covenants, including those contained in certificates of officers of Parent, Sub,
Company and others.
Section 6.3 CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation of the
Company to effect the Merger is further subject to the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Parent and Sub contained in this Agreement shall be true and correct on and as
of the Closing Date except for changes contemplated by this Agreement and except
for those representations and warranties which address matters only as of a
particular date, which shall remain true and correct as of such particular date,
with the same force and effect as if made on and as of the Closing Date, except
in such cases where the failure to be so true and correct would not have a
material adverse effect on Parent.
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(b) PERFORMANCE OF OBLIGATIONS OF PARENT AND SUB. Parent and Sub shall
have performed in all material respects all obligations required to be performed
by them under this Agreement at or prior to the Closing Date.
(c) TAX OPINION. The Company shall have received an opinion dated the
Closing Date from Wilson Sonsini Goodrich & Rosati, special counsel to the
Company, shall be delivered to the Company, in form and substance reasonably
satisfactory to the Company, substantially to the effect that, on the basis of
facts, representations and assumptions set forth in such opinion which are
consistent with the state of facts expected to exist at the Effective Time, the
Merger will be treated for Federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code. In rendering such opinion,
Wilson Sonsini Goodrich & Rosati may require and rely upon (and may incorporate
by reference) representations and covenants, including those contained in
certificates of officers of Parent, Sub, Company and others.
(d) NO MATERIAL ADVERSE CHANGE. At any time on or after the date of this
Agreement, there shall not have occurred any material adverse change in Parent
(or, if one shall have occurred, it shall have been cured).
Section 6.4 FRUSTRATION OF CLOSING CONDITIONS. None of the Company, Parent
or Sub may rely on the failure of any condition set forth in Section 6.1, 6.2 or
6.3, as the case may be, to be satisfied if such failure was caused by such
party's failure to use its reasonable best efforts to consummate the Merger and
the other transactions contemplated by this Agreement, as required by and
subject to Section 5.5.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 TERMINATION. This Agreement may be terminated, and the Merger
contemplated hereby may be abandoned, at any time prior to the Effective Time,
whether before or after approval of matters presented in connection with the
Merger by the stockholders of the Company:
(a) by mutual written consent of Parent, Sub and the Company;
(b) by either Parent or the Company if:
(i) the Merger shall not have been consummated by December 31, 1999 for
any reason; provided, however, that the right to terminate this Agreement
under this Section 7.1(b)(i) shall not be available to any party whose
action or failure to act has been a principal cause of or resulted in the
failure of the Merger to occur on or before such date and such action or
failure to act constitutes a willful and material breach of this Agreement;
(ii) any Restraint having any of the effects set forth in Section 6.1(e)
shall be in effect and shall have become final and nonappealable;
(iii) the Stockholder Approval shall not have been obtained at the
Stockholders Meeting duly convened therefor or at any adjournment or
postponement thereof; or
(iv) prior to the Effective Time, the Board of Directors of the Company
has made the determination referred to in the penultimate sentence of
Section 4.2(b); provided, however, that the Company may not terminate this
Agreement pursuant to this Section 7.1(b)(iv) unless and until three
business days have elapsed following delivery to Parent of a Notice of
Superior Proposal with respect to a Superior Proposal by the Board of
Directors of the Company, and immediately thereafter (but in no event later
than the next business day) the Company pays to Parent the amounts specified
under Section 5.8(b) pursuant to the terms of such Section 5.8(b).
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(c) by Parent if (i) the Board of Directors of the Company or any committee
thereof shall have withdrawn or modified in a manner adverse to Parent its
approval or recommendation of the Merger or this Agreement or failed to
reconfirm its recommendation within five business days after a written request
to do so, or approved or recommended any Takeover Proposal, (ii) the Company
breaches in any material respect the Option Agreement, provided, however, that
for purposes hereof, the Company shall be deemed to have committed a material
breach of the Option Agreement only if the Company refuses to permit Parent to
exercise the option provided for in the Option Agreement in accordance with the
provisions of the Option Agreement, or (iii) the Board of Directors of the
Company shall have resolved to take any of the foregoing actions;
(d) by the Company, upon a breach of any representation, warranty, covenant
or agreement on the part of Parent set forth in this Agreement, or if any such
representation or warranty or Parent shall have become inaccurate, in either
case such that the conditions set forth in Section 6.3(a) or Section 6.3(b), as
the case may be, would not be satisfied as of the time of such breach or as of
the time such representation or warranty shall have become inaccurate; provided,
that if such inaccuracy in Parent's representations and warranties or breach by
Parent is curable by Parent through the exercise of its reasonable efforts, then
(i) the Company may not terminate this Agreement under this Section 7.1(d) with
respect to a particular breach or inaccuracy prior to or during the 45-day
period commencing upon delivery by the Company of written notice to Parent
describing such breach or inaccuracy, provided Parent continues to exercise
reasonable efforts to cure such breach or inaccuracy and (ii) the Company may
not, in any event, terminate this Agreement under this Section 7.1(d) if such
inaccuracy or breach shall have been cured in all material respects during such
45-day period; and, provided further that the Company may not terminate this
Agreement pursuant to this Section 7.1(d) if it shall have willfully and
materially breached this Agreement; or
(e) by Parent, upon a breach of any representation, warranty, covenant or
agreement on the part of the Company set forth in this Agreement, or if any such
representation or warranty of the Company shall have become inaccurate, in
either case such that the conditions set forth in Section 6.2(a) or Section
6.2(b), as the case may be, would not be satisfied as of the time of such breach
or as of the time such representation or warranty shall have become inaccurate;
provided, that if such inaccuracy in the Company's representations and
warranties or breach by the Company is curable by the Company through the
exercise of its reasonable efforts, then (i) Parent may not terminate this
Agreement under this Section 7.1(e) with respect to a particular breach or
inaccuracy prior to or during the 45-day period commencing upon delivery by
Parent of written notice to the Company describing such breach or inaccuracy,
provided the Company continues to exercise reasonable efforts to cure such
breach or inaccuracy and (ii) Parent may not, in any event, terminate this
Agreement under this Section 7.1(e) if such inaccuracy or breach shall have been
cured in all material respects during such 45-day period; and, provided further
that Parent may not terminate this Agreement pursuant to this Section 7.1(e) if
it shall have willfully and materially breached this Agreement.
Section 7.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 7.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Sub or the Company, other than the
provisions of the penultimate sentence of Section 5.4, Section 5.8, this Section
7.2 and Article VIII and except to the extent that such termination results from
the willful and material breach by a party of any of its representations,
warranties, covenants or agreements set forth in this Agreement.
Section 7.3 AMENDMENT. This Agreement may be amended by the parties hereto
at any time before or after any required approval of matters presented in
connection with the Merger by the stockholders of the Company; provided,
however, that after any such approval, there shall be made no amendment that by
law requires further approval by such stockholders without the further approval
of such stockholders. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
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Section 7.4 EXTENSION; WAIVER. At any time prior to the Effective Time,
the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained herein or in any document delivered
pursuant hereto or (c) subject to the proviso of Section 7.3, waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party to any such extension or waiver shall be valid only if set forth
in an instrument in writing signed on behalf of such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 8.1
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
Section 8.2 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed given if
delivered personally or sent by overnight courier (providing proof of delivery)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
if to Parent or Sub, to:
Abbott Laboratories
200 Abbott Park Road
D-960, AP30
Abbott Park, IL 60064-6149
Attention: Senior Vice President
Hospital Products Division
with a copy to:
Abbott Laboratories
100 Abbott Park Road
D-364, AP6D
Abbott Park, IL 60064-6020
Attention: Senior Vice President,
Secretary and General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive
Chicago, Illinois 60606
Attention: Charles W. Mulaney, Jr.
if to the Company, to:
Perclose, Inc.
400 Saginaw Drive
Redwood City, CA 94063
Attention: President and Chief Executive Officer
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with a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
Attention: Casey McGlynn, Esq.
Christopher D. Mitchell, Esq.
Section 8.3 DEFINITIONS. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person;
(b) as it relates to the Company, "knowledge" means, with respect to any
matter in question, that any of the Chairman, Chief Executive Officer, Chief
Financial Officer, Vice President of U.S. Sales, Vice President of Operations,
Vice President of Marketing and Vice President of Product Development, has
actual knowledge of such matter, and as it relates to Parent, the term
"knowledge" means, with respect to any matter in question, that any of the Chief
Executive Officer, Chief Financial Officer or General Counsel of Parent has
actual knowledge of such matter;
(c) "material adverse change" or "material adverse effect" means, when used
in connection with the Company or Parent, any change or effect that is, or is
reasonable likely to be within three months, materially adverse to the business,
properties, assets, prospects or financial condition of either the Company or
Parent and its subsidiaries, taken as a whole, as the case may be; provided,
however, that (i) any adverse change or effect that is proximately caused by
conditions affecting the economy or securities markets generally shall not be
taken into account in determining whether there has been or would be a "material
adverse change" or a "material adverse effect" on or with respect to such
entity; (ii) any adverse change or effect resulting from the announcement or
pendency of the Merger shall not be taken into account in determining whether
there has been or would be a "material adverse change" or a "material adverse
effect" on or with respect to the Company, provided, however, that the loss of
the services of a key group of employees of the Company, which such loss would
otherwise represent a material adverse change of effect, shall not be excluded
from the definition of material adverse changes or material adverse effect by
virtue of this clause (ii); and (iii) any adverse change or effect resulting
from those items set forth on Schedule 8.3 of the Company Disclosure Schedule
shall not be taken into account in determining whether there has been or would
be a "material adverse change" or a "material adverse effect" on or with respect
to the Company;
(d) "person" means an individual, corporation, partnership, joint venture,
association, trust, unincorporated organization or other entity;
(e) a "subsidiary" of any person means another person, an amount of the
voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
person.
Section 8.4 INTERPRETATION. When a reference is made in this Agreement to
a Section, Annex or Schedule, such reference shall be to a Section of, or an
Annex or Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
Section 8.5 COUNTERPARTS. This Agreement may be executed (including by
facsimile transmission) in one or more counterparts, all of which shall be
considered one and the same agreement and shall
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become effective when one or more counterparts have been signed by each of the
parties and delivered to the other parties.
Section 8.6 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement, the Option Agreement, the Stockholders Agreement and the
Confidentiality Agreement (a) constitute the entire agreement, and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter of this Agreement, the Option Agreement, the
Stockholders Agreement and the Confidentiality Agreement and (b) except for the
provisions of Article II, Section 5.6 and Section 5.7, are not intended to
confer upon any person other than the parties any rights or remedies.
Section 8.7 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflict of
laws thereof.
Section 8.8 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned, in whole or in part, by
operation of law or otherwise by any of the parties without the prior written
consent of the other parties, except that Sub may assign, in its sole
discretion, any of or all its rights, interests and obligations under this
Agreement to Parent or to any direct wholly owned subsidiary of Parent, but no
such assignment shall relieve Sub of any of its obligations hereunder. Subject
to the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of, and be enforceable by, the parties and their respective successors
and assigns.
Section 8.9 ENFORCEMENT. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Delaware or in any Delaware state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any court of the United States located in the State of
Delaware or of any Delaware state court in the event any dispute arises out of
this Agreement or the transactions contemplated by this Agreement, (b) agrees
that it will not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court and (c) agrees that it will not
bring any action relating to this Agreement or the transactions contemplated by
this Agreement in any court other than a court of the United States located in
the State of Delaware or a Delaware state court.
Section 8.10 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. 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.
1 - 38
<PAGE>
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized, all as of
the date first written above.
<TABLE>
<S> <C> <C>
ABBOTT LABORATORIES
By:
-----------------------------------------
Miles D. White
Chairman of the Board and Chief Executive
Officer
AL ACQUISITION CORP.
By:
-----------------------------------------
Richard A. Gonzalez
President
PERCLOSE, INC.
By:
-----------------------------------------
Henry A. Plain, Jr.
President and Chief Executive Officer
</TABLE>
1 - 39
<PAGE>
ANNEX A
FORM OF AFFILIATE LETTER
Abbott Laboratories
100 Abbott Park Road
Abbott Park, Illinois 60064
Perclose, Inc.
400 Saginaw Drive
Redwood City, California 94063
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to be
an "affiliate" of Perclose, Inc., a Delaware corporation (the "COMPANY"), as the
term "affiliate" is (i) defined for purposes of paragraphs (c) and (d) of Rule
145 of the rules and regulations (the "RULES AND REGULATIONS") of the Securities
and Exchange Commission (the "COMMISSION") under the Securities Act of 1933, as
amended (the "Act"), and/or (ii) used in and for purposes of Accounting Series
Releases 130 and 135, as amended, of the Commission. Pursuant to the terms of
the Agreement and Plan of Merger, dated as of July 8, 1999 (the "Agreement"),
among Abbott Laboratories, an Illinois corporation ("PARENT"), the Company and
AL Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
Parent ("SUB"), Sub shall be merged with and into the Company (the "MERGER"),
and the stockholders of the Company shall receive cash or common shares, without
par value, of Parent ("PARENT COMMON STOCK"), in exchange for shares of common
stock, par value $.001 per share, of the Company ("COMPANY COMMON STOCK").
As a result of the Merger, I may receive shares of Parent Common Stock in
exchange for shares (or upon exercise of options for shares or upon the exercise
by me of rights under certain option plans of the Company that become
exercisable upon the consummation of the Merger) owned by me of Company Common
Stock ("PARENT SECURITIES").
I represent, warrant and covenant to Parent that in the event I receive any
shares of Parent Securities as a result of the Merger:
I. I shall not make any sale, transfer or other disposition of Parent
Securities in violation of the Act or the Rules and Regulations.
J. I acknowledge and understand that the representations, warranties and
covenants I have made in this letter will be relied upon by the Company,
Parent and their respective affiliates, counsel and accounting firms, and
that substantial losses and damages may be incurred by such persons if I
breach my representations, warranties or covenants. 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 Parent Securities to the extent I felt necessary,
with my counsel or counsel for the Company.
K. I have been advised that the issuance of Parent Securities to me pursuant to
the Merger shall be registered with the Commission under the Act on a
Registration Statement on Form S-4. However, I have also been advised that,
since (a) at the time the Merger shall be submitted for a vote of the
stockholders of the Company, I may be deemed to be an affiliate of the
Company and (b) the distribution by me of Parent Securities has not been
registered under the Act, I may not sell, transfer or otherwise dispose of
Parent Securities issued to me in the Merger unless (i) such sale, transfer
or other disposition is made in conformity with the volume and other
limitations of Rule 145 promulgated by the Commission under the Act, (ii)
such sale, transfer or other
A-1
<PAGE>
disposition has been registered under the Act or (iii) in the opinion of
counsel reasonably acceptable to Parent, such sale, transfer or other
disposition is otherwise exempt from registration under the Act.
L. I understand that, except as provided in the Agreement, Parent is under no
obligation to register the sale, transfer or other disposition of Parent
Securities by me or on my behalf under the Act or to take any other action
necessary in order to make compliance with an exemption from such
registration available.
M. I also understand that stop transfer instructions will be given to Parent's
transfer agents with respect to Parent Securities issued to me and that
there will be placed on the certificates for Parent Securities issued to me,
or any substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION
TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE
TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED
, 1999 BETWEEN THE REGISTERED HOLDER HEREOF AND ABBOTT
LABORATORIES, A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL
OFFICES OF ABBOTT LABORATORIES."
N. I also understand that, unless the sale or transfer by me of Parent
Securities has been registered under the Act or is a sale made in conformity
with the provisions of Rule 145, Parent reserves the right to put the
following legend on the certificates issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND
WERE ACQUIRED FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT 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 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT."
O. During the period beginning on the date 30 days prior to the Closing Date (as
defined in the Agreement) and ending on the day after Parent has published
(within the meaning of Section 201.01 of the Commission's Codification of
Financial Reporting Policies) financial results covering at least 30 days of
combined operations of the Company and Parent (the "Restricted Period"), I
will not sell, exchange, transfer, pledge, distribute or otherwise dispose
of or grant any option, establish any "short" or "put"-equivalent position
with respect to or enter into any similar transaction (through derivatives
or otherwise) intended to have or having the effect, directly or indirectly
of reducing its risk relative to any shares of Parent Common Stock that I
own. The parties acknowledge that sales of Parent Common Stock issuable on
exercise of stock options solely to provide for payment of the exercise
price of such stock options simultaneously with the exercise of such stock
options shall not constitute such reduction of relative risk.
P. Notwithstanding anything to the contrary contained in paragraph G, I will be
permitted, during the Restricted Period, (i) to sell, exchange, transfer,
pledge, distribute or otherwise dispose of or grant any option, establish
any "short" or "put"-equivalent position with respect to or enter into any
similar transaction (through derivatives or otherwise) intended to have or
having the effect, directly or indirectly, of reducing its risk relative to
any shares of Parent Common Stock that I own (a
A-2
<PAGE>
"Transfer") equal to the lesser of (A) 10% of the Parent Common Stock that I
own and (B) my pro rata portion of 1% of the total number of outstanding
shares of Parent Common Stock owned by me and all other stockholders of
Parent (in each of clause (A) and clause (B) above as measured as of the
date of such Transfer and subject to confirmation of such calculation by
Parent), and (ii) to make bona fide charitable contributions or gifts of
such securities; PROVIDED, HOWEVER, that the transferee(s) of such
charitable contributions or gifts agree(s) in writing to hold such
securities for the period specified in paragraph G.
Execution of this letter should not be considered an admission on my part
that I am an "affiliate" of the Company as described in the first paragraph of
this letter, or as a waiver of any rights I may have to object to any claim that
I am such an affiliate on or after the date of this letter.
Very truly yours,
-------------------------
Name:
Accepted this day of
, 1999 by:
ABBOTT LABORATORIES
By:
- --------------------------------------
Name:
Title:
PERCLOSE, INC.
By:
- --------------------------------------
Name:
Title:
A-3
<PAGE>
ANNEX 2
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT (this "Agreement"), dated as of July 8, 1999, between
Perclose, Inc., a Delaware corporation (the "Company"), and Abbott Laboratories,
an Illinois corporation ("Grantee").
WHEREAS, the Company, Grantee and AL Acquisition Corp., a Delaware
corporation and a newly-formed wholly owned direct subsidiary of Grantee
("Sub"), have concurrently with the execution of this Agreement entered into an
Agreement and Plan of Merger dated as of the date hereof (the "Merger
Agreement") which provides, among other things, that Sub shall be merged with
and into the Company pursuant to the terms and conditions thereof; and
WHEREAS, the Company has agreed to grant Grantee the Option (as hereinafter
defined);
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein and in the Merger Agreement, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereby agree
as follows:
1. GRANT OF OPTION. The Company hereby grants to Grantee an irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to 2,223,818
shares (such shares being referred to herein as the "Option Shares") of fully
paid and nonassessable common stock, par value $0.001 per share, of the Company
("Company Common Stock"), equal to approximately nineteen and nine-tenths
percent (19.9%) of the number of shares of Company Common Stock issued and
outstanding (before giving effect to the exercise of the Option) as of the date
hereof, including the associated stock purchase rights (the "Rights") at a
purchase price of $54.00 per share, as adjusted in accordance with the
provisions of Section 7 of this Agreement (such price, as adjusted if
applicable, the "Option Price"). All references in this Agreement to shares of
Company Common Stock issued to Grantee hereunder shall be deemed to include the
Rights.
2. (a) EXERCISE OF OPTION. Grantee may exercise the Option, in whole or
part, and from time to time, if, but only if, a Triggering Event (as hereinafter
defined) shall have occurred prior to the occurrence of an Option Termination
Event (as hereinafter defined), provided that Grantee shall have sent the
written notice of such exercise (as provided in Section 2(e) hereof) on or prior
to the last date of the one (1) year period following such Triggering Event (the
"Option Expiration Date"). The right to exercise the Option shall terminate upon
the first to occur of the Option Expiration Date or an Option Termination Event.
(b) TRIGGERING EVENTS. The term "Triggering Event" shall mean the
occurrence of an event, circumstance or condition pursuant to which Parent's
right, pursuant to Section 5.8(b) of the Merger Agreement, to receive the
Termination Fee first arises.
(c) OPTION TERMINATION EVENTS. The term "Option Termination Event"
shall mean any of the following events:
(i) the Effective Time;
(ii) the termination of the Merger Agreement other than under
circumstances which constitute (or upon satisfaction of the
conditions to payment of the Termination Fee set forth in Section
5.8(b) of the Merger Agreement would constitute) a Triggering Event
under this Agreement; or
(iii) the occurrence of the date which is twelve (12) months after
termination of the Merger Agreement under circumstances which, if
the conditions to payment of the Termination Fee set forth in
Section 5.8(b) of the Merger Agreement were satisfied, would
constitute a Triggering Event under this Agreement, provided no
such Triggering Event resulting from the satisfaction of such
conditions has occurred prior to the occurrence of such date.
2 - 1
<PAGE>
(d) NOTICE OF TRIGGERING EVENT. The Company shall notify Grantee in
writing as promptly as practicable following its becoming aware of the
occurrence of any Triggering Event, it being understood that the giving of such
notice by the Company shall not be a condition to the right of Grantee to
exercise the Option or for a Triggering Event to have occurred.
(e) NOTICE OF EXERCISE; CLOSING. In the event that Grantee is entitled
to and desires to exercise the Option, it shall send to the Company a written
notice (such notice being herein referred to as an "Exercise Notice" and the
date of issuance of an Exercise Notice being herein referred to as the "Notice
Date") specifying (i) the total number of shares (or other Option Securities (as
hereinafter defined)) it shall purchase pursuant to such exercise and (ii) a
place and date not earlier than three (3) business days nor later than forty
(40) business days from the Notice Date for the closing of such purchase (the
"Option Closing Date"); provided, that if the closing of the purchase and sale
pursuant to the Option (the "Option Closing") cannot be consummated, by reason
of any applicable Order, the period of time that otherwise would run pursuant to
this Section shall run instead from the date on which such restriction on
consummation has expired or been terminated; and provided further, without
limiting the foregoing, that if, in the reasonable opinion of Grantee, prior
notification to or approval of any regulatory agency is required in connection
with such purchase, the Company or Grantee, as the case may be, shall promptly
file the required notice or application for approval and shall expeditiously
process the same and the period of time that otherwise would run pursuant to
this sentence shall run instead from the date on which any required notification
periods have expired or been terminated or such approvals have been obtained and
any requisite waiting period or periods shall have passed.
(f) PURCHASE PRICE. At the Option Closing, Grantee shall pay to the
Company the aggregate Option Price in immediately available funds by wire
transfer to a bank account designated by the Company; provided that failure or
refusal of the Company to designate such a bank account shall not preclude
Grantee from exercising the Option.
(g) ISSUANCE OF COMPANY COMMON STOCK. At the Option Closing,
simultaneously with the delivery of immediately available funds as provided in
Section 2(f) hereof, the Company shall deliver to Grantee a certificate or
certificates representing the number of shares of Company Common Stock (or other
Option Securities) purchased by Grantee and, if the Option should be exercised
in part only, a new Option evidencing the rights of Grantee thereof to purchase
the balance of the shares (or other Option Securities) purchasable hereunder. If
at the time of issuance of any Option Shares pursuant to an exercise of all or
part of the Option hereunder, the Company shall have issued any rights or other
securities which are attached to or otherwise associated with the Company Common
Stock, then each Option Share issued pursuant to such exercise shall also
represent such rights or other securities with terms substantially the same as
and at least as favorable to Grantee as are provided under any shareholder
rights agreement or similar agreement of the Company then in effect.
(h) LEGEND. Certificates for Company Common Stock (or other Option
Securities) delivered at a closing hereunder may be endorsed with a restrictive
legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject to
resale restrictions arising under the Securities Act of 1933, as amended."
It is understood and agreed that the reference to the resale restrictions of the
Securities Act of 1933, as amended (the "Securities Act"), in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if Grantee shall have delivered to the Company a copy of a letter from the staff
of the SEC, or an opinion of counsel, reasonably satisfactory to the Company, to
the effect that such legend is not required for purposes of the Securities Act.
(i) RECORD GRANTEE; EXPENSES. Upon the delivery by Grantee to the
Company of the Exercise Notice and the tender of the applicable Option Price in
immediately available funds, Grantee shall be deemed to be the holder of record
of the shares of Company Common Stock (or other Option Securities) issuable upon
such exercise, notwithstanding that the stock transfer books of the Company
2 - 2
<PAGE>
shall then be closed or that certificates representing such shares of Company
Common Stock (or other Option Securities) shall not then be actually delivered
to Grantee or the Company shall have failed or refused to designate the bank
account described in Section 2(f). The Company shall pay all expenses that may
be payable in connection with the preparation, issuance and delivery of stock
certificates under this Section 2 in the name of Grantee. The Grantee shall pay
all expenses that may be payable in connection with the issuance and delivery of
stock certificates or a substitute option agreement in the name of any assignee,
transferee or designee of Grantee.
(j) CONSENTS. The obligation of the Company to issue Option Shares to
Grantee hereunder is subject to the conditions that (i) any waiting period under
the HSR Act applicable to the issuance of the Option Shares hereunder shall have
expired or been terminated and any approval required by the German antitrust
laws shall have been obtained; (ii) all material consents, approvals, orders or
authorizations of, or registrations, declarations or filings with, any Federal,
state or local administrative agency or commission or other Federal, state or
local governmental authority or instrumentality, if any, required in connection
with the issuance of the Option Shares hereunder shall have been obtained or
made, as the case may be; and (iii) no preliminary or permanent injunction or
other order by any court of competent jurisdiction prohibiting or otherwise
restraining such issuance shall be in effect. It is understood and agreed that
at any time during which the Option is exercisable, the parties shall use their
respective best efforts to satisfy all such conditions to closing, so that an
Option Closing may take place as promptly as practicable; provided that neither
the Company nor Grantee nor any subsidiary or affiliate thereof shall be
required to agree to any divestiture by itself or any of its affiliates of
shares of capital stock or of any business, assets or property, or the
imposition of any material limitation on the ability of any of them to conduct
their businesses or to own or exercise control of such assets, properties and
stock.
3. EVALUATION OF INVESTMENTS. Grantee, by reason of its knowledge and
experience in financial and business matters, believes itself capable of
evaluating the merits and risks of an investment in the Option and the
securities to be purchased/sold pursuant to this Agreement (collectively the
"Option Securities.")
4. INVESTMENT INTENT. Grantee represents and warrants that it is entering
into this Agreement and is acquiring and/or shall acquire the Option Securities
for its own account and not with a view to resale or distribution of all or any
part of the Option Securities in violation of applicable Law.
5. RESERVATION OF SHARES. The Company agrees (i) that it shall at all
times maintain, free from preemptive rights, sufficient authorized but unissued
or treasury shares of Company Common Stock (and other Option Securities)
issuable pursuant to this Agreement so that the Option may be exercised without
additional authorization of Company Common Stock (or such other Option
Securities) after giving effect to all other options, warrants, convertible
securities and other rights to purchase Company Common Stock (or such other
Option Securities); (ii) that it shall not, by charter amendment or through
reorganization, consolidation, merger, dissolution or sale of assets, or by any
other voluntary act, avoid or seek to avoid the observance or performance of any
of the covenants to be observed or performed hereunder by the Company; and (iii)
promptly to take all action as may from time to time be required in order to
permit Grantee to exercise the Option and the Company to duly and effectively
issue shares of Company Common Stock (or other Option Securities) pursuant
hereto.
6. LOST OPTIONS. Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, the Company shall execute and deliver a new Agreement
of like tenor and date.
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. The number of shares of
Company Common Stock purchasable upon the exercise of the Option shall be
subject to adjustment from time to time as provided in this Section 7.
2 - 3
<PAGE>
(a) TRANSACTION ADJUSTMENT. In the event of any change in Company
Common Stock by reason of stock dividends, splits, mergers, recapitalizations,
combinations, subdivisions, conversions, exchanges of shares or other similar
transactions, then that which is then purchasable upon exercise of the Option
shall be appropriately adjusted so that Grantee shall receive upon exercise of
the Option and payment of the aggregate Option Price hereunder the number and
class of shares or other securities or property (including cash) that Grantee
would have owned or been entitled to receive after the happening of any of the
events described above if the Option had been exercised immediately prior to
such event, or the record date therefor, as applicable.
(b) OPTION PRICE ADJUSTMENT. Whenever the number of shares of Company
Common Stock subject to this Option are adjusted pursuant to Section 7(a) the
Option Price shall be appropriately adjusted, if applicable, by multiplying the
Option Price by a fraction, the numerator of which shall be equal to the
aggregate number of shares of Company Common Stock purchasable under the Option
prior to the adjustment and the denominator of which shall be equal to the
aggregate number of shares of Company Common Stock purchasable under the Option
immediately after the adjustment.
8. REGISTRATION RIGHTS. The Company shall, if requested by the Grantee at
any time and from time to time within two (2) years of a Triggering Event (the
"Registration Period"), as expeditiously as possible prepare and file up to two
registration statements under the Securities Act, in order to permit the sale or
other disposition of shares of Company Common Stock that have been acquired by
or are issuable to the Grantee upon exercise of the Option ("Registrable
Securities") pursuant to a bona fide firm commitment underwritten public
offering in which the Grantee and the underwriters shall use reasonable efforts
to prevent any person or group from purchasing through such offering shares
representing more than 3% of the outstanding Company Common Stock on a fully
diluted basis and in no event shall any person or group purchase through such
offering shares representing more than 4.9% of the outstanding Company Common
Stock on a fully diluted basis (a "Permitted Offering"); provided, however, that
any such registration must relate to a number of shares equal to at least 2% of
the outstanding shares of Company Common Stock on a fully diluted basis. The
Company shall use all reasonable efforts to qualify such shares or other Option
Securities under any applicable state securities Laws; provided, however, that
the Company shall not be required to qualify to do business in, or consent to
general service of process in, any jurisdiction by reason of this provision.
Without the Grantee's prior written consent, no other securities may be included
in any such registration. The Company shall use reasonable efforts to cause each
such registration statement to become effective, to obtain all consents or
waivers of other parties which are required therefor and to keep such
registration statement effective for such period not in excess of ninety (90)
days from the day such registration statement first becomes effective as may be
reasonably necessary to effect such sale or other disposition. The obligations
of the Company hereunder to file a registration statement and to maintain its
effectiveness may be suspended for one or more periods of time not exceeding
ninety (90) days in the aggregate if the Board of Directors of the Company shall
have determined in good faith that the filing of such registration or the
maintenance of its effectiveness would require disclosure of nonpublic
information that would materially and adversely affect the Company or the
Company is required under the Securities Act to include audited financial
statements for any period in such registration statement and such financial
statements are not yet available for inclusion in such registration statement.
The expenses associated with the preparation and filing of any such registration
statement pursuant to this Section 8 and any sale covered thereby (excluding any
fees related to blue sky qualifications and filing fees in respect of the SEC or
the National Association of Securities Dealers, Inc.) ("Registration Expenses")
shall be for the account of the Company except for underwriting discounts or
commissions or brokers' fees in respect of shares of Company Common Stock to be
sold by the Grantee and the fees and disbursements of the Grantee's counsel;
provided, however, that the Company shall not be required to pay for any
Registration Expenses with respect to such registration if the registration
request is subsequently withdrawn at the request of the Grantee unless the
Grantee agrees to forfeit its right to request one registration; provided
further, however, that, if at the time of such withdrawal the
2 - 4
<PAGE>
Grantee has learned of a material adverse change in the results of operations,
condition, business or prospects of the Company from that known to the Grantee
at the time of its request and has withdrawn the request with reasonable
promptness following disclosure by the Company of such material adverse change,
then the Grantee shall not be required to pay any of such expenses and shall
retain all remaining rights to request registration. The Grantee shall provide
all information reasonably requested by the Company for inclusion in any
registration statement to be filed hereunder. If, during the Registration
Period, the Company shall propose to register under the Securities Act the
offering, sale and delivery of Company Common Stock for cash for its own account
or for any other stockholder of the Company pursuant to a firm underwriting
(other than a Registration Statement on Form S-4), it shall, in addition to the
Company's other obligations under this Section 8, allow the Grantee the right to
participate in such registration provided that the Grantee participates in the
underwriting; provided, however, that, if the managing underwriter of such
offering advises the Company in writing that, in its opinion, the number of
shares of Company Common Stock requested to be included in such registration
exceeds the number which it would be in the best interests of the Company to
sell in such offering, the Company shall, after fully including therein all
shares of Company Common Stock to be sold by the Company, include the shares of
Company Common Stock requested to be included therein by Grantee pro rata (based
on the number of shares of Company Common Stock intended to be included therein)
with the shares of Company Common Stock intended to be included therein by
Persons other than the Company and Persons to whom the Company owes a
contractual obligation not to make such a cut-back. In connection with any
offering, sale and delivery of Company Common Stock pursuant to a registration
statement effected pursuant to this Section 8, the Company and the Grantee shall
provide each other and each underwriter of the offering with customary
representations, warranties and covenants, including covenants of
indemnification and contribution. For purposes of determining whether two
requests have been made under this Section 8, only requests relating to a
registration statement that has become effective under the Securities Act shall
be counted.
9. REPURCHASE OF OPTION AND OPTION SHARES.
(a) REPURCHASE OFFER. Within fifteen (15) business days following the
occurrence of a Repurchase Event (as defined herein), the Company shall (i)
deliver an offer (an "Option Repurchase Offer") to repurchase the Option from
Grantee at a price (the "Option Repurchase Price") equal to the amount by which
(A) the Competing Transaction Price (as defined below) exceeds (B) the Option
Price, multiplied by the maximum number of shares for which the Option may then
be exercised by the Grantee, and (ii) deliver an offer (an "Option Share
Repurchase Offer") to repurchase any Option Shares held by Grantee at a price
(the "Option Share Repurchase Price") equal to the amount of the Competing
Transaction Price multiplied by the number of Option Shares then held by
Grantee. The term "Competing Transaction Price" shall mean, as of any date for
the determination thereof, the price
per share of Common Stock paid pursuant to the consummation of any Competing
Transaction or, in the event of a Competing Transaction by way of a sale of
assets of the Company, the last per share sale price of Company Common Stock on
the fourth trading day following the announcement of such sale. For purposes of
this Agreement, "Competing Transaction" shall mean any of the following, other
than the transactions with Grantee contemplated by the Merger Agreement: (a) a
merger, consolidation, recapitalization, liquidation or other business
combination to which the Company or its subsidiary is a party pursuant to which
the stockholders of the Company immediately preceding such transaction hold less
than 50% of the equity interests in the surviving or resulting entity of such
transaction, (b) the acquisition or purchase from the Company of 50% or more of
the total outstanding voting securities of the Company, or (c) the acquisition
or purchase of all or substantially all of the assets of the Company. If the
consideration paid or received in the Competing Transaction shall be other than
in cash, the per share value of such consideration (on a fully diluted basis)
shall be determined by a nationally recognized investment banking firm selected
by Grantee and reasonably acceptable to the Company, which determination shall
be conclusive for all purposes of this Agreement.
2 - 5
<PAGE>
(b) REPURCHASE REQUEST. Upon the occurrence of a Repurchase Event and
whether or not the Company shall have made an Option Repurchase Offer or Option
Share Repurchase Offer under Section 9(a), at the request (the date of such
request being the "Option Repurchase Request Date") of Grantee delivered prior
to the Option Expiration Date, the Company (i) shall repurchase the Option from
Grantee at the Option Repurchase Price and (ii) shall repurchase such number of
the Option Shares (to the extent clearly identifiable as such) from the Grantee
as the Grantee shall designate at the Option Share Repurchase Price.
(c) REPURCHASE PROCEDURES. Grantee may (i) accept the Company's Option
Repurchase Offer or Option Share Repurchase Offer under Section 9(a) or (ii)
exercise its right to require the Company to repurchase the Option or any Option
Shares, as the case may be, pursuant to Section 9(b) by a written notice or
notices stating that Grantee elects to accept such offer or to require the
Company to repurchase the Option or the Option Shares in accordance with the
provisions of this Section 9. As promptly as practicable, and in any event
within five (5) business days, after the surrender to the Company of this
Agreement or Certificates for Option Shares, as applicable, following receipt of
a notice under this Section 9(c), the Company shall deliver or cause to be
delivered to Grantee by wire transfer the Option Repurchase Price or the Option
Share Repurchase Price, as the case may be.
(d) REGULATORY APPROVALS. The Company hereby undertakes to use its best
efforts to obtain all required regulatory and legal approvals and to file any
required notices as promptly as practicable in order to accomplish any
repurchase contemplated by this Section 9. Nonetheless, to the extent that the
Company is prohibited under applicable Law from repurchasing the Option or any
Option Shares in full, the Company shall immediately so notify Grantee and
thereafter deliver or cause to be delivered, from time to time, to Grantee, the
portion of the Option Repurchase Price and the Option Share Repurchase Price,
respectively, that it is required to deliver pursuant hereto and that it is no
longer prohibited from delivering, within five (5) business days after the date
on which the Company is no longer so prohibited; provided, however, that if the
Company at any time after delivery of a notice of repurchase pursuant to Section
9(b) hereof is prohibited under applicable Law, from delivering to Grantee the
Option Repurchase Price or the Option Share Repurchase Price, respectively, in
full, Grantee may revoke its notice of repurchase of the Option or the Option
Shares, respectively, either in whole or in part whereupon, in the case of a
revocation in part, the Company shall promptly (i) deliver to Grantee that
portion of the Option Repurchase Price or the Option Share Repurchase Price that
the Company is not prohibited from delivering after taking into account any such
revocation and (ii) deliver, as appropriate, to Grantee either (A) a new
Agreement evidencing the right of Grantee to purchase that number of shares of
Company Common Stock equal to the number of shares of Company Common Stock
purchasable immediately prior to the delivery of the notice of repurchase less
the number of shares of Company Common Stock covered by the portion of the
Option repurchased or (B) a certificate for the number of Option Shares covered
by the revocation. If an Option Termination Event shall have occurred prior to
the date of the notice by the Company described in the second sentence of this
Section 9(d), or shall be scheduled to occur at any time after an Option
Repurchase Request Date or valid acceptance of the Company's Option Repurchase
Offer but before the expiration of a period ending on the thirtieth day after
such notice date, Grantee shall nonetheless have the right to exercise the
Option until the expiration of such thirty (30) day period.
(e) DEFINITION. The term "Repurchase Event" shall mean a Triggering
Event followed by the consummation of any transaction included in the definition
of Competing Transaction; provided that the Repurchase Event shall not be deemed
to have occurred until the closing of such Competing Transaction.
(f) REPRESENTATIONS. In connection with any purchase/sale of the Option
or the Option Shares pursuant to this Section 9, the Grantee shall be required
to represent and warrant to the Company that such Person is the owner of the
Option/Option Shares being purchased, free and clear of all adverse claims and
that such Person shall deliver good title to such Option/Option Shares to the
2 - 6
<PAGE>
Company, free and clear of all adverse claims, upon consummation of any
purchase/sale pursuant to this Section 9.
10. EXTENSION OF TIME FOR REGULATORY APPROVALS. The periods related to
exercise of the Option and the other rights of Grantee hereunder shall be
extended (i) to the extent necessary to obtain all regulatory approvals for the
exercise of such rights, and for the expiration of all statutory waiting periods
and (ii) to the extent necessary to avoid liability under Section 9(b) of the
Exchange Act by reason of such exercise.
11. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to Grantee as follows:
AUTHORIZED STOCK. The Company has taken all necessary corporate and other
action to authorize and reserve and, subject to the expiration or termination of
any required waiting period under the HSR Act and obtaining any required
approval under the German antitrust laws, to permit it to issue, and, at all
times from the date hereof until the obligation to deliver Option Shares upon
the exercise of the Option terminates, shall have reserved for issuance, upon
exercise of the Option, shares of Company Common Stock necessary for Grantee to
exercise the Option, and the Company shall take all necessary corporate action
to authorize and reserve for issuance all additional shares of Company Common
Stock or other Option Securities which may be issued pursuant to Section 8 upon
exercise of the Option. The shares of Company Common Stock to be issued upon due
exercise of the Option, including all additional shares of Company Common Stock
or other Option Securities which may be issuable upon exercise of the Option or
any other Option Securities which may be issued pursuant to Section 7, upon
issuance pursuant hereto, shall be duly and validly issued, fully paid and
nonassessable, and shall be delivered free and clear of all liens, claims,
charges and encumbrances of any kind or nature whatsoever, including without
limitation any preemptive rights of any stockholder of the Company.
12. ASSIGNMENT. The Company may not assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
Person, without the express written consent of Grantee. Grantee may not assign
any of its rights or obligations under this Agreement or the Option created
hereunder to any other Person, other than to a wholly-owned subsidiary of
Grantee.
13. APPLICATION FOR REGULATORY APPROVAL. Each of Grantee and the Company
shall use its reasonable efforts to make all filings with, and to obtain
consents of, all third parties and Governmental Authorities necessary to the
consummation of the transactions contemplated by this Agreement, including
without limitation making application to list the shares of Company Common Stock
issuable hereunder on the Nasdaq National Market upon official notice of
issuance; provided that neither the Company nor Grantee nor any subsidiary or
affiliate thereof shall be required to agree to any divestiture by itself or any
of its affiliates of shares of capital stock or of any business, assets or
property, or the imposition of any material limitation on the ability of any of
them to conduct their businesses or to own or exercise control of such assets,
properties and stock.
14. SPECIFIC PERFORMANCE. The parties hereto acknowledge that damages
would be an inadequate remedy for a breach of this Agreement by either party
hereto and that the obligations of the parties hereto shall be enforceable by
either party hereto through injunctive or other equitable relief.
15. 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. 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 a mutually acceptable manner in order that the
terms of this Agreement remain as originally contemplated to the fullest extent
possible.
16. NOTICES. All notices, claims, demands and other communications
hereunder shall be deemed to have been duly given or made when delivered in
person, by registered or certified mail (postage
2 - 7
<PAGE>
prepaid, return receipt requested), by overnight courier or by facsimile at the
respective addresses of the parties set forth in the Merger Agreement.
17. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the Laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflict of laws thereof.
18. COUNTERPARTS. This Agreement may be executed (including by facsimile
transmission) in two or more counterparts, each of which shall be deemed to be
an original, but all of which shall constitute one and the same agreement.
19. DEFINITIONS. Capitalized terms used and not defined herein shall have
the meanings set forth in the Merger Agreement.
20. EXPENSES. Except as otherwise expressly provided herein or in the
Merger Agreement, each of the parties hereto shall bear and pay all costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own financial
consultants, investment bankers, accountants and counsel.
21. ENTIRE AGREEMENT. Except as otherwise expressly provided herein or in
the Merger Agreement, this Agreement contains the entire agreement between the
parties with respect to the transactions contemplated hereunder and supersedes
all prior arrangements or understandings with respect thereof, written or oral.
The terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted
assigns. Nothing in this Agreement, express or implied, is intended to confer
upon any party, other than the parties hereto, and their respective successors
and permitted assigns, any rights, remedies, obligations or liabilities under or
by reason of this Agreement, except as expressly provided herein. Any provision
of this Agreement may be waived only in writing at any time by the party that is
entitled to the benefits of such provision. This Agreement may not be modified,
amended, altered or supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
22. FURTHER ASSURANCES. In the event of any exercise of the Option by
Grantee, the Company and Grantee shall execute and deliver all other documents
and instruments and take all other action that may be reasonably necessary to
the fullest extent permitted by Law in order to consummate the transactions
provided for by such exercise. Nothing contained in this Agreement shall be
deemed to authorize the Company or Grantee to breach any provision of the Merger
Agreement.
2 - 8
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed as of the date first written above.
PERCLOSE, INC.
By:
---------------------------
Name: Henry A. Plain, Jr.
Title: President and Chief Executive
Officer
ABBOTT LABORATORIES
By:
------------------------------
Name: Miles D. White
Title: Chairman of the Board and
Chief Executive Officer
2 - 9
<PAGE>
ANNEX 3
STOCKHOLDERS AGREEMENT
STOCKHOLDERS AGREEMENT (this "Agreement"), dated as of July 8, 1999, among
Abbott Laboratories, an Illinois corporation ("Parent"), and the stockholders of
Perclose, Inc., a Delaware corporation (the "Company"), listed on Schedule A
hereto (the "Stockholders").
WHEREAS, concurrently with the execution of this Agreement, Parent, AL
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Parent ("Sub"), and the Company have entered into an Agreement and Plan of
Merger (as the same may be further amended from time to time, the "Merger
Agreement"), providing for the merger (the "Merger") of Sub with and into the
Company pursuant to the terms and conditions of the Merger Agreement; and
WHEREAS, the Stockholders own of record and beneficially the shares (the
"Shares") of the common stock, par value $0.001 per share, of the Company (the
"Company Common Stock") set forth opposite their respective names on Schedule A
hereto and wish to enter into this Agreement with respect to the Shares; and
WHEREAS, in order to induce Parent and Sub to enter into the Merger
Agreement, the Stockholders have agreed, upon the terms and subject to the
conditions set forth herein, to vote the Shares at a meeting of the Company's
stockholders in favor of approval of the Merger.
NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency and adequacy of which is hereby acknowledged, the parties hereto
agree as follows:
1. AGREEMENT TO VOTE SHARES.
(a) Subject to Section 1(b) hereof, each of the Stockholders agrees
during the term of this Agreement to vote the Shares as to which it has voting
power or control, in person or by proxy, in favor of approval of the Merger at
the meeting of the stockholders of the Company at which such matter is
considered and at any adjournment thereof (the "Stockholder Meeting").
(b) Notwithstanding anything to the contrary contained herein, the
obligations of the Stockholders pursuant to Section 1(a) hereof with respect to
such matter to be considered at the Stockholder Meeting are subject to the
following conditions:
(i) Parent shall have performed in all material respects all of its
material obligations under the Merger Agreement to have been performed at
or prior to the date of such Stockholder Meeting;
(ii) there shall not be in effect on the date of such Stockholder
Meeting any statute, rule, regulation, order or injunction of a court of
competent jurisdiction or governmental authority directing that the
transactions contemplated by the Merger Agreement not be consummated; and
(iii) the Form S-4 (as defined in the Merger Agreement) to be filed
with the Securities and Exchange Commission (the "Commission") by Parent
under the Securities Act of 1933, as amended (the "Act"), to register the
common shares, no par value, of Parent to be issued in the Merger shall
have become effective under the Act and shall not be the subject of any
stop order or proceeding by the Commission seeking a stop order.
2. NO VOTING TRUSTS. Each of the Stockholders agrees that such Stockholder
shall not, nor shall such Stockholder permit any entity UNDER such Stockholder's
control to, deposit any of such Stockholder's Shares in a voting trust or
subject any of its Shares to any arrangement with respect to the voting of the
Shares inconsistent with this Agreement.
3. LIMITATION ON DISPOSITIONS AND PROXIES. During the term of this
Agreement, each of the Stockholders agrees not to sell, assign, pledge, transfer
or otherwise dispose of (each a "Transfer"), or
3 - 1
<PAGE>
grant any proxies with respect to (except for a proxy which is not inconsistent
with the terms of this Agreement) any of such Stockholder's Shares.
4. SPECIFIC PERFORMANCE. Each party hereto acknowledges that it shall be
impossible to measure in money the damage to the other party if a party hereto
fails to comply with the obligations imposed by this Agreement, and that, in the
event of any such failure, the other party shall not have an adequate remedy at
law or in damages. Accordingly, each party hereto agrees that injunctive relief
or other equitable remedy, in addition to remedies at law or damages, is the
appropriate remedy for any such failure and shall not oppose the granting of
such relief on the basis that the other party has an adequate remedy at law.
Each party hereto agrees that it shall not seek, and agrees to waive any
requirement for, the securing or posting of a bond in connection with any other
party's seeking or obtaining such equitable relief.
5. TERM OF AGREEMENT; Termination. The term of this Agreement shall
commence on the date hereof, and such term and this Agreement shall terminate
upon the earliest to occur of (i) the Effective Time; (ii) the date on which the
Merger Agreement is terminated in accordance with its terms; and (iii) March 31,
2000. Upon such termination, no party shall have any further obligations or
liabilities hereunder; PROVIDED, HOWEVER, that such termination shall not
relieve any party from liability for any breach of this Agreement prior to such
termination.
6. ENTIRE AGREEMENT. This Agreement supersedes all prior agreements,
written or oral, among the parties hereto with respect to the subject matter
hereof and contains the entire agreement among the parties with respect to the
subject matter hereof. This Agreement may not be amended, supplemented or
modified, and no provisions hereof may be modified or waived, except by an
instrument in writing signed by all parties hereto. No waiver of any provisions
hereof by any party shall be deemed a waiver of any other provisions hereof by
any such party, nor shall any such waiver be deemed a continuing waiver of any
provision hereof by such party.
7. NOTICES. All notices, consents, requests, instructions, approvals and
other communications provided for herein shall be in writing and shall be deemed
to have been duly given if mailed, by first class or registered mail, three (3)
business days after deposit in the United States mail, or if telexed or
telecopied, sent by telegram, or delivered by hand or reputable overnight
courier, when confirmation is received, in each case as follows:
If to the Stockholders, to the addresses listed on Schedule A hereto.
With a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
Attention: Casey McGlynn, Esq.
Christopher D. Mitchell, Esq.
Telecopy: (650) 493-6811
If to Parent:
Abbott Laboratories
200 Abbott Park Road
D-960, AP30
Abbott Park, IL 60064-6149
Attention: Senior Vice President
Hospital Products Division
Telecopy: (847) 937-2927
3 - 2
<PAGE>
With a copy to:
Abbott Laboratories
100 Abbott Park Road
D-364, AP6D
Abbott Park, IL 60064-6020
Attention: Senior Vice President, Secretary and General Counsel
Telecopy: (847) 938-6277
With a copy to:
Skadden, Arps, Slate, Meagher & Flom (Illinois)
333 West Wacker Drive, Suite 2300
Chicago, Illinois 60606
Attention: Charles W. Mulaney, Jr.
Telecopy: (312) 407-0411
or to such other persons or addresses as may be designated in writing by the
party to receive such notice. Nothing in this Section 7 shall be deemed to
constitute consent to the manner and address for service of process in
connection with any legal proceeding (including litigation arising out of or in
connection with this Agreement), which service shall be effected as required by
applicable law.
8. MISCELLANEOUS.
(a) This Agreement shall be deemed a contract made under, and for all
purposes shall be construed in accordance with, the laws of the State of
Delaware, without reference to its conflicts of law principles.
(b) If any provision of this Agreement or the application of such
provision to any person or circumstances shall be held invalid or unenforceable
by a court of competent jurisdiction, such provision or application shall be
unenforceable only to the extent of such invalidity or unenforceability, and the
remainder of the provision held invalid or unenforceable and the application of
such provision to persons or circumstances, other than the party as to which it
is held invalid, and the remainder of this Agreement, shall not be affected.
(c) This Agreement may be executed (including by facsimile transmission)
in one or more counterparts, each of which shall be deemed to be an original but
all of which together shall constitute one and the same instrument.
(d) All Section headings herein are for convenience of reference only
and are not part of this Agreement, and no construction or reference shall be
derived therefrom.
(e) The obligations of the Stockholders set forth in this Agreement
shall not be effective or binding upon the Stockholders until after such time as
the Merger Agreement is executed and delivered by the Company, Parent and Sub.
3 - 3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
ABBOTT LABORATORIES
By:
-------------------------
Richard A. Gonzalez
Senior Vice President,
Hospital Products
STOCKHOLDERS:
-------------------------
John B. Simpson, M.D.
SIMPSON FAMILY TRUST
By:
-------------------------
Name:
Title:
JOHN DAVID SIMPSON TRUST
By:
-------------------------
Name:
Title:
FOX HOLLOW, LTD.
By:
-------------------------
Name:
Title:
-------------------------
Henry A. Plain, Jr.
3 - 4
<PAGE>
PLAIN FAMILY TRUST
By:
-------------------------
Name:
Title:
ALEXANDRA MARIE PLAIN TRUST
By:
-------------------------
Name:
Title:
HENRY ALBERT PLAIN III TRUST
By:
-------------------------
Name:
Title:
-------------------------
Vaughn D. Bryson
VAUGHN D. BRYSON IRREVOCABLE TRUST
By:
-------------------------
Name:
Title:
-------------------------
James W. Vetter, M.D.
-------------------------
Coy F. Blevins
-------------------------
Serge Lashutka
3 - 5
<PAGE>
-------------------------
Randolph E. Campbell
-------------------------
Kenneth E. Ludlum
-------------------------
Mark A. Wan
-------------------------
John G. McCutcheon
-------------------------
Ronald W. Songer
-------------------------
Michael L. Eagle
3 - 6
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
NUMBER OF
OUTSTANDING SH
STOCKHOLDER C/O MAILING ADDRESS FOR ALL OWNED(1)
- ------------------------------------------------------------------- ---------------------------- --------------
<S> <C> <C>
Simpson Family Trust............................................... 400 Saginaw 1,202,143
Redwood City, CA 94063
John B. Simpson.................................................... --
John David Simpson Trust........................................... 49,200
Fox Hollow, Ltd.................................................... 356,294
Henry A. Plain, Jr................................................. 57,786
Plain Family Trust................................................. 95,349
Alexandra Marie Plain Trust........................................ 20,000
Henry Albert Plain III Trust....................................... 20,000
James W. Vetter, M.D............................................... 194,992
Vaughn D. Bryson................................................... --
Vaughn D. Bryson Irrevocable Trust................................. 30,000
Serge Lashutka..................................................... 2,000
Mark A. Wan........................................................ 633
Ronald W. Songer................................................... 66,828
Coy F. Blevins..................................................... 28,350
Kenneth E. Ludlum.................................................. --
John G. McCutcheon................................................. 7,398
Randolph E. Campbell............................................... 30,040
Michael L. Eagle................................................... --
</TABLE>
- ------------------------
(1) Ownership shown as of July 6, 1999.
(2) Based on a total of 11,174,966 shares outstanding as of June 30, 1999.
(3) Share holdings as of July 6, 1999.
3 - 7
<PAGE>
ANNEX 4
[LOGO]
222 South Ninth Street
Minneapolis, MN 55402
612 342-6000
July 8, 1999
The Board of Directors
Perclose Inc.
199 Jefferson Drive
Menlo Park, CA 94025
Members of the Board:
In connection with the proposed transaction ("Transaction") in which AL
Acquisition Corp., a wholly-owned subsidiary of Abbott Laboratories ("Abbott
Labs"), will be merged with and into Perclose Inc. ("Perclose") and Perclose
will become a wholly-owned subsidiary of Abbott Labs, you have requested our
opinion as to the fairness, from a financial point of view, to the stockholders
of Perclose of the proposed consideration to be received by the stockholders of
Perclose in the Transaction pursuant to the Agreement referred to below. Under
the terms of the Agreement and Plan of Merger (the "Agreement"), at the
effective time of the Transaction, each issued and outstanding share of Perclose
Common Stock will be converted into shares of Abbott Labs common stock based on
an average of the daily closing stock price of Abbott Labs for a specified
period ending prior to the stockholders meeting relating to the Transaction. The
terms and conditions of the Merger are more fully set forth in the Agreement.
The Transaction is intended to qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and is intended to be treated as a pooling-of-interests for accounting purposes.
U.S. Bancorp Piper Jaffray Inc., as a customary part of its investment
banking business, is engaged in the valuation of businesses and their securities
in connection with mergers and acquisitions, underwriting and secondary
distributions of securities, private placements and valuations for estate,
corporate and other purposes. We have acted as exclusive financial advisor to
Perclose in connection with the Transaction and will receive a fee for our
services which is contingent upon consummation of the Transaction. In addition,
we will receive a separate fee for providing this opinion, which will be
credited against the fee for our services. This opinion fee is not contingent
upon the consummation of the Transaction. Perclose has also agreed to indemnify
us against certain liabilities in connection with our services. We acted as a
manager of the initial public offering of Perclose Common Stock on November 6,
1995 and secondary public offering of Perclose Common Stock on November 20,
1997. We write research on and make a market in the Common Stock of Perclose. In
the ordinary course of our business, we and our affiliates may actively trade
securities of Abbott Labs and Perclose for our own account or the account of our
customers and, accordingly, may at any time hold a long or short position in
such securities.
In arriving at our opinion, we have undertaken such review, analyses and
inquiries as we deemed necessary and appropriate under the circumstances. Among
other things, we have reviewed (i) a draft dated July 7, 1999 of the Agreement
and Plan of Merger, (ii) certain publicly available financial,
4 - 1
<PAGE>
business and operating information related to Abbott Labs, (iii) certain
publicly available financial and securities data of Abbott Labs and selected
public companies deemed comparable to Abbott Labs, (iv) certain analyst reports
on Abbott Labs, (v) to the extent publicly available, information concerning
selected transactions deemed comparable to the proposed Transaction , (vi)
certain publicly available financial, business and operating information
relative to Perclose, (vii) certain internal financial information of Perclose
on a stand-alone basis prepared for financial planning purposes, and furnished
by Perclose management and (viii) certain publicly available financial and
securities data of Perclose and selected public companies deemed comparable to
Perclose. We had discussions with members of the management of Perclose
concerning the financial condition, current operating results and business
outlook for Perclose on a stand-alone basis and as a combined company. We also
had discussions with members of the management of Abbott Labs concerning the
financial condition, current operating results and business outlook for Abbott
Labs and as a combined company.
We have relied upon and assumed the accuracy, completeness and fairness of
the financial statements and other information provided to us by Perclose,
Abbott Labs, or otherwise made available to us, and have not assumed
responsibility for the independent verification of such information. Perclose
has advised us that it does not publicly disclose internal financial information
of the type provided to us and that such information was prepared for financial
planning purposes and not with the expectation of public disclosure. We have
relied upon the assurance of the management of Perclose and Abbott Labs that the
information provided to us by Perclose and Abbott Labs has been prepared on a
reasonable basis, and, with respect to financial planning data and other
business outlook information, reflects the best currently available estimates,
and that they are not aware of any information or facts that would make the
information provided to us incomplete or misleading.
We have assumed that the final form of the Agreement will be substantially
similar to the last draft reviewed by us, without modification of material terms
or conditions by Perclose or Abbott Labs. We have also assumed that the
Transaction contemplated by the Agreement will constitute a "reorganization"
within the meaning of Section 368(a) of the Code and that the Transaction will
be treated as a pooling-of-interests for accounting purposes. In addition, we
have assumed that, in the course of obtaining the necessary regulatory approvals
for the Transaction, no restrictions, including any divestiture requirements,
will be imposed that will have a material adverse effect on the contemplated
benefits of the Transaction.
In arriving at our opinion, we have not performed any appraisals or
valuations of any specific assets or liabilities of Perclose or Abbott Labs, and
have not been furnished with any such appraisals or valuations. We express no
opinion regarding the liquidation value of any entity. We were not authorized to
solicit, and did not solicit, other persons regarding a business combination
with Perclose.
This opinion is necessarily based upon the information available to us and
facts and circumstances as they exist and are subject to evaluation on the date
hereof; events occurring after the date hereof could materially affect the
assumptions used in preparing this opinion. We are not expressing any opinion
herein as to the price at which shares of Perclose or Abbott Labs Common Stock
have traded or may trade at any future time. We have not undertaken to reaffirm
or revise this opinion or otherwise comment upon any events occurring after the
date hereof and do not have any obligation to update, revise or reaffirm this
opinion.
This opinion is directed to the Board of Directors in connection with its
consideration of the Transaction and is not intended to be and does not
constitute a recommendation to any stockholder as to how such stockholder should
vote with respect to the Transaction. We were not requested to opine as to, and
this opinion does not address, the basic business decision to proceed with or
effect the Transaction. This opinion shall not be published or otherwise used,
nor shall any public references to us be made, without our prior written
approval.
4 - 2
<PAGE>
Based upon and subject to the foregoing and based upon such other factors as
we consider relevant, it is our opinion that the consideration proposed to be
received by the stockholders of Perclose in the Transaction pursuant to the
Agreement is fair, from a financial point of view, to the stockholders of
Perclose as of the date hereof.
Sincerely,
U.S. BANCORP PIPER JAFFRAY INC.
4 - 3
<PAGE>
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF PERCLOSE, INC.
SPECIAL MEETING OF STOCKHOLDERS
The undersigned stockholder of Perclose, Inc., a Delaware corporation (the
"Company"), hereby acknowledges receipt of the Notice of Special Meeting of
Stockholders and Proxy Statement/Prospectus, each dated August 26, 1999, and
hereby appoints Henry A. Plain, Jr. and Kenneth E. Ludlum, or either of them,
proxies and attorneys-in-fact, with full power to each of substitution, on
behalf and in the name of the undersigned to represent the undersigned at the
Special Meeting of Stockholders of the Company to be held on October 8, 1999, at
8:00 a.m., local time, at the Company's executive offices located at 400 Saginaw
Drive, Redwood City, California 94063 and at any postponement or adjournment
thereof, and to vote all shares of Company common stock which the undersigned
would be entitled to vote if then and there personally present, on the matter
set forth below and, in their discretion, upon all matters incident to the
conduct of the Special Meeting and all matters presented at the Special Meeting
but which were not known to the Company Board of Directors a reasonable time
before the solicitation of this proxy:
/X/ Please mark your votes as in this example.
THE COMPANY BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSAL:
1. Approval and adoption of the Agreement and Plan of Merger dated as of July
8, 1999 pursuant to which the Company will become a wholly owned subsidiary
of Abbott Laboratories.
/ / FOR / / AGAINST / / ABSTAIN
(CONTINUED AND TO BE SIGNED AND DATED ON THE OTHER SIDE)
<PAGE>
(CONTINUED FROM OTHER SIDE)
This proxy, when properly executed, will be voted as directed or, if no
contrary direction is indicated, will be voted as follows: For approval and
adoption of the Agreement and Plan of Merger, and in the discretion of the proxy
holders on such other matters as may properly come before the meeting.
Please sign exactly as your name appears hereon. If the stock is registered
in the names of two or more persons, each should sign. Executors,
administrators, trustees, guardians and attorneys-in-fact should add their
titles. If signer is a corporation, please give full corporate name and have a
duly authorized officer sign, stating title. If signer is a partnership, please
sign in partnership name by authorized person.
Dated:
______________________________________________,
1999
_______________________________________
Signature
_______________________________________
Signature if held jointly
Please sign, date and promptly return
this proxy in the enclosed return
envelope which is postage prepaid if
mailed in the United States.
NOTE: (This Proxy should be marked,
signed by the stockholder(s) exactly as
his or her name appears hereon, and
returned promptly in the enclosed
envelope. Persons signing in a
fiduciary capacity should so indicate.
If shares are held by joint tenants or
as community property, both should
sign.)
