<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
COMMISSION FILE NUMBER 0-26204
--------------------
INSTENT INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State of incorporation)
22-3104528
(I.R.S. employer identification number)
6271 BURY DRIVE, EDEN PRAIRIE, MINNESOTA 55346
(Address, including zip code, of registrant's principal executive offices)
(612) 937-0322
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------ ------
At May 10, 1996, there were 10,037,427 shares of the registrant's Common Stock,
$.01 par value outstanding.
Page 1 of 12
<PAGE> 2
INSTENT INC.
FORM 10-Q
THREE MONTHS ENDED MARCH 31, 1996
INDEX
<TABLE>
<CAPTION>
Page No.
PART I. FINANCIAL INFORMATION:
<S> <C> <C>
Item 1. Combined Consolidated Financial Statements ...................... 3
Condensed Consolidated Balance Sheets .......................... 4
Condensed Consolidated Statements of Operations ................ 5
Condensed Consolidated Statements of Cash Flows ................ 6
Notes to Condensed Consolidated Financial Statements ........... 7-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................. 9-10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ................................. 11
Signatures ......................................................................... 12
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. COMBINED CONSOLIDATED FINANCIAL STATEMENTS
- - ------- ------------------------------------------
The consolidated Financial Statements and Supplementary data of the Company
begin on page 4 of this Report.
3
<PAGE> 4
InStent Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
<TABLE>
<CAPTION>
MARCH 31, 1996 DECEMBER 31, 1995
(unaudited) (audited)
-------------- -----------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 35,933 $ 23,494
Short term investments 5,164 19,072
Receivables
Trade 1,280 974
Interest receivable 157 134
Inventory
Finished goods 3 79
Raw materials and assemblies 60 83
Prepaid assets and other current assets 351 346
-------------- -----------------
Total current assets 42,948 44,182
Other assets
Equipment and fixtures 826 451
Intangible assets 125 131
-------------- -----------------
$ 43,899 $ 44,764
============== =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 506 $ 544
Other current liabilities 387 294
-------------- -----------------
Total current liabilities 893 838
-------------- -----------------
Shareholders' equity
Common stock, par value $.01 per share;
25,000,000 shares authorized,
10,026,360 and 10,016,560 issued
and outstanding, for the respective
periods 100 100
Additional paid-in capital 51,706 51,686
Accumulated deficit (8,800) (7,849)
Cumulative translation adjustment - (11)
-------------- -----------------
Total shareholders' equity 43,006 43,926
-------------- -----------------
$ 43,899 $ 44,764
============== =================
</TABLE>
See accompanying notes.
4
<PAGE> 5
InStent Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------
1996 1995
-------- ---------
<S> <C> <C>
Revenue $ 1,004 $ 422
Cost of goods sold 354 165
-------- ---------
Gross profit 650 257
-------- ---------
Operating expenses
Selling, general & administrative 1,022 434
Research & development 889 251
Expenses related to proposed merger 245 -
-------- ---------
Total operating expenses 2,156 685
-------- ---------
Loss from operations (1,506) (428)
Other income, net 570 5
-------- ---------
Loss before income taxes (936) (423)
Income taxes 15 -
-------- ---------
Net loss $ (951) $ (423)
======== =========
Net loss per share $ (0.09) $ (0.07)
Weighted average number of shares used in
computing net loss per share 10,020 6,234
</TABLE>
See accompanying notes.
5
<PAGE> 6
InStent Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------------
1996 1995
--------- --------
<S> <C> <C>
Operating activities:
Net loss $ (951) $ (423)
Depreciation and amortization 70 19
Stock options recognized as compensation 2 55
Changes in operating assets and liabilities (180) (184)
------- ------
Net cash flows used by operating activities (1,059) (533)
------- ------
Investing activities:
Purchase of equipment and fixtures (437) (33)
Net redemption of short-term investments 13,908 -
Other investing activities (2) -
------- ------
Net cash provided by investing activities 13,469 (33)
------- ------
Financing activities:
Net proceeds from issuances of stock 18 1,100
------- ------
Net cash provided (used) by financing
activities 18 1,100
------- ------
Effect of exchange rate changes on cash 11 1
------- ------
Increase in cash and cash equivalents 12,439 535
Cash and cash equivalents:
Beginning of period 23,494 729
------- ------
End of period $35,933 $1,264
======= ======
</TABLE>
See accompanying notes.
6
<PAGE> 7
INSTENT INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The unaudited condensed consolidated financial information contained in this
report reflects all adjustments (consisting of normal recurring adjustments)
considered necessary, in the opinion of management, for a fair presentation
of results for the interim periods presented.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These financial statements
should be read in conjunction with the most recent audited financial
statements and notes thereto included in the Company's Form 10-K for the
fiscal year ended December 31, 1995. The results of operations for periods
ended March 31 are not necessarily indicative of the results of operations
for a full year.
1. Cash, cash equivalents and short-term investments
The Company's investments are carried at cost, which approximates market,
and are as follows:
<TABLE>
<CAPTION>
March 31, 1996
--------------
<S> <C>
U.S. Treasury Notes $ 5,186,000
Commercial Paper and Corporate Bonds 34,678,000
Other 1,233,000
------------
Total cash, cash equivalents
and short-term investments $ 41,097,000
============
</TABLE>
Investments are interest-bearing, investment grade securities with
remaining maturities ranging from thirty to ninety days.
2. Receivable, Trade
The allowance for doubtful accounts was $50,000 at both March 31, 1996 and
December 31, 1995.
3. Equipment and fixtures
Accumulated depreciation was $264,000 and $201,000 at March 31, 1996 and
December 31, 1995, respectively.
4. Intangible assets
Accumulated amortization was $90,000 and $83,000 at March 31, 1996 and
December 31, 1995, respectively.
5. Significant Events
A three-year exclusive distribution agreement was signed January 9, 1996
with C.R. Bard, Inc. to distribute the Company's EsophaCoil esophageal
stents and EndoCoil biliary stents in the United States.
7
<PAGE> 8
On March 22, 1996, InStent entered into a merger agreement with
Medtronic, Inc., pursuant to which InStent shareholders will receive
0.3833 shares of Medtronic common stock for each share of InStent common
stock. Outstanding options exercisable for InStent common stock will be
exercisable for Medtronic common stock at the same conversion ratio. The
Merger Agreement calls for a pooling of interests transaction.
Consummation of the Merger is subject to customary conditions, including
registration with the Securities and Exchange Commission, approval of
InStent's shareholders and receipt of Hart-Scott-Rodino approvals. The
Company's principal shareholders, directors, executive officers and
certain of their family members, who in the aggregate own approximately
38% of the Company's outstanding common stock, have agreed to vote their
shares for the Merger. During the three months ended March 31, 1996, the
Company expensed $245,000 related to this proposed merger.
Subsequent to the execution of the Merger Agreement, the Company and
Medtronic also executed a five-year Distribution Agreement, dated as of
March 27, 1996, pursuant to which the Company appointed Medtronic its
exclusive worldwide distributor of coronary and carotid stent products.
This agreement is not contingent upon the consummation of the Merger.
8
<PAGE> 9
INSTENT INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
InStent Inc. ("InStent" or the "Company") designs, develops, manufactures
and markets a variety of highly-specialized stents for a broad range of medical
indications. InStent's stents are designed to hold open passageways in the
body, such as the arterial vasculature, the esophagus, bile duct and male
urethra, that may have closed or become obstructed as a result of aging,
disease or trauma. To date, InStent has focused its product development efforts
on the coronary, vascular, carotid, esophageal, biliary, and urology markets to
treat obstructions due to atherosclerosis, cancerous tumor ingrowth, fibrous
tissue formation, and benign prostatic hypertrophy ("BPH"). InStent believes
these are the primary markets for application of stent technology. Stents are
increasingly being used as an alternative or adjunct to many surgical and
minimally-invasive procedures or drug therapies.
InStent's stents include self-expanding, nitinol (nickel-titanium alloy)
wire coils that are inserted into the body non-surgically via InStent's
patented, catheter-based stent delivery systems. InStent also is developing a
series of balloon expandable stents. Once placed, stents exert radial force
against the walls of passageways to enable the passageways to remain open and
functional. InStent manufactures stents with differing flexibilities and
radial forces and in a variety of shapes and sizes to treat specific medical
indications, ranging from relatively rigid esophageal stents that resist tumor
ingrowth to more pliant urethral, coronary and vascular stents that must
conform to delicate and intricate anatomy. The combination of InStent's stents
and delivery systems enables the accurate, non-surgical placement of a variety
of stents at multiple sites within the body.
RESULTS OF OPERATIONS
Revenue. For the first quarter of 1996, revenue increased 138% to
$1,004,000, compared to the first quarter of 1995 revenue of $422,000. The
first quarter increase was due to a 100% increase in unit sales complemented by
a 19% increase in the average selling price. Two-thirds of the increase in
sales volume was the result of an increase in domestic sales, made possible by
both FDA clearances to market two of the company's products domestically and
the Bard Distribution Agreement. A change in product mix contributed to the
increased average selling price as sales shifted from the lower priced urology
products to the higher price esophageal and biliary products.
Gross Profit. Gross margins improved from 61% in the first quarter of 1995
to 65% in the first quarter of 1996. The improved margins were generated by the
higher average selling prices, offset slightly by the change in product mix to
products with a greater average product cost. The increase in sales volume
resulted in improved production efficiencies causing overall product costs to
decline.
Operating Expenses. Operating expenses increased 176% in the first
quarter of 1996, excluding expenses related to the proposed merger, to
$1,911,000, compared to $685,000 in the first quarter of 1995. Selling,
general and administrative expenses increased 135%, proportionate with the
increase in sales, due to expenses incurred to support the Company's growth as
well as costs associated with being a public company. Research and development
expenses increased 254% to $889,000 for the first quarter of 1996 due to the
acceleration of new product development, particularly a balloon expandable
stent, and work related to U.S. FDA Investigational Device Exemption
submissions.
9
<PAGE> 10
Other Income. Other income, which consists primarily of interest income,
increased in the first quarter of 1996 to $570,000 from $5,000 for the first
quarter of 1995, due to significantly higher cash and investment balances as a
result of proceeds from the Company's initial public offering which closed on
July 5, 1995.
Net Loss. The Company recorded a net loss of $951,000 in the first
quarter of 1996, compared to a net loss of $423,000 for the first quarter of
1995. Although the gross margins improved with the increased average selling
prices, the acceleration of new product development and product introductions
were greater, creating a larger loss in the first quarter of 1996 than the
comparable period in 1995, excluding the first quarter 1996 expenses related to
the proposed merger.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used by operations for the first quarter of 1996 of $1,059,000
was primarily due to the net loss, increase in trade receivables and decrease
in current liabilities. The Company believes that the net proceeds from its
initial public offering in 1995, and cash flows from current product sales will
be sufficient to fund its operations and planned new product development for
the foreseeable future.
Capital expenditures of $437,000 for the first quarter were to support
production for the increased sales volume and additional research and
development activities.
The Company's exposure to foreign currency fluctuations has been limited
to-date since the Company's sales have been denominated in U.S. currency and
because neither of the Company's international subsidiaries have had
significant assets.
As of March 31, 1996, the Company had no outstanding debt. Working
capital at the end of the first quarter of 1996 decreased slightly to
$42,055,000 primarily due to the accelerated spending in support of new
products, compared to $1,699,000 at March 31, 1995.
OUTLOOK
Although the Company currently markets five stents internationally,
to-date only the EsophaCoil esophageal and EndoCoil biliary product lines are
cleared to market in the United States. The Company will incur substantial
clinical research and other costs in connection with obtaining regulatory
approvals for its products in the United States. The Company expects to
continue to incur losses until at least such time, if ever, as its products
achieve broader market acceptance internationally and domestically and as it
receives additional regulatory approvals to market a broad line of its products
in the more significant geographic markets. The Company's longer-term
prospects are highly dependent on successful development, timely receipt of
regulatory approvals and market acceptance of the Company's products.
10
<PAGE> 11
INSTENT INC.
INDEX TO EXHIBITS
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- - -------- --------------------------------
a. Exhibits
EXHIBIT
NUMBER
-------
2 Agreement and Plan of Reorganization dated as of March
22, 1996, by and among Medtronic, Inc., InStent Inc. and
Merger Subsidiary.
10.1 Distribution Agreement dated March 27, 1996, by and
between Medtronic, Inc. and InStent Inc.
10.2 Distribution Agreement dated January 9, 1996, by and
between C.R. Bard, Inc. and InStent Inc.
10.3 Second Amendment to Assignment Agreement dated as of
March 22, 1996, by and among Dr. Daniel Yachia, Dr.
Mordechay Beyar, Dr. Rafael Beyar, Modern Therapeutic
Modalities, Ltd., a corporation organized and formed
under the laws of Israel, Lewis C. Pell, Katsumi Oneda,
Warren Bielke and InStent Inc.
10.4 Form of Change of Control Agreement
27 Financial Data Schedule
b. Reports on From 8-K. No reports on Form 8-K were filed during
the quarter for which this report is filed.
11
<PAGE> 12
INSTENT INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
InStent Inc.
------------
Date: May 10, 1996 /s/ Warren Bielke
-------------------------------------
Warren Bielke
President and Chief Executive Officer
Date: May 10, 1996 /s/ Sven Wehrwein
-------------------------------------
Sven Wehrwein
Chief Financial Officer
(Principal Financial and Accounting
Official)
12
<PAGE> 1
EXHIBIT 2
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
MEDTRONIC, INC.,
BYR ACQUISITION CORP.,
AND
INSTENT INC.
March 22, 1996
A-1
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE 1 THE MERGER; CONVERSION OF SHARES . . . . . . . . . . . . . . . . . . . . . . A-5
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-5
1.2 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-5
1.3 Conversion of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-5
1.4 Dissenting Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-6
1.5 Exchange of Company Common Stock . . . . . . . . . . . . . . . . . . . . . A-6
1.6 Exchange of Acquisition Subsidiary Common Stock. . . . . . . . . . . . . . . A-8
1.7 Stock Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-8
1.8 Capitalization Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . A-8
1.9 Certificate of Incorporation of the Surviving Corporation. . . . . . . . . . A-8
1.10 Bylaws of the Surviving Corporation. . . . . . . . . . . . . . . . . . . . . A-9
1.11 Directors and Officers of the Surviving Corporation. . . . . . . . . . . . . A-9
ARTICLE 2 CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-9
2.1 Time and Place . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-9
2.2 Filings at the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . A-9
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. . . . . . . . . . . . . . . . A-9
3.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-9
3.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-9
3.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-10
3.4 Reports and Financial Statements . . . . . . . . . . . . . . . . . . . . . . A-10
3.5 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . A-11
3.6 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . A-11
3.7 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-11
3.8 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-12
3.9 Absence of Material Adverse Changes . . . . . . . . . . . . . . . . . . . . A-12
3.10 Environmental Laws and Regulations . . . . . . . . . . . . . . . . . . . . . A-12
3.11 Officers, Directors and Employees . . . . . . . . . . . . . . . . . . . . . A-13
3.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-13
3.13 Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-14
3.14 Title to Properties; Liens . . . . . . . . . . . . . . . . . . . . . . . . . A-15
3.15 Permits, Licenses, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . A-15
3.16 Intellectual Property Rights . . . . . . . . . . . . . . . . . . . . . . . . A-15
3.17 Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-15
3.18 Minute Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-17
3.19 Insurance Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-17
3.20 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-17
3.21 Powers of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-17
3.22 Product Liability Claims . . . . . . . . . . . . . . . . . . . . . . . . . . A-17
3.23 Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-18
3.24 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-18
3.25 Relations with Suppliers and Customers . . . . . . . . . . . . . . . . . . . A-18
3.26 No Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-18
3.27 Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-18
3.28 Merger Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-19
3.29 Fairness Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-19
3.30 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-19
</TABLE>
A-2
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION
SUBSIDIARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-19
4.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-19
4.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-19
4.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-19
4.4 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . A-20
4.5 Reports; Financial Statements; Absence of Changes. . . . . . . . . . . . . . A-20
4.6 Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . A-20
4.7 Merger Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-21
4.8 No Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-21
ARTICLE 5 COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-21
5.1 Conduct of Business of the Company . . . . . . . . . . . . . . . . . . . . . A-21
5.2 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-23
5.3 Access and Information . . . . . . . . . . . . . . . . . . . . . . . . . . . A-23
5.4 Approval of Shareholders; Proxy Statement; Registration Statement A-24
5.5 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-25
5.6 Affiliates' Letters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-25
5.7 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-25
5.8 Further Actions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-25
5.9 Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-25
5.10 Certain Notifications. . . . . . . . . . . . . . . . . . . . . . . . . . . . A-26
5.11 Voting of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-26
5.12 Noncompetition Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . A-26
5.13 NYSE Listing Application . . . . . . . . . . . . . . . . . . . . . . . . . . A-26
5.14 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-26
5.15 Letters of the Company's and Parent's Accountants. . . . . . . . . . . . . . A-27
5.16 Royalty Revision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-27
5.17 Pooling; Reorganization. . . . . . . . . . . . . . . . . . . . . . . . . . . A-27
5.18 Subsidiary Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-27
ARTICLE 6 CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-27
6.1 Conditions to Obligations of Parent, Acquisition Subsidiary and the Company A-27
6.2 Conditions to Obligations of Parent and Acquisition Subsidiary A-28
6.3 Conditions to Obligations of the Company . . . . . . . . . . . . . . . . . . A-29
ARTICLE 7 TERMINATION AND ABANDONMENT. . . . . . . . . . . . . . . . . . . . . . . . . A-29
7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-29
7.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . A-30
ARTICLE 8 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-31
8.1 Amendment and Modification . . . . . . . . . . . . . . . . . . . . . . . . . A-31
8.2 Waiver of Compliance; Consents . . . . . . . . . . . . . . . . . . . . . . . A-31
8.3 Investigation; Survival of Representations and Warranties. . . . . . . . . . A-31
8.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-31
8.5 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-32
8.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-32
8.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-32
8.8 Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-32
8.9 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-32
8.10 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-33
8.11 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-33
</TABLE>
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EXHIBITS:
Exhibit A: Form of Pooling Affiliate's Letter
Exhibit B: Form of Agreement to Facilitate Merger
Exhibit C: Form of Noncompetition Agreement
Exhibit D: Form of Opinion of the Company's Counsel
Exhibit E: Form of Opinion of Parent's Counsel
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT is dated as of March 22, 1996, by and among MEDTRONIC,
INC., a Minnesota corporation ("Parent"), BYR ACQUISITION CORP., a Delaware
corporation ("Acquisition Subsidiary"), and InSTENT INC., a Delaware
corporation (the "Company").
WHEREAS, the Boards of Directors of Parent, Acquisition Subsidiary and the
Company have approved the merger of Acquisition Subsidiary with and into the
Company (the "Merger") upon the terms and subject to the conditions set forth
herein; and
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for accounting purposes, it is intended that the Merger shall be
recorded as a "pooling of interests" within the meaning of Accounting
Principles Board Opinion No. 16, and the rules and regulations of the
Securities and Exchange Commission (the "SEC"); and
WHEREAS, the parties hereto desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
various conditions to the Merger;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE 1
THE MERGER; CONVERSION OF SHARES
1.1 The Merger. Subject to the terms and conditions of this Agreement, at
the Effective Time (as defined in Section 1.2 hereof), Acquisition Subsidiary
shall be merged with and into the Company in accordance with the provisions of
the Delaware General Corporation Law (the "DGCL"), whereupon the separate
corporate existence of Acquisition Subsidiary shall cease, and the Company
shall continue as the surviving corporation (the "Surviving Corporation").
From and after the Effective Time, the Surviving Corporation shall possess all
the rights, privileges, powers and franchises and be subject to all the
restrictions, disabilities and duties of the Company and Acquisition
Subsidiary, all as more fully described in the DGCL.
1.2 Effective Time. As soon as practicable after each of the conditions
set forth in Article 6 has been satisfied or waived, the Company and
Acquisition Subsidiary will file, or cause to be filed, with the Secretary of
State of the State of Delaware a Certificate of Merger for the Merger, which
Certificate shall be in the form required by and executed in accordance with
the applicable provisions of the DGCL. The Merger shall become effective at
the time such filing is made or, if agreed to by Parent and the Company, such
later time or date set forth in the Certificate of Merger (the "Effective
Time").
1.3 Conversion of Shares. At the Effective Time, by virtue of the Merger
and without any action on the part of any holder of any share of capital stock
of the Company or Acquisition Subsidiary:
(a) Each share of common stock of the Company, $.01 par value, (the
"Company Common Stock") issued and outstanding immediately prior thereto
(except for the shares referred to in Section 1.3(b) hereof) shall be
converted into the right to receive 0.3833 of a share (subject to
adjustment as provided below, the "Conversion Ratio") of common stock of
Parent, par value $.10 per share, ("Parent Common Stock").
Notwithstanding the foregoing, if the sum of the number of shares of
Company Common Stock outstanding immediately prior to the Effective Time
plus the number of shares subject to then outstanding
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options, warrants or other rights to acquire shares of Company Common
Stock (collectively, "Company Stock Acquisition Rights") is greater than
10,850,362 such shares or if the aggregate exercise price of all such
Company Stock Acquisition Rights then outstanding is less than the
aggregate exercise price reflected in Schedule 3.3, then the Conversion
Ratio shall be the lower of 0.3833 and the amount (rounded to the nearest
ten thousandth, with the fourth decimal place rounded up if the fifth
decimal place is 5 or more) equal to (i) $[23.00 times 10,850,362] minus
the aggregate exercise price reflected in Schedule 3.3 plus the aggregate
amount received by the Company as a result of any issuance of Company
Common Stock after the date of this Agreement and prior to the Effective
Time plus the aggregate exercise price of all Company Stock Acquisition
Rights outstanding immediately prior to the Effective Time divided by
(ii) $60.00 times the sum of (A) the number of shares of Company Common
Stock outstanding immediately prior to the Effective Time plus (B) the
number of shares subject to Company Stock Acquisition Rights then
outstanding.
An appropriate adjustment shall be made in the event that, prior to
the Effective Time, the outstanding shares of Company Common Stock,
without new consideration, are changed into or exchanged for a different
kind of shares or securities through a reorganization, reclassification,
stock dividend, stock combination or other like change in the Company's
capitalization. Notwithstanding the foregoing, nothing in this Section
shall be deemed to constitute authorization or permission for or consent
from Parent or Acquisition Subsidiary to any increase in the number of
shares of Company Common Stock outstanding or subject to outstanding
Company Stock Acquisition Rights, to any decrease in the exercise price
of such Rights or to any reorganization, reclassification, stock
dividend, stock combination or other like change in capitalization.
(b) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time that is held in the treasury of
the Company or is then owned beneficially or of record by Parent,
Acquisition Subsidiary or any direct or indirect subsidiary of Parent or
the Company shall be cancelled without payment of any consideration
therefor and without any conversion thereof.
(c) Each share of any other class of capital stock of the Company
(other than Company Common Stock) shall be cancelled without payment of
any consideration therefor and without any conversion thereof.
(d) Each share of common stock of Acquisition Subsidiary, par value
$.01 per share, (the "Acquisition Subsidiary Common Stock") issued and
outstanding immediately prior to the Effective Time shall be converted
into one share of the common stock of the Surviving Corporation, $.01 par
value, (the "Surviving Corporation Common Stock").
1.4 Dissenting Shares. The Merger does not give rise to appraisal rights
of the Company shareholders.
1.5 Exchange of Company Common Stock.
(a) Promptly after the Effective Time, Parent shall cause Parent's
stock transfer agent or such other person as Parent may appoint to act as
exchange agent (the "Exchange Agent") to mail to each holder of record
(other than Parent, Acquisition Subsidiary, the Company or any subsidiary
of Parent or the Company) of a certificate or certificates that
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock ("Company Certificates") a form letter of
transmittal (which shall specify that delivery shall be effective, and
risk of loss and title to Company Certificate(s) shall pass, only upon
delivery of Company Certificate(s) to the Exchange Agent) and
instructions for such holder's use in effecting the surrender of Company
Certificates in exchange for certificates representing shares of Parent
Common Stock.
(b) As soon as practicable after the Effective Time, the Exchange
Agent shall distribute to holders of shares of Company Common Stock, upon
surrender to the Exchange Agent of one or more Company Certificates for
cancellation, together with a duly-executed letter of transmittal, (i)
one or more Parent certificates representing the number of whole shares
of Parent Common Stock into which the shares
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represented by Company Certificate(s) shall have been converted pursuant
to Section 1.3(a), and (ii) a bank check in the amount of cash into which
the shares represented by Company Certificate(s) shall have been
converted pursuant to Section 1.5(f) (relating to fractional shares), and
Company Certificate(s) so surrendered shall be cancelled. In the event
of a transfer of ownership of Company Common Stock that is not registered
in the transfer records of the Company, it shall be a condition to the
issuance of shares of Parent Common Stock that Company Certificate(s) so
surrendered shall be properly endorsed or be otherwise in proper form for
transfer and that such transferee shall (i) pay to the Exchange Agent any
transfer or other taxes required, or (ii) establish to the satisfaction
of the Exchange Agent that such tax has been paid or is not payable.
(c) Holders of Company Common Stock will be entitled to any
dividends or other distributions pertaining to the Parent Common Stock
received in exchange therefor that become payable to persons who are
holders of record of Parent Common Stock as of a record date that follows
the Effective Time, but only after they have surrendered their Company
Certificates for exchange. Subject to the effect, if any, of applicable
law, the Exchange Agent shall receive, hold, and remit any such dividends
or other distributions to each such record holder entitled thereto,
without interest, at the time that such Company Certificates are
surrendered to the Exchange Agent for exchange. Holders of Company
Common Stock will not be entitled, however, to dividends or other
distributions that become payable before or after the Effective Time to
persons who were holders of record of Parent Common Stock as of a record
date that is prior to the Effective Time.
(d) All shares of Parent Common Stock issued upon the surrender for
exchange of Company Common Stock in accordance with the terms hereof
(including any cash paid for fractional shares pursuant to Section 1.5(f)
hereof) shall be deemed to have been issued in full satisfaction of all
rights pertaining to such shares of Company Common Stock.
(e) After the Effective Time, there shall be no further registration
of transfers on the stock transfer books of the Surviving Corporation of
the shares of Company Common Stock that were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Company
Certificates representing such shares are presented to the Surviving
Corporation, they shall be cancelled and exchanged as provided in this
Article 1. As of the Effective Time, the holders of Company Certificates
representing shares of Company Common Stock shall cease to have any
rights as shareholders of the Company, except such rights, if any, as
they may have pursuant to the DGCL. Except as provided above, until such
Company Certificates are surrendered for exchange, each such Company
Certificate shall, after the Effective Time, represent for all purposes
only the right to receive the number of whole shares of Parent Common
Stock into which the shares of Company Common Stock shall have been
converted by the Merger as provided in Section 1.3(a) hereof and the
right to receive the cash value of any fraction of a share of Parent
Common Stock as provided in Section 1.5(f) hereof.
(f) No fractional shares of Parent Common Stock and no certificates
or scrip therefor, or other evidence of ownership thereof, shall be
issued upon the surrender for exchange of Company Certificates, no
dividend or other distribution of Parent shall relate to any fractional
share, and such fractional share interests shall not entitle the owner
thereof to vote or to any rights of a shareholder of Parent. All
fractional shares of Parent Common Stock to which a holder of Company
Common Stock immediately prior to the Effective Time would otherwise be
entitled, at the Effective Time, shall be aggregated if and to the extent
multiple Company Certificates of such holder are submitted together to
the Exchange Agent. If a fractional share results from such aggregation,
then (in lieu of such fractional share) the Exchange Agent shall pay to
each holder of shares of Company Common Stock who otherwise would be
entitled to receive such fractional share of Parent Common Stock an
amount of cash (without interest) determined by multiplying (i) the
Parent Average Market Price (defined below) by (ii) the fractional share
of Parent Common Stock to which such holder would otherwise be entitled.
Parent will make available to the Exchange Agent any cash necessary for
this purpose. For purposes hereof, "Parent Average Market Price" shall
mean the average (rounded to the nearest full cent, with the cents
rounded up if the third decimal place is 5 or more) of the closing sale
prices of a share of Parent Common Stock as reported on the New York
Stock Exchange (the "NYSE") Composite Tape, as reported in The Wall
Street Journal, for
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<PAGE> 8
the twenty consecutive NYSE trading days ending and including the
fifth NYSE trading day immediately preceding the Effective Time.
(g) In the event any Company Certificates shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange for such
lost, stolen or destroyed Company Certificate, upon the making of an
affidavit of that fact by the holder thereof, such shares of Parent
Common Stock and cash for fractional shares, if any, as may be required
pursuant to this Article 1; provided, however, that Parent may,
in its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed Company Certificate
to deliver a bond in such sum as Parent may direct as indemnity against
any claim that may be made against Parent or the Exchange Agent with
respect to such Company Certificate alleged to have been lost, stolen or
destroyed.
(h) Each person entitled to receive shares of Parent Common Stock
pursuant to this Article 1 shall receive together with such shares the
number of Parent Common Stock Purchase Rights (pursuant to the Rights
Agreement dated as of June 27, 1991, between Parent and Norwest Bank
Minnesota, N.A., the "Parent Rights Plan") per share of Parent Common
Stock equal to the number of Parent Common Stock Purchase Rights
associated with one share of Parent Common Stock at the Effective Time.
1.6 Exchange of Acquisition Subsidiary Common Stock. From and after the
Effective Time, each outstanding certificate previously representing shares of
Acquisition Subsidiary Common Stock shall be deemed for all purposes to
evidence ownership of and to represent the number of shares of Surviving
Corporation Common Stock into which such shares of Acquisition Subsidiary
Common Stock shall have been converted. Promptly after the Effective Time, the
Surviving Corporation shall issue to Parent a stock certificate or certificates
representing such shares of Surviving Corporation Common Stock in exchange for
the certificate or certificates that formerly represented shares of Acquisition
Subsidiary Common Stock, which shall be cancelled.
1.7 Stock Options. Each option to purchase shares of Company Common Stock
that is outstanding at the Effective Time (a "Company Option") shall, by virtue
of the Merger and without any action on the part of the holder thereof, be
assumed by Parent in such manner that Parent (i) is a corporation "assuming a
stock option in a transaction to which Section 424(a) applies" within the
meaning of Section 424 of the Code and the regulations thereunder or (ii) to
the extent that Section 424 of the Code does not apply to any such Company
Option, would be such a corporation were Section 424 of the Code applicable to
such Company Option. From and after the Effective Time, all references to the
Company in the Company Option shall be deemed to refer to Parent. The Company
Option assumed by Parent shall be exercisable upon the same terms and
conditions as under the Company Option except that (i) such Company Option
shall entitle the holder to purchase from Parent the number of shares of Parent
Common Stock (rounded down to the nearest whole number of such shares) that
equals the product of the Conversion Ratio times the number of shares of
Company Common Stock subject to such option immediately prior to the Effective
Time and (ii) the option exercise price per share of Parent Common Stock shall
be an amount (rounded up to the nearest full cent) equal to the option exercise
price per share of Company Common Stock in effect immediately prior to the
Effective Time divided by the Conversion Ratio. As promptly as practicable
after the Effective Time, Parent shall issue to each holder of a Company Option
a written instrument informing such holder of the assumption by Parent of such
Company Option.
1.8 Capitalization Changes. 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 any reclassification, recapitalization, split-up, combination, exchange of
shares, or stock dividend, the Conversion Ratio and all per share price amounts
and calculations set forth in this Agreement shall be appropriately adjusted.
1.9 Certificate of Incorporation of the Surviving Corporation. The
Certificate of Incorporation of Acquisition Subsidiary, as in effect
immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended in
accordance with applicable law; provided that upon the Effective Time, Article
I of the Certificate of Incorporation of the Surviving Corporation shall be
amended to read in its entirety as follows: "The name of the Corporation is
[Buyer][Global], Inc."
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<PAGE> 9
1.10 Bylaws of the Surviving Corporation. The Bylaws of Acquisition
Subsidiary, as in effect immediately prior to the Effective Time, shall be the
Bylaws of the Surviving Corporation until thereafter amended in accordance with
applicable law.
1.11 Directors and Officers of the Surviving Corporation. The directors
and officers of Acquisition Subsidiary immediately prior to the Effective Time
shall be the directors and officers, respectively, of the Surviving Corporation
until their respective successors shall be duly elected and qualified.
ARTICLE 2
CLOSING
2.1 Time and Place. Subject to the satisfaction or waiver of the
provisions of Article 6, the closing of the Merger (the "Closing") shall take
place at the offices of Fredrikson & Byron, P.A., 1100 International Centre,
900 Second Avenue South, Minneapolis, Minnesota 55402, at 10:00 a.m., local
time, on the day the Merger is approved by the shareholders of the Company at a
special meeting of shareholders called pursuant to Section 5.4 hereof (the
"Company Shareholders Meeting") or at such other place, time or date as Parent
and the Company may mutually agree. The date on which the Closing actually
occurs is herein referred to as the "Closing Date."
2.2 Filings at the Closing. At the Closing, subject to the provisions of
Article 6, Parent, Acquisition Subsidiary and the Company shall cause a
Certificate of Merger to be filed in accordance with the provisions of Section
251 of the DGCL, and take any and all other lawful actions and do any and all
other lawful things necessary to cause the Merger to become effective.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby makes the following representations and warranties to
Parent and Acquisition Subsidiary:
3.1 Organization. The Company and each subsidiary of the Company
(referred to herein as a "Subsidiary") is a corporation duly organized, validly
existing and in good standing under the laws of its respective jurisdiction of
incorporation and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.
The Company and each Subsidiary is duly qualified and in good standing to do
business in each jurisdiction in which the property owned, leased or operated
by it or the nature of the business conducted by it makes such qualification
necessary and where the failure to qualify would have a Company Material
Adverse Effect (as defined below). "Company Material Adverse Effect" means an
effect that, individually or in the aggregate with other effects, is or would
reasonably be expected to be materially adverse: (i) to the present or planned
business, properties, liabilities, results of operation or financial condition
of the Company and its Subsidiaries, considered as a whole; (ii) to the ability
of Parent or the Surviving Corporation to conduct such businesses, as presently
conducted, following the Effective Time; or (iii) to the Company's ability to
perform any of its obligations under this Agreement or to consummate the
Merger. The jurisdictions in which the Company and each Subsidiary are
qualified are listed on SCHEDULE 3.1. The Company has heretofore delivered to
Parent complete and accurate copies of the Certificate of Incorporation and
Bylaws of the Company and each Subsidiary, as currently in effect. Except to
the extent specifically disclosed on SCHEDULE 3.1, neither the Company nor any
Subsidiary, directly or indirectly, owns or controls or has any capital,
equity, partnership, participation or other ownership interest in any
corporation, partnership, joint venture or other business association or
entity.
3.2 Authorization. The Company has full corporate power and authority to
execute and deliver this Agreement and, subject to obtaining the necessary
approval of its shareholders, to consummate the transactions contemplated
hereby, and to file and distribute the Proxy Statement/Prospectus (as defined
in Section 5.4 hereof). The execution and delivery of this Agreement by the
Company and the consummation of the transactions contemplated hereby have been
duly and validly authorized and approved by the Company's Board of Directors,
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<PAGE> 10
no other corporate proceedings on the part of the Company or any Subsidiary are
necessary to authorize this Agreement, and, subject to obtaining the approval
of its shareholders, no other corporate action on the part of the Company or
any Subsidiary is necessary to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by the Company
and constitutes the valid and binding obligation of the Company, enforceable in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies. To the
Company's knowledge, each Agreement to Facilitate Merger and Affiliate's Letter
(as described in Sections 5.11 and 5.6) has been duly and validly executed and
delivered by the Company shareholder who is a party thereto and constitutes the
valid and binding obligation of such shareholder, enforceable in accordance
with its terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies.
3.3 Capitalization. The authorized capital stock of the Company consists
of (i) 25,000,000 shares of Company Common Stock, $.01 par value, of which
10,024,693 shares are issued and outstanding and no shares are held in the
Company's treasury, and (ii) 3,000,000 shares of the Company Preferred Stock,
$.01 par value, none of which are issued or outstanding. Except as set forth
on SCHEDULE 3.3, all issued and outstanding shares of capital stock of each
Subsidiary are owned, beneficially and of record, by the Company, free and
clear of any Liens (as defined in Section 3.14). All issued and outstanding
shares of Company Common Stock have been validly issued, are fully paid and
nonassessable, and have not been issued in violation of and are not currently
subject to any preemptive rights. Except for options to purchase an aggregate
825,669 shares of Company Common Stock granted pursuant to the Company 1993
Stock Option Plan and the 1995 Stock Option and Compensation Plan, (the
"Company Option Plans"), there are not any outstanding or authorized
subscriptions, options, warrants, calls, rights, convertible securities,
commitments, restrictions, arrangements or any other agreements of any
character to which the Company or any Subsidiary is a party that, directly or
indirectly, (i) obligate the Company or any Subsidiary to issue any shares of
capital stock or any securities convertible into, or exercisable or
exchangeable for, or evidencing the right to subscribe for, any shares of
capital stock, (ii) call for or relate to the sale, pledge, transfer or other
disposition or encumbrance by the Company or any Subsidiary of any shares of
its capital stock, or (iii) to the knowledge of the Company, relate to the
voting or control of such capital stock. To the Company's knowledge, except as
specifically disclosed on SCHEDULE 3.3, no shares of Company Common Stock
beneficially owned by an affiliate of the Company are subject to a pledge,
security interest or other security agreement or arrangement. SCHEDULE 3.3
sets forth a complete and accurate list of all stock options, warrants and
other rights to acquire Company Common Stock, including the name of the holder,
the date of grant, acquisition price, expiration date, number of shares,
exercisability schedule, and, in the case of options, the type of option under
the Code. SCHEDULE 3.3 also sets forth the restrictions to which any shares of
Company Common Stock issued pursuant to the Company Option Plans or otherwise
are currently subject and also sets forth the restrictions to which such shares
will be subject immediately after the Effective Time. Section 1.7 hereof is
consistent with the terms and provisions of the Company Option Plans, and no
consent of holders or participants under such Plans is required to carry out
the provisions of such Section.
3.4 Reports and Financial Statements. The Company has filed all forms,
reports, registration statements and documents required to be filed by it with
the Securities and Exchange Commission ("SEC") since January 1, 1995 (such
forms, reports, registration statements and documents, together with any
amendments thereto, are referred to as the "Company SEC Filings"). As of their
respective dates, the Company SEC Filings (i) complied as to form in all
material respects with the applicable requirements of the Securities Act of
1933 and the rules and regulations thereunder (the "1933 Act") and the
Securities Exchange Act of 1934 and the rules and regulations thereunder (the
"1934 Act"), as the case may be, and (ii) did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The audited
financial statements and unaudited interim financial statements included or
incorporated by reference in the Company SEC Filings and the Company's audited
financial statements at and for the year ended December 31, 1995 (the "Company
1995 Financials") (i) were prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except as may be indicated therein or in the notes thereto), (ii) complied as
of their respective dates in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, and (iii) fairly present, in all material respects, the consolidated
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<PAGE> 11
financial position of the Company as of the dates thereof and the income, cash
flows and changes in shareholder's equity for the periods involved. The
statements of operations included in the audited or unaudited interim financial
statements in the Company SEC Filings and in the 1995 Financials do not contain
any items of special or nonrecurring income or any other income not earned in
the ordinary course of business, except as expressly specified in the
applicable statement of operations or notes thereto. Prior to the date hereof,
the Company has delivered to Parent complete and accurate copies of all the
Company SEC Filings since January 1, 1995 and of the Company 1995 Financials
and has also delivered to Parent complete and accurate copies of all statements
on Schedule 13D and Schedule 13G known to the Company to have been filed with
the SEC with respect to capital stock of the Company. The Company has filed in
a timely manner all reports required to be filed by it pursuant to Sections 13,
14 or 15(d) of the 1934 Act.
3.5 Absence of Undisclosed Liabilities. Except to the extent specifically
disclosed on SCHEDULE 3.5, neither the Company nor any Subsidiary has any
liabilities or obligations of any nature (whether absolute, accrued, contingent
or otherwise) except (a) liabilities or obligations that are accrued or
reserved against in the audited consolidated balance sheet of the Company as of
December 31, 1995 contained in the Company 1995 Financials (the "Company
Audited Balance Sheet"), and (b) liabilities or obligations arising since
December 31, 1995 in the ordinary course of business and consistent
with past practice that would not have a Company Material Adverse Effect.
3.6 Consents and Approvals. Except for (i) any applicable requirements of
the 1933 Act, the 1934 Act, state securities laws, the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 and the regulations thereunder (the "HSR
Act"), and the antitrust, competition, foreign investment or similar laws of
any foreign countries or supranational commissions or boards that require
pre-merger notifications or filings with respect to the Merger (collectively,
"Foreign Merger Laws"), (ii) the Company shareholders' approval, (iii) the
filing and recordation of appropriate merger documents as required by the DGCL,
and (iv) any items disclosed on SCHEDULE 3.6, the execution and delivery of
this Agreement by the Company, and, to the Company's knowledge, the execution
and delivery of the Agreements to Facilitate Merger, and the consummation of
the transactions contemplated hereby and thereby will not: (a) violate any
provision of the Certificate of Incorporation or Bylaws of the Company or any
Subsidiary; (b) violate any statute, rule, regulation, order or decree of any
federal, state, local or foreign body or authority (including, but not limited
to, the Food and Drug Administration (the "FDA") or any nongovernmental
self-regulatory agency) by which the Company or any Subsidiary or any of their
respective properties or assets may be bound; (c) require any filing with or
permit, consent or approval of any federal, state, local or foreign public body
or authority (including, but not limited to, the FDA or any nongovernmental
self-regulatory agency); or (d) result in any violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default
under, result in the loss of any material benefit under, or give rise to any
right of termination, cancellation, increased payments or acceleration under,
or result in the creation of any Lien (as defined in Section 3.14) on any of
the properties or assets of the Company or any Subsidiary under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
license, franchise, permit, authorization, agreement or other instrument or
obligation to which the Company or any Subsidiary is a party, or by which it or
any of its properties or assets may be bound, except, in the case of clause
(d), for any such violations, breaches, defaults or other occurrences which
would not prevent or delay consummation of any of the transactions contemplated
hereby in any material respect, or otherwise prevent the Company from
performing its obligations under this Agreement in any material respect, and
would not have a Company Material Adverse Effect.
3.7 Compliance with Laws. All activities of the Company and each
Subsidiary have been, and are currently being, conducted in compliance with all
applicable federal, state, local or foreign laws, ordinances, regulations,
interpretations, judgments, decrees, injunctions, permits, licenses,
certificates, governmental requirements, orders and other similar items of any
court or other governmental entity (including, but not limited to, those of the
FDA or any nongovernmental self-regulatory agency), the failure to comply with
which would have a Company Material Adverse Effect. The Company and each
Subsidiary has timely filed or otherwise provided all registrations, reports,
data, and other information and applications with respect to its medical
device, pharmaceutical, consumer, health-care and other governmentally
regulated products (the "Regulated Products") required to be filed with or
otherwise provided to the FDA or any other federal, state, local or foreign
governmental authorities with jurisdiction over the manufacture, use or sale of
the Regulated Products, and all regulatory licenses
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or approvals in respect thereof are in full force and effect, except where the
failure to file timely such registrations, reports, data, information and
applications or the failure to have such licenses and approvals in full force
and effect would not have a Company Material Adverse Effect.
3.8 Litigation. Except to the extent specifically disclosed on SCHEDULE
3.8, to the Company's knowledge, no investigation or review by any federal,
state, local or foreign body or authority (including, but not limited to, the
FDA or any nongovernmental self-regulatory agency) with respect to the Company
or any Subsidiary is pending or threatened, nor has any such body or authority
(including, but not limited to, the FDA or any nongovernmental self-regulatory
agency) indicated to the Company or any Subsidiary an intention to conduct the
same. Except to the extent specifically disclosed on SCHEDULE 3.8, there are
no claims, actions, suits or proceedings by any private party that could
reasonably be expected to involve individually an amount in excess of $25,000
or collectively an aggregate amount in excess of $100,000, or by any
governmental body or authority (including, but not limited to, the FDA or any
nongovernmental self-regulatory agency), against or affecting the Company or
any Subsidiary, pending or, to the knowledge of the Company, threatened at law
or in equity, or before any federal, state, local, foreign or other
governmental department, commission, board, bureau, agency or instrumentality
(including, but not limited to, the FDA or any nongovernmental self-regulatory
agency) and, to the knowledge of the Company, there is no basis for any such
investigation, review, claim, action, suit or proceeding that would have a
Company Material Adverse Effect.
3.9 Absence of Material Adverse Changes. Except to the extent
specifically disclosed on SCHEDULE 3.9, since December 31, 1995 there has not
been any (a) change or circumstance that would have a Company Material Adverse
Effect; (b) action by the Company or any Subsidiary that, if taken on or after
the date of this Agreement, would require the consent or approval of Parent
pursuant to Section 5.1 hereof, except for actions as to which consent or
approval has been given as provided therein; (c) damage, destruction or loss,
whether covered by insurance or not, that would have a Company Material Adverse
Effect; (d) change by the Company or any Subsidiary in accounting methods or
principles used for financial reporting purposes, except as required by a
change in generally accepted accounting principles and concurred with by the
Company's independent public accountants; or (e) agreement, whether in writing
or otherwise, to take any action described or referenced in this Section 3.9.
3.10 Environmental Laws and Regulations. SCHEDULE 3.10 completely and
accurately sets forth the following: (a) a list of, to the Company's knowledge,
all above-ground storage tanks or underground storage tanks for Hazardous
Materials (as defined below) on real property now or at any time in the past
owned, leased or occupied by the Company or any Subsidiary (such real property
referred to in this Section as the "Real Property"); (b) the identity of any
Hazardous Materials (as defined below) used, generated, transported or disposed
of by the Company or any Subsidiary now or at any time in the past, together
with a brief description and location of each activity using such Hazardous
Materials; (c) a summary of the identity of, to the Company's knowledge, any
Hazardous Materials that have been disposed of or found on, above or below any
Real Property; and (d) a list of all reports, studies or tests in the
possession of the Company or any Subsidiary or initiated by the Company or any
Subsidiary pertaining to the existence of Hazardous Materials on, above or
below any Real Property or any property adjoining or which could reasonably be
expected to affect Real Property, or concerning compliance with or liability
under the Regulations (as defined below). The Company has heretofore delivered
to Parent complete and accurate copies of such reports, studies or tests.
The Company and each Subsidiary have obtained, and maintained in full
force and effect, all required environmental permits and other governmental
approvals and are in compliance with all applicable Regulations (as defined
below), except where the failure to so obtain and maintain or to be in
compliance would not have a Company Material Adverse Effect. Neither the
Company nor any Subsidiary (i) has received a written notice or Claim (as
defined below) alleging potential liability under any of the Regulations or
alleging a violation of the Regulations or (ii) has any knowledge that such a
notice or Claim may be issued in the future. Neither the Company nor any
Subsidiary has any knowledge of any notices to or Claims against any persons,
or reasonable basis therefor, alleging potential liability under any of the
Regulations with respect to the Real Property or any adjoining properties or
which could reasonably be expected to affect the Real Property. Neither the
Company nor any Subsidiary (i) has been or is presently subject to or, to the
knowledge of the Company, threatened with any administrative or judicial
proceeding pursuant to the Regulations, or (ii) has any information that it may
be subject
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to or, to the knowledge of the Company, threatened with such a
proceeding in the future. Neither the Company nor any Subsidiary has knowledge
of any conditions or circumstances that could reasonably be expected to result
in the determination of liability against the Company or any Subsidiary
relating to environmental matters that would have a Company Material Adverse
Effect, including, but not limited to, any Claim arising from past or present
environmental practices with respect to Hazardous Materials, the Real Property
or to any disposal sites. No Hazardous Materials have been or are threatened
to be discharged, omitted or released into the air, water, soil, or subsurface
at or from any Real Property by the Company or, to the Company's knowledge, by
any other person.
For purposes of this Section 3.10, the following terms shall have the
following meanings: (i) "Hazardous Materials" means asbestos, urea
formaldehyde, polychlorinated biphenyls, nuclear fuel or materials, chemical
waste, radioactive materials, explosives, known human carcinogens, petroleum
products or other substances or materials listed, identified or designated as
toxic or hazardous or as a pollutant or contaminant in, or the use, release or
disposal of which is regulated by, the Regulations; (ii) "Regulations" means
the Comprehensive Environmental Response Compensation and Liability Act
("CERCLA") as amended by the Superfund Amendments and Reauthorization Act of
1986 ("SARA"), 42 U.S.C. Sections 9601 et seq.; the Federal Resource
Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C. Sections 6901
et seq.; the Clean Water Act, 33 U.S.C. Sections 1321 et seq.; the
Clean Air Act, 42 U.S.C. Sections 7401 et seq., and any other federal,
state, county, local, foreign or other governmental statute, regulation, or
ordinance, as now in existence, that relates to or deals with employee safety
and human health, pollution, health or the environment including, but not
limited to, the use, generation, discharge, transportation, disposal,
recordkeeping, notification and reporting of Hazardous Materials; and (iii)
"Claim" means any and all claims, demands, causes of actions, suits,
proceedings, administrative proceedings, losses, judgments, decrees, debts,
damages, liabilities, court costs, penalties, attorneys' fees and any other
expenses incurred, assessed, sustained or alleged by or against the Company or
any Subsidiary.
3.11 Officers, Directors and Employees. Prior to the date hereof, the
Company has provided to Parent a list that completely and accurately sets forth
the name and current annual salary rate of each officer or employee of the
Company or any Subsidiary whose total remuneration for the last fiscal year
was, or for the current fiscal year has been set at, in excess of $50,000,
together with a summary of the bonuses, commissions, additional compensation
and other like benefits, if any, paid or payable to such persons for the last
fiscal year and proposed for the current fiscal year. SCHEDULE 3.11 completely
and accurately sets forth (i) the names of all former employees whose
employment with the Company or any Subsidiary has terminated either voluntarily
or involuntarily during the preceding 12-month period; and (ii) the names of
the officers (with all positions and titles indicated) and directors of the
Company and each Subsidiary. No unfair labor practice complaint against the
Company or any Subsidiary is pending before the National Labor Relations Board,
and there is no labor strike, slowdown or stoppage pending or, to the knowledge
of the Company, threatened against or involving the Company or any Subsidiary.
No unionizing efforts have, to the knowledge of the Company, been made by
employees of the Company or any Subsidiary, neither the Company nor any
Subsidiary is a party to or subject to any collective bargaining agreement, and
no collective bargaining agreement is currently being negotiated by the Company
or any Subsidiary. There is no labor dispute pending or, to the knowledge of
the Company, threatened between the Company or any Subsidiary and its
employees.
3.12 Taxes. The Company has previously furnished to Parent complete and
accurate copies of all tax or assessment reports and tax returns (including any
applicable information returns) required by any law or regulation (whether
United States, foreign, state, local or other jurisdiction) filed by the
Company for each of the three fiscal years ended December 31, 1992, 1993 and
1994 and of all such returns filed separately by any Subsidiary for fiscal
years ending during or after 1992. The Company and each Subsidiary has filed,
or has obtained extensions to file (which extensions have not expired without
filing), all state, local, United States, foreign or other tax reports and
returns required to be filed by any of them. The Company and each Subsidiary
has duly paid, or accrued on its books of account, all taxes (including
estimated taxes) shown as due on such reports and returns (or such extension
requests), or assessed against it, or that it is obligated to withhold from
amounts owed by it to any person. The liabilities and reserves for taxes
reflected on the Company Audited Balance Sheet are adequate to cover all taxes
payable by the Company and its Subsidiaries for all taxable periods and
portions thereof ending on or before the dates thereof. There are no Liens (as
defined in Section 3.14) for taxes upon any property or asset of the Company or
any Subsidiary. Neither the Company nor any Subsidiary is delinquent in the
payment
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<PAGE> 14
of any tax assessment (including, but not limited to, any applicable
withholding taxes). None of the tax returns or reports for the tax periods
ended December 31, 1992, 1993 and 1994 have been audited by the Internal
Revenue Service (the "IRS") or by any other taxing authority. Further, to the
knowledge of the Company, except to the extent specifically disclosed on
SCHEDULE 3.12, no state of facts exists or has existed that would subject the
Company or any Subsidiary to an additional material tax liability for any taxes
assessable by either the IRS or any separate state, local, foreign or other
taxing authority with respect to any reports or returns filed on or before the
date hereof (other than extension requests for which returns have not been
filed as of the date hereof). Neither the Company nor any Subsidiary has, with
regard to any assets or property held, acquired or to be acquired by any of
them, filed a consent to the application of Section 341(f)(2) of the Code.
Except to the extent specifically disclosed on SCHEDULE 3.12, neither the
Company nor any Subsidiary has (i) received notification of any pending or
proposed examination by either the IRS or any state, local, foreign or other
taxing authority, (ii) received notification of any pending or proposed
deficiency by either the IRS or any state, local, foreign or other taxing
authority, or (iii) granted any extension of the limitations period applicable
to any claim for taxes.
For the purposes of this Section 3.12, "tax" shall mean and include taxes,
additions to tax, penalties, interest, fines, duties, withholdings,
assessments, and charges assessed or imposed by any governmental authority,
including but not limited to all federal, state, county, local and foreign
income, profits, gross receipts, import, ad valorem, real and personal
property, franchise, license, sales, use, value added, stamp, transfer,
withholding, payroll, employment, excise, custom, duty, and any other taxes,
obligations and assessments of any kind whatsoever; "tax" shall also include
any liability arising as a result of being (or ceasing to be) a member of any
affiliated, consolidated, combined, or unitary group as well as any liability
under any tax allocation, tax sharing, tax indemnity or similar agreement.
3.13 Contracts. SCHEDULE 3.13 lists, and the Company has heretofore
furnished to Parent complete and accurate copies of (or, if oral, SCHEDULE 3.13
states all material provisions of), (a) every independent sales representative,
noncompetition (except only for standard noncompetition agreements entered into
with the Company's employees, the forms of which have been provided to Parent),
loan, credit, escrow, security, mortgage, guaranty, pledge, buy-sell, letter of
credit, OEM, supply, distribution, manufacturers' representative, dealer,
agency, lease (except for immaterial personal property leases), licensing
(except for immaterial licenses, which include, without limitation, licenses
for off-the-shelf software), franchise, development, joint development, joint
venture, research and development, or similar contract, agreement or
understanding to which the Company or any Subsidiary is a party or may be
bound, (b) every employment or consulting agreement or arrangement with or for
the benefit of any director, officer, employee, other person or shareholder of
the Company or any Subsidiary or any affiliate thereof, (c) every contract,
agreement or understanding to which the Company or any Subsidiary is a party
that could reasonably be expected to involve payments by or to the Company or
any Subsidiary in excess of $50,000, or would have a Company Material Adverse
Effect, or that was not made in the ordinary course of business, (d) every
agreement or contract between the Company or any Subsidiary and any of the
Company's officers, directors or more than 5% shareholders or any entity in
which any of the Company's officers, directors or more than 5% shareholders has
a greater than 2% equity interest, and (e) every other contract, plan,
agreement or understanding to which the Company or any Subsidiary is a party or
may be bound and which would be required to be filed with the SEC in a filing
to which paragraph (b)(10) of Item 601 of Regulation S-K of the Rules and
Regulations of the SEC would be applicable. The Company and each Subsidiary
has performed all obligations required to be performed by it under any listed
or material contract, plan, agreement, understanding or arrangement made or
obligation owed by or to the Company or any Subsidiary, except where the
failure would not have a Company Material Adverse Effect; there has not been
any event of default (or any event or condition which with notice or the lapse
of time, both or otherwise, would constitute an event of default) thereunder on
the part of the Company, any Subsidiary or, to the Company's knowledge, any
other party to any thereof that would have a Company Material Adverse Effect;
the same are in full force and effect and valid and enforceable by the Company
or its Subsidiaries in accordance with their respective terms subject to laws
of general application relating to bankruptcy, insolvency and the relief of
debtors and rules or law governing specific performance, injunctive relief and
other equitable remedies; and the performance of any such contracts, plans,
agreements, understandings, arrangements or obligations would not have a
Company Material Adverse Effect.
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<PAGE> 15
3.14 Title to Properties; Liens. The Company and/or its Subsidiaries have
good and marketable title to all properties and assets reflected on the Company
Audited Balance Sheet or acquired after the dates thereof (except for
properties and assets sold or otherwise disposed of in the ordinary course of
business since the dates thereof), which includes each asset the absence or
unavailability of which would have a Company Material Adverse Effect, subject
only to (a) statutory Liens arising or incurred in the ordinary course of
business with respect to which the underlying obligations are not delinquent,
(b) with respect to personal property, the rights of customers of the Company
or any Subsidiary with respect to inventory or work in progress under orders or
contracts entered into by the Company or any Subsidiary in the ordinary course
of business, (c) Liens reflected on the Company Audited Balance Sheet, (d)
Liens for taxes not yet delinquent and (e) and defects in title that would not
have a Company Material Adverse Effect. The term "Lien" as used in this
Agreement means any mortgage, pledge, security interest, encumbrance, lien,
claim or charge of any kind. All properties and assets purported to be leased
by the Company or any Subsidiary are subject to valid and effective leases that
are in full force and effect, and there does not exist, and the Merger will not
result in, any default or event that with notice or lapse of time, or both or
otherwise, would constitute a default under any such leases which would have a
Company Material Adverse Effect. The properties and assets of the Company and
each Subsidiary have been kept in good condition and repair in the ordinary
course of business.
3.15 Permits, Licenses, Etc.. The Company and each Subsidiary has all
rights, permits, certificates, licenses, consents, franchises, approvals,
registrations, and other authorizations necessary to sell its products and
services and otherwise carry on and conduct its business and to own, lease, use
and operate its properties and assets at the places and in the manner now
conducted and operated, except those the absence of which would not have a
Company Material Adverse Effect. Neither the Company nor any Subsidiary has
received any notice or claim pertaining to the failure to obtain any permit,
certificate, license, franchise, approval, registration or other authorization
required by any federal, state, local or foreign body or authority (including,
but not limited to, the FDA or any nongovernmental self-regulatory agency).
3.16 Intellectual Property Rights. SCHEDULE 3.16 contains a complete and
accurate list of all patents, trademarks, trade names, service marks,
copyrights and applications for or registrations of any of the foregoing as to
which the Company or any Subsidiary is the owner or a licensee (indicating
whether such license is exclusive or nonexclusive). The Company and each
Subsidiary exclusively owns, free and clear of any Lien (as defined in Section
3.14), or is exclusively (unless otherwise indicated in SCHEDULE 3.16) licensed
to use, all patents, trademarks, trade names, service marks, copyrights,
applications for or registrations of any of the foregoing, processes,
inventions, designs, technology, formulas, computer software programs, know-how
and trade secrets used in or necessary for the conduct of its respective
business as currently conducted or proposed to be conducted (the "Company
Intellectual Property"). Except to the extent specifically disclosed on
SCHEDULE 3.16, no claim has been asserted or, to the knowledge of the Company,
threatened by any person, and, to the Company's knowledge, no basis for any
claim exists, with respect to the use of the Company Intellectual Property or
challenging or questioning the validity or effectiveness of any license or
agreement with respect thereto. To the knowledge of the Company, neither the
use of the Company Intellectual Property by the Company or any Subsidiary in
the present or planned conduct of its business nor any product or service of
the Company or any Subsidiary infringes on the intellectual property rights of
any person. No current or former shareholder, employee or consultant of the
Company or any Subsidiary has any rights in or to any of the Company
Intellectual Property. All the Company Intellectual Property listed on
SCHEDULE 3.16 has the status indicated therein and all applications are still
pending in good standing and have not been abandoned. Except to the extent
specifically disclosed on SCHEDULE 3.16: (i) the Company Intellectual Property
is valid and has not been challenged in any judicial or administrative
proceeding; (ii) the Company and each Subsidiary has made all statutorily
required filings, if any, to record its interests, and taken reasonable actions
to protect its rights, in the Company Intellectual Property; (iii) to the
knowledge of the Company, no person or entity nor such person's or entity's
business or products has infringed, misused or misappropriated the Company
Intellectual Property or currently is infringing, misusing or misappropriating
the Company Intellectual Property; and (iv) no other person or entity has any
right to receive or any obligation to pay a royalty with respect to any the
Company Intellectual Property or any product or service of the Company or any
Subsidiary.
3.17 Benefit Plans.
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<PAGE> 16
(a) Except to the extent specifically disclosed on SCHEDULE 3.17(A),
neither the Company nor any Subsidiary sponsors, maintains, contributes
to, or has sponsored, maintained or contributed to or been required to
contribute to, any "employee pension benefit plan" ("Pension Plan"), as
such term is defined in Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), including, solely for the
purpose of this subsection, a plan excluded from coverage by Section
4(b)(5) of ERISA. Each such Pension Plan presently maintained by the
Company or any Subsidiary is, in all material respects, in compliance
with applicable provisions of ERISA, the Code and other applicable law.
(b) Neither the Company nor any Subsidiary sponsors, maintains,
contributes to, or has sponsored, maintained or contributed to or been
required to contribute to, any Pension Plan that is a "Multiemployer
Plan" within the meaning of Section 4001(a)(3) of ERISA.
(c) Except to the extent specifically disclosed on SCHEDULE 3.17(C),
neither the Company nor any Subsidiary sponsors, maintains, contributes
to, or has sponsored, maintained, contributed to, or been required to
contribute to, any "employee welfare benefit plan" ("Welfare Plan"), as
such term is defined in Section 3(1) of ERISA, whether insured or
otherwise, and any such Welfare Plan presently maintained by the Company
or any Subsidiary is, in all material respects, in compliance with the
provisions of ERISA, the Code and all other applicable laws, including,
but not limited to, Sections 4980B of the Code and the regulations
thereunder, and Part 6 of Title I of ERISA. Except to the extent
specifically disclosed on SCHEDULE 3.17(C), neither the Company nor any
Subsidiary has established or contributed to any "voluntary employees'
beneficiary association" within the meaning of Section 501(c)(9) of the
Code.
(d) Neither the Company nor any Subsidiary sponsors, maintains or
contributes to, or has sponsored, maintained or contributed to, a
"self-insured medical reimbursement plan" within the meaning of Section
105(h) of the Code and the regulations thereunder.
(e) Except to the extent specifically disclosed on SCHEDULE 3.17(E),
neither the Company nor any Subsidiary currently maintains or
contributes to any oral or written bonus, profit-sharing, compensation
(incentive or otherwise), commission, stock option or other stock-based
compensation, retirement, severance, change of control, vacation, sick or
parental leave, dependent care, deferred compensation, cafeteria,
disability, hospitalization, medical, death, retiree, insurance or other
benefit or welfare or other similar plan, policy, agreement, trust, fund
or arrangement providing for the remuneration or benefit of all or any
employees or shareholders or any other person, that is neither a Pension
Plan nor a Welfare Plan (collectively, the "Compensation Plans").
(f) To the knowledge of the Company, neither any Pension Plans or
Welfare Plans nor any trust created or insurance contract issued
thereunder nor any trustee, fiduciary, custodian, or administrator
thereof, nor any officer, director or employee of the Company or any
Subsidiary, custodian or any other "disqualified person" within the
meaning of Section 4975(e)(2) of the Code, or "party in interest" within
the meaning of Section 3(14) of ERISA, with respect to any such plan has
engaged in any act or omission which could reasonably be expected to
subject the Company or any Subsidiary, either directly or indirectly, to
a liability for breach of fiduciary duties under ERISA or a tax or
penalty imposed by Section 502 of ERISA.
(g) Full and timely payment has been made of all amounts that the
Company or any Subsidiary is required, under applicable law, with respect
to any Pension Plan, Welfare Plan or Compensation Plan, or any agreement
relating to any Pension Plan, Welfare Plan or Compensation Plan, to have
paid as a contribution to each Pension Plan, Welfare Plan or Compensation
Plan. To the extent required by generally accepted accounting
principles, the Company has made adequate provisions for reserves to meet
contributions that have not been made because they are not yet due under
the terms of any Pension Plan, Welfare Plan or Compensation Plan or
related agreements. There will be no change on or before the Closing
Date in the operation of any Pension Plan, Welfare Plan or Compensation
Plan or documents under which any such plan is maintained that will
result in an increase in the benefit liabilities under such plan, except
as may be required by law. The IRS has issued favorable determination
letters
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<PAGE> 17
with respect to all the Company and Subsidiary Pension Plans that are
intended to be qualified under Section 401(a) of the Code. The Company
has provided to Parent complete and accurate copies of all Pension Plans,
Welfare Plans, Compensation Plans and related agreements, annual reports
(Form 5500), favorable determination letters, current summary plan
descriptions, and all employee handbooks or manuals.
(h) Except to the extent specifically disclosed on SCHEDULE 3.17(h),
the execution of, and performance of the transactions contemplated in,
this Agreement will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any Pension
Plan, Welfare Plan, Compensation Plan or other arrangement that will or
may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits. Except to the
extent specifically disclosed on SCHEDULE 3.17(H), 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 by any
employee, officer or director of the Company or any of its affiliates who
is a "disqualified individual" (as such term is defined in proposed
Treasury Regulation Section 1.280G-1) under any Pension Plan, Welfare
Plan or Compensation Plan currently in effect would be an "excess
parachute payment" (as such term is defined in Section 280G(b)(1) of the
Code).
3.18 Minute Books. The minute books of the Company and the Subsidiaries,
as previously made available to Parent and its representatives, contain, in all
material respects, complete and accurate records of all meetings of and
corporate actions or written consents by the shareholders, Boards of Directors,
and committees of the Boards of Directors of the Company and the Subsidiaries.
3.19 Insurance Policies. SCHEDULE 3.19 sets forth a complete and accurate
list, including the term, coverages, premium rates, limits and deductibles
thereof, of all policies of insurance maintained by the Company or any
Subsidiary with respect to any of its officers, directors, employees,
shareholders, agents, properties, buildings, machinery, equipment, furniture,
fixtures or operations and a description of each claim made by the Company or
any Subsidiary during the three-year period preceding the date hereof under any
such policy of insurance. The Company has previously delivered to Parent
complete and accurate copies of all such policies of insurance and complete and
accurate copies of all documentation regarding claims made thereunder. All
such policies of insurance are in full force and effect, have been issued for
the benefit of the Company or its Subsidiary by properly licensed insurance
carriers, and are adequate and customary for the assets, business and
operations of the Company and its Subsidiaries. The Company has
promptly and properly notified its insurance carriers of any and all claims
known to it with respect to its operations or products for which it is insured.
3.20 Bank Accounts. SCHEDULE 3.20 sets forth a list of each bank, broker
or other depository with which the Company or any Subsidiary has an account or
safe deposit box, the names and numbers of such accounts or boxes and the names
of all persons authorized to draw thereon or execute transactions.
3.21 Powers of Attorney. SCHEDULE 3.21 sets forth the names of all
persons, if any, holding powers of attorney from the Company or any Subsidiary
and a description of the scope of each such power of attorney. The Company has
delivered to Parent prior to the date hereof complete and accurate copies of
all such powers of attorney.
3.22 Product Liability Claims. Except to the extent specifically
disclosed on SCHEDULE 3.22, during the three-year period preceding the date
hereof, neither the Company nor any Subsidiary has ever received a claim, or
incurred any uninsured or insured liability, for or based upon breach of
product warranty (other than warranty service and repair claims in the ordinary
course of business not material in amount or significance), strict liability in
tort, negligent manufacture of product, negligent provision of services or any
other allegation of liability, including or resulting in, but not limited to,
product recalls, arising from the materials, design, testing, manufacture,
packaging, labeling (including instructions for use) or sale of its products or
from the provision of services (hereafter collectively referred to as "Product
Liability"). To the knowledge of the Company, no basis for any claim based
upon alleged Product Liability exists which would have a Company Material
Adverse Effect.
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3.23 Warranties. To the knowledge of the Company, all products
manufactured or sold, and all services provided, by the Company or any
Subsidiary have complied, and are in compliance, in all material respects with
all contractual requirements, warranties or covenants, express or implied,
applicable thereto, and with all applicable governmental, trade association or
regulatory specifications therefor or applicable thereto, including, to the
extent applicable, FDA Good Manufacturing Practices. The terms of all product
and service warranties and product return, sales credit, discount, warehouse
allowance, advertising allowance, demo sales and credit policies of the Company
and each Subsidiary are specifically set forth on SCHEDULE 3.23. The Company
has delivered to Parent prior to the date hereof complete and accurate copies
of all such warranties and policies.
3.24 Inventories. Except as specifically set forth on SCHEDULE 3.24, all
inventories of the Company and its Subsidiaries consist of items of
merchantable quality and quantity usable or salable in the ordinary course of
business, are salable at prevailing market prices not less than the book value
amounts thereof or the price customarily charged by the Company or the
applicable Subsidiary therefor, conform to the specifications established
therefor and have been manufactured in accordance with applicable regulatory
requirements, except to the extent that the failure of such inventories so to
consist, be saleable, conform or be manufactured would not have a Company
Material Adverse Effect. Except as specifically set forth on SCHEDULE 3.24,
the quantities of all inventories, materials and supplies of the Company and
each Subsidiary (net of the obsolescence reserve therefor shown on the Company
Audited Balance Sheet and determined in the ordinary course of business
consistent with past practice) are not obsolete, damaged, slow-moving,
defective or excessive, and are reasonable and balanced in the circumstances of
the Company and its Subsidiaries, except to the extent that the failure of such
inventories to be in such conditions would not have a Company Material Adverse
Effect. SCHEDULE 3.24 sets forth a true and complete list of the addresses of
all warehouses or other facilities in which inventories of the Company or any
Subsidiary are located.
3.25 Relations with Suppliers and Customers. No material current supplier
of the Company or any Subsidiary has cancelled any contract or order for
provision of, and, to the knowledge of the Company, there has been no threat by
or basis for any such supplier not to provide, raw materials, products,
supplies, or services to the businesses of the Company and its Subsidiaries
either prior to or following the Merger. Except as specifically set forth on
SCHEDULE 3.25, neither the Company nor any Subsidiary has, to the knowledge of
the Company, received any information from any customer that accounted for more
than 5% of the revenues of the Company and its Subsidiaries during the last
full fiscal year to the effect that such customer intends to materially
decrease the amount of business it does with the businesses of the Company and
its Subsidiaries either prior to or following the Merger. SCHEDULE 3.25 lists
each supplier to the Company or any Subsidiary that is the sole source of a
particular raw material, product, supply, or service.
3.26 No Finders. No act of the Company or any Subsidiary has given or
will give rise to any claim against any of the parties hereto for a brokerage
commission, finder's fee or other like payment in connection with
the transactions contemplated herein, except payments in the amounts specified
on SCHEDULE 3.26 to those parties identified thereon who have acted as a finder
for the Company or have been retained by the Company as financial advisors
pursuant to the writings described in SCHEDULE 3.26 and copies of which have
been provided to Parent prior to the date of this Agreement.
3.27 Proxy Statement. The Proxy Statement/Prospectus (as defined in
Section 5.4 hereof), and any amendments or supplements thereto, will comply in
all material respects with all applicable laws, and none of the information
relating to the Company or its affiliates included or incorporated therein or
in any amendments or supplements thereto, or any schedules required to be filed
with the SEC in connection therewith, will, at any time during the period
beginning at the time it is mailed to shareholders and ending at the time of
the Company Shareholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that no representation or warranty is made by the Company with respect to
information relating to Parent or any affiliate of Parent supplied by Parent
specifically for inclusion in the Proxy Statement/Prospectus.
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3.28 Merger Filings. The information as to the Company and the
Subsidiaries or any of their affiliates or shareholders included in the
Company's filing, or submitted to Parent for inclusion in its filing, if any,
required to be submitted under the HSR Act or under any Foreign Merger Laws
shall be true, correct and complete in all material respects and shall comply
in all material respects with the applicable requirements of the HSR Act, the
rules and regulations issued by the Federal Trade Commission pursuant thereto
and the Foreign Merger Laws.
3.29 Fairness Opinion. The Company has received an oral opinion from each
of Dillon, Read & Co., Inc. and Volpe, Welty & Company, each to the effect
that, as of the date hereof, the consideration to be received by the holders of
Company Common Stock in the Merger is fair to such holders from a financial
point of view and will receive promptly hereafter a signed written copy of each
such opinion and will thereupon deliver a copy of each opinion to Parent.
3.30 Disclosure. To the knowledge of the Company, no representation or
warranty by the Company in this Agreement, and no information disclosed in the
Schedules supplied by the Company (taken as a whole), contains any untrue
statement of a material fact or omits to state a material fact necessary to
make the statements contained herein or therein not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
OF PARENT AND ACQUISITION SUBSIDIARY
Parent and Acquisition Subsidiary hereby jointly and severally make the
following representations and warranties to the Company:
4.1 Organization. Each of Parent and Acquisition Subsidiary is a
corporation duly organized, validly existing and in good standing under the
laws of the state of its incorporation and each has all requisite corporate
power and authority to own, lease and operate its respective properties and to
carry on its business as now being conducted. Each of Parent and Acquisition
Subsidiary is duly qualified and in good standing to do business in each
jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary and
where the failure to qualify could have a Parent Material Adverse Effect (as
defined below). The term "Parent Material Adverse Effect" means an effect
that, individually or in the aggregate with other effects, is or would
reasonably be expected to be materially adverse to the present or planned
business, properties, liabilities, results of operation or financial condition
of Parent and its subsidiaries, considered as a whole, or to Parent's ability
to perform any of its obligations under this Agreement or to consummate the
Merger.
4.2 Authorization. Each of Parent and Acquisition Subsidiary has full
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby, and Parent has full corporate
power and authority to prepare, file and distribute the Registration Statement.
The execution and delivery of this Agreement by Parent and Acquisition
Subsidiary and the consummation of the transactions contemplated hereby have
been duly and validly authorized and approved by the Boards of Directors of
Parent and Acquisition Subsidiary and by Parent as the sole shareholder
of Acquisition Subsidiary, and no other corporate proceedings on the part of
Parent and Acquisition Subsidiary are necessary to authorize this Agreement or
the consummation of the transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by each of Parent and Acquisition
Subsidiary and constitutes the valid and binding obligation of Parent and
Acquisition Subsidiary, enforceable against each of them in accordance with its
terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance injunctive relief or other equitable remedies.
4.3 Capitalization. As of February 29, 1996, the authorized capital stock
of Parent consisted of (a) 800,000,000 shares of Common Stock with a par value
of $.10 per share, of which there were 234,131,829 shares issued and
outstanding and no shares held in Parent's treasury, and (b) 2,500,000 shares
of Preferred Stock with a par value of $1.00 per share, of which there were no
shares issued and outstanding. The authorized capital stock
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of Acquisition Subsidiary consists of 2,500 shares of Acquisition
Subsidiary Common Stock, 100 of which are issued and outstanding and owned by
Parent. All issued and outstanding shares of Parent Common Stock and
Acquisition Subsidiary Common Stock are, and the shares of Parent Common Stock
to be issued and delivered in the Merger pursuant to Article 1 hereof shall be,
at the time of issuance and delivery, validly issued, fully paid, nonassessable
and free of preemptive rights. The shares of Parent Common Stock to be issued
and delivered in the Merger pursuant to Article 1 hereof shall be registered
under the 1933 Act and duly listed for trading on the NYSE, subject to official
notice of issuance.
4.4 Consents and Approvals. Except for (i) any applicable requirements of
the 1933 Act, the 1934 Act, state securities laws, the NYSE, the HSR Act, and
Foreign Merger Laws and (ii) the filing and recordation of appropriate merger
documents as required by the MBCA, the execution and delivery of this Agreement
by Parent and Acquisition Subsidiary and the consummation of the transactions
contemplated hereby will not: (a) violate any provision of the Articles or
Certificate of Incorporation or Bylaws of Parent or Acquisition Subsidiary; (b)
violate any statute, rule, regulation, order or decree of any public body or
authority (including, but not limited to, the FDA or any nongovernmental
self-regulatory agency) by which Parent or any of its subsidiaries or any of
their respective properties or assets may be bound; (c) require any filing with
or permit, consent or approval of any public body or authority (including, but
not limited to, the FDA or any nongovernmental self-regulatory agency); or (d)
result in any violation or breach of, or constitute (with or without due notice
or lapse of time or both) a default under, result in the loss of any material
benefit under, or give rise to any right of termination, cancellation,
increased payments or acceleration under, or result in the creation of any Lien
on any of the properties or assets of Parent or its subsidiaries under, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, franchise, permit, agreement or other instrument or obligation to
which Parent or any of its subsidiaries is a party, or by which any of them or
any of their respective properties or assets may be bound, except, in the case
of clause (d), for any such violations, breaches, defaults or other occurrences
which would not prevent or delay consummation of any of the transaction
contemplated hereby in any material respect, or otherwise prevent Parent from
performing its obligations under this Agreement in any material respect, and
would not have a Parent Material Adverse Effect.
4.5 Reports; Financial Statements; Absence of Changes. Parent has filed
all forms, reports, registration statements and documents required to be filed
by it with the Securities and Exchange Commission ("SEC") since December 31,
1994 (such forms, reports, registration statements and documents, together with
any amendments thereto, are referred to as the "Parent SEC Filings"). As of
their respective dates, the Parent SEC Filings (i) complied as to form in all
material respects with the applicable requirements of the 1933 Act and the 1934
Act, as the case may be, and (ii) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading. The audited financial statements
and unaudited interim financial statements included or incorporated by
reference in the Parent SEC Filings (i) were prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except as may be indicated therein or in the notes
thereto), (ii) complied as of their respective dates in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, and (iii) fairly present the consolidated
financial position of Parent as of the dates thereof and the income, cash flows
and changes in shareholder's equity for the periods it involved. Except to the
extent disclosed in Parent's subsequent filings with the SEC or specifically
disclosed on SCHEDULE 4.5, since April 30, 1995 there has not been any change
or circumstance that would have a Parent Material Adverse Effect.
4.6 Registration Statement. The Registration Statement (as defined in
Section 5.4 hereof) and any amendments or supplements thereto will comply in
all material respects with the 1933 Act, and none of the information relating
to Parent or its affiliates included or incorporated therein or in any
amendments or supplements thereto, or any schedules required to be filed with
the SEC in connection therewith will, at the time the Registration Statement
becomes effective or at the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that no representation or warranty is made by Parent with respect to
information supplied by the Company or any affiliate of the Company
specifically for inclusion in the Registration Statement.
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4.7 Merger Filings. The information as to Parent and Acquisition
Subsidiary or any of their affiliates or shareholders included in Parent's
filing, or submitted to the Company for inclusion in its filing, if any,
required to be submitted under the HSR Act or under any Foreign Merger Laws
shall be true, correct and complete in all material respects and shall comply
in all material respects with the applicable requirements of the HSR Act, the
rules and regulations issued by the Federal Trade Commission pursuant thereto
and Foreign Merger Laws.
4.8 No Finders. No act of Parent or Acquisition Subsidiary has given or
will give rise to any claim against any of the parties hereto for a brokerage
commission, finder's fee or other like payment in connection with the
transactions contemplated herein.
ARTICLE 5
COVENANTS
5.1 Conduct of Business of the Company. Except as contemplated by this
Agreement, during the period from the date of this Agreement to the Effective
Time, the Company and each Subsidiary will conduct its respective operations
according to its ordinary and usual course of business and consistent with past
practice, and the Company and each Subsidiary will use all reasonable efforts
to preserve intact its respective business organizations, to maintain its
present and planned business, to keep available the services of its respective
officers and employees and to maintain satisfactory relationships with
licensors, licensees, suppliers, contractors, distributors, physicians,
consultants, customers and others having business relationships with it. The
Company will promptly advise Parent orally and in writing of any material
change in the management, present or planned business, properties, liabilities,
results of operations or financial condition of the Company or any Subsidiary.
Without limiting the generality of the foregoing, and except as otherwise
expressly provided in or contemplated by this Agreement, prior to the Effective
Time, neither the Company nor any Subsidiary will, without the prior written
consent of Parent:
(a) amend its Certificate of Incorporation or Bylaws;
(b) authorize for issuance, issue, sell, pledge or deliver (whether
through the issuance or granting of additional options, warrants,
commitments, subscriptions, rights to purchase or otherwise) any stock of
any class or any securities convertible into shares of stock of any class
(other than the issuance of the number of shares of Company Common Stock
indicated in Section 3.3 hereof upon the exercise in accordance with the
current terms of the stock options listed in Schedule 3.3 hereof as
outstanding on the date of this Agreement);
(c) split, combine or reclassify any shares of its capital stock,
declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its
capital stock; or redeem or otherwise acquire any shares of its capital
stock or other securities; or amend or alter any material term of any of
its outstanding securities;
(d) create, incur or assume any indebtedness for borrowed money, or
assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any
other person, other than in the ordinary course of business and
consistent with past practice; or make any loans, advances or capital
contributions to, or investments in, any other person, except loans to
employees in the ordinary course of business consistent with past
practice and in an aggregate amount not to exceed $25,000 beyond the
aggregate amount of all such loans outstanding on the date of this
Agreement; or create, incur or assume any Lien on any material asset;
(e) knowingly take any action that would have the effect of (i)
jeopardizing the treatment of the acquisition of the Company by Parent as
a "pooling of interests" for accounting purposes, or (ii) jeopardizing
the qualification of the Merger as a reorganization within the meaning of
Section 368(a)(2)(E) of the Code;
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(f) (i) increase in any manner the compensation of any of its
directors, officers, employees, shareholders or consultants, except in
the ordinary course of business and consistent with past practice, or
accelerate the payment of any such compensation (whether or not any such
acceleration is consistent with past practice); (ii) pay or accelerate or
otherwise modify the payment, vesting, exercisability, or other feature
or requirement of any pension, retirement allowance, severance, change of
control, stock option or other employee benefit not required by any
existing plan, agreement or arrangement to any such director, officer,
employee, shareholder or consultant, whether past or present; or (iii)
except for normal increases in the ordinary course of business in
accordance with its customary past practices, commit itself to any
additional or increased pension, profit-sharing, bonus, incentive,
deferred compensation, stock purchase, stock option, stock appreciation
right, group insurance, severance, change of control, retirement or other
benefit, plan, agreement or arrangement, or to any employment or
consulting agreement, with or for the benefit of any person, or amend any
of such plans or any of such agreements in existence on the date hereof;
(g) except in the ordinary course of business and consistent with
past practice or pursuant to contractual obligations existing on the date
hereof, (i) sell, transfer, mortgage, or otherwise dispose of or encumber
any real or personal property, (ii) pay, discharge or satisfy claims,
liabilities or obligations (absolute, accrued, contingent or otherwise),
or (iii) cancel any debts or waive any claims or rights, which involve
payments or commitments to make payments which individually exceeds
$25,000 or, in the aggregate, exceed $100,000;
(h) acquire or agree to acquire (i) by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by any
other manner, any portion of the assets of, or by any other manner, any
business of any corporation, partnership, joint venture, association or
other business organization or division thereof or (ii) any assets that
are material, individually or in the aggregate, to the Company, except as
provided in (i) below and except purchases of inventory in the ordinary
course of business consistent with past practice;
(i) make or agree to make any new capital expenditure or
expenditures which, individually, is in excess of $25,000 or, in the
aggregate, are in excess of $50,000 (other than up to an aggregate
$250,000 for investment in and lease costs for capital equipment related
to the Company's balloon expandable stent);
(j) enter into, amend or terminate any joint ventures or any other
agreements, commitments or contracts that, individually or in the
aggregate, are material to the Company or any Subsidiary (except
agreements, commitments or contracts expressly provided for or
contemplated by this Agreement or for the purchase, sale or lease of
goods, services or properties in the ordinary course of business,
consistent with past practice), or otherwise make any material change in
the conduct of the business or operations of the Company or any
Subsidiary;
(k) enter into or terminate, or amend, extend, renew or otherwise
modify (including, but not limited to, by default or by failure to act)
any distribution, OEM, independent sales representative, noncompetition,
licensing, franchise, research and development, supply or similar
contract, agreement or understanding (except agreements, commitments or
contracts expressly provided for or contemplated by this Agreement or for
the purchase, sale or lease of goods, services or properties in the
ordinary course of business, consistent with past practice);
(l) change in any material respect its credit policy as to sales of
inventories or collection of receivables or its inventory consignment
practices;
(m) remove or permit to be removed from any building, facility or
real property any machinery, equipment, fixture, vehicle or other
personal property or parts thereof, except in the ordinary course of
business;
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(n) alter or revise its accounting principles, procedures, methods
or practices, except as required by a change in generally accepted
accounting principles and concurred with by the Company's independent
public accountants;
(o) institute, settle or compromise any claim, action, suit or
proceeding pending or threatened by or against it involving amounts in
excess of $50,000, at law or in equity or before any federal, state,
local, foreign or other governmental department, commission, board,
bureau, agency or instrumentality (including, but not limited to, the FDA
or any nongovernmental self-regulatory agency);
(p) distribute or otherwise circulate any notices, directives or
other communications directed to all or groups of customers, vendors,
employees, distributors or others associated with its business relating
to the transactions contemplated hereby or to the operation of business
after consummation of such transactions without consulting with Parent,
giving Parent reasonable opportunity to comment thereon and obtaining
prior to distribution Parent's approval thereof, which shall not
unreasonably be withheld;
(q) knowingly take any action that would render any representation,
warranty, covenant or agreement of the Company in this Agreement
inaccurate or breached as of the Closing Date; or
(r) agree, whether in writing or otherwise, to do any of the
foregoing.
5.2 No Solicitation. Neither the Company nor any Subsidiary, nor any of
their respective officers, directors, employees, representatives, agents or
affiliates (including, but not limited to any investment banker, attorney or
accountant retained by the Company or any Subsidiary), shall, directly or
indirectly, solicit, encourage, initiate or participate in any way in
discussions or negotiations with, or knowingly provide any information to, any
corporation, partnership, person or other entity or group (other than Parent or
any affiliate or agent of Parent) concerning any merger, sale or licensing of
any significant portion of the assets, sale of shares of capital stock
(including without limitation any proposal or offer to the Company's
shareholders) or similar transactions involving the Company or any Subsidiary
(an "Alternative Proposal"), or otherwise facilitate any effort or attempt to
make or implement an Alternative Proposal. The Company will promptly
communicate to Parent the terms of any proposal or inquiry that it has received
or may receive in respect of any such transaction or of any such information
requested from it or of any such negotiations or discussions being sought to be
initiated with the Company; provided, however, that this Section shall not
prohibit the Board of Directors of the Company from (i) furnishing information
to or entering into discussions or negotiations with, any person or entity that
makes an unsolicited bona fide Alternative Proposal, if, and only to the extent
that, (a) the Board of Directors of the Company determines in good faith that
such action is so required for the Board of Directors to comply with its
fiduciary duties to shareholders imposed by law and the Board has been so
advised in writing (with a copy furnished to Parent) by independent, outside
counsel, in its judgment and opinion, as being so required, (b) prior to
furnishing information to, or entering into discussions and negotiations with,
such person or entity, the Company provides written notice to Parent to the
effect that it is furnishing information to, or entering into discussions or
negotiations with, such person or entity, and (c) the Company keeps Parent
informed of the status and all material information with respect to any such
discussions or negotiations; and (ii) to the extent applicable, complying with
Rule 14e-2 promulgated under the 1934 Act with regard to an Alternative
Proposal. Nothing in this Section shall (x) permit the Company to terminate
this Agreement (except as specifically provided in Article 7 hereof), (y)
permit the Company to enter into any Agreement with respect to an Alternative
Proposal for as long as this Agreement remains in effect (it being agreed that
for as long as this Agreement remains in effect, the Company shall not enter
into any Agreement with any person that provides for, or in any way
facilitates, an Alternative Proposal), or (z) affect any other obligation of
the Company under this Agreement.
5.3 Access and Information. The Company shall afford to Parent, and to
Parent's accountants, officers, directors, employees, counsel and other
representatives, reasonable access during normal business hours, from the date
hereof through the Effective Time, to all of its properties, books,
contracts, commitments and records, and, during such period, the Company shall
furnish promptly to Parent all information concerning the Company's and its
Subsidiaries' businesses, prospects, properties, liabilities, results of
operations, financial condition, testing, clinicals, officers, employees,
investigators, distributors, customers, suppliers or others having dealings
with the Company as Parent may reasonably request and reasonable opportunity to
contact and obtain information from such
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officers, employees, investigators, distributors, customers, suppliers or
others having dealings with the Company as Parent may reasonably request.
During the period from the date hereof to the Effective Time, the parties shall
in good faith meet and correspond on a regular basis for mutual consultation
concerning the conduct of the Company's and the Subsidiaries' businesses and,
in connection therewith, Parent shall be entitled to have employees or other
representatives present at the offices of the Company and its Subsidiaries to
observe, and be kept informed concerning, the Company's and the Subsidiaries'
operations and business planning. Parent shall hold in confidence all such
nonpublic information as required and in accordance with the confidentiality
agreement dated January 19, 1996 between Parent and the Company (the
"Confidentiality Agreement").
5.4 Approval of Shareholders; Proxy Statement; Registration Statement.
(a) the Company shall promptly take all action necessary in
accordance with Delaware law and the Company's Certificate of
Incorporation and Bylaws to cause a meeting of the Company's shareholders
(the "Company Shareholders Meeting") to be duly called and held as soon
as reasonably practicable following the date upon which the Registration
Statement (as defined below) becomes effective for the purpose of voting
upon the Merger, and shall use all reasonable efforts to obtain the
Company shareholder approval of this Agreement and the Merger. In
accordance therewith, the Company shall, with the cooperation of Parent,
prepare and file, as soon as reasonably practicable, a proxy
statement/prospectus included as part of the Registration Statement (such
proxy statement/prospectus, together with notice of meeting, form of
proxy and any letter or other materials to the Company shareholders
included therein are referred to in this Agreement as the "Proxy
Statement/Prospectus"). The Company shall use all reasonable efforts to
cause the definitive Proxy Statement/Prospectus to be mailed to the
shareholders of the Company, as soon as reasonably practicable following
its effectiveness, with the date of mailing as mutually determined by the
Company and Parent. The Company will, through its Board of Directors,
recommend to its shareholders approval of the Merger in the definitive
Proxy Statement/Prospectus.
(b) Parent shall, with the cooperation of the Company, prepare and
file, as soon as reasonably practicable, a registration statement under
the 1933 Act registering the shares of Parent Common Stock to be issued
in the Merger (the "Registration Statement"), which Registration
Statement shall include the Proxy Statement/Prospectus. Parent will use
all reasonable efforts to have the Registration Statement declared
effective by the SEC as promptly thereafter as practicable. Parent shall
also take any action required to be taken under state blue sky or
securities laws in connection with the issuance of Parent Common Stock
pursuant to the Merger. The Company shall furnish to Parent all
information concerning the Company and its Subsidiaries and the holders
of its capital stock, and shall take such other action and otherwise
cooperate, as Parent may reasonably request in connection with any such
action.
(c) Parent shall notify the Company promptly of the receipt of the
comments of the SEC and of any request by the SEC for amendments or
supplements to the Registration Statement and shall supply the Company
with copies of all correspondence with the SEC with respect to the
Registration Statement.
(d) If at any time prior to the Company Shareholders Meeting, any
event should occur relating to the Company, any Subsidiary or the
Company's officers or directors that is required to be described in an
amendment or supplement to the definitive Proxy Statement/Prospectus or
the Registration Statement, the Company shall promptly inform Parent. If
at any time prior to the Company Shareholders Meeting, any event shall
occur relating to Parent or Acquisition Subsidiary or their respective
officers or directors that is required to be described in an amendment or
supplement to the definitive Proxy Statement/Prospectus or the
Registration Statement, Parent shall promptly inform the Company.
Whenever any event occurs that should be described in an amendment of, or
supplement to, the definitive Proxy Statement/Prospectus or the
Registration Statement, the Company or Parent, as the case may be, shall,
upon learning of such event, promptly notify the other and consult and
cooperate with the other in connection with the preparation of a mutually
acceptable amendment or supplement. The parties shall promptly file such
amendment or supplement with the SEC and mail such amendment or
supplement as soon as practicable after it is cleared by the SEC.
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5.5 Consents. The Company will, at its cost and expense, use all
reasonable efforts to obtain all approvals and consents of all third parties
necessary on the part of the Company or its Subsidiaries to consummate the
transactions contemplated hereby. Parent agrees to cooperate with the Company
in connection with obtaining such approvals and consents. Parent will, at its
cost and expense, use all reasonable efforts to obtain all approvals and
consents of all third parties necessary on the part of Parent to consummate the
transactions contemplated hereby. The Company agrees to cooperate with Parent
in connection with obtaining such approvals and consents.
5.6 Affiliates' Letters.
(a) the Company has delivered to Parent a list of names and addresses of
those persons, in the Company's reasonable judgment after consultation
with outside legal counsel, who, as of the date hereof, are affiliates
within the meaning of Rule 145 of the rules and regulations promulgated
under the Securities Act or otherwise applicable SEC accounting releases
with respect to pooling-of-interests accounting treatment (each such
person, a "Pooling Affiliate") of the Company. The Company shall provide
Parent such information and documents as Parent shall reasonably request
for purposes of reviewing such list, and shall promptly update such list
to reflect any changes thereto. The Company has caused to be delivered
to Parent an affiliate letter in the form attached hereto as EXHIBIT A,
executed by each of the Pooling Affiliates of the Company identified in
the foregoing list, and shall use all reasonable efforts to deliver or
cause to be delivered to Parent prior to the Effective Time such an
affiliate letter executed by any additional persons who become Pooling
Affiliates after the date hereof. Parent shall be entitled to place
legends as specified in such affiliate letters on the certificates
evidencing any of the Parent Common Stock to be received by such Pooling
Affiliates pursuant to the terms of this Agreement, and to issue
appropriate stop transfer instructions to the transfer agent for the
Parent Common Stock, consistent with the terms of such letters.
(b) For so long as resales of shares of Parent Common Stock issued
pursuant to the Merger are subject to the resale restrictions set forth
in Rule 145 under the Securities Act, Parent will use all reasonable
efforts to comply with Rule 144(c)(1) under the Securities Act.
5.7 Expenses. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement, the transactions
contemplated hereby, the Proxy Statement/Prospectus and the Registration
Statement will be paid by the party incurring such costs and expenses, except
that the Company and Parent will share equally the cost of printing and filing
with the SEC the Proxy Statement/Prospectus and the Registration Statement, the
filing fees required under the HSR Act or any Foreign Merger Laws and the fees
charged by Price Waterhouse LLP for the letters described in Section 5.16 (the
"Shared Expenses").
5.8 Further Actions. Subject to the terms and conditions herein provided
and without being required to waive any conditions herein (whether absolute,
discretionary or otherwise), each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
make effective the transactions contemplated by this Agreement. In case at any
time after the Effective Time any further action is necessary or desirable to
carry out the purposes of this Agreement, the proper officers and directors of
each party to this Agreement shall take all such necessary action.
5.9 Regulatory Approvals. The Company and Parent will take all reasonable
action as may be necessary under federal or state securities laws or the HSR
Act or Foreign Merger Laws applicable to or necessary for, and will file as
soon as reasonably practicable and, if appropriate, use all reasonable efforts
to have declared effective or approved all documents and notifications with the
SEC and other governmental or regulatory bodies (including, without limitation,
the FDA and equivalent foreign regulatory bodies, and other foreign regulatory
bodies that administer Foreign Merger Laws, and any foreign labor councils or
bodies as may be required) that they deem necessary or appropriate for, the
consummation of the Merger and the transactions contemplated hereby, and each
party shall give the other information reasonably requested by such other party
pertaining to it and its subsidiaries and affiliates to enable such other party
to take such actions. Notwithstanding the foregoing or anything herein to the
contrary, neither Parent nor Acquisition Subsidiary shall be required to make
arrangements for or to effect the
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cessation, sale or other disposition of particular assets or categories
of assets or businesses of Parent, Acquisition Subsidiary, the Company or any
of their affiliates.
5.10 Certain Notifications. The Company shall promptly notify Parent in
writing of the occurrence of any event that will or could reasonably be
expected to result in the failure by the Company or its affiliates to satisfy
any of the conditions specified in Section 6.1 or 6.2. Parent shall promptly
notify the Company in writing of the occurrence of any event that will or could
reasonably be expected to result in the failure by Parent or its affiliates to
satisfy any of the conditions specified in Section 6.1 or 6.3.
5.11 Voting of Shares. To induce Parent to execute this Agreement,
certain shareholders of the Company have executed and delivered as of the date
hereof Agreements to Facilitate Merger in the form attached hereto as EXHIBIT
B, whereby each such shareholder has agreed to vote his/her shares of the
Company in favor of the Merger at the Company Shareholders Meeting.
5.12 Noncompetition Agreements. To induce Parent to execute this
Agreement, the Company has caused certain individuals to execute and deliver to
Parent as of the date hereof (but expressly contingent upon the Closing of
Merger) noncompetition agreements substantially in the form of EXHIBIT C
hereto.
5.13 NYSE Listing Application. Parent shall prepare and submit to the
NYSE a listing application for the Parent Common Stock to be issued in the
Merger pursuant to Article 1 of this Agreement. The Company shall cooperate
with Parent in such listing application.
5.14 Indemnification. Parent shall indemnify, defend and hold harmless
each person who is now, or has been at any time prior to the date hereof or who
becomes prior to the Effective Time, an officer, director or employee of the
Company or any of its Subsidiaries (the "Indemnified Parties") against all
losses, claims, damages, costs, expenses (including reasonable attorneys' fees
and expenses), liabilities or judgments, or amounts that are paid in settlement
with the approval of Parent (which approval shall not be unreasonably
withheld), of or in connection with any claim, action, suit, proceeding or
investigation based in whole or in part on or arising in whole or in part out
of the fact that such person is or was a director, officer or employee of the
Company or any Subsidiary, whether pertaining to any matter existing or
occurring at or prior to the Effective Time and whether asserted or claimed
prior to, or at or after, the Effective Time, including, without limitation,
this Agreement and the transactions contemplated hereby ("Indemnified
Liabilities"), in each case to the full extent the Company would have been
permitted under Delaware law and its Certificate of Incorporation and Bylaws as
of the Effective Time to indemnify such person (and Parent shall pay expenses
in advance of the final disposition of any such action or proceeding to each
Indemnified Party to the full extent permitted by law upon receipt of any
affirmation or undertaking required by Section 145(e) of the DGCL). Without
limiting the foregoing, in the event any such claim, action, suit, proceeding
or investigation is brought against any Indemnified Party (whether arising
before or after the Effective Time), (i) any counsel retained by the
Indemnified Parties for any period after the Effective Time shall be reasonably
satisfactory to Parent; (ii) after the Effective Time, Parent shall pay all
reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received; and (iii) after the Effective
Time, Parent will use all reasonable efforts to assist in the vigorous defense
of any such matter, provided that Parent shall not be liable for any settlement
of any claim effected without its written consent, which consent, however,
shall not be unreasonably withheld. Any Indemnified Party wishing to claim
indemnification under this Section 5.14, upon learning of any such claim,
action, suit, proceeding or investigation, shall notify Parent (but the failure
so to notify Parent shall not relieve it from any liability which it may have
under this Section 5.14 except to the extent such failure materially prejudices
Parent), and shall deliver to Parent the affirmation and undertaking, if any,
required by Section 145(e) of the DGCL. The Indemnified Parties as a group may
retain only one law firm to represent them with respect to each such matter
unless there is, under applicable standards of professional conduct, a conflict
of any significant issue between the positions of any two or more Indemnified
Parties. In the event of any dispute as to the enforcement or interpretation
of an Indemnified Party's rights under this Section 5.14 and the Indemnified
Parties are held by a court of competent jurisdiction to have been entitled to
indemnification under this Section 5.14, Parent shall promptly reimburse the
Indemnified Party's fees and expenses (including reasonable attorneys' fees and
expenses) incurred in connection with such matter. The obligations of Parent
to an Indemnified Party under this Section 5.14 shall survive and continue
after the Effective Time, and shall inure to the benefit of
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the Indemnified Party for all Indemnified Party's heirs, legal
representatives, administrators and other successors in interest. It is
expressly understood and agreed that (i) each Indemnified Party shall be
considered a third party beneficiary of this Section 5.14 and (ii) the parties
hereto will not amend or modify the provisions of this Section 5.14 so as to
adversely affect the rights of an Indemnified Party without in each instance
first obtaining the prior written consent to such amendment or modification of
all Indemnified Parties.
5.15 Letters of the Company's and Parent's Accountants. (A) The Company
shall cooperate with Parent and use all reasonable efforts to cause to be
delivered to Parent the following letters from Price Waterhouse LLP
("PW") addressed to the Company and Parent: (i) a letter dated the date of
this Agreement, stating that after appropriate review and based on its
familiarity with the Company, the Company has not taken or agreed to take any
action that would prevent Parent from accounting for the Merger as a pooling of
interests transaction under Option 16 of the Accounting Principles Board and
applicable SEC rules and regulations; and (ii) a letter dated as of the Closing
Date confirming as of the Closing Date the previously delivered letter referred
to above. (B) The Company shall cooperate with Parent and Parent shall use all
reasonable means to cause to be delivered to the Company the following letters
from PW addressed to Parent and the Company: (i) a letter dated the date of
this Agreement, stating that after appropriate review of this Agreement and a
letter from the Parent describing the transaction, the Merger will qualify as a
pooling of interests transaction under Opinion 16 of the Accounting Principles
Board and applicable SEC rules and regulations; and (ii) a letter dated as of
the Closing Date confirming as of the Closing Date the previously delivered
letter referred to above. The fees charged by PW for such letters shall be
shared equally by Parent and the Company
5.16 Royalty Revision. The Company shall use all reasonable efforts to
revise, to such terms as are mutually satisfactory to the Company and Parent,
the Company's royalty payment obligations to the parties to that certain
Assignment Agreement dated April 25, 1991, as amended, among the Company and
others.
5.17 Pooling; Reorganization. From the date hereof to the Effective Time,
Parent agrees that it will not knowingly take any action that would have the
effect of (i) jeopardizing the treatment of the acquisition of the Company by
Parent as a "pooling of interests" for accounting purposes, or (ii)
jeopardizing the qualification of the Merger as a reorganization within the
meaning of Section 368(a)(2)(E) of the Code.
5.18 Subsidiary Shares. At or prior to the Closing, the Company shall
cause all issued and outstanding Subsidiary shares owned by any person other
than the Company to be transferred for no or nominal consideration to such
person or persons designated by Parent.
ARTICLE 6
CLOSING CONDITIONS
6.1 Conditions to Obligations of Parent, Acquisition Subsidiary and the
Company. The respective obligations of each party to consummate the Merger
shall be subject to the fulfillment at or prior to the Closing of the following
conditions:
(a) No Injunction. Neither Parent, Acquisition Subsidiary, nor the
Company shall be subject to any final order, decree or injunction of a
court of competent jurisdiction within the United States that (i)
prevents or materially delays the consummation of the Merger, or (ii)
would impose any material limitation on the ability of Parent effectively
to exercise full rights of ownership of the Company or the assets or
business of the Company.
(b) Shareholder Approval. The approval of the shareholders of the
Company referred to in Section 5.4 hereof shall have been obtained, in
accordance with the DGCL and the Company's Certificate of Incorporation
and Bylaws.
(c) Registration Statement. The Registration Statement (as amended
or supplemented) shall have become effective under the 1933 Act and shall
not be subject to any "stop order," and no action, suit,
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proceeding or investigation by the SEC to suspend the effectiveness or
qualification thereof shall have been initiated and be continuing or have
been threatened and be unresolved. Parent shall also have received all
state securities law or blue sky authorizations necessary to carry out
the transactions contemplated hereby.
(d) NYSE Listing. The shares of Parent Common Stock to be delivered
pursuant to the Merger shall have been duly listed on the NYSE, subject
to official notice of issuance.
(e) Waiting Periods. The waiting periods applicable to the
consummation of the Merger under the HSR Act and any Foreign Merger Laws
shall have expired or been terminated.
6.2 Conditions to Obligations of Parent and Acquisition Subsidiary. The
respective obligations of Parent and Acquisition Subsidiary to consummate the
Merger shall be subject to the fulfillment at or prior to the Closing of the
following additional conditions:
(a) Representations and Warranties True. Each representation and
warranty of the Company contained in this Agreement, without regard to
any qualification or reference to immateriality or "Company Material
Adverse Effect", shall be true and correct as of the date hereof and on
the Closing Date as though such representations and warranties were made
on such date (except those representations and warranties that address
matters only as of a particular date shall remain true and correct as of
such date), except for any inaccuracies which, individually or in the
aggregate, have not had, and would not have, a Company Material Adverse
Effect.
(b) Performance. The Company shall have performed and complied in
all material respects with all agreements, obligations and conditions
required by this Agreement to be performed or complied with by it on or
prior to the Closing and Parent shall have received a certificate to such
effect signed by the Chief Executive Officer of the Company.
(c) Consents. The Company shall have obtained all permits,
authorizations, consents and approvals required on its part to perform
its obligations under, and consummate the transactions contemplated by,
this Agreement, in form and substance satisfactory to Parent, and Parent
and Acquisition Subsidiary shall have received evidence satisfactory to
them of the receipt of such permits, authorizations, consents and
approvals.
(d) Opinion of Counsel for the Company. Parent and Acquisition
Subsidiary shall have received an opinion of Maslon, Edelman, Borman &
Brand, a Professional Limited Liability Partnership, counsel to the
Company, dated the Closing Date, in form and substance reasonably
satisfactory to Parent, to the effect set forth in EXHIBIT D hereto.
(e) Affiliates' Letters. Parent shall have received a letter from
each of the Affiliates pursuant to Section 5.6 hereof.
(f) Noncompetition Agreements. Parent shall have received executed
agreements from such persons, and in such form satisfactory to Parent, as
described in Section 5.12 hereof.
(g) Resignations. Such officers and directors (as shall have been
specified Parent) of the Company or of any Subsidiary shall have tendered
their respective resignations effective as of the Effective Time.
(h) Pooling Opinion. Parent shall have received each of the letters
described in Sections 5.15.
(i) Royalty Revision. The Company's royalty obligations referenced
in Section 5.16 shall have been revised to such terms as are mutually
satisfactory to Parent and the Company.
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(j) Subsidiary Shares. The transfer of Subsidiary shares as
provided in Section 5.18 shall have occurred.
6.3 Conditions to Obligations of the Company. The obligation of the
Company to consummate the Merger shall be subject to the fulfillment at or
prior to the Closing of the following additional conditions:
(a) Representations and Warranties True. Each representation and
warranty of Parent contained in this Agreement without regard to any
qualification or reference to immateriality or "Parent Material Adverse
Effect", shall be true and correct on the date of this Agreement and on
the Closing Date as though such representations and warranties were made
on such date (except those representations and warranties that address
matters only as of a particular date shall remain true and correct as of
such date), except for any inaccuracies which, individually or in the
aggregate, have not had, and would not have, a Parent Material Adverse
Effect.
(b) Performance. Parent and Acquisition Subsidiary shall have
performed and complied in all material respects with all agreements,
obligations and conditions required by this Agreement to be performed or
complied with by them on or prior to the Closing.
(c) Consents. Parent and Acquisition Subsidiary shall have obtained
all permits, authorizations, consents and approvals required on its part
to perform its obligations under, and consummate the transactions
contemplated by, this Agreement, in form and substance satisfactory to
Parent, and the Company shall have received evidence satisfactory to it
of the receipt of such permits, authorizations, consents and approvals.
(d) Opinion of Counsel for Parent. The Company shall have received
an opinion of Fredrikson & Byron, P.A., counsel to Parent, dated the
Closing Date, in form and substance reasonably satisfactory to the
Company, to the effect set forth in EXHIBIT E hereto.
(e) Tax Opinion. Since the date of this Agreement, there shall not
have been any change in the facts, circumstances or applicable federal
tax laws that would prevent the Company from receiving an opinion, dated
the Closing Date, of Maslon, Edelman, Borman & Brand, a Professional
Limited Liability Partnership, counsel to the Company, to the effect
that, subject to customary conditions, the Merger will be treated for
federal income tax purposes as a reorganization within the meaning of
Section 368(a)(2)(E) of the Code.
ARTICLE 7
TERMINATION AND ABANDONMENT
7.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval by the shareholders of the
Company, only:
(a) by mutual written consent duly authorized by the Board of
Directors of Parent and the Board of Directors of the Company;
(b) by either Parent or the Company if the Merger shall not have
been consummated on or before September 30, 1996; provided, however, that
the terminating party shall not have breached in any material respect its
obligations under this Agreement in any manner that shall have been the
proximate cause of, or resulted in, the failure to consummate the Merger
by such date and provided further, however, that, if a request for
additional information is received from the U.S. Federal Trade Commission
("FTC") or Department of Justice ("DOJ") pursuant to the HSR Act or
additional information is requested by an authority (a "Foreign
Authority") pursuant to Foreign Merger Laws, such date shall be extended
to the 90th day following acknowledgment by the FTC, DOJ or Foreign
Authority, as applicable, that Parent and the Company have complied with
such request, but in any event not later than October 31, 1996;
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<PAGE> 30
(c) by either Parent or the Company if a court of competent
jurisdiction or an administrative, governmental, or regulatory authority
has issued a final non-appealable order, decree or ruling, or taken any
other action, having the effect of permanently restraining, enjoining or
otherwise prohibiting the Merger;
(d) by either Parent or the Company if, at the Company Shareholders
Meeting, the requisite vote of the shareholders of the Company is not
obtained, except that the right to terminate this Agreement under this
Section 7.1(e) will not be available to any party whose failure to
perform any material obligation under this Agreement has been the
proximate cause of, or resulted in, the failure to obtain the requisite
vote of the shareholders of the Company;
(e) by Parent if either (i) the Company has breached its obligations
under Section 5.2 in any material respect, (ii) the Board of Directors of
the Company has recommended, approved, accepted, or entered into an
agreement regarding, an Alternative Proposal, as defined in Section 5.2,
or (iii) the Board of Directors of the Company has withdrawn or modified
in a manner adverse to Parent its recommendation of the Merger;
(f) by the Company if (i) it is not in material breach of its
obligations under this Agreement, (ii) the Board of Directors of the
Company has accepted an Alternative Proposal, and (iii) the Company has
paid to Parent the fee required to be paid to Parent by Section 7.2 in
the manner therein provided;
(g) by Parent if (i) Parent is not in material breach of its
obligations under this Agreement and (ii) there has been a material
breach by the Company of any of its representations, warranties or
obligations under this Agreement such that the conditions in Section 6.2
will not be satisfied, and the breach is not curable or, if curable, is
not cured by the Company within 30 calendar days after receipt by the
Company of written notice from Parent of such breach;
(h) by the Company if (i) the Company is not in material breach of
its obligations under this Agreement and (ii) there has been a material
breach by Parent of any of its representations, warranties or obligations
under this Agreement such that the conditions in Section 6.3 will not be
satisfied, and the breach is not curable or, if curable, is not cured by
Parent within 30 calendar days after receipt by Parent of written notice
from the Company of such breach.
7.2 Effect of Termination.
(a) In recognition of the time, efforts and expenses expended and
incurred by Parent with respect to the Company and the opportunity the
Company presents to Parent, if:
(i) this Agreement is terminated pursuant to Section 7.1(e) or
7.1(f); or
(ii) (A) any third party makes an Alternative Proposal or
acquires 10% or more of the outstanding Company Common Stock prior
to the Company Shareholders Meeting, (B) the requisite vote of the
shareholders of the Company to approve the Merger is not obtained,
(C) this Agreement is terminated, and (D) within 12 months after
such termination (x) the Company enters into an agreement relating
to an Alternative Proposal or (y) an Alternative Proposal is
consummated,
then, in any such event, the Company will pay to Parent, upon the
termination date in the event of termination pursuant to Section 7.1(f),
within five business days after demand by Parent in the case of
termination pursuant to Section 7.1(e), and immediately upon the first to
occur of the entering into an agreement providing for, or the
consummation of, an Alternative Proposal in the case of the events
specified in clause (ii) above (by wire transfer of immediately available
funds to an account designated by Parent for such purpose), a fee equal
to $5 million. The Company acknowledges that the agreements contained in
this Section 7.2 are an integral part of the transactions contemplated by
this Agreement, and that, without these agreements, Parent would not
enter into this Agreement. If the Company fails to pay
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promptly the fee due pursuant to this Section 7.2, the Company shall
also pay to Parent interest on the amount of the fee under this Section,
accruing from its due date, at an interest rate per annum equal to 2%
plus the prime commercial lending rate quoted by Norwest Bank Minnesota,
N.A. Any change in the interest rate hereunder resulting from a change
in such prime rate shall be effective at the beginning of the day of such
change in such prime rate.
(b) Except as provided in the next sentence of this paragraph, in
the event of the termination of this Agreement pursuant to any paragraph
of Section 7.1, the obligations of the parties to consummate the Merger
will expire, and none of the parties will have any further obligations
under this Agreement except pursuant to Section 7.2(a), Sections 5.3 and
5.7 and Article 8. In the event of the termination of this Agreement
pursuant to any paragraph of Section 7.1 that is caused by a breach of a
party, the party whose breach was the basis for the termination will not
be relieved from any liability for its breach or its obligations pursuant
to Section 7.2(a), and the other party will have no further obligations
under this Agreement except as provided in Sections 5.3 and 5.7 and
Article 8.
ARTICLE 8
MISCELLANEOUS
8.1 Amendment and Modification. Subject to applicable law, this Agreement
may be amended, modified or supplemented only by written agreement of Parent,
Acquisition Subsidiary and the Company at any time prior to the Effective Time
with respect to any of the terms contained herein. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
8.2 Waiver of Compliance; Consents. Any failure of Parent or Acquisition
Subsidiary on the one hand, or the Company on the other hand, to comply with
any obligation, covenant, agreement or condition herein may be waived by the
Company or Parent, respectively, only by a written instrument signed by an
officer of the party granting such waiver, but such waiver or failure to insist
upon strict compliance with such obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent
or other failure. Whenever this Agreement requires or permits consent by or on
behalf of any party hereto, such consent shall be given in writing.
Acquisition Subsidiary agrees that any consent or waiver of compliance given by
Parent hereunder shall be conclusively binding upon Acquisition Subsidiary,
whether given expressly on its behalf or not.
8.3 Investigation; Survival of Representations and Warranties. The
respective representations and warranties of Parent and the Company contained
herein or in any certificates or other documents delivered prior to or at the
Closing shall not be deemed waived or otherwise affected by any investigation
made by any party hereto. Each and every representation and warranty contained
herein shall be deemed to be conditions to the Merger and shall not survive the
Merger. This Section 8.3 shall have no effect upon any other obligation of the
parties hereto, whether to be performed before or after the Closing.
8.4 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given when delivered personally by commercial
courier service or otherwise, or by telecopier, or three days after such notice
is mailed by registered or certified mail (return receipt requested) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
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(a) if to Parent or Acquisition Subsidiary, to it at:
Medtronic, Inc.
7000 Central Avenue Northeast
Minneapolis, Minnesota 55432
with separate copies thereof addressed to
Attention: General Counsel
and FAX: (612) 572-5459
Attention: Vice President, Corporate Development and Associate
General Counsel
FAX: (612) 572-5404
(b) If to the Company, to it at:
InStent Inc.
6271 Bury Drive
Eden Prairie, Minnesota 55436
FAX: (612) 937-0312
Attention: Warren L. Bielke, Chief Executive Officer
with a copy to:
Maslon, Edelman, Borman & Brand
a Professional Limited Liability Partnership
3300 Norwest Center
Minneapolis, Minnesota 55402-4140
FAX: (612) 672-8397
Attention: Joseph Alexander
8.5 Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties, nor
is this Agreement intended to confer upon any other person except the parties
any rights or remedies hereunder.
8.6 Governing Law. Except to the extent that Delaware law is mandatorily
applicable to the Merger and the rights of the shareholders of the Company and
Acquisition Subsidiary, this Agreement shall be governed by the laws of the
State of Minnesota (regardless of the laws that might otherwise govern under
applicable Minnesota principles of conflicts of law).
8.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
8.8 Knowledge. As used in this Agreement or the instruments, certificates
or other documents required hereunder, the term "knowledge" shall mean actual
knowledge of a fact or the knowledge that such person or, if such person is a
corporation, its directors, officers or other key employees could reasonably be
expected to have based on reasonable investigation and inquiry. The knowledge
of an entity shall be deemed to include the knowledge of its subsidiaries.
8.9 Interpretation. The Table of Contents, article and section headings
contained in this Agreement are inserted for reference purposes only and shall
not affect the meaning or interpretation of this Agreement. This Agreement
shall be construed without regard to any presumption or other rule requiring
the resolution of any ambiguity regarding the interpretation or construction
hereof against the party causing this Agreement to be drafted.
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8.10 Publicity. Upon execution of this Agreement by Parent, Acquisition
Subsidiary and the Company, the parties shall jointly issue a press release, as
agreed upon by them. The parties intend that all future statements or
communications to the public or press regarding this Agreement or the Merger
will be mutually agreed upon by them. Neither party shall, without such mutual
agreement or the prior consent of the other, issue any statement or
communication to the public or to the press regarding this Agreement, or any of
the terms, conditions or other matters with respect to this Agreement, except
as required by law or the rules of the NYSE or Nasdaq and then only (a) upon
the advice of such party's legal counsel; (b) to the extent required by law or
the rules of the NYSE or Nasdaq; and (c) following prior notice to, and
consultation with, the other party (which notice shall include a copy of the
proposed statement or communication to be issued to the press or public). The
foregoing shall not restrict Parent's or the Company's communications with
their employees or customers in the ordinary course of business.
8.11 Entire Agreement. This Agreement, including the exhibits and
schedules hereto and the Confidentiality Agreement referred to herein, embodies
the entire agreement and understanding of the parties hereto in respect of the
subject matter contained herein. This Agreement and the Confidentiality
Agreement supersede all prior agreements and the understandings between the
parties with respect to such subject matter.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
Medtronic, Inc.
By /s/ Michael D. Ellwein
----------------------------------
Its Vice President
BYR Acquisition Corp.
By /s/ Michael D. Ellwein
----------------------------------
Its Vice President
InStent Inc.
By /s/ Warren Bielke
----------------------------------
Its President and CEO
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<PAGE> 1
EXHIBIT 10.1
DISTRIBUTION AGREEMENT
This Agreement, dated as of March 27, 1996 (the "Effective Date"), is made
between InStent, Inc., a Delaware corporation, and its affiliated companies
(collectively, "InStent"), and Medtronic, Inc., a Minnesota corporation
("Distributor").
InStent and Distributor, in consideration of the agreements and covenants
contained herein, and for other good and valuable consideration, the receipt of
which is hereby acknowledged, agree as follows:
SECTION 1 - APPOINTMENT
1.1 Distributor. InStent hereby appoints Distributor for the Term (as
defined in Paragraph 7.1) and subject to the terms and conditions of this
Agreement, as its exclusive distributor of the coronary and carotid stent
products identified on the attached Exhibit A (the "Products") within all
countries of the world (the "Territory").
1.2 Exclusivity. InStent shall not (i) appoint another distributor of the
Products whose territory includes any portion of the Territory during the Term,
(ii) market Products within the Territory during the Term, or (iii) effect
direct sales of the Products to dealers or retailers located within the
Territory during the Term. InStent represents and warrants that no
distributors, agents or dealers have previously been appointed in the Territory
for the Products. In the event that as of the Effective Date of this Agreement
there are presently appointed any other distributors for the Products in the
Territory, InStent shall use all reasonable efforts to terminate all such other
distributors at the earliest possible date following the Effective Date.
1.3 Independent Contractor. Distributor is an independent contractor and
is not and shall not act as the agent, employee, franchisee or partner of
InStent.
1.4 No Creation of Obligation by One Party for Other. Neither party
hereto shall be entitled to, nor shall attempt to, create or assume any
obligation, express or implied, on behalf of the other party hereto.
1.5 Sub-contract or Resale. During the Term hereof, Distributor may sell
the Products to customers who intend to resell the Products. Distributor may
sub-contract distributorship of the Products to any third party, entity, firm
or agent.
1.6 Acceptance. Distributor accepts its appointment as Distributor of the
Products in the Territory and shall use its reasonable efforts to develop sales
of the Products, in the Territory, and to support InStent's marketing program
in the Territory. In furtherance thereof, Distributor shall:
(a) keep on hand a reasonable inventory of the Products sufficient to
allow for prompt delivery of Products to purchasers;
<PAGE> 2
2
(b) participate regularly in local or regional trade shows, medical
conventions or like events within the Territory, and conduct regular local
promotional, advertising and other marketing efforts for the Products;
(c) provide appropriate and professional application advice and counseling
for the Products sold by Distributor, and provide prompt follow-up service and
advice to purchasers of the Products when so requested by the purchaser or by
InStent;
(d) respond promptly to sales leads or referrals furnished by InStent;
(e) maintain and make available to InStent periodically, as reasonably
requested by InStent, accurate records of Distributor's sales of Products under
this Agreement;
(f) assist promptly in executing any such recalls of Products as may be
mutually agreed by InStent and Distributor, for which InStent will reimburse
Distributor for its documented, reasonable, out-of-pocket expenses in
connection with repurchasing Products subject to recall;
(g) promptly advise InStent of each complaint that Distributor receives or
becomes aware of concerning the Products, and promptly notify InStent as
required by applicable law to report any information of which Distributor
becomes aware that suggests that any of the Products may have been associated
in any way with an injury to a user or patient;
(h) advise InStent of any inquiry other than a purchase order or potential
purchase order from the public, any governmental authority, any trade
association or any news media, publication or reporter concerning the Products
or InStent;
(i) not use any product literature, manuals or other written materials
developed by Distributor (the "Distributor Materials") without the prior
written approval of InStent (such approval not to be unreasonably withheld) and
Distributor shall defend, indemnify and hold harmless InStent from any claims,
actions and proceedings and any damages, liability, losses, costs and expenses
(including, but not limited to, reasonable attorneys' fees) arising out of or
related to any such Distributor Materials, which were not, prior to their use,
approved in writing by InStent.
1.7 Obligations of InStent.
(a) InStent will provide to Distributor reasonable amounts of sales
literature and training materials free of charge and Products samples at
InStent's cost.
(b) InStent will provide Distributor ninety (90) days advance notice in
the event that it discontinues production of any of its Products.
(c) InStent will refer all inquiries for purchases of Products received
from within the Territory to Distributor.
<PAGE> 3
3
(d) InStent will promptly advise Distributor of each complaint that
InStent may receive or become aware of concerning the Products, and notify
Distributor as required by applicable law to report any information of which
InStent becomes aware that suggests that any of the Products may have been
associated in any way with an injury to a user or a patient.
(e) InStent will use its reasonable best efforts to obtain clearance and
marketing approval of the Products from (i) the United States Food and Drug
Administration (the "FDA"), and (ii) any applicable regulatory or governmental
authority of other countries within the Territory in which Products will be
sold or distributed by Distributor.
(f) InStent will provide Distributor reasonable advance notice with
respect to proposed modifications to the Products or the specifications; all
proposed modifications shall be within the confines of the then current FDA
approvals.
(g) At the expense of Distributor, InStent will assess the feasibility of
modifications to the Products or the specifications proposed by Distributor and
will notify Distributor with respect to cost changes resulting from any such
modifications which cost changes are subject to Distributor's approval, such
approval not to be unreasonably withheld.
(h) InStent shall supply the Products in sterile condition with labeling
approved by the FDA and other applicable regulatory or governmental authorities
and in form and content reasonably acceptable to Distributor.
SECTION 2 - FORECASTS AND REPORTS
2.1 Forecasts. Commencing ninety (90) days after "Commercialization" (as
hereinafter defined) and at least thirty (30) days before the beginning of each
three-month period thereafter (commencing three months after
Commercialization), Distributor shall furnish InStent with a rolling forecast
for the following twelve (12) months of Products sales by units, and an
estimate of Distributor's forthcoming orders for Products during the next three
months. Such rolling forecasts by Distributor shall be used for purposes of
facilitating Distributor's and InStent's marketing plans and in order to meet
the lead times required by certain of InStent's suppliers; provided, however,
such forecasts shall not be legally binding in any manner.
2.2 Commercialization. For the purposes of this Agreement
"Commercialization" shall mean the first commercial sale of the Products in any
country within the Territory after "Regulatory Approval" (as hereinafter
defined) of the Products shall have been obtained. "Regulatory Approval", for
the purposes of this Agreement, shall mean the notification to or concurrence,
acknowledgment or approval of the FDA or any other governmental or
quasi-governmental agency or regulatory body, domestic or foreign, which
notification, concurrence, acknowledgment or approval is necessary for or
useful to the marketing, distribution or sale of the Products within the
Territory.
<PAGE> 4
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SECTION 3 - TERMS OF SALE.
3.1 Price.
(a) Until otherwise mutually agreed to by the parties in writing, the
selling price to Distributor for each model of the Products shall be equal to
35% of Distributor's average net sales price per unit of such Product model
determined from Distributor's net sales quarterly on a country-by-country or
region by region basis (the "ASPs"). As used herein, the term "net sales"
shall mean the sales of Products by Distributor, less trade discounts,
commissions, returns and allowances, excise sales tax, shipping and
transportation costs, as included in the gross sales price. Sales of Products
will be made by InStent to Distributor based on Distributor's reasonable
estimate of Distributor's selling price for such Product, and adjusting
payments will by made by one party to the other, as appropriate, within 90 days
of completion of each calendar quarter such that the actual price paid for
Product sold in such calendar quarter equals the ASP for such Product for such
calendar quarter.
(b) Notwithstanding anything set forth herein, all prices are payable in
U.S. Dollars unless provided otherwise on the applicable invoice.
3.2 Taxes. Distributor's prices for the Products and other amounts
specified in this Agreement do not include sales, use or other applicable
taxes, unless expressly stated to the contrary.
3.3 Delivery. InStent will deliver all Products sold to Distributor FOB
Eden Prairie, Minnesota, U.S.A. Title to, and all risk or loss of or damage or
casualty to, such Products will pass to Distributor upon delivery. As invoiced
to Distributor by InStent, Distributor will reimburse InStent for all shipping
charges, premiums for freight, insurance, customs, duties and other import and
export fees, and other transportation costs incurred by InStent. Distributor
shall have the right to reject the Products for failure to meet Distributor's
quality and regulatory assurance standards by returning such Products to
InStent within thirty (30) days of delivery for credit of the purchase price or
replacement of the Products.
3.4 Payment. Unless specified otherwise in the applicable order,
Distributor shall make payment to InStent for Products purchased hereunder in
full within thirty (30) days of the date of InStent's invoice. InStent may, at
its discretion, refuse orders, require payment in full, ship C.O.D. or halt
shipments in transmit if (i) all prior invoices are not paid in full, or (ii)
InStent reasonably deems such steps necessary to secure payment.
3.5 Interest. Any amount not paid when due will be subject to finance
charges at the rate of one and one-half percent (1.5%) per month or the maximum
rate permitted by applicable law, whichever is less, determined and compounded
on a daily basis from the date due until the date paid. Payment of such
finance charges will not excuse or cure Distributor's breach or default for
late payment. If InStent retains a collection agency, attorney or other person
or entity to collect overdue payments, all collection costs, including but not
limited to reasonable attorney's fees, will be payable by Distributor.
<PAGE> 5
5
3.6 Returns. Distributor shall not return Products to InStent without
InStent's prior authorization promptly confirmed in writing which authorization
shall not be unreasonably withheld or delayed.
SECTION 4 - CONFIDENTIALITY, PROPRIETARY RIGHTS.
4.1 Confidentiality . Without the express prior written consent of
InStent, Distributor shall not disclose or allow the disclosure to any third
parties, or use other than in the performance of Distributor's duties under
this Agreement, any confidential or proprietary information or trade secret of
InStent, including, but not limited to, information relating to InStent's
Products, technology, know-how, research, customer lists, supplier lists,
marketing plans, financial information, costs or pricing information.
4.2 Ownership.
(a) Distributor acknowledges that:
(i) the Products involve valuable patent, copyright, trade secret,
trade name, trademark and other proprietary rights of InStent;
(ii) no title to or ownership of such proprietary rights is
transferred to Distributor under this Agreement or by use of any
trademark, patent or other proprietary right; and
(iii) InStent reserves all such proprietary rights.
(b) Distributor will not infringe or violate any proprietary rights
described in paragraph 4.2(a).
(c) Without limiting the generality of the foregoing, Distributor will not
register or attempt to register, directly or indirectly, within the Territory
or elsewhere, any such patents, copyrights, trade names, trademarks or other
proprietary rights without InStent's express written permission.
4.3 Notification. Distributor promptly will notify InStent of any
infringement of InStent's proprietary rights of which Distributor becomes
aware, especially any such infringement relating to the activities of
Distributor or any of its employees, agents, representatives or customers.
InStent may, at its option, and at its expense, undertake or assume control of
any legal proceeding relating to such infringement. InStent will have
exclusive control over the prosecution and settlement of any such legal
proceeding, and Distributor will provide such assistance related to any such
legal proceeding as InStent may reasonably request at InSent's expense. Also,
Distributor will assist InStent at InStent's expense in enforcing any
settlement or order made in connection with any such legal proceeding.
<PAGE> 6
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4.4 Trademarks and Trade Names. InStent hereby grants Distributor the
royalty-free right to use the trademarks and trade names identified on attached
Exhibit B (the "InStent Trademarks") in the Territory during the Term solely
for the purpose of identifying the Products in conjunction with Distributor's
marketing and sale of the Products under this Agreement, and solely in
accordance with the Products quality and other standards issued from time to
time by InStent. Except as permitted under this paragraph, InStent reserves
all rights in the InStent Trademarks. Distributor shall not use the InStent
Trademarks for any purpose other than as permitted under this paragraph.
Distributor shall properly identify and accurately describe as a product of
InStent all of the Products. Distributor shall not alter, remove, deface or
obscure any notice of trademark, trade name, patent, copyright, proprietary
right or trade secret on a Product and shall not add to a Products any other
additional trademark or trade name, provided that Distributor may use thereon
any trademarks of Distributor's as selected by Distributor (the "Distributor
Trademarks") with the prominence of Distributor's trademarks to be at least
equal to those of InStent in connection with the marketing and sale of the
Products, so long as (a) InStent has previously approved such use in writing
which consent shall not be unreasonably withheld, (b) the InStent Trademark is
used together with the Distributor Trademark, (c) the InStent Trademark is
prominently displayed, and (d) the Distributor Trademark and InStent Trademark
are not commingled.
4.5 Assignments. Upon termination of the Term, Distributor will assign to
InStent or such other person or entity as InStent may designate all rights,
registrations, reservations, licenses, permits and similar items made or
obtained by Distributor directly relating to the Products, InStent trademarks
and trade names, or any other proprietary rights of InStent (it being
understood and agreed that Distributor shall not be required to assign to
InStent any proprietary rights of Distributor).
SECTION 5 - WARRANTY, EXCLUSIVE REMEDIES AND LIMITATION OF LIABILITY.
5.1 Warranty. InStent warrants that, upon delivery:
(a) each Product will be free from defects in materials and
workmanship;
(b) each Product will conform in all material respects to its
specifications established by InStent;
(c) each Product will not infringe any patent arising under the law of any
country;
(d) each Product at the time of delivery will not be adulterated or
misbranded within the meaning of any material applicable domestic governmental
regulation;
(e) InStent's procedures will comply in all material respects with "Good
Manufacturing Practices" of the FDA. and
(f) InStent will use its reasonable efforts to comply with Distributor's
quality and regulatory assurance reviews, provided that Distributor will use
its reasonable efforts to assist InStent in connection with such compliance;
and any costs directly incurred by InStent in
<PAGE> 7
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connection with such compliance will be borne solely by Distributor, but only
to the extent that such expenses were for compliance above and beyond Good
Manufacturing Practices of the FDA.
5.2 Exclusive Remedy for Defective Products. InStent will, at its option,
repair, replace or otherwise correct any Product that does not conform to the
warranty set forth in paragraph 5. 1 (a) or (b); provided, that (a) Distributor
notifies InStent of such nonconformity before the later of expiration of six
(6) months after delivery of the non-conforming Products to Distributor or 45
days following the discovery of any latent defects, (b) Distributor, at
InStent's request and Distributor's expense, returns the non-conforming
Products to InStent's plant; and (c) such nonconformity is not the result of
any use of the Products other than in strict accordance with InStent's
instructions and user manuals.
5.3 Exclusive Remedy for Infringement.
(a) If any of the Products violate or, in InStent's reasonable judgment,
is likely to violate, the warranty set forth in paragraph 5. 1 (c), then
InStent may, at its sole option, either secure for Distributor the right to
continue to distribute such Products or replace or modify any such Product to
make it non-infringing or discontinue Distributor's right to distribute the
particular Product until such time as the sale of such Product would be
non-infringing. InStent shall have no liability or obligation under paragraph
5. 1 (c), paragraph 5.2, or this paragraph 5.3 for any infringement or alleged
infringement that arises out of Distributor's or Distributor's customers
combining or using of Products with any equipment, devices, or other goods not
made by or furnished by InStent or arising out of any modification of Products
not done by or at the direction of InStent.
(b) InStent will indemnify, defend and hold Distributor harmless against
any claim to, or other defect in title of, any Products which has been
delivered to and fully paid for by Distributor, and against any claim that the
Products infringes any third party patent or that the InStent Trademarks
infringe any third party trademark in the Territory; provided that Distributor
notifies InStent of such claim or defect promptly after Distributor learns of
such claim or defect, InStent has exclusive control over the defense or
settlement of any proceeding related to such claim or defect, Distributor
provides InStent such assistance in relation to such proceeding as InStent may
reasonably request at InStent's expense, and Distributor complies with any
settlement or court order arising from such proceeding. InStent's liability to
Distributor other than to be reimbursed for expenses in connection with the
defense of a patent or trademark infringement action as set forth above, shall
be limited to any damages awarded against Distributor in any proceeding
resulting from such claim.
5.4 Exclusive Remedy for Products Liability: Insurance.
(a) InStent will indemnify, defend and hold Distributor harmless against
any claim of bodily injury (including death) or damage to personal property to
the extent such claim is based on strict liability or caused by negligence in
the design or manufacture of the Products, provided that Distributor: (i)
promptly notifies InStent of such claim; (ii) allows InStent to assume control
of the defense or settlement of such claim; (iii) cooperates with InStent and
provides such assistance as
<PAGE> 8
8
InStent may reasonably request in the conduct of the defense of settlement of
such claim at InStent's expense; and (iv) does not settle such claim without
InStent's written consent, which will not be unreasonably withheld. Further,
in such event, InStent will: (i) pay any damages awarded against Distributor in
any proceeding resulting from the claim; (ii) reimburse the expenses reasonably
incurred by Distributor to provide the assistance requested by InStent in the
conduct of the defense or settlement of the claim; and, (iii) if the claim is
settled, pay any amounts consented to by InStent. The foregoing
indemnification shall not apply to the extent any claim arises out of
Distributor's negligence.
(b) Insurance. InStent shall maintain insurance coverage issued by a
responsible insurer in the amount of at least Three Million Dollars
($3,000,000) per claim for all product liability claims involving Products,
shall name Distributor as an additional insured under such coverage, and shall
provide to Distributor from time to time on written request a certificate of
insurance from the insurer certifying that the coverage is in place.
5.5 DISCLAIMER. INSTENT MAKES NO REPRESENTATION OR WARRANTY WITH REGARD
TO ANY PRODUCT OR OTHER ITEM FURNISHED UNDER THIS AGREEMENT EXCEPT AS
SPECIFICALLY SET FORTH IN PARAGRAPH 5.l. EXCEPT AS PROVIDED IN PARAGRAPHS 5.1,
5.2, 5.3 and 5.4, INSTENT DISCLAIMS AND DISTRIBUTOR WAIVES AND RELEASES ALL
RIGHTS AND REMEDIES OF DISTRIBUTOR AND ALL WARRANTIES AND OBLIGATIONS OF
INSTENT., EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE, WITH RESPECT TO ANY
PRODUCT OR OTHER ITEMS DELIVERED BY OR ON BEHALF OF INSTENT UNDER THIS
AGREEMENT, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, IMPLIED WARRANTY ARISING
FROM COURSE OF PERFORMANCE, COURSE OF DEALING, OR USAGE OF TRADE, AND ANY CLAIM
OF INFRINGEMENT.
SECTION 6 - OTHER OBLIGATIONS OF DISTRIBUTOR
6.1 Guaranty. Distributor shall not make or extend on behalf of InStent
any written or oral warranty in respect of any of the Products except as may be
contained in sales literature or brochures that are published or approved in
writing by InStent. Distributor shall not advise, perform or demonstrate any
use or application of any Products that is not specifically approved in writing
by InStent. Distributor shall defend, indemnify and hold harmless InStent from
any claims, actions and proceedings and any damages, liability, losses, costs
and expenses (including, but not limited to, reasonable attorneys' fees)
arising out of or related to any breach of this paragraph by Distributor.
6.2 Compliance With Laws.
(a) General. Distributor will comply with applicable regulations
concerning the use, handling, sale and disposition of the Products in the
Territory. Distributor shall comply with all laws, ordinances and regulations
of any governmental entity having jurisdiction applicable to its business with
respect to the importation, sale, demonstration, use and disposition of
Products, and
<PAGE> 9
9
shall defend, indemnify and hold InStent harmless from all claims, losses,
damages, costs and liabilities (including, but not limited to reasonable
attorneys' fees) arising out of any failure of Distributor to comply with this
Section 6. Distributor shall not impair the sterility or integrity of the
Products while they are in Distributor's custody.
(b) Export Control. Without limiting the generality of paragraph 6.2(a),
Distributor will not, directly or indirectly, export or re-export any Products,
technical data associated with the Products, or the immediate products
(including, but not limited to, processes, services, data and reports) derived
from use of the Products from the United States, without first obtaining if
required the appropriate license from the U.S. Office of Export Licensing or
its successor.
6.3 Financial Assurance. Distributor shall maintain in force a
self-insurance program and/or insurance reasonably covering Distributor's
activities in furtherance of this Agreement including the operation of
Distributor's motor vehicles. Distributor shall provide InStent not less than
thirty (30) days advance notice of cancellation or material change in any such
self-insurance program and insurance.
Section 7 - Term and Termination
7.1 Term. This Agreement shall be in effect from the Effective Date until
April 1, 2001, unless sooner terminated under paragraph 7.2 (the "Term").
Subject to Paragraph 7.4, upon the expiration of the Term, this Agreement shall
terminate without further act or deed of either party.
7.2 Termination. Upon any breach of or default under this Agreement by
either party, the other party may notify the party alleged to be in breach of
such fact in writing specifying the breach, whereupon the party alleged to be
in breach has thirty (30) days to cure the breach. Failure to cure any such
breach which is material within the thirty (30) day period, or any chronic
breach of this Agreement whether cured or not, shall entitle the party giving
notice to terminate this Agreement, effective immediately, by giving written
notice to the other party. In addition, InStent may terminate this Agreement
immediately by notice to Distributor and reject, or revoke acceptance of, any
orders for Products not then in the hands of Distributor if Distributor engages
in any act, practice or omission that materially impairs or imminently
threatens to materially impair the goodwill associated with the Trademarks.
7.3 Cause.
(a) Notwithstanding the foregoing, InStent reserves the right to earlier
terminate Distributor's appointment ("termination for cause") such termination
to be effective thirty (30) days after the date of the written notice to that
effect from InStent, in the event that any of the following events shall occur:
(1) Upon the appointment of a receiver for the property, rights,
credits or assets of Distributor, or any part of these categories;
(2) Upon Distributor's admission that it is unable to pay its debts
as they
<PAGE> 10
10
become due, and/or the filing of a petition by or against
Distributor under any law, the purpose of which is for the relief
of debtors, bankruptcy, or any similar such reorganization; or
(3) Upon an assignment by Distributor of any assets for the benefit
of creditors.
7.4 Right of Negotiation. Beginning six (6) months prior to the end of
the Term, InStent and Distributor will begin to negotiate in good faith for an
extension of the Term, provided that the Agreement has not been otherwise
terminated pursuant to Paragraphs 7.2 and 7.3. If InStent and Distributor have
not entered into a written extension of the Term of the Agreement prior to the
end of the Term, neither party shall have any further obligations under this
Paragraph 7.4.
7.5 Winding up. In the event of termination, InStent will credit
Distributor's account with any orders from Distributor which are shipped by
InStent prior to the date of termination. In the event of any rightful
termination of this Agreement, Distributor agrees to cooperate with InStent in
an orderly winding up of its affairs with InStent and extend all reasonable
assistance at InStent's expense to any successor for its Territory. Following
any rightful termination of this Agreement, all orders for Products not within
the inventory of Distributor from Distributor will be shipped to Distributor's
customer therefore by InStent and InStent will bill the customer directly,
paying Distributor a fee of 50% of the invoice price (net of tax, freight,
commissions, insurance of other non-Products related charges) therefore, such
fee to be paid upon receipt by InStent of the customer's payment of the
invoice.
7.6 Consequences. Upon any termination or expiration of any Term, all
sums due to InStent shall become immediately due and payable. Distributor may,
but shall not be obligated to, upon the termination or expiration of the Term,
sell any Products in Distributor's inventory as to which Distributor had
distribution rights hereunder during the Term. InStent may, but shall not be
obligated to, repurchase at their original invoiced price all or any portion of
the Products in Distributor's inventory, which six (6) months after the end of
the Term have not been sold by Distributor, that are still in their factory
packaging and unopened. InStent shall pay the purchase price for such Products
upon Distributor's tender of the Products with a bill of sale conveying
marketable title to the Products free and clear of all other claims and
interests. Delivery shall be F.O.B. Distributor's principal place of business.
Subparagraphs 1.6(g) and (h), Paragraphs 4.1, 4.2, 4.5, 5.1, 5.2, 5.3, 5.4 and
6.1 and Section 8 (and any other provisions which can reasonably be interpreted
as surviving the expiration or termination of the Term) shall survive the
expiration or termination of the Term.
SECTION 8 - COMPETITION.
8.1 Requirement Not to Compete. Except for those stent products that
Distributor has currently or hereafter owns, develops or acquires for sale and
distribution by Distributor, Distributor will not, directly or indirectly,
offer for sale or solicit, within the Territory, orders for
<PAGE> 11
11
expandable coronary or carotid stents of any other person, firm, entity or
corporation other than InStent.
SECTION 9 - MISCELLANEOUS
9.1 Limitation of Liability. EXCEPT FOR CLAIMS ARISING UNDER PARAGRAPH 5.4
OR FROM AN INTENTIONAL BREACH OF THIS AGREEMENT, IN NO EVENT SHALL INSTENT BE
LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES ARISING
OUT OF ITS PERFORMANCE OR NONPERFORMANCE OF THIS AGREEMENT.
9.2 Force Majeure. Neither party will be liable for, or be considered to
be in breach of or default under this Agreement on account of, any delay or
failure to perform as required by this Agreement (other than for payment under
Section 3) as a result of any cause or condition beyond such party's reasonable
control.
9.3 Distributor's and InStent's Representation. Each of Distributor and
InStent represents and warrants to the other that it is free to enter into and
perform this Agreement without thereby being in breach of or default under the
terms of any other contract, commitment or understanding.
9.4 Resolution of Disputes. Except as provided below, any dispute between
the parties relating to, under or in connection with this Agreement, except for
any dispute relating to InStent's proprietary rights in the Products or
Trademarks, shall be resolved through binding arbitration. Arbitration shall
be conducted in the Minneapolis, Minnesota metropolitan area, in the English
language, and shall be conducted in accordance with the rules of the American
Arbitration Association then in effect.
9.5 Assignment. Distributor shall not assign this Agreement, in whole or
in part, directly, by operation of law, or otherwise, except with the prior
written consent of InStent; provided, however, Distributor may assign its
rights under this Agreement to any corporation controlling, controlled by or
under common control with Distributor. No assignment by Distributor, with or
without InStent's consent, will relieve Distributor from any of its obligations
under this Agreement. Nothing in this paragraph shall impair Distributor's
right to hire its own employees, contractors or agents to assist in the
discharge of Distributor's responsibilities under this Agreement.
9.6 Notice. Notices or consents under this Agreement shall be in writing
and delivered personally or, if mailed, shall be sent certified mail, return
receipt requested, or by telex or facsimile or overnight express service, if
addressed to the recipient's address set forth herein, or in either case to
such other address as may be established by notice to the other party. Notice
shall be effective only upon actual receipt.
<PAGE> 12
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Notices to Distributor at:
Medtronic, Inc.
Attention: Chief Operating Officer
7000 Central Avenue N.E.
Minneapolis, MN 55432
Notices to InStent at:
InStent, Inc.
Attention: Chief Executive Officer
6271 Bury Drive
Eden Prairie, MN 55346
9.7 Entire Agreement. This Agreement contains the entire agreement
between the parties relating to the specific subject matter herein, and shall
not be waived, amended or rescinded except by a writing signed by the party to
be charged thereby.
9.8 Non-waiver. The failure of either party to insist upon or enforce
strict performance of any of the provisions of this Agreement or to exercise
any rights or remedies under this Agreement will not be construed as a waiver
or relinquishment to any extent of such party's right to assert or rely upon
any such provisions, rights or remedies in that or any other instance; rather,
the same will be and remain in full force and effect.
9.9 Interpretation. The English language of this Agreement shall govern
any interpretation of or dispute regarding the terms of this Agreement.
Section and Paragraph captions are for convenience of reference and do not
alter or limit the terms of this Agreement.
9.10 Governing Law; Venue. This Agreement shall be governed by
and interpreted in accordance with the local laws of the State of Minnesota,
without regard to conflicts of law provisions and not including the provisions
of the 1980 U.N. Convention in Contracts for the International Sale of
Goods. Distributor irrevocably consents, and submits to the jurisdiction of
the Federal and State courts of and located in the State of Minnesota.
Distributor will not commence or prosecute any suit, claim, or proceeding
arising under this Agreement other than in the courts identified in the
preceding sentence. Except as expressly provided in this Agreement, any remedy
set forth in this Agreement is in addition to any other remedy under this
Agreement, any other contract, by law or otherwise.
9.11 Counterparts. This Agreement may be signed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties have executed this Agreement and caused it
to be effective as of the day and year first above written.
MEDTRONIC, INC.
By: __________________________
Its: __________________________
INSTENT, INC.
By: __________________________
Its: __________________________
<PAGE> 14
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EXHIBIT A
PRODUCTS
The following products and delivery systems therefor and all improvements,
enhancements, and successors and accessories thereto are "Products" under this
Agreement:
- CardioCoil coronary stent
- Balloon-expandable tubular coronary stent
- CarotidCoil stent
<PAGE> 15
15
EXHIBIT B
LIST
OF
INSTENT
TRADEMARKS AND TRADENAMES
CARDIOCOIL
<PAGE> 1
EXHIBIT 10.2
DISTRIBUTION AGREEMENT
This Agreement, dated January 9, 1996, is made between InStent Inc., a
Delaware corporation ("InStent"), and C.R. Bard, Inc. a New Jersey corporation
acting through its Bard Interventional Products Division ("Distributor").
InStent and Distributor, in consideration of the agreements and covenants
contained herein, and for other good and valuable consideration, the receipt of
which is hereby acknowledged, agree as follows:
Section I - Appointment
1.1 Distributor. InStent hereby appoints Distributor for the Term (as
defined in Paragraph 7.1) and subject to the terms and conditions of this
Agreement, as its distributor of the Products, and only the Products, of
InStent identified on the attached Exhibit A (the "Products") within the
territory described on the attached Exhibit B (the "Territory").
1.2 Exclusivity. InStent shall not (i) appoint another distributor of the
Products whose territory includes any portion of the Territory during the Term,
(ii) market Products within the Territory during the Term, or (iii) effect
direct sales of the Products to dealers or retailers located within the
Territory during the Term. Notwithstanding the foregoing, InStent's
distributors as of the date first above written will continue to have the right
to sell the Products in the Territory through January 31, 1996. InStent
represents and warrants to Distributor that InStent has the right to and will
terminate by February 1, 1996, its agreements with all such InStent
distributors. InStent agrees to indemnify, defend and hold harmless
Distributor from and against any suit by any such InStent distributor arising
out of, pertaining to or resulting from InStent's termination of its existing
agreement with such distributor.
1.3 Independent Contractor. Distributor is an independent contractor and
is not and shall not act as the agent, employee, franchisee or partner of
InStent.
1.4 No Creation of Obligation by One Party for Other. Neither party
hereto shall be entitled to, nor shall attempt to, create or assume any
obligation, express or implied, on behalf of the other party hereto.
1.5 Sub-contract or Resale. During the Term hereof, Distributor may sell
the Product to customers who intend to resell the Product, if, and only if,
such customers agree not to resell the Product outside the Territory.
Distributor may sub-contract distributorship of the Product to any third party,
entity, firm or agent. If any purchaser of the Product from Distributor
resells or distributes the Product outside the Territory, Distributor shall
cease selling the Product to such purchaser upon learning of such sales
outside the Territory, and shall (or permit InStent to) enforce the prohibition
against such resale outside the Territory.
1
<PAGE> 2
1.6 Acceptance. Distributor accepts its appointment as Distributor of the
Product in the Territory and shall use its reasonable efforts to develop sales
of the Product, in the Territory, and to support InStent's marketing program in
the Territory. In furtherance thereof, Distributor shall:
(a) Keep on hand a reasonable inventory of the Products (defined as
not less than one month's average projected sales) sufficient to allow
for prompt delivery of Products to purchasers;
(b) Participate regularly in local or regional trade shows, medical
conventions or like events within the Territory, and conduct regular
local promotional, advertising and other marketing efforts for the
Products;
(c) Provide appropriate and professional application advice and
counseling for each unit of the Products sold by Distributor, and provide
prompt follow-up service and advice to purchasers of the Products when so
requested by the purchaser or by InStent;
(d) Respond promptly to sales leads or referrals furnished by
InStent;
(e) Maintain and furnish periodically, as reasonably requested by
InStent, complete and accurate records of each sale of each unit of
Products sold under this Agreement, showing date of sale, name and
address of purchaser, and the Product serial number or lot number;
(f) Assist promptly in executing Product recalls as directed by
InStent, for which InStent will reimburse Distributor's documented,
reasonable, out-of-pocket expenses in connection with repurchasing
Products subject to recall;
(g) Promptly advise InStent of each complaint that Distributor may
receive or become aware of concerning the Products, and notify InStent
promptly and as required by applicable law to report any information of
which Distributor becomes aware that suggests that any of the Products
may have been associated in any way with an injury to a user or patient;
(h) Refer to InStent any inquiry other than a purchase order or
potential purchase order from the public, any Governmental authority, any
trade association or any news media, publication or reporter concerning
the Products or InStent;
(i) Not obtain the Products for resale from any other party or
actively seek customers, establish a new branch or maintain any
distribution depot for the Products outside the Territory; and
(j) Not use any product literature, manuals or other written
materials developed by Distributor (the "Distributor Materials") without
the prior written approval of InStent (such approval not to be
unreasonably withheld) and Distributor shall defend,
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indemnify and hold harmless InStent from any claims, actions and
proceedings and any damages, liability, losses, costs and expenses
(including, but not limited to, attorneys' fees) arising out of or related
to any such Distributor Materials, which were not prior to their use
approved in writing by InStent.
(k) Bard agrees to furnish InStent all sales records for the first
six months so that InStent can compensate its previous reps.
1.7 Obligations of InStent.
(a) InStent will provide to Distributor reasonable amounts of sales
literature, training materials and Product samples at the prices set
forth in Exhibit D.
(b) InStent will provide Distributor ninety (90) days advance notice
in the event that it discontinues production of any of its Products.
(c) InStent will refer all inquiries for purchases of Products
received from within the Territory to Distributor.
(d) InStent will promptly advise Distributor of each complaint that
InStent may receive or become aware of concerning the Products, and
notify Distributor as required by applicable law to report any
information of which InStent becomes aware that suggests that any of the
Products may have been associated in any way with an injury to a user or
a patient.
(e) InStent will provide Distributor reasonable advance notice with
respect to proposed modifications to the Products or the specifications;
all proposed modifications shall be within the confines of the then
current FDA approvals or InStent will obtain the needed FDA approvals to
market.
(f) At the expense of Distributor, InStent will assess the
feasibility of modifications to the Products or the specifications
proposed by Distributor and will notify Distributor with respect to cost
changes which are subject to Distributor's approval, such approval not to
be unreasonably withheld.
Section 2 - Forecasts
2.1 Forecasts. Upon execution of this Agreement and at least thirty (30)
days before the beginning of each three-month period thereafter, Distributor
shall fumish InStent with a rolling forecast of sales for the following twelve
(12) months of Products by units, and an estimate of Distributor's forthcoming
orders for Products during the next three months. Upon execution of this
Agreement and sixty (60) days prior to the beginning of each three-month period
thereafter, Distributor will submit a purchase order for at least eighty
percent (80%) of the
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Products estimated to be purchased pursuant to Distributor's estimate for such
three-month period.
Section 3 - Terms of Sale.
3.1 Price.
(a) Price to Distributor of the Products for the first twelve months
of this Agreement shall be $700 for each EndoCoil biliary stent and $850
for each EsophaCoil esophageal stent. Within ninety (90 days) of last
day of such twelve-month period, the parties shall review the
Distributor's average sales price of each stent during such twelve month
period (the "Base Average Sales Price") and adjust the price at which
each stent is sold by InStent to Distributor so as to Yield to
Distributor a gross profit margin of 50% on the Base Average Sales Price,
provided that if such adjustment would result in a reduction of InStent's
gross profit margin below fifty percent (50%), then Distributor's gross
profit margin otherwise required hereby shall be reduced by such amount
as shall yield to InStent a gross profit margin of 50%. Such adjusted
sales prices shall be retroactive to the first day of the second twelve
month period of this Agreement and shall be hereinafter referred to as
the "Base Price(s)." Within ninety (90) days of last day of the second
twelve month period of this agreement, the parties shall review the
average sales price of each stent during such twelve month period. The
Base Price of each stent shall be then adjusted retroactive to the first
day of the third twelve month period of this Agreement to reflect the
following with regard to each stent: (i) any decrease during the second
twelve month period of this Agreement in Distributor's average sales
price below the Base Average Sales Price will be shared equally by
InStent and Distributor (for example, if Distributor's average sales
price declines by 10% below the Base Average Sales Price, InStent will
reduce its Base Price to Distributor by 5%), (ii) if during the second
twelve month period of this Agreement Distributor's average sales price
increased above the Base Average Sales Price, InStent can proportionally
increase its Base Price to Distributor up to a maximum of $500 per stent,
(iii) InStent is not required to pass through to Distributor any decrease
in the manufacturing cost of a Product, and (iv) if any adjustment
pursuant to the preceding clauses (i), (ii) or (iii) would result in a
reduction of InStent's gross profit margin below fifty percent (50%) then
Distributor's gross profit margin otherwise required hereby shall be
reduced by such amount as shall yield to InStent a gross profit margin of
50%.
(b) Notwithstanding anything set forth herein, all prices are
payable in U.S. Dollars unless provided otherwise on the applicable
invoice.
3.2 Taxes. The purchase prices and other amounts specified in this
Agreement do include sales, use or other applicable taxes, unless expressly
stated to the contrary. Distributor will pay all such taxes.
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3.3 Delivery. InStent will deliver all Products sold to Distributor FOB
Eden Prairie, Minnesota, U.S.A. Title to, and all risk or loss of or damage or
casualty to, such Products will pass to Distributor upon delivery. As invoiced
to Distributor by InStent, Distributor will reimburse InStent for all shipping
charges, premiums for freight insurance, customs duties and other import and
export fees, and other transportation costs incurred by InStent. Distributor
shall have the right to reject the Products for failure to meet its Quality
Assurance/Regulatory Assurance standards by returning such Products to InStent
within fifteen (15) days of delivery for credit of the purchase price or
replacement of the Product. Prior to returning any such Products, Distributor
shall first obtain a Return Goods Authorization number from InStent which shall
be included with the return shipment.
3.4 Payment. Unless specified otherwise in the applicable order, payment
shall be made in full within thirty (30) days of the date of InStent's invoice.
InStent may, at its discretion, refuse orders, require payment in full, ship
C.O.D. or halt shipments in transmit if (i) all prior invoices are not paid in
full, or (ii) InStent reasonably deems such steps necessary to secure payment.
3.5 Interest. Any amount not paid when due will be subject to finance
charges at the rate of one and one-half percent (1.5%) per month or the maximum
rate permitted by applicable law, whichever is less, determined and compounded
on a daily basis from the date due until the date paid. Payment of such
finance charges will not excuse or cure Distributor's breach or default for
late payment. If InStent retains a collection agency, attorney or other person
or entity to collect overdue payments, all collection costs, including but not
limited to reasonable attorney's fees, will be payable by Distributor.
3.6 Returns. Distributor shall not return Products to InStent without
InStent's prior authorization promptly confirmed in writing except as otherwise
provided in paragraph 3.3.
Section 4 - Confidentiality, Proprietary rights.
4.1 Confidentiality. Without the express prior written consent of
InStent, Distributor shall not, during the term of this Agreement and for a
period of three (3) years thereafter, disclose or allow the disclosure to any
third parties, or use other than in the performance of Distributor's duties
under this Agreement, any confidential or proprietary information or trade
secret of InStent, including, but not limited to, information relating to
InStent's Products, technology, know-how, research, customer lists, supplier
lists, marketing plans, financial information, costs or pricing information,
exclusive of information: (i) which at the time of disclosure by InStent to
Distributor hereunder was in the public domain or subsequently becomes part of
the public domain by any means other than the breach by Distributor of its
obligations hereunder; or (ii) which was known to the Distributor at the time
of disclosure by InStent to Distributor hereunder as evidenced by the
Distributor's business records maintained in the ordinary course of business;
or (iii) which is, at any time, disclosed to the Distributor by any person or
entity not a party hereto who the Distributor believes, after reasonable
inquiry, has the right to disclose the same; or (iv) which is developed by an
employee of the Distributor who is shown, by competent proof
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and by clear and convincing evidence, not to have been privy to the disclosure
by; or (v) which is required to be disclosed by court or otherwise by law.
4.2 Ownership.
(a) Distributor acknowledges that:
(i) the Products involve valuable patent, copyright, trade
secret, trade name, trademark and other proprietary rights of
InStent;
(ii) no title to or ownership of such proprietary rights is
transferred to Distributor under this Agreement or by use of any
trademark, patent or other proprietary right; and
(iii) InStent reserves all such proprietary rights.
(b) Distributor will not infringe or violate any proprietary rights
described in paragraph 4.2(a).
(c) Without limiting the generality of the foregoing, Distributor
will not register or attempt to register, directly or indirectly, within
the Territory or elsewhere, any such patents, copyrights, trade names,
trademarks or other proprietary rights without InStent's express written
permission.
4.3 Notification. Distributor will immediately notify InStent of any
infringement of InStent's proprietary rights, especially any such infringement
relating to the activities of Distributor or any of its employees, agents,
representatives or customers. InStent may, at its option, and at its expense,
undertake or assume control of any legal proceeding relating to such
infringement. InStent will have exclusive control over the prosecution and
settlement of any such legal proceeding, and Distributor will provide such
assistance related to any such legal proceeding as InStent may reasonably
request. Also, Distributor will assist InStent in enforcing any settlement or
order made in connection with any such legal proceeding.
4.4 Trademarks and Trade Names. InStent hereby grants Distributor the
royalty-free right to use the trademarks and trade names identified on attached
Exhibit C (the "InStent Trademarks") in the Territory during the Term solely
for the purpose of identifying the Products in conjunction with Distributor's
marketing and sale of the Products under this Agreement, and solely in
accordance with the Products quality and other standards issued from time to
time by InStent. Except as permitted under this paragraph, InStent reserves
all rights in the InStent Trademarks. Distributor shall not use the InStent
Trademarks for any purpose other than as permitted under this paragraph.
Distributor shall properly identify and accurately describe as a product of
InStent all of the Products. Distributor shall not alter, remove, deface or
obscure any notice of trademark, trade name, patent, copyright, proprietary
right or trade secret on a Product and shall not add to a Product any other
additional trademark or trade name, provided that
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Distributor may use a trademark of Distributor's (the "Distributor
Trademarks") in connection with the marketing and sale of the Products, so long
as (a) InStent has previously approved such use in writing which consent shall
not be unreasonably withheld, (b) the InStent Trademark is used together with
the Distributor Trademark, (c) the InStent Trademark is prominently displayed,
and (d) the Distributor Trademark and InStent Trademark are not commingled.
4.5 Assignments. Upon termination of the Term, Distributor will assign to
InStent or such other person or entity as InStent may designate all fights,
registrations, reservations, licenses, permits and similar items made or
obtained by Distributor relating to the Products, InStent trademarks and trade
names, or any other proprietary fights of InStent.
Section 5 - Warranty, Exclusive Remedies and Limitation of Liability.
5.1 Warranty. InStent warrants that, upon delivery:
(a) each Product will be free from defects in materials and
workmanship;
(b) each Product will conform in all material respects to its
specifications established by InStent;
(c) each Product will not infringe any patent arising under the law
of any country in which InStent has been granted a patent or has filed a
patent application;
(d) each Product at the time of delivery will not be adulterated or
misbranded within the meaning of any material applicable domestic
governmental regulation;
(e) InStent's procedures will comply in all material respects with
Good Manufacturing Practices of the FDA; and
(f) InStent will use its reasonable efforts to comply with
Distributor's Quality Assurance/Regulatory Assurance reviews, provided
that Distributor will use its reasonable efforts to assist InStent in
connection with such compliance; and any costs directly incurred by
InStent in connection with such compliance will be borne solely by
Distributor, but only to the extent that such expenses were for
compliance above and beyond Good Manufacturing Practices of the FDA.
5.2 Exclusive Remedy for Defective Products. InStent will, at its option,
repair, replace or otherwise correct any Product that does not conform to the
warranty set forth in paragraph 5.1(a) or (b); provided, that (a) Distributor
notifies InStent of such nonconformity before the expiration of six (6) months
after delivery of the non-conforming Products to Distributor, (b) Distributor,
at InStent's request and Distributor's expense, returns the non-conforming
Product to InStent's plant; and (c) such nonconformity is not the result of any
use of the Products other than in strict accordance with InStent's instructions
and user manuals.
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5.3 Exclusive Remedy for Infringement.
(a) If any Product violates or, in InStent's reasonable judgment, is
likely to violate, the warranty set forth in paragraph 5.1 (c), then
InStent may, at its sole option, either secure for Distributor the right
to continue to distribute such Products or replace or modify such
Products to make it non-infringing or discontinue Distributor's right to
distribute such Products. InStent shall have no liability or obligation
under paragraph 5.1 (c), paragraph 5.2, or this paragraph 5.3 for any
infringement or alleged infringement that arises out of Distributor's or
Distributor's customers combining or using of Products with any
equipment, devices, or other goods not made by or furnished by InStent or
arising out of any modification of Products not done by or at the
direction of InStent.
(b) InStent will indemnify, defend and hold Distributor harmless
against any claim to, or other defect in title of, any Products which
have been delivered to and fully paid for by Distributor, and against any
claim that the Products infringe any patent arising under the law of any
country in which InStent has been granted a patent or has filed a patent
application or that the InStent Trademarks infringe any trademarks in the
Territory; provided that Distributor notifies InStent of such claim or
defect promptly after Distributor learns of such claim or defect, InStent
has exclusive control over the defense or settlement of any proceeding
related to such claim or defect, Distributor provides InStent such
assistance in relation to such proceeding as InStent may reasonably
request, and Distributor complies with any settlement or court order
arising from such proceeding. InStent's liability to Distributor other
than to be reimbursed for expenses in connection with the defense of a
patent infringement action as set forth above, shall be limited to any
damages awarded against Distributor in any proceeding resulting from such
claim.
5.4 Exclusive Remedy for Product Liability, Insurance.
(a) InStent will indemnify, defend and hold Distributor harmless
against any claim of bodily injury (including death) or damage to
personal property to the extent caused by negligence in the design or
manufacture of the Products, provided that Distributor: (i) promptly
notifies InStent of such claim; (ii) allows InStent to assume control of
the defense or settlement of such claim; (iii) cooperates with InStent
and provides such assistance as InStent may reasonably request in the
conduct of the defense of settlement of such claim; and (iv) does not
settle such claim without InStent's written consent, which will not be
unreasonably withheld. Further, in such event, InStent will: (i)
pay any damages awarded against Distributor in any proceeding resulting
from the claim; (ii) reimburse the expenses reasonably incurred by
Distributor to provide the assistance requested by InStent in the conduct
of the defense or settlement of the claim; and, (iii) if the claim is
settled, pay any amounts consented to by InStent. The foregoing
indemnification shall not apply to the extent any claim arises out of
Distributor's negligence.
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(b) Insurance. InStent shall maintain insurance coverage issued by
a responsible insurer in the amount of at least Three Million Dollars
($3,000,000) per claim for all product liability claims involving
Products, shall name Distributor as an additional insured under such
coverage, and shall provide to Distributor from time to time on written
request a certificate of insurance from the insurer certifying that the
coverage is in place.
5.5 DISCLAIMER. INSTENT MAKES NO REPRESENTATION OR WARRANTY WITH REGARD
TO ANY PRODUCTS OR OTHER ITEM FURNISHED UNDER THIS AGREEMENT EXCEPT AS
SPECIFICALLY SET FORTH IN PARAGRAPH 5.1. EXCEPT AS PROVIDED IN PARAGRAPHS 5.1,
5.2, 5.3, and 5.4 INSTENT DISCLAIMS AND DISTRIBUTOR WAIVES AND RELEASES ALL
RIGHTS AND REMEDIES OF DISTRIBUTOR AND ALL WARRANTIES AND OBLIGATIONS OF
INSTENT, EXPRESS OR IMPLIED, ARISING BY LAW OR OTHERWISE, WITH RESPECT TO ANY
PRODUCTS OR OTHER ITEMS DELIVERED BY OR ON BEHALF OF INSTENT UNDER THIS
AGREEMENT, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, IMPLIED WARRANTY ARISING
FROM COURSE OF PERFORMANCE, COURSE OF DEALING, OR USAGE OF TRADE, AND ANY CLAIM
OF INFRINGEMENT.
Section 6 - Other Obligations of Distributor
6.1 Guaranty. Distributor shall not make or extend on behalf of InStent
any written or oral warranty in respect of any of the Products except as may be
contained in sales literature or brochures that are published or approved in
writing by InStent. Distributor shall not advise, perform or demonstrate any
use or application of any Products that are not specifically approved in
writing by InStent. Distributor shall defend, indemnify and hold harmless
InStent from any claims, actions and proceedings and any damages, liability,
losses, costs and expenses (including, but not limited to, attorneys' fees)
arising out of or related to any breach of this paragraph by Distributor.
6.2 Compliance With Laws.
(a) General. Distributor represents to InStent that Distributor is
thoroughly familiar with applicable regulations concerning the use,
handling, sale and disposition of the Products in the Territory.
Distributor shall comply with all laws, ordinances and regulations of any
governmental entity having jurisdiction applicable to its business with
respect to the importation, sale, demonstration, use and disposition of
Products, and shall defend, indemnify and hold InStent harmless from all
claims, losses, damages, costs and liabilities (including, but not
limited to attorneys' fees) arising out of any failure of Distributor to
comply with this Section 6. Distributor shall not impair the sterility
or integrity of the Products while they are in Distributor's custody.
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(b) Export Control. Without limiting the generality of paragraph
6.2(a), Distributor will not, directly or indirectly, export or re-export
any Products, technical data associated with the Products, or the
immediate products (including, but not limited to, processes, services,
data and reports) derived from use of the Products from the Territory,
without first obtaining the appropriate license from the U.S. Office of
Export Licensing or its successor.
6.3 Financial Assurance. Distributor shall maintain in force for the Term
liability insurance in such form and written by such insurers as may be
reasonably satisfactory to InStent, in a minimum coverage of $1,000,000
combined single limit, covering Distributor's activities in furtherance of this
Agreement including the operation of Distributor's motor vehicles. Distributor
shall provide InStent not less than thirty (30) days advance notice of
cancellation or material change in any such policies.
Section 7 - Term and Termination
7.1 Term. This Agreement shall be in effect for a term of three (3) years
from the date of this Agreement, unless sooner terminated under paragraph 7.2.
Upon expiration of the Term, this Agreement shall terminate without further act
or deed of either party. If InStent is acquired or merges with another company
during the Term, the acquiring company or the surviving company, as the case
may be, shall have the option to terminate this Agreement upon one (1) year
prior written notice to Distributor provided the terminating party agrees, upon
Distributor's request, to repurchase from Distributor at their original
invoiced price all or any portion of those Products in the Distributor's
inventory as of the termination date that are in unopened, factory packaging
and whose expiration date has not expired.
7.2 Termination. Upon any breach of or default under this Agreement by
either party, the other party may notify the party alleged to be in breach of
such fact in writing specifying the breach, whereupon the party alleged to be
in breach has thirty (30) days to cure the breach. Failure to cure such breach
within the thirty (30) day period, or any chronic breach of this Agreement
whether cured or not, shall entitle the party giving notice to terminate this
Agreement, effective immediately, by giving written notice to the other party.
In addition, InStent may terminate this Agreement immediately by notice to
Distributor and reject, or revoke acceptance of, any orders for Products not
then in the hands of Distributor if Distributor engages in any act, practice or
omission that threatens the health or safety of users of the Products or their
patients, or that impairs or imminently threatens to impair the goodwill
associated with the Trademarks.
7.3 Cause.
(a) Notwithstanding the foregoing, InStent reserves the right to
earlier terminate Distributor's appointment ("termination for cause")
such termination to be
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effective thirty (30) days after the date of the written notice to that
effect from InStent, in the event that any of the following events shall
occur:
(1) If Distributor fails during any calendar quarter to
maintain the required inventory of Products;
(2) If three or more consecutive months elapse in which
Distributor's monthly account receivable statement discloses
monies due from Distributor to InStent beyond thirty (30) days
from the date of invoice, or if Distributor is late in payment of
InStent Product invoices in six (6) or more of any twelve (12)
consecutive months during any Term.
(3) If Distributor sells or takes orders for the Products in
violation of its Territory;
(4) If Distributor carries or offers any Products in
competition with those offered by InStent except as permitted
pursuant to Section 8 hereof,
(5) Upon the appointment of a receiver for the property,
rights, credits or assets of Distributor, or any part of these
categories;
(6) Upon Distributor's admission that it is unable to pay its
debts as they become due, and/or the filing of a petition by or
against Distributor under any law, the purpose of which is for the
relief of debtors, bankruptcy, or any similar such reorganization;
or
(7) Upon an assignment by Distributor of any assets for the
benefit of creditors.
7.4 Right of Negotiation. Beginning six (6) months prior to the end of
the Term, InStent and Distributor will begin to negotiate in good faith for an
extension of the Term; provided, that the Agreement has not been otherwise
terminated pursuant to Paragraph 7.2 or 7.3. If InStent and Distributor have not
entered into a written extension of the Term of the Agreement prior to the end
of the Term, neither party shall have any further obligations under this
Paragraph 7.4.
7.5 Winding up. In the event of termination, InStent will credit
Distributor's account with any orders from Distributor which are shipped by
InStent prior to the date of termination. Distributor agrees to cooperate with
InStent in an orderly winding up of its affairs with InStent and extend all
reasonable assistance to any successor for its Territory. Upon notice of
termination all orders for Products not within the inventory of Distributor
from Distributor will be shipped to Distributor's customer therefore by InStent
and InStent will bill the customer directly, paying Distributor a fee of 10% of
the invoice price (net of tax, freight, commissions,
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insurance of other non-Product related charges) therefore, such fee to be paid
upon receipt by InStent of the customer's payment of the invoice.
7.6 Consequences. Upon any termination or expiration of any Term, all
sums due to InStent shall become immediately due and payable. Distributor may,
but shall not be obligated to, upon the termination or expiration of the Term,
sell any Products in Distributor's inventory as to which Distributor had
distribution rights hereunder during the Term. Except as otherwise provided in
paragraph 7.1, InStent may, but shall not be obligated to, repurchase at their
original invoiced price all or any portion of the Products in Distributor's
inventory, which six (6) months after the end of the Term have not been sold by
Distributor, that are still in their factory packaging and unopened. InStent
shall pay the purchase price for such Products upon Distributor's tender of the
Products with a bill of sale conveying marketable title to the Products free
and clear of all other claims and interests. Delivery shall be F.O.B.
Distributor's principal place of business. Subparagraphs 1.6(g) and (h),
Paragraphs 4.1, 4.2, 4.5, 5.3, 5.4 and 6.1 and Section 8 (and any other
provisions which can reasonably be interpreted as surviving the expiration or
termination of the Term) shall survive the expiration or termination of the
Term.
Section 8 - Competition.
Requirement Not to Compete. Distributor will not, for itself or on behalf
of any person, firm, entity or corporation other than InStent, directly or
indirectly, offer for sale or solicit, within the Territory, orders for any
expandable stents competitive with the Products:
(a) during the Term; and
(b) if this Agreement is terminated by InStent (x) for cause
pursuant to Paragraph 7.3, or (y) on account of breach or
default by Distributor pursuant to Paragraph 7.2; then
for a period thereafter ending the earlier of (i) six
months after the termination of this Agreement or (ii)
the date upon which InStent has entered into an agreement
for, or otherwise established, distribution of the Products
in the Territory.
For the purposes of this Section 8, Distributor shall include any person or
entity controlled by, controlling or under common control with Distributor.
Section 9 - Miscellaneous
9.1 Limitation of Liability EXCEPT FOR CLAIMS ARISING UNDER PARAGRAPH 1.2
OR PARAGRAPH 5.4, INSTENT'S LIABILITY (WHETHER IN TORT, CONTRACT OR OTHERWISE
AND NOTWITHSTANDING ANY FAULT, NEGLIGENCE (WHETHER ACTIVE, PASSIVE OR IMPUTED),
PRODUCT LIABILITY, OR STRICT LIABILITY OF INSTENT) UNDER THIS AGREEMENT OR WITH
REGARD TO ANY PRODUCTS OR OTHER ITEMS FURNISHED UNDER THIS AGREEMENT SHALL IN
NO
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EVENT EXCEED THE COMPENSATION PAID TO INSTENT UNDER SECTION 3. IN NO EVENT
SHALL INSTENT BE LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL
DAMAGES ARISING OUT OF ITS PERFORMANCE OR NONPERFORMANCE OF THIS AGREEMENT OR
THE USE OF, INABILITY TO USE, OR RESULTS OF USE OF ANY PRODUCTS.
9.2 Force Majeure. Neither party will be liable for, or be considered to
be in breach of or default under this Agreement on account of, any delay or
failure to perform as required by this Agreement (other than for payment under
Section 3) as a result of any cause or condition beyond such party's reasonable
control.
9.3 Distributor's Representation. Distributor represents and warrants to
InStent that Distributor is free to enter into and perform this Agreement
without thereby being in breach of or default under the terms of any other
contract, commitment or understanding.
9.4 Resolution of Disputes. Except as provided below, any dispute between
the parties relating to, under or in connection with this Agreement, except for
any dispute relating to InStent's proprietary rights in the Products or
Trademarks, shall be resolved through binding arbitration. Arbitration shall
be conducted in the Minneapolis, Minnesota metropolitan area, in the English
language, and shall be conducted in accordance with the rules of the American
Arbitration Association.
9.5 Assignment. Distributor shall not assign this Agreement, in whole or
in part, directly, by operation of law, or otherwise, except with the prior
written consent of InStent, provided that Distributor may assign its rights
under this Agreement to any corporation controlling, controlled by or under
common control with Distributor. No assignment by Distributor, with or without
InStent's consent, will relieve Distributor from any of its obligations under
this Agreement. Nothing in this paragraph shall impair Distributor's right to
hire its own employees to assist in the discharge of Distributor's
responsibilities under this Agreement.
9.6 Notice. Notices or consents under this Agreement shall be in writing
and delivered personally or, if mailed, shall be sent certified mail, return
receipt requested, or by telex or facsimile or overnight express service, if
addressed to the recipient's address set forth on the signature page of this
Agreement, or in either case to such other address as may be established by
notice to the other party, Notice shall be effective only upon actual receipt.
9.7 Entire Agreement. This Agreement contains the entire agreement, and
supersedes any and all prior agreements, between the parties relative to its
subject, and shall not be waived, amended or rescinded except by a writing
signed by the party to be charged thereby.
9.8 Nonwaiver. The failure of either party to insist upon or enforce
strict performance of any of the provisions of this Agreement or to exercise
any rights or remedies under this Agreement will not be construed as a waiver
or relinquishment to any extent of such party's right
13
<PAGE> 14
to assert or rely upon any such provisions, rights or remedies in that or any
other instance; rather, the same will be and remain in full force and effect.
9.9 Interpretation. The English language of this Agreement shall govern
any interpretation of or dispute regarding the terms of this Agreement.
Section and Paragraph captions are for convenience of reference and do not
alter or limit the terms of this Agreement.
9.10 Governing Law; Venue. This Agreement shall be governed by and
interpreted in accordance with the local laws of the State of Minnesota,
without regard to conflicts of law provisions and not including the provisions
of the 1980 U.N. Convention in Contracts for the International Sale of Goods.
Distributor irrevocably consents, and submits to the jurisdiction of the
Federal and State courts of and located in the State of Minnesota. Distributor
will not commence or prosecute any suit, claim, or proceeding arising under
this Agreement other than in the courts identified in the preceding sentence.
Except as expressly provided in this Agreement, any remedy set forth in this
Agreement is in addition to any other remedy under this Agreement, any other
contract, by law or otherwise.
9.11 Counterparts. This Agreement may be signed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute but one and the same instrument.
14
<PAGE> 15
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
BARD INTERVENTIONAL PRODUCTS DIVISION
C.R.BARD, INC.
By:
---------------------------------
Its
------------------------------
Address: 129 Concord Road
Billerica, MA 01821
INSTENT INC
By:
----------------------------------
Warren L. Bielke
Its President
Address: 6271 Bury Drive
Eden Prairie, MN 55346
15
<PAGE> 16
EXHIBIT A
DESCRIPTION OF STENTS
EndoCoil(R) Biliary Stent
EC-50
EC-60
EC-70
EsophaCoil(R) Esophageal Stent
EG-18/15
EG-18/10
EG-16/15
EG-16/10
16
<PAGE> 17
EXHIBIT B
TERRITORY
United States
17
<PAGE> 18
EXHIBIT C
INSTENT TRADEMARKS
InStent(R)
EndoCoil(R)
EsophaCoil(R)
18
<PAGE> 19
EXHIBIT D
SAMPLES AND LITERATURE COSTS
All literature at InStent's printing costs
Samples on the catheter $300.00
Samples off the catheter $100.00
19
<PAGE> 1
EXHIBIT 10.3
SECOND AMENDMENT TO
ASSIGNMENT AGREEMENT
This Second Amendment to Assignment Agreement is dated as of
March 22, 1996, by and between Daniel Yachia, a resident of Natania,
Israel ("Yachia"), Seila Yachia, a resident of Turkey ("Assignee"), Mordechay
Beyar, a resident of Tel-Aviv, Israel ("Beyar"), Rafael Beyar, a resident of
Haifa, Israel ("Rafael"), Modern Therapeutic Modalities Ltd., a corporation
organized and formed under the laws of Israel ("MTML"), Meir Bachar, a resident
of Tel Aviv, Israel ("Distributee"), Lewis C. Pell, a resident of Armonk, New
York, U.S.A. ("Pell"), Katsumi Oneda, a resident of Alpine, New Jersey, U.S.A.
("Oneda"), Warren L. Bielke, a resident of Minneapolis, Minnesota, U.S.A.
("Bielke") and InStent Inc. (formerly known as StenTek Inc.), a corporation
duly organized and formed under the laws of the State of Delaware, U.S.A.
("InStent").
RECITALS:
A. On April 25, 1991, certain of the parties hereto entered into an
Assignment Agreement which was amended by an Addendum dated as of May 31, 1991,
a Second Addendum dated as of April 30, 1992 and an Amendment Agreement dated
as of June 27, 1995 (said Agreements, together with the first and second
Addendums and Amendment Agreement shall hereinafter be referred to as
"Assignment Agreement").
B. Medtronic, Inc., a Delaware, U.S.A. corporation ("Medtronic") and
InStent propose to enter into an Agreement and Plan of Reorganization of even
date herewith (the "Merger Agreement"), pursuant to which, on the Effective
Date, as defined in the Merger Agreement, Medtronic will acquire the capital
stock and business (including good-will) of InStent by the merger of a wholly
owned subsidiary of Medtronic with and into InStent (the "Merger").
C. The parties hereto desire to induce Medtronic to enter into the Merger
Agreement and consummate the transactions contemplated thereby.
D. The royalty set forth in Section 3 of the Assignment Agreement was
payable to MTML or its designees.
E. On December 31, 1991, MTML was dissolved and its assets were distributed
to Assignee, Beyar and Distributee including the rights of MTML contained in
Section 3 of the Assignment Agreement.
<PAGE> 2
NOW, THEREFORE, in consideration of the mutual conditions, covenants and
agreements contained herein and to induce Medtronic to enter into the Merger
Agreement, the parties hereto agree as follows:
1. Section 3 of the Assignment Agreement is hereby deleted in its entirety
and the following Section 3 (compromised of the following Paragraphs 3.1 and
3.2) are inserted in lieu thereof and the Assignment Agreement is amended
thereby:
"3.1. InStent shall pay royalties to MTML or its designees on
all sales by InStent of products that incorporate components using
the technology covered by claims under one or more of the patents
listed in Exhibit A annexed hereto or under one or more patents
resulting from a patent application listed in Exhibit A attached
hereto. The royalty rate shall be 3% of any sales of such
products to third parties (it being understood that the royalty
payable on any one product shall not exceed such 3% rate
regardless of the number of patents or patent claims covering such
product), after deduction therefrom of returned products, sales
commissions payable to third parties, freight and insurance
expenses, other transportation charges, duties, excise tax, value
added tax, sales tax and other similar taxes, relating thereto.
The foregoing royalties shall be payable only with respect to
sales of such products prior to the sixth anniversary of this
Second Amendment to Assignment Agreement. Notwithstanding
anything to the contrary herein, the total royalties payable under
this Paragraph 3.1 shall not exceed $2,000,000 in the aggregate;
provided however, in the event the cumulative amount of royalties
paid from the date hereof is equal to $2,000,000, then InStent
shall pay an additional royalty of $1,000,000.
3.2 Royalties will be paid quarterly within thirty (30) days of each
calendar quarter. Royalties payable under Paragraph 3.1 of this Section
3 shall accrue if not paid; provided, however, this shall in no way limit
InStent's obligation to make due and punctual payment of such royalties."
3.3 The parties hereto agree that the royalties payable pursuant to this
Section 3 are payable to the following individuals at the following
addresses and in the following percentages:
Payee and Address Percentage of Royalty
----------------- ---------------------
Mordechay Beyar 37.5%
Assignee 50%
Distributee 12.5%
2. This Agreement shall take effect as of the Effective Date of the
Merger. In the event the Merger Agreement shall terminate, then this Agreement
shall automatically terminate without any further act of the parties hereto and
shall be of no further force or effect.
-2-
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
Agreement on the date and year first above written.
/s/ Daniel Yachia
-------------------------------------
Daniel Yachia
/s/ Mordechay Beyar
-------------------------------------
Mordechay Beyar
/s/ Rafael Beyar
-------------------------------------
Rafael Beyar
Modern Therapeutic Modalities Ltd.
By illegible signature
----------------------------------
Its
----------------------------------
/s/ Lewis C. Pell
-------------------------------------
Lewis C. Pell
/s/ Katsumi Oneda
-------------------------------------
Katsumi Oneda
/s/ Warren L. Bielke
-------------------------------------
Warren L. Bielke
InStent Inc.
By /s/ Warren L. Bielke
----------------------------------
Warren L. Bielke, President
/s/ Seila Yachia
-------------------------------------
Seila Yachia,
Successor in interest to MTML
Assignee of Daniel Yachia
-3-
<PAGE> 4
/s/ Meir Bachar
-------------------------------------
Meir Bachar
Distributee
/s/ Mordechay Beyar
-------------------------------------
Mordechay Beyar,
Successor in Interest to MTML
/s/ Daniel Yachia
-------------------------------------
Daniel Yachia,
Successor in Interest to MTML
-4-
<PAGE> 1
EXHIBIT 10.4
InSTENT INC.
FORM OF
CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT is made by and between InStent Inc., a Delaware
corporation (hereinafter called the "Company") and __________________ (the
"Executive"), as of the ____ day of ______________, 1996 (the "Effective
Date").
RECITALS:
WHEREAS, the Executive is currently employed by the Company;
WHEREAS, the Board of Directors of the Company (the "Board") has
determined that it is in the best interests of the Company and its stockholders
to reinforce and encourage the continued attention and dedication of certain
officers and senior managers of the Company, including the Executive, to their
assigned duties;
WHEREAS, the existence of this Agreement with the Executive and any
similar agreements with other employees of the Company shall not be construed
to imply that any successors to their respective positions or offices (or any
other employees) would ever be entitled to severance benefits similar to those
provided thereunder; and
WHEREAS, this Agreement sets forth the minimum severance compensation
that the Executive will receive from the Employer (as defined below) if the
Executive's employment with such Employer terminates under one of the
circumstances described herein in connection with or following a Change in
Control (as defined below).
<PAGE> 2
NOW, THEREFORE, in consideration of the mutual covenants and
conditions herein contained and in further consideration of services performed
and to be performed by the Executive for the Employer (as defined below) and,
the parties hereto agree as follows:
AGREEMENT
1. Certain Definitions. For purposes of this Agreement, the
terms defined above and the following terms have the meanings indicated:
(a) Company. "Company" means InStent Inc.
(b) Employer. "Employer" means the Company; and shall also include
any other entity that (i) employs the Executive immediately after a Change
in Control, (ii) is a successor to or assignee of the business and/or
assets of the Company and (iii) either executes and delivers the agreement
provided for in Section 5 or otherwise becomes or remains bound by all the
terms and provisions of this Agreement by operation of law.
(c) Change in Control. A "Change in Control" of the Company shall
occur if any person (as defined in Sections 3 (a) (9) and 13(d)(3) of the
'34 Act, as defined below) becomes the "beneficial owner" (as defined in
Rule 13d-3 promulgated pursuant to the '34 Act), directly or indirectly, of
thirty percent (30%) or more of combined voting power of the then
outstanding securities of the Company; provided, however, that no Change in
Control shall be deemed to occur if such person:
(i) includes any individual, corporation or other entity
(or any Affiliate thereof, as defined below) that is now the
beneficial owner of at least five percent (5%) of such securities; or
2
<PAGE> 3
(ii) became a beneficial owner of such securities in a
transaction after which the Company remains as the survivor and the
majority of the members of the Board remain such members after the
closing of the transaction.
For purposes of this subsection (b), the term " '34 Act" shall mean the
Securities Exchange Act of 1934, as amended; and the term "Affiliate" shall
mean any individual, corporation or other entity that controls, is
controlled by or is under common control with (as applicable) any other
individual, corporation or other entity referred to herein.
(d) Cause. In the case of a discharge from employment, the term
"Cause" shall mean:
(i) the willful and continued failure by the Executive to
substantially perform his or her duties under this Agreement or any
other employment agreement between the Executive and the Company
(other than any such failure resulting from the Executive's incapacity
due to physical or mental illness or any such actual or anticipated
failure after the issuance of a Notice of Termination by the Executive
for Good Reason), after a written demand for substantial performance
is delivered by the Employer that specifically identifies the manner
in which the Employer believes the Executive has not substantially
performed his or her duties; or
(ii) the willful engaging by the Executive in misconduct
that is materially injurious to the Employer, monetarily or otherwise.
No act, or failure to act, on the Executive's part shall be considered
"willful" unless done, or omitted to be done, by him or her not in
good faith and without reasonable belief that his or her action or
omission was in the best interest of the Employer.
3
<PAGE> 4
Notwithstanding the foregoing, the Executive shall not be deemed to
have been terminated for Cause without (x) a reasonable advance written
notice to the Executive, given before the delivery of a Notice of
Termination and setting forth the reasons for the Employer's intention to
terminate for Cause; (y) a reasonable opportunity for the Executive to
promptly cure any alleged conduct, condition or injury (to the extent it is
curable) or disprove its existence; and (z) delivery to the Executive of a
Notice of Termination from the Employer stating that, in the good faith
opinion of the Employer, the Executive was guilty of conduct set forth
above in clause (i) or (ii) hereof, and specifying the particulars thereof
in detail.
(e) Date of Termination. "Date of Termination" shall mean:
(i) if this Agreement is terminated by the Employer for
Disability, the date 30 days after Notice of Termination is given to
the Executive; provided; however, that such date shall not have been
delayed pursuant to the following clause (ii); or
(ii) if the Executive's employment is terminated by the
Employer for any other reason, the date on which a Notice of
Termination is delivered to the Executive or any later date specified
in such Notice.
(f) Disability. "Disability" shall mean the Executive's incapacity
due to physical or mental illness to substantially perform his or her
duties on a full-time basis for six consecutive months. If the Executive
does not agree with a determination to terminate him or her because of
Disability, the question of the Executive's Disability shall be subject to
the certification of a qualified medical doctor agreed to by the Employer
and the Executive or, in the event of the Executive's incapacity to
designate a doctor, the Executive's legal
4
<PAGE> 5
representative. In the absence of agreement between the Employer and the
Executive, each party shall nominate a qualified medical doctor and the two
doctors shall select a third qualified medical doctor, who shall determine
the question of the Executive's Disability.
(g) Effective Date. The term "Effective Date" shall mean the date
of this Agreement.
(h) Good Reason. In the case of a resignation from employment,
the term "Good Reason" shall mean:
(i) the assignment of duties or limitation of the
Executive's responsibilities that are inconsistent with the
Executive's title, position, duties, responsibilities and status, as
in effect immediately prior to the Change in Control or the removal
from or failure to elect the Executive to positions held immediately
prior to the Change in Control;
(ii) a reduction by the Employer in the Executive's base
salary as in effect on the date hereof or as the same may be increased
from time to time during the term of this Agreement;
(iii) any requirement that the Executive relocate to any
place outside the Minneapolis-St. Paul, Minnesota metropolitan area,
except for reasonably required travel by the Executive on the business
of the Employer to an extent substantially consistent with the
Executive's business travel obligations at the time of a Change in
Control of the Company;
(iv) any material breach by the Employer of any provision of
this Agreement;
5
<PAGE> 6
(v) if the assets of the Company have been sold in
connection with a Change in Control, any failure by the Company to
obtain the assumption of this Agreement by the purchaser pursuant to
Section 5; or
(vi) any purported termination of the Executive's employment
that is not properly effected hereunder and pursuant to a Notice of
Termination. For purposes of this Agreement, no such purported
termination shall be effective.
(i) Notice of Termination. A "Notice of Termination" shall mean a
written notice, which shall indicate the specific employment termination
provisions in this Agreement that are relied upon by the party giving such
notice, and which sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for the Executive's termination of
employment. Any notice of a reason for a proposed termination of the
Executive's employment for Cause shall not be treated as a Notice of
Termination.
Any termination of the Executive's employment by the Employer shall be
communicated by a Notice of Termination.
2. Term. The term of this Agreement shall commence on the
Effective Date and shall continue in effect until the second anniversary of the
Effective Date. Commencing on that anniversary, and each anniversary thereof,
the term of this Agreement shall automatically be extended for one additional
year, unless at least three (3) months before any such anniversary the Employer
shall have given the Executive a written notice stating that this Agreement
shall not be so renewed as of the next such anniversary; provided, however,
that if a Change of Control shall have occurred at any time during the term of
this Agreement, such term shall be automatically extended until the end of the
two (2) year period beginning on the date of such Change of Control and shall
terminate at
6
<PAGE> 7
the end of such period. To the extent that any obligation of the Employer
hereunder remains unpaid as of the end of such term, this Agreement shall
remain in effect until such obligation is satisfied.
3. Minimum Severance Compensation in Connection with a Change of
Control. In the event that (a) a Change in Control of the Company occurs
during the term of this Agreement; and (b) within the period beginning on the
date the Company announces such Change in Control generally to its employees
and ending twenty-four (24) months after the date of the Change in Control,
either (i) the Employer terminates the Executive's employment for any reason
(or no reason) other than his or her death, Disability or for Cause (it being
understood that a purported termination for Disability or for Cause that is
finally determined not to have such reason, or not to have been properly done,
shall not be a termination for Disability or for Cause), or (ii) the Executive
terminates his or her employment with the Employer for Good Reason, then:
(A) the Employer shall pay the Executive any unpaid installment of
base salary (to the extent earned and accrued through the Date of
Termination) at the rate in effect at the time the Notice of Termination is
given, any accrued vacation time (at that same rate) and all other
pro-rated and unpaid amounts to which the Executive is entitled as of the
Date of Termination under any compensation plan or program of the Employer,
including without limitation a portion of the amount (pro-rated based on
the number of days in the fiscal year or any lesser measurement period)
that otherwise would be earned under any executive bonus plan in which the
Executive is then participating for the year in which occurs such Date of
Termination; in each case determined by assuming that a bonus under such
plan would have been earned for the fiscal year or any lesser measurement
period in which the Date of Termination falls, by performance that reaches
the previously budgeted level under the plan
7
<PAGE> 8
for that period; and all of such payments shall be made in a lump sum on or
before the fifth day following the Date of Termination;
(B) in lieu of any further salary or bonus payments to the
Executive for periods subsequent to the Date of Termination, the Employer
shall pay to the Executive as severance pay an amount equal to the product
of:
(i) the sum of (a) the Executive's annual base salary in
effect as of the Date of Termination; and (b) the annual amount that
otherwise would be earned under any executive bonus plan in which the
Executive is then participating for the Employer's fiscal year in
which occurs such Date of Termination, determined by assuming that a
bonus under such plan would have been earned for the fiscal year in
which the Date of Termination falls, by performance that reaches the
previously budgeted level under the plan for that year; and
(ii) a number that is equal to the number of months
(including any fraction of a month) remaining between the Date of
Termination and the second anniversary of the date of the Change of
Control, divided by twelve; such payment to be made in a lump sum on
or before the fifth calendar day following the Date of Termination;
provided, however, that the amount payable to the Executive under this
Section 2(B) shall be reduced by the sum of any other severance pay
amounts due the Executive from the Company or the Employer under any
other plan or agreement; and
(C) during the remaining part of the period beginning on the Date
of Termination and ending on the second anniversary of the date of the
Change of Control, the Employer shall continue to provide the Executive
with employee benefits (including without limitation
8
<PAGE> 9
health benefits, life and disability insurance coverage and any individual
and family open enrollment options thereunder) that are the same as or
comparable to those provided to the Executive by the Company and his or her
dependents immediately before the Company's announcement of the Change of
Control, but only to the extent such benefits and enrollment options may be
provided to former employees and their dependents under rules of the
Employer's group insurance contracts (if any) and applicable law; provided,
however, that during such period the Executive pays the same share of the
costs for such benefits as the share he or she was required to pay before
such announcement (or, if he or she or any dependent enrolls in new
coverage during that period, the share applicable to similarly situated
active employees); and provided further that after such period the Employer
shall permit Executive and/or his or her dependents to continue such
coverage at his or her own cost, to the extent required by applicable law,
by treating the end of such period as the date coverage would otherwise
terminate for purposes of any such law.
4. No Obligation to Mitigate Damages; No Effect on Other
Contractual Rights.
(a) The Executive shall not be required to mitigate damages or the
amount of any payment provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment provided for
under this Agreement be reduced by any compensation earned by the Executive
as the result of employment by another employer after the Date of
Termination, or otherwise.
(b) The provisions of this Agreement, and any payment provided for
hereunder, shall not reduce any amounts otherwise payable, or in any way
diminish the Executive's existing rights, or rights which would accrue
solely as a result of the passage of time, under
9
<PAGE> 10
any employee benefit plan, incentive plan, Employer securities plan,
employment agreement or other contract, plan or arrangement.
5. Successors to the Company and Employer.
(a) The Company and any successor Employer shall require any
successor or assignee that purchases (other than by a merger of
corporations) all or substantially all of the business and/or assets of the
Company or such Employer, by agreement in form and substance reasonably
satisfactory to the Executive, to expressly, absolutely and unconditionally
assume and agree to perform this Agreement in the same manner and to the
same extent that the Company or the successor Employer would be required to
perform it if no such purchase had taken place. Any failure of the Company
or a successor Employer to obtain such agreement prior to the effectiveness
of any such purchase shall be a material breach of this Agreement and shall
entitle the Executive to terminate his or her employment hereunder for Good
Reason.
(b) This Agreement shall inure to the benefit of and be enforceable
by the Company and its successors and assigns, and by the Executive's
personal and legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If the Executive should die
while any amounts are still payable to him or her hereunder, all such
amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Executive's beneficiary last designated
in a writing delivered to the Employer before his or her death, or
otherwise to the Executive's devisee or legatee under a last will and
testament or testamentary trust or, if there be none of the foregoing, to
the Executive's estate.
10
<PAGE> 11
6. Notice. For purposes of this Agreement, all notices and other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, as follows:
If to the Company:
InStent Inc.
6271 Bury Drive
Eden Prairie, MN 55346
Attention: Chief Executive Officer
With a copy to:
Maslon Edelman Borman & Brand,
a Professional Limited Liability Partnership
3300 Norwest Center
Minneapolis, Minnesota 55402-4140
Attention: Joseph Alexander, Esq.
If to the Executive:
or such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
7. Miscellaneous. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the Executive and an authorized officer of the
Employer. If any party hereto at any time waives any breach of this Agreement
by another party hereto, or waives compliance with any condition or provision
of this Agreement to be performed by another party hereto, such waiver shall
not be
11
<PAGE> 12
deemed a waiver of that provision or condition at any prior or subsequent time,
or any similar or dissimilar provision or condition at the same or any other
time. No agreements or representations, oral or otherwise, express or impled,
with respect to the subject matter hereof have been made by either party except
as expressly set forth in this Agreement. This Agreement shall be governed by
and construed in accordance with the laws of the State of Minnesota.
8. Validity. The invalidity or unenforceability of any
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
9. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same instrument.
10. Fees and Expenses. The Employer shall pay all fees and
expenses (including attorney's fees) that the Executive may incur as a result
of the Employer contesting the validity, enforceability or the Executive's
interpretation of, or any determinations under, this Agreement.
11. Confidentiality. The Executive shall retain in confidence any
and all confidential information known to the Executive concerning the Employer
and its business so long as such information is not otherwise publicly
disclosed.
12. Employer's Right to Terminate Employment. Notwithstanding
anything contained in this Agreement to the contrary, the Employer may
terminate the Executive's employment at any time, for any reason or no reason,
except as may be otherwise provided under a separate written employment
agreement (if any) between the Executive and the Employer; and no provision
contained herein shall affect the Employer's ability to terminate the
Executive's employment at any time, with
12
<PAGE> 13
or without Cause. Nothing in this Agreement shall in any way require the
Employer to provide any of the benefits specified in this Agreement prior to a
Change in Control, nor shall this Agreement be construed in any way to
establish any policies or other benefits for the Executive or any other
employee of the Employer whose employment with the Employer is terminated prior
to a Change in Control.
IN WITNESS WHEREOF, the parties have executed this Agreement with full
authority as of the Effective Date first above written.
ATTEST: InStent Inc.
________________________ By______________________________
Secretary Its________________________
"COMPANY"
________________________________
"EXECUTIVE"
13
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<ARTICLE> 5
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 35,933
<SECURITIES> 5,164
<RECEIVABLES> 1,330
<ALLOWANCES> 50
<INVENTORY> 63
<CURRENT-ASSETS> 42,948
<PP&E> 1,092
<DEPRECIATION> 264
<TOTAL-ASSETS> 43,899
<CURRENT-LIABILITIES> 893
<BONDS> 0
0
0
<COMMON> 51,806
<OTHER-SE> (8,800)
<TOTAL-LIABILITY-AND-EQUITY> 43,899
<SALES> 1,004
<TOTAL-REVENUES> 1,004
<CGS> 354
<TOTAL-COSTS> 354
<OTHER-EXPENSES> 2,156
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (936)
<INCOME-TAX> 15
<INCOME-CONTINUING> (951)
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<CHANGES> 0
<NET-INCOME> (951)
<EPS-PRIMARY> (0.09)
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</TABLE>
